00:00

An idea is like an asshole. Everyone has one. Okay. Ideas don't mean anything. This guy is known as the Indian Warren Buffett. He's billionaire investor Monish Pabry. And last month, I went to his house and asked him to teach me everything he knows about investing. How did you make your monies? After taxes, after everything, I got a million dollars.

An idea is like an asshole. Everyone has one. Okay. Ideas don't mean anything. This guy is known as the Indian Warren Buffett. He's billionaire investor Monish Pabry. And last month, I went to his house and asked him to teach me everything he knows about investing. How did you make your monies? After taxes, after everything, I got a million dollars.

00:20

And I, for the first time,

And I, for the first time,

00:22

had money in the bank. Right. That million became worth thirteen million.

had money in the bank. Right. That million became worth thirteen million.

00:27

And,

And,

00:28

I said, wow. Well done, Monish.

I said, wow. Well done, Monish.

00:30

And,

And,

00:31

So they got seventy percent a year compounded. How the hell were you getting these returns? I'm always looking at what is hated and unloved.

So they got seventy percent a year compounded. How the hell were you getting these returns? I'm always looking at what is hated and unloved.

00:39

The key to moving the needle is inactivity.

The key to moving the needle is inactivity.

00:42

I've met and become friends with Charlie Munger and Warren Buffett. Good afternoon, mister Buffet, and good afternoon, mister Munger.

I've met and become friends with Charlie Munger and Warren Buffett. Good afternoon, mister Buffet, and good afternoon, mister Munger.

00:49

My name is Monish Pabry.

My name is Monish Pabry.

00:52

How does that happen? It shouldn't happen. When I look at a CEO,

How does that happen? It shouldn't happen. When I look at a CEO,

00:56

I always try to find out, did they run a lemonade stand when they were twelve?

I always try to find out, did they run a lemonade stand when they were twelve?

01:02

Because if they didn't run the lemonade stand when they were twelve, they're not gonna that great at business at thirty. How stupid can you be?

Because if they didn't run the lemonade stand when they were twelve, they're not gonna that great at business at thirty. How stupid can you be?

01:09

If you know the big picture, you can change the big picture, the most important thing in life.

If you know the big picture, you can change the big picture, the most important thing in life.

01:16

Are you a fan of, Bitcoin? Are you a believer? If you put a gun to my head, I would say, what do you think about, Elon Musk? Elon is not here If I said, what's the number one trait

Are you a fan of, Bitcoin? Are you a believer? If you put a gun to my head, I would say, what do you think about, Elon Musk? Elon is not here If I said, what's the number one trait

01:25

that makes a great investor? What comes to mind?

that makes a great investor? What comes to mind?

01:32

Alright.

Alright.

01:34

Welcome. Good morning.

Welcome. Good morning.

01:40

Great to be here, Sean. You are a great investor,

Great to be here, Sean. You are a great investor,

01:43

but you started as a businessman. I'm a businessman trying to become a great investor.

but you started as a businessman. I'm a businessman trying to become a great investor.

01:47

How do those two relate in our brains, we actually use the exact same part of the brain,

How do those two relate in our brains, we actually use the exact same part of the brain,

01:54

in both activities. So Warren Warren Buffett has a great quote he says I'm a better investor because I'm a businessman,

in both activities. So Warren Warren Buffett has a great quote he says I'm a better investor because I'm a businessman,

02:01

and I'm a better businessman

and I'm a better businessman

02:03

be because I'm an investor.

be because I'm an investor.

02:06

And,

And,

02:07

And in his case,

And in his case,

02:09

a lot of people don't know, but Warren had done a lot of different businesses

a lot of people don't know, but Warren had done a lot of different businesses

02:14

in

in

02:14

different areas

different areas

02:16

before he was seventeen

before he was seventeen

02:18

starting when he was,

starting when he was,

02:20

I think five or six years old. His very first business was,

I think five or six years old. His very first business was,

02:24

buying,

buying,

02:26

buying

buying

02:27

cokes from his grandfather store

cokes from his grandfather store

02:30

at,

at,

02:31

at a Nicola Peace and then selling them at a dime piece. Right. My wholesale cell retail. Yeah. So that that was one of his first first ones. And one of the things that a lot of,

at a Nicola Peace and then selling them at a dime piece. Right. My wholesale cell retail. Yeah. So that that was one of his first first ones. And one of the things that a lot of,

02:42

people don't,

people don't,

02:44

understand about the way our brains work is the human brain actually

understand about the way our brains work is the human brain actually

02:49

when we are born, it is the most underdeveloped

when we are born, it is the most underdeveloped

02:53

organ,

organ,

02:54

when we're born because the birth canal is not wide enough. So for the first five years of life, the brain is the fastest growing organ

when we're born because the birth canal is not wide enough. So for the first five years of life, the brain is the fastest growing organ

03:02

that we have as human. The the neuron connections are growing at

that we have as human. The the neuron connections are growing at

03:06

exponential rate

exponential rate

03:08

from the age of about eleven

from the age of about eleven

03:11

to about twenty,

to about twenty,

03:14

that window is when the brain is set up to specialize.

that window is when the brain is set up to specialize.

03:19

And,

And,

03:20

the neuron connections get cut.

the neuron connections get cut.

03:23

So they actually go down quite a bit, but the brain allocates

So they actually go down quite a bit, but the brain allocates

03:27

areas

areas

03:29

to hone in and specialize. So, you know, if you think of someone like Michael Angelo

to hone in and specialize. So, you know, if you think of someone like Michael Angelo

03:34

or,

or,

03:35

Bill Gates or even Warren Buffett. These these guys started

Bill Gates or even Warren Buffett. These these guys started

03:40

specializing

specializing

03:41

at ten or eleven.

at ten or eleven.

03:43

And,

And,

03:44

if you start writing code

if you start writing code

03:47

at the age of ten or eleven, for example,

at the age of ten or eleven, for example,

03:50

like like Bill Gates did.

like like Bill Gates did.

03:52

By the time he was twenty,

By the time he was twenty,

03:55

the expertise that he had, someone else starting at twenty,

the expertise that he had, someone else starting at twenty,

03:58

would not be able to match him

would not be able to match him

04:01

even at fifty.

even at fifty.

04:02

So that ten year window

So that ten year window

04:05

is a very critical window in human development.

is a very critical window in human development.

04:08

And,

And,

04:10

unfortunately, our education system doesn't recognize that. Right. And, unfortunately, I'm thirty five. So it's two

unfortunately, our education system doesn't recognize that. Right. And, unfortunately, I'm thirty five. So it's two

04:18

We hope there are some eleven year olds listening, or we hope when you have kids. Tell your kids. Yeah. It's not all the the the cake's not fully baked yet.

We hope there are some eleven year olds listening, or we hope when you have kids. Tell your kids. Yeah. It's not all the the the cake's not fully baked yet.

04:27

So I think the the thing with Warren was that I think when he was about

So I think the the thing with Warren was that I think when he was about

04:31

ten or eleven years old, he was running,

ten or eleven years old, he was running,

04:35

a bunch of very interesting businesses. What was he doing? I've never heard these. So, yeah, I, like, I didn't know this back. One first businesses was he used to go to this racetrack in Omaha

a bunch of very interesting businesses. What was he doing? I've never heard these. So, yeah, I, like, I didn't know this back. One first businesses was he used to go to this racetrack in Omaha

04:44

called Aksarben, which is a Nebraska spelled backwards.

called Aksarben, which is a Nebraska spelled backwards.

04:48

And,

And,

04:49

he used to publish racing tips

he used to publish racing tips

04:52

called stable boy selections.

called stable boy selections.

04:54

Basically telling you what what horses to bet on. And, and then also what he would do is when all the races had been run, he'd collect all the discarded tickets on the ground,

Basically telling you what what horses to bet on. And, and then also what he would do is when all the races had been run, he'd collect all the discarded tickets on the ground,

05:05

and he'd go home and go through each one carefully

and he'd go home and go through each one carefully

05:09

to see if some drunk had thrown out a winning ticket. And and he'd find a few. He'd find a few, but he was too young to go to the window to collect with under eighteen. So he would give them to his aunt Alice who would go and collect for him around the age of fourteen or fifteen

to see if some drunk had thrown out a winning ticket. And and he'd find a few. He'd find a few, but he was too young to go to the window to collect with under eighteen. So he would give them to his aunt Alice who would go and collect for him around the age of fourteen or fifteen

05:28

He had a very good friend in high school called Don Danley,

He had a very good friend in high school called Don Danley,

05:31

and and

and and

05:32

Danley was a tinkerer. He was, like, very mechanically inclined one time, I think,

Danley was a tinkerer. He was, like, very mechanically inclined one time, I think,

05:37

Warren went to his home and he saw that,

Warren went to his home and he saw that,

05:40

Don's working on a pinball machine in his garage.

Don's working on a pinball machine in his garage.

05:43

And, he asked Don what he's doing. He said, oh, I just bought this pinball machine that wasn't working. They gave it away while it paid, like, fifteen bucks for it.

And, he asked Don what he's doing. He said, oh, I just bought this pinball machine that wasn't working. They gave it away while it paid, like, fifteen bucks for it.

05:52

And I think I can get it working.

And I think I can get it working.

05:54

And,

And,

05:55

Warren asked him,

Warren asked him,

05:57

how much is it gonna cost? He said it's gonna cost, like, three dollars.

how much is it gonna cost? He said it's gonna cost, like, three dollars.

06:00

In parts and maybe a couple of hours to get it working. And then Warren says,

In parts and maybe a couple of hours to get it working. And then Warren says,

06:05

can you find more machines like this which don't work. He says, oh, yeah, there's a lot of machines you can buy, which people people don't want them because they don't work, etcetera.

can you find more machines like this which don't work. He says, oh, yeah, there's a lot of machines you can buy, which people people don't want them because they don't work, etcetera.

06:15

So

So

06:16

Don and him formed,

Don and him formed,

06:18

a company in their minds and their wife incorporated anything. They called it the Wilson Coiner operated amusement company.

a company in their minds and their wife incorporated anything. They called it the Wilson Coiner operated amusement company.

06:26

And, they went to barbershops

And, they went to barbershops

06:28

in DC,

in DC,

06:29

and these two boys, you know, kind of, you know, a nerdy looking fifteen year old, they

and these two boys, you know, kind of, you know, a nerdy looking fifteen year old, they

06:35

went to the bar and said, look, we work for a Mr. Wilson, and Mr. Wilson did not exist as a fictitious character. We work for Mr. Wilson, and Mr. Milson has asked us to present you with a proposition that

went to the bar and said, look, we work for a Mr. Wilson, and Mr. Wilson did not exist as a fictitious character. We work for Mr. Wilson, and Mr. Milson has asked us to present you with a proposition that

06:47

we can put a pinball machine in the barber shop and we'll come by once a week. And whatever coins are in there, we'll split it fifty fifty with you, half for you and half for mister Wilson.

we can put a pinball machine in the barber shop and we'll come by once a week. And whatever coins are in there, we'll split it fifty fifty with you, half for you and half for mister Wilson.

06:59

So the barber said, yeah, put it in the corner. Right? And so Warren got Danly busy

So the barber said, yeah, put it in the corner. Right? And so Warren got Danly busy

07:06

fixing pinball machines.

fixing pinball machines.

07:09

And the two of them would go on weekends and, you know, get barber shops. Yeah. Every week, they're making some money. And and so I think he had eventually something like forty barber shops

And the two of them would go on weekends and, you know, get barber shops. Yeah. Every week, they're making some money. And and so I think he had eventually something like forty barber shops

07:19

with with these machines. And

with with these machines. And

07:22

Warren said that the first week he went back to the first barbershop,

Warren said that the first week he went back to the first barbershop,

07:26

he thought he died and went to heaven. So there was, like,

he thought he died and went to heaven. So there was, like,

07:29

five or six dollars in there. And, so their take was about, like, you know, three dollars

five or six dollars in there. And, so their take was about, like, you know, three dollars

07:34

on

on

07:35

eighteen dollars of capital in one week. Right. And, and he he just told Don't go as fast as you can. Danley, what are you doing right now?

eighteen dollars of capital in one week. Right. And, and he he just told Don't go as fast as you can. Danley, what are you doing right now?

07:45

Exactly. Warren had all these different businesses that he was a senior partner and whoever he was working as a junior partner. One time,

Exactly. Warren had all these different businesses that he was a senior partner and whoever he was working as a junior partner. One time,

07:54

Dan Lee showed him an ad for a Rolls Royce

Dan Lee showed him an ad for a Rolls Royce

07:57

for sale for three hundred dollars, but it didn't run. It was a old beat up rolls and,

for sale for three hundred dollars, but it didn't run. It was a old beat up rolls and,

08:03

you know, people is giving away, like, like, junk. Right? And he thought he could fix the roles. So they bought the roles for three hundred, maybe another fifty bucks in parts, and Danley had it running. And then they, you know, spruce it up, and they would rent it on weekends for a hundred dollars to weddings.

you know, people is giving away, like, like, junk. Right? And he thought he could fix the roles. So they bought the roles for three hundred, maybe another fifty bucks in parts, and Danley had it running. And then they, you know, spruce it up, and they would rent it on weekends for a hundred dollars to weddings.

08:21

And,

And,

08:22

And then on the weekdays, the two of them would go to school,

And then on the weekdays, the two of them would go to school,

08:25

the high school, in the roles.

the high school, in the roles.

08:27

You know, so so what happened is and warned in

You know, so so what happened is and warned in

08:31

he didn't know this, but he was specializing

he didn't know this, but he was specializing

08:35

and figuring out business

and figuring out business

08:37

in that window of time, the eleven to twenty. Right? And so by the time he was nineteen, eighteen or nineteen, I think he went to college when he was seventeen.

in that window of time, the eleven to twenty. Right? And so by the time he was nineteen, eighteen or nineteen, I think he went to college when he was seventeen.

08:46

By the time he was seventeen, when he went to college,

By the time he was seventeen, when he went to college,

08:49

he had fifteen thousand dollars.

he had fifteen thousand dollars.

08:51

And he told his dad,

And he told his dad,

08:53

I'm gonna pay for my college myself,

I'm gonna pay for my college myself,

08:55

and he also told his dad I don't need an inheritance. What of a money there is you're leaving? Leave it to my two sisters. Right. I'm I'm I'm I'm good. And fifteen thousand back then is a lot, you know Well, it's it's about ten to one. So a hundred fifty grand. That's a seventeen year old. Yeah. Think about seventeen year old, a hundred and fifty k. Right? And at that time, college was cheap, you know.

and he also told his dad I don't need an inheritance. What of a money there is you're leaving? Leave it to my two sisters. Right. I'm I'm I'm I'm good. And fifteen thousand back then is a lot, you know Well, it's it's about ten to one. So a hundred fifty grand. That's a seventeen year old. Yeah. Think about seventeen year old, a hundred and fifty k. Right? And at that time, college was cheap, you know.

09:16

And,

And,

09:17

and the other thing is that he got interested

and the other thing is that he got interested

09:20

in

in

09:21

investing his his dad will stock broker. So he used to go to the dad's office on the weekends,

investing his his dad will stock broker. So he used to go to the dad's office on the weekends,

09:26

and he says that at the age of eleven, he bought his first stop.

and he says that at the age of eleven, he bought his first stop.

09:31

And he said I was wasting my time till then. You know?

And he said I was wasting my time till then. You know?

09:35

And but, you know, he didn't really have a philosophy. He didn't have an investing philosophy.

And but, you know, he didn't really have a philosophy. He didn't have an investing philosophy.

09:40

At nineteen, he read the intelligent investor by Ben Graham,

At nineteen, he read the intelligent investor by Ben Graham,

09:44

and that was transformational. And he thought Ben Graham was this guy who, you know, died and passed away. But then he discovered

and that was transformational. And he thought Ben Graham was this guy who, you know, died and passed away. But then he discovered

09:52

that Ben Graham was teaching at Columbia. He was a professor at Columbia. So when he finished his undergrad,

that Ben Graham was teaching at Columbia. He was a professor at Columbia. So when he finished his undergrad,

09:58

he applied to Columbia

he applied to Columbia

10:00

to go to business school there so he could,

to go to business school there so he could,

10:03

he could learn directly from Engram, and he joined

he could learn directly from Engram, and he joined

10:06

Columbia's MBA program

Columbia's MBA program

10:09

must have been twenty or something. Hey, real quick. As you know, we're big on ideas here. We love bringing new ideas, business ideas, brainstorming ideas for the podcast. Well, a lot of people ask, what do you do with all those ideas? Can we go find them? Is there a list somewhere the great people at HubSpot have put together a business ideas database. It's totally free. If you just click the link in the description below, you can go download a collection of over fifty plus business ideas that are from the archive listed out for you curated.

must have been twenty or something. Hey, real quick. As you know, we're big on ideas here. We love bringing new ideas, business ideas, brainstorming ideas for the podcast. Well, a lot of people ask, what do you do with all those ideas? Can we go find them? Is there a list somewhere the great people at HubSpot have put together a business ideas database. It's totally free. If you just click the link in the description below, you can go download a collection of over fifty plus business ideas that are from the archive listed out for you curated.

10:34

And so, what are you waiting for? Go download it. It's free. Check it out. It's in the description below. Alright. Back to the show. And then, of course, after that,

And so, what are you waiting for? Go download it. It's free. Check it out. It's in the description below. Alright. Back to the show. And then, of course, after that,

10:42

Graham hired him.

Graham hired him.

10:44

And there's some story where he tells Graham, like, I'll work for you for free. And Ben Graham says, your price is too high. That's correct.

And there's some story where he tells Graham, like, I'll work for you for free. And Ben Graham says, your price is too high. That's correct.

10:52

So we still ended up convincing him somewhat. So, actually, Graham

So we still ended up convincing him somewhat. So, actually, Graham

10:56

at that time, Jews were very heavily discriminated against. There was a lot of anti semitism

at that time, Jews were very heavily discriminated against. There was a lot of anti semitism

11:01

on Wall Street. So Ben Graham was Jewish

on Wall Street. So Ben Graham was Jewish

11:03

wanted to give the few jobs that he had

wanted to give the few jobs that he had

11:06

to Jewish kids and, and young Jewish people because they just want many opportunities. So he basically told Warren, look, I gotta take care of the community. Right. But but then Warren went back to Omaha in about a few months after that

to Jewish kids and, and young Jewish people because they just want many opportunities. So he basically told Warren, look, I gotta take care of the community. Right. But but then Warren went back to Omaha in about a few months after that

11:20

Graham called him and said,

Graham called him and said,

11:22

if you wanna come to New York, I got something for you. And Warren never asked him what the salary was, what the position was, he just threw the next stranger in New York.

if you wanna come to New York, I got something for you. And Warren never asked him what the salary was, what the position was, he just threw the next stranger in New York.

11:32

With his, with his wife, his experience as a businessman

With his, with his wife, his experience as a businessman

11:37

He was very lucky. It got seared in in that window of time. And both Warren and Charlie, they can crack businesses and business models.

He was very lucky. It got seared in in that window of time. And both Warren and Charlie, they can crack businesses and business models.

11:46

Really fast.

Really fast.

11:47

So

So

11:48

when we when we start a business,

when we when we start a business,

11:51

we will spend maybe three or four or five percent of our time on figuring out the strategy, you know, what's gonna be the product, service,

we will spend maybe three or four or five percent of our time on figuring out the strategy, you know, what's gonna be the product, service,

12:00

price point. Yeah. All the how we're gonna make it work, Right. And all the different plans. Right? And then ninety five, ninety seven percent

price point. Yeah. All the how we're gonna make it work, Right. And all the different plans. Right? And then ninety five, ninety seven percent

12:07

is all the blocking and tackling to make it happen. Right. It's Danley fixing machines. Yeah. Exactly. And so

is all the blocking and tackling to make it happen. Right. It's Danley fixing machines. Yeah. Exactly. And so

12:14

in the case of investing,

in the case of investing,

12:17

we use the same brain cells that we use in that three to five percent of time.

we use the same brain cells that we use in that three to five percent of time.

12:22

And and, basically,

And and, basically,

12:25

one of the things that attracted me to investing was that basically the three percent becomes eighty percent.

one of the things that attracted me to investing was that basically the three percent becomes eighty percent.

12:32

Because,

Because,

12:33

we don't need a Danley. We've got public bank companies and all of that. And,

we don't need a Danley. We've got public bank companies and all of that. And,

12:38

we just have to pick

we just have to pick

12:39

which businesses we wanna own partially,

which businesses we wanna own partially,

12:43

and which ones we wanna ride and so on. And so I think that

and which ones we wanna ride and so on. And so I think that

12:48

I I always find it strange if I run into investors

I I always find it strange if I run into investors

12:52

who haven't been entrepreneurs because I think they're missing

who haven't been entrepreneurs because I think they're missing

12:56

very key part. Right. And on the other hand, I find that entrepreneurs

very key part. Right. And on the other hand, I find that entrepreneurs

13:00

are very naturally,

are very naturally,

13:04

already set up

already set up

13:06

to be great investors if they make a couple of tweaks.

to be great investors if they make a couple of tweaks.

13:09

And but what what ends up happening is that we don't see

And but what what ends up happening is that we don't see

13:13

a lot of entrepreneurs, becoming investors.

a lot of entrepreneurs, becoming investors.

13:16

And we also don't see, we we see a lot of investors who haven't built businesses, met payroll,

And we also don't see, we we see a lot of investors who haven't built businesses, met payroll,

13:23

And so both, both have flaws. So if you if you had the,

And so both, both have flaws. So if you if you had the,

13:28

the good fortune

the good fortune

13:30

of

of

13:31

having the entrepreneurial experience, then I think

having the entrepreneurial experience, then I think

13:34

looking at the Buffet Munker frameworks,

looking at the Buffet Munker frameworks,

13:37

it's a very easy transition. Right? Is probably also easier to go business to investor than investor for a long time than suddenly go try to be an entrepreneur. Well, investor to business, the problem is the windows close. Strike. So so you'd be you'd be at a disadvantage to start with.

it's a very easy transition. Right? Is probably also easier to go business to investor than investor for a long time than suddenly go try to be an entrepreneur. Well, investor to business, the problem is the windows close. Strike. So so you'd be you'd be at a disadvantage to start with.

13:52

And, but yeah, the earlier you start on both endeavors,

And, but yeah, the earlier you start on both endeavors,

13:55

Right. The better off you are. There's a great, I don't know if you've seen this, but I didn't know. Like, I always heard, okay,

Right. The better off you are. There's a great, I don't know if you've seen this, but I didn't know. Like, I always heard, okay,

14:03

Warren and Charlie, great investors. I read the shareholder letters, and the shareholder letters are often,

Warren and Charlie, great investors. I read the shareholder letters, and the shareholder letters are often,

14:08

they're amazing, but they're very, like, they're high level and they're philosophical in a way. Then you have,

they're amazing, but they're very, like, they're high level and they're philosophical in a way. Then you have,

14:15

I saw this letter of Warren writing a letter to this. I think the CEO of Cs Candy, I don't know if you've seen this, but it's a it's a letter and it's I expected it to be very again philosophical amusing. Instead, he's like brass tacks right away. He's like, I went to the store, and I have a few ideas for you. It's a very operational tactical. I noticed this price point. I noticed this. And I was like, oh,

I saw this letter of Warren writing a letter to this. I think the CEO of Cs Candy, I don't know if you've seen this, but it's a it's a letter and it's I expected it to be very again philosophical amusing. Instead, he's like brass tacks right away. He's like, I went to the store, and I have a few ideas for you. It's a very operational tactical. I noticed this price point. I noticed this. And I was like, oh,

14:37

he's He's a businessman. Like, he's just, like,

he's He's a businessman. Like, he's just, like,

14:41

today, we only think of him as one bucket, but actually he's got both gears.

today, we only think of him as one bucket, but actually he's got both gears.

14:45

CES is a wonderful,

CES is a wonderful,

14:47

wonderful business.

wonderful business.

14:49

It taught it taught them a lot. It taught them more than they ever thought they'd learn from a stupid candy business. Right. But one of the things Warren did when he first bought seas is

It taught it taught them a lot. It taught them more than they ever thought they'd learn from a stupid candy business. Right. But one of the things Warren did when he first bought seas is

14:58

he told,

he told,

14:59

he told the CEO, listen, you got free rein run the business like you've been running and so on and so forth. But on December twenty sixth,

he told the CEO, listen, you got free rein run the business like you've been running and so on and so forth. But on December twenty sixth,

15:08

I'm going to set the prices for the next year. Okay. Okay? So he would sit down with the entire C's price list, and he would bump all the prices by ten or fifteen percent.

I'm going to set the prices for the next year. Okay. Okay? So he would sit down with the entire C's price list, and he would bump all the prices by ten or fifteen percent.

15:20

And

And

15:21

inflation might have been three percent. Right? And so

inflation might have been three percent. Right? And so

15:26

he would raise prices significantly above inflation.

he would raise prices significantly above inflation.

15:30

And what he would observe is volumes went up.

And what he would observe is volumes went up.

15:34

So and then the year after that, he'd again bump it by another ten, twelve percent.

So and then the year after that, he'd again bump it by another ten, twelve percent.

15:39

And volume still went up. And and so both him and Charlie were amazed

And volume still went up. And and so both him and Charlie were amazed

15:45

that you could have a business where you're continuously raising prices

that you could have a business where you're continuously raising prices

15:50

significantly above the rate of inflation,

significantly above the rate of inflation,

15:53

and there's no resistance

and there's no resistance

15:55

on the customer base to accepting those prices, and that's what

on the customer base to accepting those prices, and that's what

15:59

gave them a huge lesson in brands.

gave them a huge lesson in brands.

16:03

And,

And,

16:04

you know, he was a died in the world hardcore deep value investor.

you know, he was a died in the world hardcore deep value investor.

16:09

It was really hard for them. They paid three times book value for Cs. They were choking almost when they paid that amount.

It was really hard for them. They paid three times book value for Cs. They were choking almost when they paid that amount.

16:17

So, I think the bot sees for, like, twenty five million.

So, I think the bot sees for, like, twenty five million.

16:20

Looking back,

Looking back,

16:22

they could have paid two hundred million.

they could have paid two hundred million.

16:24

And it's still would have been a good deal. Yeah. And Cs has,

And it's still would have been a good deal. Yeah. And Cs has,

16:30

sent dividends to Berkshire

sent dividends to Berkshire

16:32

in the billions.

in the billions.

16:34

I mean, it's been about fifty years since the purchase.

I mean, it's been about fifty years since the purchase.

16:37

And billions of dollars have flown from seas to Berkshire, which has then been used to buy

And billions of dollars have flown from seas to Berkshire, which has then been used to buy

16:44

a whole plethora of other businesses. And and if you look at their,

a whole plethora of other businesses. And and if you look at their,

16:48

their purchase of Coke, for example,

their purchase of Coke, for example,

16:52

they they put a quarter of the entire book value of Berkshire Hathaway

they they put a quarter of the entire book value of Berkshire Hathaway

16:57

into Coke in nineteen eighty eight.

into Coke in nineteen eighty eight.

17:01

If they had not bought Cs,

If they had not bought Cs,

17:04

they would have never bought Coke. Right. So the lessons that they learned about branding

they would have never bought Coke. Right. So the lessons that they learned about branding

17:09

and the power of brands

and the power of brands

17:11

is what led to the coke investment, which was a much bigger home run. And they've made many more brand investment since then. Half the portfolio is an Apple right now. Right? Yeah. So One of the apps brands in the world. And and I think I think Warren

is what led to the coke investment, which was a much bigger home run. And they've made many more brand investment since then. Half the portfolio is an Apple right now. Right? Yeah. So One of the apps brands in the world. And and I think I think Warren

17:24

understood

understood

17:25

this notion of consumer behavior

this notion of consumer behavior

17:28

and how powerful brands can be

and how powerful brands can be

17:31

and, how powerful habits can be. And, and then he went from there. So, yeah, absolutely. And, one of the interesting things about Cs is that Cs wasn't this fast grower. It wasn't,

and, how powerful habits can be. And, and then he went from there. So, yeah, absolutely. And, one of the interesting things about Cs is that Cs wasn't this fast grower. It wasn't,

17:43

they bought it and then it sales exploded.

they bought it and then it sales exploded.

17:45

But what I think the the beauty of Cs, if I remember correctly, is that it was just no additional capital had to go in. So everything was just free cash flow coming out. Yeah. So so C's is very much a California story. Right? I mean, it it it was it was founded in California. Almost all the sales were in California.

But what I think the the beauty of Cs, if I remember correctly, is that it was just no additional capital had to go in. So everything was just free cash flow coming out. Yeah. So so C's is very much a California story. Right? I mean, it it it was it was founded in California. Almost all the sales were in California.

18:02

If you look at Cs from the time they bought it till today,

If you look at Cs from the time they bought it till today,

18:06

about fifty years,

about fifty years,

18:08

the unit volume has gone up on average two percent a year. Okay?

the unit volume has gone up on average two percent a year. Okay?

18:15

California

California

18:16

GDP.

GDP.

18:17

Probably at least in the seventies, eighties, nineties was going up about at least four or five percent a year. So they were actually and part of that might have been the the price increases. Okay? But even with those heavy price increases, they still got the volume

Probably at least in the seventies, eighties, nineties was going up about at least four or five percent a year. So they were actually and part of that might have been the the price increases. Okay? But even with those heavy price increases, they still got the volume

18:32

going up slightly.

going up slightly.

18:34

But when you overlay that, you know, you do fifty years of ten percent,

But when you overlay that, you know, you do fifty years of ten percent,

18:39

that's that's a very big number. Right? And so Caesar's not cheap today. Right? And now

that's that's a very big number. Right? And so Caesar's not cheap today. Right? And now

18:45

Warren was very excited

Warren was very excited

18:48

about being the candy muggle of the world. So they tried really hard

about being the candy muggle of the world. So they tried really hard

18:54

to

to

18:56

sense these everywhere.

sense these everywhere.

18:57

Right? I mean, they would open a store in Chicago.

Right? I mean, they would open a store in Chicago.

19:00

And then fall flat on their face. Then they'd open in Arizona, and they fall flat on base. They've repeatedly

And then fall flat on their face. Then they'd open in Arizona, and they fall flat on base. They've repeatedly

19:06

tried over and over and over again

tried over and over and over again

19:09

to broadensies

to broadensies

19:11

and expand it. And by and large,

and expand it. And by and large,

19:15

those,

those,

19:16

those efforts didn't work. Even today, the bulk of the volumes of seas is in California.

those efforts didn't work. Even today, the bulk of the volumes of seas is in California.

19:21

Right? And,

Right? And,

19:23

and so

and so

19:25

when the coke investment came about,

when the coke investment came about,

19:28

they discover they they found something very different than C's.

they discover they they found something very different than C's.

19:33

They knew

They knew

19:35

C's doesn't travel well.

C's doesn't travel well.

19:37

But they could look at more than a hundred year history of Coke, and they knew Coke travels really well. There are two countries in the world where you can't get Coke.

But they could look at more than a hundred year history of Coke, and they knew Coke travels really well. There are two countries in the world where you can't get Coke.

19:47

North Korea and Cuba.

North Korea and Cuba.

19:50

Okay?

Okay?

19:51

If they opened up to Coke in either of those two countries,

If they opened up to Coke in either of those two countries,

19:55

and Coke did not advertise at all.

and Coke did not advertise at all.

19:58

Sales would take off. It's so embedded in the pop culture. So even in countries and places where They've never done any branding before. You know,

Sales would take off. It's so embedded in the pop culture. So even in countries and places where They've never done any branding before. You know,

20:09

people in Pakistan or India or Bangladesh, they're having Indian food. With a Coke. Right. Right. So it's it's ubiquitous.

people in Pakistan or India or Bangladesh, they're having Indian food. With a Coke. Right. Right. So it's it's ubiquitous.

20:15

And that did not exist

And that did not exist

20:17

with sea's candy. It wasn't ubiquitous. And and Warren understood

with sea's candy. It wasn't ubiquitous. And and Warren understood

20:22

you can't con you can't consume

you can't con you can't consume

20:25

infinite amounts of candy. You know, there's an aftertaste and all that. Coke, you can actually consume a lot of. Right. There's no, what do you call it? Taste memory? There's no aftertaste. Yeah. Yeah. That's right. So so I think, like I said, I think they they

infinite amounts of candy. You know, there's an aftertaste and all that. Coke, you can actually consume a lot of. Right. There's no, what do you call it? Taste memory? There's no aftertaste. Yeah. Yeah. That's right. So so I think, like I said, I think they they

20:39

move from being

move from being

20:41

hardcore quantitative

hardcore quantitative

20:43

deep value guys

deep value guys

20:44

to actually understanding

to actually understanding

20:47

a lot of nuances of brands and consumer behavior.

a lot of nuances of brands and consumer behavior.

20:50

Which was very fundamental to how and why Berkshire did so well. So you talked about,

Which was very fundamental to how and why Berkshire did so well. So you talked about,

20:56

specializing

specializing

20:57

kind of that eleven to twenty years old ish window.

kind of that eleven to twenty years old ish window.

21:01

Yeah. Today, you've done phenomenally well. You manage I don't know, almost a billion dollars. I mean, maybe more who knows. A lot of money, and and have done incredibly well investing.

Yeah. Today, you've done phenomenally well. You manage I don't know, almost a billion dollars. I mean, maybe more who knows. A lot of money, and and have done incredibly well investing.

21:12

Did you

Did you

21:13

did you do that when you were a little bit Yeah. Or or were you a late bloomer? So,

did you do that when you were a little bit Yeah. Or or were you a late bloomer? So,

21:18

no. Actually,

no. Actually,

21:19

it was just dumb luck. A lot of things in my life have been dumb luck.

it was just dumb luck. A lot of things in my life have been dumb luck.

21:24

So my dad was a quintessential

So my dad was a quintessential

21:27

entrepreneur.

entrepreneur.

21:28

And,

And,

21:29

he was really good.

he was really good.

21:31

So, you know, a great entrepreneur, one of the first traits you need is you need to be able to identify offering apps,

So, you know, a great entrepreneur, one of the first traits you need is you need to be able to identify offering apps,

21:38

some product or service that ought to exist, but doesn't, like Starbucks before Starbucks

some product or service that ought to exist, but doesn't, like Starbucks before Starbucks

21:44

or McDonald's before McDonald's and so on. Right? And so my dad was really good at figuring out that, oh, this

or McDonald's before McDonald's and so on. Right? And so my dad was really good at figuring out that, oh, this

21:52

product should be there, but isn't

product should be there, but isn't

21:54

And he was really good at identifying

And he was really good at identifying

21:57

these offering gaps. He was also really good at

these offering gaps. He was also really good at

22:01

starting businesses from scratch. But his downfall was that

starting businesses from scratch. But his downfall was that

22:05

he was always very aggressive

he was always very aggressive

22:08

and he was always over levered.

and he was always over levered.

22:10

So

So

22:12

When the businesses were going, he was literally taking

When the businesses were going, he was literally taking

22:15

every last dime of profit coming in and everything that he could borrow

every last dime of profit coming in and everything that he could borrow

22:20

and just pounding into the growth as aggressively as possible.

and just pounding into the growth as aggressively as possible.

22:24

And

And

22:24

the negative was that when the first headwind showed up,

the negative was that when the first headwind showed up,

22:29

the businesses had no staying power. And so they would run into

the businesses had no staying power. And so they would run into

22:33

trouble. So my brother and I,

trouble. So my brother and I,

22:35

I think after we were, like, maybe nine or ten years old,

I think after we were, like, maybe nine or ten years old,

22:39

we were like his board of directors.

we were like his board of directors.

22:41

Okay. And I remember, like, when I'm, like, ten or eleven years old, my dad and my brother and me would sit down

Okay. And I remember, like, when I'm, like, ten or eleven years old, my dad and my brother and me would sit down

22:47

in the evening.

in the evening.

22:48

And we had to figure out how to make the business survive for one more day. So all the walls were caving in. There were everything going bad and there were a lot of moving parts,

And we had to figure out how to make the business survive for one more day. So all the walls were caving in. There were everything going bad and there were a lot of moving parts,

23:01

and we put our heads together, and we try to figure out how to make it last. Right? And then we'd make it past the one day. And the next night, the same thing over. Right? And so

and we put our heads together, and we try to figure out how to make it last. Right? And then we'd make it past the one day. And the next night, the same thing over. Right? And so

23:12

I finished many MBAs

I finished many MBAs

23:14

before I was twelve. Yeah. By basic and and I think at sixteen or sixteen.

before I was twelve. Yeah. By basic and and I think at sixteen or sixteen.

23:19

I was I don't know why my dad did it, but I'm really grateful he did. He used to take me on sales calls. And, you know, who takes fifteen year old on a sales call. It just doesn't fit, but my dad didn't care. And that was just incredible for me because I was getting to see

I was I don't know why my dad did it, but I'm really grateful he did. He used to take me on sales calls. And, you know, who takes fifteen year old on a sales call. It just doesn't fit, but my dad didn't care. And that was just incredible for me because I was getting to see

23:34

You know, I was in, I finished high school in Dubai. So I was in Dubai from the age of sixteen

You know, I was in, I finished high school in Dubai. So I was in Dubai from the age of sixteen

23:40

to actually nineteen.

to actually nineteen.

23:42

And

And

23:43

in

in

23:44

in that window of time, my dad had a gold jewelry business.

in that window of time, my dad had a gold jewelry business.

23:48

And, so we used to go I used to go with him

And, so we used to go I used to go with him

23:51

to these,

to these,

23:53

he was manufacturing gold jewelry and he was selling it to

he was manufacturing gold jewelry and he was selling it to

23:56

these, retail merchants. Right? And so he's going into

these, retail merchants. Right? And so he's going into

24:00

cold calling. Right? Right. And, and I'm I'm observing him going into a jewelry store. He doesn't know them. Were you a silent shadow, or did you have a role? No. No. I I was very excited. Okay. But I was I was soaking it in. And sometimes when he was traveling,

cold calling. Right? Right. And, and I'm I'm observing him going into a jewelry store. He doesn't know them. Were you a silent shadow, or did you have a role? No. No. I I was very excited. Okay. But I was I was soaking it in. And sometimes when he was traveling,

24:13

my brother and I would run the business, So they were, like, all these goldsmiths and all that, and we'd manage giving them the gold and taking the jewelry and all that. So, basically,

my brother and I would run the business, So they were, like, all these goldsmiths and all that, and we'd manage giving them the gold and taking the jewelry and all that. So, basically,

24:22

I didn't I didn't realize it then, but when when I went to college, I I studied engineering.

I didn't I didn't realize it then, but when when I went to college, I I studied engineering.

24:29

And then I joined

And then I joined

24:31

a telecom networking company as an as a R and D engineer.

a telecom networking company as an as a R and D engineer.

24:35

And when we're working on these products,

And when we're working on these products,

24:38

I'd ask my boss, so

I'd ask my boss, so

24:40

what are you gonna sell this for? And who's the customer?

what are you gonna sell this for? And who's the customer?

24:43

And what kind of like, what are you gonna make on it? And my boss would tell me

And what kind of like, what are you gonna make on it? And my boss would tell me

24:48

Those are all questions for marketing and sales. We don't we don't need to care about that. Just design the product. Right. He didn't know the answers. Yeah.

Those are all questions for marketing and sales. We don't we don't need to care about that. Just design the product. Right. He didn't know the answers. Yeah.

24:56

That's the poker tell. He didn't know the answers. He didn't care. Right. And I found that all the people I worked with, the engineers didn't care. I said,

That's the poker tell. He didn't know the answers. He didn't care. Right. And I found that all the people I worked with, the engineers didn't care. I said,

25:04

How stupid can you be? You know, you you don't have the big picture. The big picture is interesting and exciting.

How stupid can you be? You know, you you don't have the big picture. The big picture is interesting and exciting.

25:10

If you know the big picture, you can change the big picture. Right?

If you know the big picture, you can change the big picture. Right?

25:14

And,

And,

25:15

so what I did after,

so what I did after,

25:17

two and a half years with the nerds

two and a half years with the nerds

25:20

is I switched to international marketing. And that was such a breath of fresh air. It was so great. And I my learning again Right. Skyrocketed. And I had a big advantage because I had a very strong engineering background.

is I switched to international marketing. And that was such a breath of fresh air. It was so great. And I my learning again Right. Skyrocketed. And I had a big advantage because I had a very strong engineering background.

25:32

But I also had all the background for my teen years.

But I also had all the background for my teen years.

25:35

And so,

And so,

25:37

what I found is that I was able to

what I found is that I was able to

25:41

connect with customers and figure out kind of what they wanted and how to really get the order much better

connect with customers and figure out kind of what they wanted and how to really get the order much better

25:50

than guys twenty years more experienced than me because they hadn't had all these experiences, and they didn't they didn't think like an entrepreneur. Right? It was just a

than guys twenty years more experienced than me because they hadn't had all these experiences, and they didn't they didn't think like an entrepreneur. Right? It was just a

26:00

a small subset. And and later in life when I heard about Buffet for the first time,

a small subset. And and later in life when I heard about Buffet for the first time,

26:06

I found a lot of commonality.

I found a lot of commonality.

26:07

Right? I mean, he had a he had a very different experience in the sense that he was his own entrepreneur. Right. But one of the things that's really important is that

Right? I mean, he had a he had a very different experience in the sense that he was his own entrepreneur. Right. But one of the things that's really important is that

26:15

when I look at a CEO,

when I look at a CEO,

26:18

I always try to find out did they run a lemonade stand when they were twelve?

I always try to find out did they run a lemonade stand when they were twelve?

26:23

Because if they didn't run the REM lemonade stand, they were when they were twelve, they're not gonna be that great at business at thirty.

Because if they didn't run the REM lemonade stand, they were when they were twelve, they're not gonna be that great at business at thirty.

26:29

Okay?

Okay?

26:30

The the little itty bitty lemonade stand has a lot of lessons. Right. And and so I think,

The the little itty bitty lemonade stand has a lot of lessons. Right. And and so I think,

26:37

when when we have kids, I think it's really important in that window

when when we have kids, I think it's really important in that window

26:42

they don't need to run them in h stands, but they really need to,

they don't need to run them in h stands, but they really need to,

26:46

be doing what's going to be their calling. Right. And, and I think that's what the biggest

be doing what's going to be their calling. Right. And, and I think that's what the biggest

26:53

responsibility of parents is.

responsibility of parents is.

26:55

They need to expose them to

They need to expose them to

26:57

more of what they think their passion is. You know, I've done, like, maybe five hundred plus episodes now of this. And

more of what they think their passion is. You know, I've done, like, maybe five hundred plus episodes now of this. And

27:04

the podcast and name, my first mailing, because when we first started, I would just say, as fascinated by the many different ways people became millionaires. I thought that's cool to hear the stories.

the podcast and name, my first mailing, because when we first started, I would just say, as fascinated by the many different ways people became millionaires. I thought that's cool to hear the stories.

27:14

That's how the podcast started. And along the way, I noticed three common things of what you were doing in your teens, because I used to ask this question. I was like, you know, you're amazing now. If I met you when you were fourteen, what were you doing? What I have known that you were gonna go on to do in such things. And most people are very humble. They're like, oh, you wouldn't have known. But then when I say, what were you doing? It's always something other thirteen or fourteen year old is doing. It's like, oh, yeah. I used to go to the shop, and I found these, you know, these CDs rosetta stone that I could go sell for three x on eBay, And I made a eBay account or I, you know, I started buying shoes and flipping them. So it was always like eBay flipping or sneaker flipping is like a a super common one. Another one was a competitive video games because a lot of the strategy,

That's how the podcast started. And along the way, I noticed three common things of what you were doing in your teens, because I used to ask this question. I was like, you know, you're amazing now. If I met you when you were fourteen, what were you doing? What I have known that you were gonna go on to do in such things. And most people are very humble. They're like, oh, you wouldn't have known. But then when I say, what were you doing? It's always something other thirteen or fourteen year old is doing. It's like, oh, yeah. I used to go to the shop, and I found these, you know, these CDs rosetta stone that I could go sell for three x on eBay, And I made a eBay account or I, you know, I started buying shoes and flipping them. So it was always like eBay flipping or sneaker flipping is like a a super common one. Another one was a competitive video games because a lot of the strategy,

27:56

you know, communication, collaboration,

you know, communication, collaboration,

27:59

you know, just extreme competitiveness

you know, just extreme competitiveness

28:01

gets built in there. And,

gets built in there. And,

28:04

and there's a couple others, but another one is like a Mormon mission. So, Mormons would go and have to sell, you know, Jesus to to a bunch of people get rejected a thousand times in two years.

and there's a couple others, but another one is like a Mormon mission. So, Mormons would go and have to sell, you know, Jesus to to a bunch of people get rejected a thousand times in two years.

28:14

They become incredible sales people. And so you you you see these backgrounds where, oh, you were kind of forged at an early age to to do this? Well, we have a common friend, you know, side bulky. Right? And you you interviewed him for your podcast. And Said

They become incredible sales people. And so you you you see these backgrounds where, oh, you were kind of forged at an early age to to do this? Well, we have a common friend, you know, side bulky. Right? And you you interviewed him for your podcast. And Said

28:28

was an entrepreneur

was an entrepreneur

28:30

at the age of eight or nine,

at the age of eight or nine,

28:32

you know, I'm even maybe even earlier than that. He was selling, greeting cards. He was making and selling, on street cars. Right. You know? And, and then by the time he was eleven or twelve, I think he was, writing co and make a website. You know, and,

you know, I'm even maybe even earlier than that. He was selling, greeting cards. He was making and selling, on street cars. Right. You know? And, and then by the time he was eleven or twelve, I think he was, writing co and make a website. You know, and,

28:47

went from there. Right. You know, yeah. How did you make your money? Give me the highlights of your progression in terms of your own ability to to generate money and then start to invest it. I actually never ever

went from there. Right. You know, yeah. How did you make your money? Give me the highlights of your progression in terms of your own ability to to generate money and then start to invest it. I actually never ever

28:57

wanted to be an entrepreneur. I never wanted to start a business because I had seen

wanted to be an entrepreneur. I never wanted to start a business because I had seen

29:03

so much turmoil

so much turmoil

29:05

in in my in my childhood. Right? And I remember I was like,

in in my in my childhood. Right? And I remember I was like,

29:10

twenty

twenty

29:12

four or twenty five years old, and my dad was visiting me. I was living in Chicago,

four or twenty five years old, and my dad was visiting me. I was living in Chicago,

29:17

and he tells me it's time to quit.

and he tells me it's time to quit.

29:20

And start your own business.

And start your own business.

29:22

And, so I said, you know, have you forgotten?

And, so I said, you know, have you forgotten?

29:26

Have you forgotten my childhood?

Have you forgotten my childhood?

29:29

And, you know, all the ups and downs. He so my dad just said, oh, that's what makes life great. Right. But he said, look, the company you're you're in, my the business I work for had two thousand people.

And, you know, all the ups and downs. He so my dad just said, oh, that's what makes life great. Right. But he said, look, the company you're you're in, my the business I work for had two thousand people.

29:40

He said you're such a tiny c cog in a such a big wheel.

He said you're such a tiny c cog in a such a big wheel.

29:44

You could drop dead tomorrow.

You could drop dead tomorrow.

29:46

They won't even miss you. Okay? You don't matter.

They won't even miss you. Okay? You don't matter.

29:50

And what you really want to to be doing is figure out something where there's an offering gap

And what you really want to to be doing is figure out something where there's an offering gap

29:57

and,

and,

29:58

go for it. Right? And and I was actually,

go for it. Right? And and I was actually,

30:02

getting a little bit frustrated at work because the company had been growing it. We get more and more bureaucratic. And

getting a little bit frustrated at work because the company had been growing it. We get more and more bureaucratic. And

30:08

So I actually,

So I actually,

30:10

started to think about,

started to think about,

30:13

what might be possible

what might be possible

30:16

and I didn't have any money. You know, basically I was twenty four, twenty five. So what I did is I came

and I didn't have any money. You know, basically I was twenty four, twenty five. So what I did is I came

30:22

I came up with some

I came up with some

30:26

IT services offerings that I thought would be pretty unique because that time client server computing was,

IT services offerings that I thought would be pretty unique because that time client server computing was,

30:32

just getting going early nineties.

just getting going early nineties.

30:34

And,

And,

30:35

so I had about

so I had about

30:37

thirty thousand dollars in my four zero one k. And I said, okay. We'll worry retirement later. And we'd pay the penalty. I pulled that out. Nice. And I I I

thirty thousand dollars in my four zero one k. And I said, okay. We'll worry retirement later. And we'd pay the penalty. I pulled that out. Nice. And I I I

30:47

applied for every credit card I could get my hands on.

applied for every credit card I could get my hands on.

30:51

And, so I had seventy thousand available to me

And, so I had seventy thousand available to me

30:55

in different

in different

30:57

credit limits in credit cards.

credit limits in credit cards.

30:59

And so I said, okay. We've got up to a hundred thousand that we can play with. And the third thing that I did is I

And so I said, okay. We've got up to a hundred thousand that we can play with. And the third thing that I did is I

31:07

basically

basically

31:08

did both. I,

did both. I,

31:11

was going to my

was going to my

31:13

my job and I had started my company at the same time because, basically, what I would do is, like, from, like, six to nine in the morning, I'd work on my business, And then from six PM till midnight, I worked with my business again and weekends. Right. But somebody was paying the rent. I still had a paycheck and all that. And I said, okay. Once we have enough revenue,

my job and I had started my company at the same time because, basically, what I would do is, like, from, like, six to nine in the morning, I'd work on my business, And then from six PM till midnight, I worked with my business again and weekends. Right. But somebody was paying the rent. I still had a paycheck and all that. And I said, okay. Once we have enough revenue,

31:34

client's profit,

client's profit,

31:35

I can quit. Right? And And I always tell,

I can quit. Right? And And I always tell,

31:39

tell people that basically,

tell people that basically,

31:43

if you think about it, there's a hundred and sixty eight hours in a week.

if you think about it, there's a hundred and sixty eight hours in a week.

31:46

Your employer needs you for forty.

Your employer needs you for forty.

31:49

Right? And if you live close to work or work remote,

Right? And if you live close to work or work remote,

31:54

the commute time is not that much. And even if you take out time for eating, sleeping, everything else,

the commute time is not that much. And even if you take out time for eating, sleeping, everything else,

31:59

you have at least another forty, fifty hours.

you have at least another forty, fifty hours.

32:02

That you can engage on something

That you can engage on something

32:05

other than work. Right. And I used to always get great reviews when I was starting my business. I said, okay, look.

other than work. Right. And I used to always get great reviews when I was starting my business. I said, okay, look.

32:11

The plan is

The plan is

32:13

to not get fired.

to not get fired.

32:15

The plan is not to be employee of the year. Okay. Right. I don't need to overshoot. So I said I'm going to give them just enough

The plan is not to be employee of the year. Okay. Right. I don't need to overshoot. So I said I'm going to give them just enough

32:23

so I'm just above firing level. Right. You know, where it's not so bad that they call me in and terminate me. I need to be above that. Okay?

so I'm just above firing level. Right. You know, where it's not so bad that they call me in and terminate me. I need to be above that. Okay?

32:31

And I did this over nine months, and then I had clients, revenue, and all that. And I went into my boss and his boss,

And I did this over nine months, and then I had clients, revenue, and all that. And I went into my boss and his boss,

32:38

and I resigned. Right? And,

and I resigned. Right? And,

32:41

they they said, you know, Monish,

they they said, you know, Monish,

32:43

we really couldn't figure out

we really couldn't figure out

32:45

last nine months. Like,

last nine months. Like,

32:47

you checked out.

you checked out.

32:49

I said exactly.

I said exactly.

32:50

I said my my goal was to

I said my my goal was to

32:54

just do enough so I didn't get fired, but he said she said, yeah, we saw a big drop.

just do enough so I didn't get fired, but he said she said, yeah, we saw a big drop.

32:59

In the old morning and the new morning, and we talked about it. And we actually said, it's not so bad that we would fire him.

In the old morning and the new morning, and we talked about it. And we actually said, it's not so bad that we would fire him.

33:06

But there's something off. Right. Maybe. We could we could fill it out. Right? And then, so I explained to them I was going into a business. My own business was not comparative with theirs. Yeah. And so they said, look, when your business fails,

But there's something off. Right. Maybe. We could we could fill it out. Right? And then, so I explained to them I was going into a business. My own business was not comparative with theirs. Yeah. And so they said, look, when your business fails,

33:18

not if your business fails, when your business fails, you can come back. We're gonna give you more money. We're gonna promote you.

not if your business fails, when your business fails, you can come back. We're gonna give you more money. We're gonna promote you.

33:27

And you're gonna do great. So I said, you know, my my plan was that if I failed, when I was going to my business, if I failed, I said, look, I got my degree. I can look for a job.

And you're gonna do great. So I said, you know, my my plan was that if I failed, when I was going to my business, if I failed, I said, look, I got my degree. I can look for a job.

33:37

I can apply for personal bankruptcy, clean everything off, and start over. Right? I said this is even better. I don't have to look for a job. Right. I get more money. Right? And so I actually felt like the, you know, people think

I can apply for personal bankruptcy, clean everything off, and start over. Right? I said this is even better. I don't have to look for a job. Right. I get more money. Right? And so I actually felt like the, you know, people think

33:51

there's a people have a a a false mental model.

there's a people have a a a false mental model.

33:56

People think entrepreneurs

People think entrepreneurs

33:58

take risk.

take risk.

34:00

Entrepreneurs do not take risk.

Entrepreneurs do not take risk.

34:02

They do everything in their power to minimize risk. If you think about Buffet's pinball machine

They do everything in their power to minimize risk. If you think about Buffet's pinball machine

34:09

us. What was the risk those two fourteen year olds? Quanny's fourteen year olds took. Nothing.

us. What was the risk those two fourteen year olds? Quanny's fourteen year olds took. Nothing.

34:15

Okay. It's fifteen dollars in a pinball machine, which take use themselves. Right. Where's this area? Three dollars three dollars in parts.

Okay. It's fifteen dollars in a pinball machine, which take use themselves. Right. Where's this area? Three dollars three dollars in parts.

34:23

So the second pinball machine will only get bought when the first one's already producing Right. Right. And the third one after the second one. So, basically,

So the second pinball machine will only get bought when the first one's already producing Right. Right. And the third one after the second one. So, basically,

34:32

there's no risk. Right? If it fails,

there's no risk. Right? If it fails,

34:35

They sell those machines for more than they bought them. Entrepreneurs are actually great risk reducers.

They sell those machines for more than they bought them. Entrepreneurs are actually great risk reducers.

34:40

They start with something that seems risky, but So that's the other thing that is a commonality t between entrepreneurs

They start with something that seems risky, but So that's the other thing that is a commonality t between entrepreneurs

34:46

and value investors,

and value investors,

34:48

which is why the same brain cells get used,

which is why the same brain cells get used,

34:51

both are trying

both are trying

34:53

to minimize risk. You know, we as value investors wanna go low risk high return,

to minimize risk. You know, we as value investors wanna go low risk high return,

34:58

and great entrepreneurs,

and great entrepreneurs,

35:00

that's exactly what they're doing. They're going low risk high return. Nobody

that's exactly what they're doing. They're going low risk high return. Nobody

35:04

is doing high risk high return.

is doing high risk high return.

35:06

The only only so if you look at the United States,

The only only so if you look at the United States,

35:10

probably around a million businesses, more than a million businesses a year get formed in the United States.

probably around a million businesses, more than a million businesses a year get formed in the United States.

35:17

Venture backed businesses,

Venture backed businesses,

35:20

are less than much less than even one percent of that pie.

are less than much less than even one percent of that pie.

35:24

Might be in most years less than one tenth or one percent. Right? So if there was no venture capital and no venture backed businesses,

Might be in most years less than one tenth or one percent. Right? So if there was no venture capital and no venture backed businesses,

35:32

it would make no difference to the landscape.

it would make no difference to the landscape.

35:34

Okay. We'd still have the million businesses being formed.

Okay. We'd still have the million businesses being formed.

35:37

Winter backed businesses are a different animal because they are

Winter backed businesses are a different animal because they are

35:41

high risk high return, right, the what the VC wants you to do, the VC's got ten bets. He doesn't care whether your bet works or not. He just wants one of those ten to work. Yep. So he wants you to step on the gas

high risk high return, right, the what the VC wants you to do, the VC's got ten bets. He doesn't care whether your bet works or not. He just wants one of those ten to work. Yep. So he wants you to step on the gas

35:54

as aggressively as possible. If you blow up, you blow up. Right?

as aggressively as possible. If you blow up, you blow up. Right?

35:58

When you are an entrepreneur who's not venture backed, that is not how you go. You don't put just,

When you are an entrepreneur who's not venture backed, that is not how you go. You don't put just,

36:05

you know, foot on the gas, you're very careful about downside protection.

you know, foot on the gas, you're very careful about downside protection.

36:10

So what happened in some of the big in, big entrepreneur with Richard Branson. Oh, yeah. I think is the people see him as this free, you know, ret risk taker, reckless sort of guy, but you you've pointed out that That's not true about Richard Branson in this case. One of those stories I love about Branson

So what happened in some of the big in, big entrepreneur with Richard Branson. Oh, yeah. I think is the people see him as this free, you know, ret risk taker, reckless sort of guy, but you you've pointed out that That's not true about Richard Branson in this case. One of those stories I love about Branson

36:27

is when he had the idea to start,

is when he had the idea to start,

36:31

Virgin Atlantic

Virgin Atlantic

36:32

airline, right,

airline, right,

36:34

the minimum that you need

the minimum that you need

36:37

to start

to start

36:38

transatlantic

transatlantic

36:39

service

service

36:40

is a Boeing seven four seven.

is a Boeing seven four seven.

36:43

Okay?

Okay?

36:43

A couple of hundred million dollars. Right?

A couple of hundred million dollars. Right?

36:46

And,

And,

36:48

Branson got virgin Atlantic off the ground with no money.

Branson got virgin Atlantic off the ground with no money.

36:53

So what he did is he calls,

So what he did is he calls,

36:56

directory assistance.

directory assistance.

36:57

In the United States, five five five one two one two in Seattle, two zero six five five five one two one two. Ask for the number for Boeing.

In the United States, five five five one two one two in Seattle, two zero six five five five one two one two. Ask for the number for Boeing.

37:05

Okay, gets the number for Boeing calls the main switchboard

Okay, gets the number for Boeing calls the main switchboard

37:08

and says,

and says,

37:10

I'd like to lease a seven four seven that you guys might have hanging around. You're not using, they hang up on him. Right. Okay.

I'd like to lease a seven four seven that you guys might have hanging around. You're not using, they hang up on him. Right. Okay.

37:16

It keeps calling them.

It keeps calling them.

37:18

And finally,

And finally,

37:19

the lady of switchboards says,

the lady of switchboards says,

37:22

let me transfer you to someone who can get rid of you properly.

let me transfer you to someone who can get rid of you properly.

37:26

Right? So she transferred him to someone who's head of, like, commercial sales.

Right? So she transferred him to someone who's head of, like, commercial sales.

37:31

And so this guy tells him, listen, mister Branson,

And so this guy tells him, listen, mister Branson,

37:35

in every country, we have one customer.

in every country, we have one customer.

37:38

And

And

37:39

you are not the customer

you are not the customer

37:42

in the UK.

in the UK.

37:43

It's British Airways.

It's British Airways.

37:44

And so, therefore, there's nothing to talk about. So

And so, therefore, there's nothing to talk about. So

37:48

Richard tell them, listen.

Richard tell them, listen.

37:50

I I I agree with you. That's fine, but I just humor me for a second.

I I I agree with you. That's fine, but I just humor me for a second.

37:55

Do you have a old Boeing seven four seven lying around that you're not using.

Do you have a old Boeing seven four seven lying around that you're not using.

38:00

And he says, yeah. Actually, we do. And if one of your customers, like, the one of the UK called, you, like, British called you and they wanted a plane,

And he says, yeah. Actually, we do. And if one of your customers, like, the one of the UK called, you, like, British called you and they wanted a plane,

38:08

what would you lease it for?

what would you lease it for?

38:10

So he says, well, I really don't need to have this conversation, but we would lease it for about two hundred thousand a month, okay, two or three hundred thousand a month. And

So he says, well, I really don't need to have this conversation, but we would lease it for about two hundred thousand a month, okay, two or three hundred thousand a month. And

38:21

Branson was able to convince Boeing

Branson was able to convince Boeing

38:24

to lease him that seven four seven because he was sitting and doing nothing. Right. Then when he set up, Virgin and Plantic, he said you get paid for all the future flights in advance

to lease him that seven four seven because he was sitting and doing nothing. Right. Then when he set up, Virgin and Plantic, he said you get paid for all the future flights in advance

38:36

because people buy tickets.

because people buy tickets.

38:39

So the plane's gonna fly in April people already bought tickets in February. Right. So you say I got cash coming in two months, three months before the plane plane's gonna fly, and I'm gonna pay for the fuel.

So the plane's gonna fly in April people already bought tickets in February. Right. So you say I got cash coming in two months, three months before the plane plane's gonna fly, and I'm gonna pay for the fuel.

38:50

Thirty days after that plane lands.

Thirty days after that plane lands.

38:52

Okay? So he had negative working capital, and the lease payment is also in arrears. Right? So, basically, he's he was able to

Okay? So he had negative working capital, and the lease payment is also in arrears. Right? So, basically, he's he was able to

39:02

get Virgin Atlantic off the ground

get Virgin Atlantic off the ground

39:05

with zero equity.

with zero equity.

39:07

Right? Now the way I look at it is that if if you can start an airline

Right? Now the way I look at it is that if if you can start an airline

39:12

with no money,

with no money,

39:13

you can start any business with no money. Right. Okay.

you can start any business with no money. Right. Okay.

39:17

You just have to replace capital

You just have to replace capital

39:19

with creative thinking.

with creative thinking.

39:21

Right? How is it possible

Right? How is it possible

39:23

that point one percent of the population

that point one percent of the population

39:25

owns

owns

39:26

almost seventy percent of all the motels in America. That's right. This is an incredible story. Can you explain How is that possible? In the early seventies,

almost seventy percent of all the motels in America. That's right. This is an incredible story. Can you explain How is that possible? In the early seventies,

39:34

a dictator

a dictator

39:35

came to power

came to power

39:37

in Uganda.

in Uganda.

39:39

And idi amin noticed that in Uganda,

And idi amin noticed that in Uganda,

39:42

most of the businesses were controlled

most of the businesses were controlled

39:45

by east asians,

by east asians,

39:46

Indians,

Indians,

39:47

hotels,

hotels,

39:49

they control, like, eighty percent of the economy. And these

they control, like, eighty percent of the economy. And these

39:52

hotels had come to Uganda, Uganda.

hotels had come to Uganda, Uganda.

39:55

They were brought to Uganda about a hundred years ago. To work on the railroad almost as slaves.

They were brought to Uganda about a hundred years ago. To work on the railroad almost as slaves.

40:01

Right? And

Right? And

40:03

but because they're natural entrepreneurs,

but because they're natural entrepreneurs,

40:06

they they went from

they they went from

40:08

railroad builders

railroad builders

40:10

to eventually

to eventually

40:11

owning and controlling below economy. And he was pissed.

owning and controlling below economy. And he was pissed.

40:15

So so idi amin said Africa

So so idi amin said Africa

40:19

is for Africans,

is for Africans,

40:21

and you guys are not Africans.

and you guys are not Africans.

40:23

And

And

40:24

these hotels

these hotels

40:25

had been in Uganda for three or four generations.

had been in Uganda for three or four generations.

40:29

That was the home. They were Ug citizens,

That was the home. They were Ug citizens,

40:32

you know, born and raised. Right?

you know, born and raised. Right?

40:34

And what he did is he nationalized all their businesses.

And what he did is he nationalized all their businesses.

40:38

And he threw threw him out of the country. Which just means took their businesses. Right? He just took them. Yeah. Yeah. He basically confiscated all not their businesses, homes, everything, confiscated all the assets.

And he threw threw him out of the country. Which just means took their businesses. Right? He just took them. Yeah. Yeah. He basically confiscated all not their businesses, homes, everything, confiscated all the assets.

40:48

And he told them you got ninety days to leave the country. So these these pattels in Uganda

And he told them you got ninety days to leave the country. So these these pattels in Uganda

40:54

were stateless.

were stateless.

40:55

Okay. You're you're being thrown out. You know, you're sitting in a country. The country's throwing you out. Right?

Okay. You're you're being thrown out. You know, you're sitting in a country. The country's throwing you out. Right?

41:02

And,

And,

41:03

and they lost all their money. So they they were able to convert

and they lost all their money. So they they were able to convert

41:08

a very little small sliver of their assets into gold

a very little small sliver of their assets into gold

41:12

and,

and,

41:13

the United States took some hotels as refugees.

the United States took some hotels as refugees.

41:16

The UK took them,

The UK took them,

41:18

Canada took them India. Surprisingly

Canada took them India. Surprisingly

41:21

refused

refused

41:22

to take the patel refused to recognize

to take the patel refused to recognize

41:25

the patel at any right to return to India because they said you haven't been here for a hundred years.

the patel at any right to return to India because they said you haven't been here for a hundred years.

41:30

And, and India was at that time dealing with the Bangladesh crisis.

And, and India was at that time dealing with the Bangladesh crisis.

41:34

So it couldn't deal with anymore. But a small number of patel, a few thousand of them,

So it couldn't deal with anymore. But a small number of patel, a few thousand of them,

41:40

came into the United States in the early seventies, the refugees.

came into the United States in the early seventies, the refugees.

41:45

They didn't have skills there where they could get great jobs.

They didn't have skills there where they could get great jobs.

41:49

They didn't have they spoke English with a funny accent.

They didn't have they spoke English with a funny accent.

41:53

And,

And,

41:55

they they realized that, look, if we

they they realized that, look, if we

41:59

by a really small motel, ten, twelve,

by a really small motel, ten, twelve,

42:03

fourteen room motel,

fourteen room motel,

42:05

the family can live in one or two rooms. Motels are labor intensive.

the family can live in one or two rooms. Motels are labor intensive.

42:09

Right.

Right.

42:10

The family can do all the work. You know? It's a job in a house together, So, basically, cooking, cleaning, front desk, laundry.

The family can do all the work. You know? It's a job in a house together, So, basically, cooking, cleaning, front desk, laundry.

42:17

And so what what they started doing is they would

And so what what they started doing is they would

42:21

by these motels

by these motels

42:23

and,

and,

42:24

basically fire all the staff

basically fire all the staff

42:26

and move in into two of the rooms

and move in into two of the rooms

42:29

And because they had no costs,

And because they had no costs,

42:32

they were able to charge nightly rates that were lower

they were able to charge nightly rates that were lower

42:36

that all the neighboring motels.

that all the neighboring motels.

42:39

So what would happen is that the Patel owned motel

So what would happen is that the Patel owned motel

42:43

would be running hundred percent occupancy.

would be running hundred percent occupancy.

42:46

The other motels couldn't match that rate because they'd lose money. Right. Right. Because they they had staff and workers comp and staff and all that stuff. Right? And what the Patel started to do, and they Patel are very frugal. They basically were vegetarians,

The other motels couldn't match that rate because they'd lose money. Right. Right. Because they they had staff and workers comp and staff and all that stuff. Right? And what the Patel started to do, and they Patel are very frugal. They basically were vegetarians,

43:00

at that time in the US, if you were vegetarian, you're really host. You couldn't really eat out anywhere. So by,

at that time in the US, if you were vegetarian, you're really host. You couldn't really eat out anywhere. So by,

43:07

they were forced

they were forced

43:08

to just cook themselves, which was cheap. Right? So there wasn't much of a grocery bill. And, what they started doing is

to just cook themselves, which was cheap. Right? So there wasn't much of a grocery bill. And, what they started doing is

43:17

as their nephew came of age, for example,

as their nephew came of age, for example,

43:21

they would

they would

43:22

help him out to buy his own motel.

help him out to buy his own motel.

43:25

Right? And then the nephew

Right? And then the nephew

43:27

would get that going and then the next one, the next one.

would get that going and then the next one, the next one.

43:31

And you run this for fifty years,

And you run this for fifty years,

43:34

and

and

43:35

you end up with

you end up with

43:37

seventy percent of the motels

seventy percent of the motels

43:39

in the country under Patel ownership.

in the country under Patel ownership.

43:42

Not only that. They've actually gone up market now. So a lot of the Hilton's

Not only that. They've actually gone up market now. So a lot of the Hilton's

43:47

mariots, westerns.

mariots, westerns.

43:49

If you really look, you'll find it's under Patel ownership.

If you really look, you'll find it's under Patel ownership.

43:52

Right? Same

Right? Same

43:53

same math. They always are very good operators, and then they went into seven eleven laundromats, dunkin donuts, all of it. You name it. And,

same math. They always are very good operators, and then they went into seven eleven laundromats, dunkin donuts, all of it. You name it. And,

44:02

but boss bottom line was that

but boss bottom line was that

44:05

these were entrepreneurs

these were entrepreneurs

44:07

that were low cost producers.

that were low cost producers.

44:09

Right?

Right?

44:10

Low cost produce producers have an inherent advantage.

Low cost produce producers have an inherent advantage.

44:13

And I remember when I first,

And I remember when I first,

44:16

when I first met Charlie,

when I first met Charlie,

44:18

he had he had read my book

he had he had read my book

44:20

and, and we were discussing the patels. He says, yeah, you know, I got some friends in the motel business. I just tell them, don't ever, ever

and, and we were discussing the patels. He says, yeah, you know, I got some friends in the motel business. I just tell them, don't ever, ever

44:29

try to compete with a Patel. If you ever find yourself in competition with a Patel,

try to compete with a Patel. If you ever find yourself in competition with a Patel,

44:34

just find another game to play. Just move on. It's not worth it.

just find another game to play. Just move on. It's not worth it.

44:39

So you said you met Charlie.

So you said you met Charlie.

44:42

That's gotta be kind of a surreal thing for you,

That's gotta be kind of a surreal thing for you,

44:45

to have met and become friends with Charlie Munger and Warren Buffett.

to have met and become friends with Charlie Munger and Warren Buffett.

44:49

How does that happen? How does that come about?

How does that happen? How does that come about?

44:51

It shouldn't happen. You know, I was this squanny kid who grew up in the suburbs of Mumbai

It shouldn't happen. You know, I was this squanny kid who grew up in the suburbs of Mumbai

44:57

And,

And,

44:59

I accidentally heard a Warren Buffett in the mid nineties

I accidentally heard a Warren Buffett in the mid nineties

45:03

and it was a big aha moment for me. At that time, I was lucky. The first couple of biographies on him had come out,

and it was a big aha moment for me. At that time, I was lucky. The first couple of biographies on him had come out,

45:09

and what I realized is when I read

and what I realized is when I read

45:12

about how Warren was investing,

about how Warren was investing,

45:14

I said

I said

45:15

all these,

all these,

45:17

all these models

all these models

45:19

are the same models that an entrepreneur uses.

are the same models that an entrepreneur uses.

45:22

It's the same. Exactly what I was saying that, you know,

It's the same. Exactly what I was saying that, you know,

45:26

better businessman because I'm an entrepreneur and vice versa.

better businessman because I'm an entrepreneur and vice versa.

45:30

So I said, you know, but the big advantage he seems to have is that four percent of time of strategy

So I said, you know, but the big advantage he seems to have is that four percent of time of strategy

45:37

is eighty percent time for him. And

is eighty percent time for him. And

45:40

even in the business, I had created the IT business,

even in the business, I had created the IT business,

45:44

which had grown and scaled,

which had grown and scaled,

45:46

I always enjoyed the four percent more. I I I was strategy, the figure. I was happy doing sales calls and,

I always enjoyed the four percent more. I I I was strategy, the figure. I was happy doing sales calls and,

45:53

you know, building teams and all that. That was that was great.

you know, building teams and all that. That was that was great.

45:56

Do it once.

Do it once.

45:58

I said, wow, if I go into investing,

I said, wow, if I go into investing,

46:01

it would be eighty percent of my time

it would be eighty percent of my time

46:03

because

because

46:04

there's no blocking and tackling. Someone else is doing that. And for me, that was a big, moment that

there's no blocking and tackling. Someone else is doing that. And for me, that was a big, moment that

46:11

I should switch I was lucky in our in the mid nineties, someone bought a small portion of my business

I should switch I was lucky in our in the mid nineties, someone bought a small portion of my business

46:18

after taxes, after everything. I got a million dollars.

after taxes, after everything. I got a million dollars.

46:21

And I, for the first time,

And I, for the first time,

46:24

had money in the bank. Right.

had money in the bank. Right.

46:26

And I didn't really need the million. Right? So I said, okay. What we're gonna do is we're gonna take this million we're gonna invest in the public markets,

And I didn't really need the million. Right? So I said, okay. What we're gonna do is we're gonna take this million we're gonna invest in the public markets,

46:33

and we're gonna find out if we can actually do this, you know, this, you know,

and we're gonna find out if we can actually do this, you know, this, you know,

46:39

an idea is like an asshole. Everyone has one. Okay. Ideas don't mean anything. Right? So you really have to execute

an idea is like an asshole. Everyone has one. Okay. Ideas don't mean anything. Right? So you really have to execute

46:46

it's really execution

it's really execution

46:48

on the idea that has value. You know,

on the idea that has value. You know,

46:50

entrepreneurs get kinda hung up on, oh, I need to get a patent and all that. One of the things you have to understand is you can go to your most direct competitors.

entrepreneurs get kinda hung up on, oh, I need to get a patent and all that. One of the things you have to understand is you can go to your most direct competitors.

46:58

You can tell them all your trade secrets.

You can tell them all your trade secrets.

47:01

They will listen to you really carefully,

They will listen to you really carefully,

47:03

and they will not change behavior.

and they will not change behavior.

47:06

Okay? So

Okay? So

47:07

you don't need patents for anything. You don't the ideas don't mean anything. It's really the execution.

you don't need patents for anything. You don't the ideas don't mean anything. It's really the execution.

47:12

And,

And,

47:13

so, basically,

so, basically,

47:15

I I said, okay, let's take the million. Let's start investing it. Let's figure out what happens.

I I said, okay, let's take the million. Let's start investing it. Let's figure out what happens.

47:19

And I was surprised we did really well. I think that from, like, ninety

And I was surprised we did really well. I think that from, like, ninety

47:24

five to two thousand, a five year period,

five to two thousand, a five year period,

47:28

that million became worth thirteen million.

that million became worth thirteen million.

47:31

And,

And,

47:31

I said, wow. Well done, Monish.

I said, wow. Well done, Monish.

47:34

And,

And,

47:35

So, like, a seventy percent a year compounded. Yeah. And, so I was getting I was doing investing part time while I was running my IT business.

So, like, a seventy percent a year compounded. Yeah. And, so I was getting I was doing investing part time while I was running my IT business.

47:45

I was much more interested in the investing side

I was much more interested in the investing side

47:48

losing interest on the business side till till that point when in nineteen ninety nine,

losing interest on the business side till till that point when in nineteen ninety nine,

47:54

I didn't even feel like going into work. I I said, this is I I just wanna just focus on investing.

I didn't even feel like going into work. I I said, this is I I just wanna just focus on investing.

48:00

And, so I made I made a couple of changes then I,

And, so I made I made a couple of changes then I,

48:04

looked for and found a CEO to run my company.

looked for and found a CEO to run my company.

48:08

And, basically,

And, basically,

48:10

thirteen, fourteen million, I felt was enough

thirteen, fourteen million, I felt was enough

48:13

to retire,

to retire,

48:14

do nothing. You know, I could do investing full time. Right? And so my plan was, okay, someone can run the business. Whatever's value is there is is there. It doesn't matter. I can go off and just now do

do nothing. You know, I could do investing full time. Right? And so my plan was, okay, someone can run the business. Whatever's value is there is is there. It doesn't matter. I can go off and just now do

48:26

investing full time.

investing full time.

48:28

And,

And,

48:30

I had a few friends

I had a few friends

48:32

who had,

who had,

48:33

basically,

basically,

48:35

I used to just give them stock tips, you know, the mid nineties. I find some company and make the investment

I used to just give them stock tips, you know, the mid nineties. I find some company and make the investment

48:41

after that, I didn't care who bought the stock. Right? I mean, I I already bought it. Right? And so I tell my friends, hey, you know, I found this company. You ought to

after that, I didn't care who bought the stock. Right? I mean, I I already bought it. Right? And so I tell my friends, hey, you know, I found this company. You ought to

48:48

see if you wanna take a

see if you wanna take a

48:50

take a flyer on it and buy it and so on. And

take a flyer on it and buy it and so on. And

48:54

they did really well on the stock tips. Right? But

they did really well on the stock tips. Right? But

48:57

you know, some guys worth, like, five million.

you know, some guys worth, like, five million.

49:00

They would put ten thousand to what I told them. Right. And they would triple their money. Wouldn't make any difference. Right? So a bunch of these friends came to me and said, look, we don't like this randomness of these talk tips. We don't see you sometimes and

They would put ten thousand to what I told them. Right. And they would triple their money. Wouldn't make any difference. Right? So a bunch of these friends came to me and said, look, we don't like this randomness of these talk tips. We don't see you sometimes and

49:13

you may have sold. We don't know.

you may have sold. We don't know.

49:15

We want you to manage some money for us.

We want you to manage some money for us.

49:19

And,

And,

49:20

so they were proposing giving me a hundred thousand dollars each,

so they were proposing giving me a hundred thousand dollars each,

49:24

and it would be a million dollars in all. Right? And I said, okay. I'll do it. I thought of it as a hobby. I didn't even think of it as a fund, but I wanna do it in a format that works for me. So I love the buffet partnerships where he didn't charge management fees.

and it would be a million dollars in all. Right? And I said, okay. I'll do it. I thought of it as a hobby. I didn't even think of it as a fund, but I wanna do it in a format that works for me. So I love the buffet partnerships where he didn't charge management fees.

49:40

He only charged performance fees. So what's a normal structure and then what did Warren do? So a normal hedge fund would be a two and twenty structure. They would take two percent of assets to the management fee for breathing every year. Every year. Yeah. And then, twenty percent of the profits. Right? So if a if a hedge fund, for example,

He only charged performance fees. So what's a normal structure and then what did Warren do? So a normal hedge fund would be a two and twenty structure. They would take two percent of assets to the management fee for breathing every year. Every year. Yeah. And then, twenty percent of the profits. Right? So if a if a hedge fund, for example,

49:59

let's say it has a billion billion dollars under management. Right?

let's say it has a billion billion dollars under management. Right?

50:03

The general partners would take twenty million dollars a year for breathing for breathing.

The general partners would take twenty million dollars a year for breathing for breathing.

50:08

And then if if it went up ten percent,

And then if if it went up ten percent,

50:11

so they would make a hundred million, for example, on the billion.

so they would make a hundred million, for example, on the billion.

50:15

They take another twenty million on that. Right.

They take another twenty million on that. Right.

50:17

So, basically, what would happen is the investor who put up the money on a ten percent return gets a six percent return,

So, basically, what would happen is the investor who put up the money on a ten percent return gets a six percent return,

50:25

right, below the S and P, right, because of all these frictional costs. So Buffet had run his partnership by saying that,

right, below the S and P, right, because of all these frictional costs. So Buffet had run his partnership by saying that,

50:33

there's no management fee.

there's no management fee.

50:35

The first six percent returns go to you.

The first six percent returns go to you.

50:38

And above that, I'll take one fourth and you take three fourth. So in the same situation,

And above that, I'll take one fourth and you take three fourth. So in the same situation,

50:43

if if the fund is up ten percent,

if if the fund is up ten percent,

50:46

in Buffett's case,

in Buffett's case,

50:48

the first sixty million goes to the investors,

the first sixty million goes to the investors,

50:51

and the remaining forty million is split. So it becomes ten million to him

and the remaining forty million is split. So it becomes ten million to him

50:56

thirty million to the investors. Right? So it's a it's a better it's a half the fee, basically. And you're you're paying for performance. Right. If he's not up that much, you don't pay anything.

thirty million to the investors. Right? So it's a it's a better it's a half the fee, basically. And you're you're paying for performance. Right. If he's not up that much, you don't pay anything.

51:04

So I like that structure. And so

So I like that structure. And so

51:07

I told them I wanna set up a a fund.

I told them I wanna set up a a fund.

51:11

So it's all legal.

So it's all legal.

51:12

And we will do it with that structure. This they really didn't care what structure it was. And,

And we will do it with that structure. This they really didn't care what structure it was. And,

51:18

so Pabry funds really started in ninety nine as a hobby.

so Pabry funds really started in ninety nine as a hobby.

51:22

With me and my buddies. And I had thirteen million on the side, which was my main focus. And I said, yeah, there's another million here.

With me and my buddies. And I had thirteen million on the side, which was my main focus. And I said, yeah, there's another million here.

51:30

It's okay if I find something and buy for both, right, makes no difference. Right? And,

It's okay if I find something and buy for both, right, makes no difference. Right? And,

51:36

about a year

about a year

51:38

year after that, there was about two and a half million. We were up, like, seventy percent the first year.

year after that, there was about two and a half million. We were up, like, seventy percent the first year.

51:43

And,

And,

51:43

some more money had come in And I said, you know, why do I treat the fund like a stepchild?

some more money had come in And I said, you know, why do I treat the fund like a stepchild?

51:49

Why don't I think of it like a real business? And why don't I

Why don't I think of it like a real business? And why don't I

51:53

basically grow and scale it like a real business.

basically grow and scale it like a real business.

51:57

And,

And,

51:58

and so I I started to do that. And for Bry funds,

and so I I started to do that. And for Bry funds,

52:02

we had a very good run,

we had a very good run,

52:05

for the first eight or nine years. I think we were doing, like, mid thirties a year on average, no down years.

for the first eight or nine years. I think we were doing, like, mid thirties a year on average, no down years.

52:11

And the assets grew. We were at about, I think, in

And the assets grew. We were at about, I think, in

52:14

two thousand seven,

two thousand seven,

52:16

we were at about six hundred million in assets under management.

we were at about six hundred million in assets under management.

52:20

And I had made a lot of money. You know, the fees and the compounding and all of that. So in like a ten year period, you turned the million dollars of managed money into about six hundred million of assets in management, including new money. Yeah. Yeah. It wasn't all. It wasn't just organic, but but but the original money

And I had made a lot of money. You know, the fees and the compounding and all of that. So in like a ten year period, you turned the million dollars of managed money into about six hundred million of assets in management, including new money. Yeah. Yeah. It wasn't all. It wasn't just organic, but but but the original money

52:36

had almost tripled. Right. You know, tripled or quadrupled in that period. I had asked you. Yesterday, when we were hanging out, I said, you know, there's really two questions when you hear this story. Number one, how the hell were you getting these returns? So what what what did you know about invest? What was that part? But the second part is how'd you what'd you do on the fundraising side? How'd you get so many so much more money to come through the door? And you had a great line about that, about how you get more money to come through the door because you didn't strike me as a a guy who wanted to be out there fundraising and knocking on doors trying to raise funds. So how does it happen? Buffett has a great, great quote. He says

had almost tripled. Right. You know, tripled or quadrupled in that period. I had asked you. Yesterday, when we were hanging out, I said, you know, there's really two questions when you hear this story. Number one, how the hell were you getting these returns? So what what what did you know about invest? What was that part? But the second part is how'd you what'd you do on the fundraising side? How'd you get so many so much more money to come through the door? And you had a great line about that, about how you get more money to come through the door because you didn't strike me as a a guy who wanted to be out there fundraising and knocking on doors trying to raise funds. So how does it happen? Buffett has a great, great quote. He says

53:10

that if you are in a rowboat in the middle of the Atlantic,

that if you are in a rowboat in the middle of the Atlantic,

53:14

they will swim to you in shock infested waters to invest with you

they will swim to you in shock infested waters to invest with you

53:19

if you have beaten the market. Right?

if you have beaten the market. Right?

53:22

They will find you. He says you could be a leper and they will invest with you. That's what happened.

They will find you. He says you could be a leper and they will invest with you. That's what happened.

53:28

And also,

And also,

53:29

one of the things that was very,

one of the things that was very,

53:32

difficult for me was that

difficult for me was that

53:34

the SEC has a lot of rules and laws,

the SEC has a lot of rules and laws,

53:37

around hedge funds.

around hedge funds.

53:39

One of those is you cannot solicit to general public.

One of those is you cannot solicit to general public.

53:42

So when I was running my IT business, I could call on any CIO and say, hey, you know, would you like to use our services, etcetera? I could literally call anyone out of the phone book.

So when I was running my IT business, I could call on any CIO and say, hey, you know, would you like to use our services, etcetera? I could literally call anyone out of the phone book.

53:53

When you're running a fund, you can't just get a list of dentists in North Carolina and pound them. That's that's not legal. You can't do that.

When you're running a fund, you can't just get a list of dentists in North Carolina and pound them. That's that's not legal. You can't do that.

54:00

So the SEC said you can only talk to people. You know.

So the SEC said you can only talk to people. You know.

54:04

Okay? I said to people, I know, I'm gonna round about roller decks in, like, five minutes. You know, there's very few people I know. So what I did is I started to meet my investors once a year,

Okay? I said to people, I know, I'm gonna round about roller decks in, like, five minutes. You know, there's very few people I know. So what I did is I started to meet my investors once a year,

54:16

for an annual meeting where I would give them their results and

for an annual meeting where I would give them their results and

54:20

take their questions and all of that. And I told them, listen.

take their questions and all of that. And I told them, listen.

54:26

There was one reason and one reason alone.

There was one reason and one reason alone.

54:29

You were put on planet earth,

You were put on planet earth,

54:31

and that is to bring assets to Pabry funds.

and that is to bring assets to Pabry funds.

54:35

Okay?

Okay?

54:36

Humans are always looking for calling.

Humans are always looking for calling.

54:39

They are looking for some cult leader to follow

They are looking for some cult leader to follow

54:43

and be part of cult. Okay. So you gave them one. So, yeah, you know, they were they were wandering in the wilderness They needed purpose. Okay. So I said, here's what you need to do. You need to go talk to your friends and family because I can't talk to them. The SEC won't let me talk to them. You can talk to them. Okay? You talk to them. You tell them about me. You tell them to contact me. Once they contact me, I can engage with them. Okay? So go out and spread the word, okay, and send me more of your assets too. Okay? So, basically,

and be part of cult. Okay. So you gave them one. So, yeah, you know, they were they were wandering in the wilderness They needed purpose. Okay. So I said, here's what you need to do. You need to go talk to your friends and family because I can't talk to them. The SEC won't let me talk to them. You can talk to them. Okay? You talk to them. You tell them about me. You tell them to contact me. Once they contact me, I can engage with them. Okay? So go out and spread the word, okay, and send me more of your assets too. Okay? So, basically,

55:15

what

what

55:16

like I, like I said, it started with a million a year later. It's two and a half million. Two years later, it's ten million.

like I, like I said, it started with a million a year later. It's two and a half million. Two years later, it's ten million.

55:22

And it's growing, you know, and and part of it was that the annual returns

And it's growing, you know, and and part of it was that the annual returns

55:27

are adding, but part of it was that so I had eight investors when I started a year later, they were seventeen

are adding, but part of it was that so I had eight investors when I started a year later, they were seventeen

55:34

and two years later, they were twenty five. So now I had an audience of twenty five.

and two years later, they were twenty five. So now I had an audience of twenty five.

55:38

To proselytize

To proselytize

55:39

and spread the word. You know? And,

and spread the word. You know? And,

55:43

and and,

and and,

55:44

of course, the results now the other thing that was happening is that

of course, the results now the other thing that was happening is that

55:48

when I started the funds in nineteen ninety nine,

when I started the funds in nineteen ninety nine,

55:52

we were

we were

55:53

nine months away

nine months away

55:55

from the biggest bubble about to burst.

from the biggest bubble about to burst.

55:57

That had happened in decades, the dot com bubble. Right?

That had happened in decades, the dot com bubble. Right?

56:02

And

And

56:03

I

I

56:04

I was able to see the bubble

I was able to see the bubble

56:07

not very much in advance of the rest of the world, maybe just two or three months ahead.

not very much in advance of the rest of the world, maybe just two or three months ahead.

56:12

I I knew the internet was transformational.

I I knew the internet was transformational.

56:15

But I also knew that

But I also knew that

56:17

the euphoria was too much. You know, we had

the euphoria was too much. You know, we had

56:21

pets dot com. Trading at multi billion dollar valuations

pets dot com. Trading at multi billion dollar valuations

56:25

with no revenues. Mhmm. Right? I mean, there was this common to have a lot of company that people are counting eyeballs.

with no revenues. Mhmm. Right? I mean, there was this common to have a lot of company that people are counting eyeballs.

56:32

They're not counting dollars and the the they're not looking at net income.

They're not counting dollars and the the they're not looking at net income.

56:36

They're not even looking at revenue. They're just looking at eyeballs. Right? And so So I said, okay. This this is bad news.

They're not even looking at revenue. They're just looking at eyeballs. Right? And so So I said, okay. This this is bad news.

56:44

It will blow. At some point, it's gonna the bubble's gonna burst. I didn't know when.

It will blow. At some point, it's gonna the bubble's gonna burst. I didn't know when.

56:49

So I had always been a tech investor

So I had always been a tech investor

56:51

from, like, the mid nineties, and I've done really well.

from, like, the mid nineties, and I've done really well.

56:55

Tech had had a great run from

Tech had had a great run from

56:57

ninety five to two thousand. It had just done really well, and I'd written that coattail.

ninety five to two thousand. It had just done really well, and I'd written that coattail.

57:02

But what I did in ninety nine when the fund started and also with my own capital

But what I did in ninety nine when the fund started and also with my own capital

57:07

is I did a one eighty. I switched completely

is I did a one eighty. I switched completely

57:11

to classic Ben Graham deep value, you know, what Buffet had started doing in the fifties. And one of the things that was happening in the equity markets at that time was

to classic Ben Graham deep value, you know, what Buffet had started doing in the fifties. And one of the things that was happening in the equity markets at that time was

57:22

the day the Nasdaq peaked, I think, March eight or March nine, two thousand

the day the Nasdaq peaked, I think, March eight or March nine, two thousand

57:26

was the day that Berkshire hit a multi year low.

was the day that Berkshire hit a multi year low.

57:29

And literally, people were pulling money out of their Berkshire stock. And buying pets dot com. Right? I mean, then then that goes to zero eventually.

And literally, people were pulling money out of their Berkshire stock. And buying pets dot com. Right? I mean, then then that goes to zero eventually.

57:37

And so I said, okay. Basically,

And so I said, okay. Basically,

57:40

there's a lot of basic businesses

there's a lot of basic businesses

57:43

that had become really cheap

that had become really cheap

57:45

because nobody was interested.

because nobody was interested.

57:47

So I was buying funeral homes at two times earnings and buying steel companies at three times earnings.

So I was buying funeral homes at two times earnings and buying steel companies at three times earnings.

57:53

And so a lot of basic businesses, which are very predictable

And so a lot of basic businesses, which are very predictable

57:57

and doing well,

and doing well,

58:00

trading really cheap. Right. And, and so Pabry funds did really well. In fact,

trading really cheap. Right. And, and so Pabry funds did really well. In fact,

58:07

the Nasdaq

the Nasdaq

58:08

imploded.

imploded.

58:09

Basically, it hit five thousand

Basically, it hit five thousand

58:11

in March two thousand, by the time it bottomed out the next two or three years, it was a twelve hundred. It's seventy have a center you know, and, the Dow and the S and P didn't go down as much, but they also went down a lot.

in March two thousand, by the time it bottomed out the next two or three years, it was a twelve hundred. It's seventy have a center you know, and, the Dow and the S and P didn't go down as much, but they also went down a lot.

58:24

And, so it was

And, so it was

58:26

it was a traumatic period

it was a traumatic period

58:29

for investors.

for investors.

58:31

It was a great period for me. And and so it was very easy for me to talk to my investors because I was the only guy making money for them. Okay? If they had, like, five accounts,

It was a great period for me. And and so it was very easy for me to talk to my investors because I was the only guy making money for them. Okay? If they had, like, five accounts,

58:43

they just moved it all to me because everything else was going down. Everything else is red.

they just moved it all to me because everything else was going down. Everything else is red.

58:48

And,

And,

58:48

so that's how we we got going. So in two thousand seven,

so that's how we we got going. So in two thousand seven,

58:54

I

I

58:54

I think my network at that time was, like, eighty four million.

I think my network at that time was, like, eighty four million.

58:58

And

And

59:00

Warren had been running

Warren had been running

59:02

these,

these,

59:04

charity lunch auctions where once a year, you could bid on eBay to have lunch with Warren Buffett, and the money would go to the Clyde Foundation, which was doing, you know, feeding the homeless and all that in San Francisco.

charity lunch auctions where once a year, you could bid on eBay to have lunch with Warren Buffett, and the money would go to the Clyde Foundation, which was doing, you know, feeding the homeless and all that in San Francisco.

59:17

So I said, you know,

So I said, you know,

59:20

I am using this guy's intellectual property. I'm making all this money off him.

I am using this guy's intellectual property. I'm making all this money off him.

59:26

I really have a big tuition bill I need to pay.

I really have a big tuition bill I need to pay.

59:29

So I said the lunch is a great way to do that. I said I can,

So I said the lunch is a great way to do that. I said I can,

59:35

bit for the lunch,

bit for the lunch,

59:37

and I'll meet Warren. I'll be able to thank him in person, and it goes to a cause that he supports. So I thought about it. It's okay. Eighty four million. What's an appropriate

and I'll meet Warren. I'll be able to thank him in person, and it goes to a cause that he supports. So I thought about it. It's okay. Eighty four million. What's an appropriate

59:46

tuition bill? I said

tuition bill? I said

59:48

two million is he is good. I think if if I if I gave him two million, I'd feel good about that. Right? So

two million is he is good. I think if if I if I gave him two million, I'd feel good about that. Right? So

59:55

I said, okay. I decided in two thousand seven, I was gonna bid for that lunch, and I I decided I would go up to two million dollars. And you can bring

I said, okay. I decided in two thousand seven, I was gonna bid for that lunch, and I I decided I would go up to two million dollars. And you can bring

01:00:03

up to seven other people to that lunch. So I was gonna take my family, but there still were a couple of seat seventy. So I contacted my friend, Rice, Geispear. He lived in Zurich. I said, hey, guy, I'm gonna bid on this lunch blah blah blah. And I said, do you wanna come in with me?

up to seven other people to that lunch. So I was gonna take my family, but there still were a couple of seat seventy. So I contacted my friend, Rice, Geispear. He lived in Zurich. I said, hey, guy, I'm gonna bid on this lunch blah blah blah. And I said, do you wanna come in with me?

01:00:18

And I said if you and your wife wanna join us,

And I said if you and your wife wanna join us,

01:00:21

because there'll be four of us and two of you, you can pay one third

because there'll be four of us and two of you, you can pay one third

01:00:24

and,

and,

01:00:26

and

and

01:00:27

I'm willing to go up to two million. So guys says, well, that's too rich for me. I can't pay one third of two million. He says, I'm good for a quarter million.

I'm willing to go up to two million. So guys says, well, that's too rich for me. I can't pay one third of two million. He says, I'm good for a quarter million.

01:00:35

So I said, okay.

So I said, okay.

01:00:36

Whatever the bid ends up at, you're capped at a quarter million. Right? And, so I bid for it,

Whatever the bid ends up at, you're capped at a quarter million. Right? And, so I bid for it,

01:00:43

it

it

01:00:44

settled at

settled at

01:00:46

six hundred and fifty thousand,

six hundred and fifty thousand,

01:00:48

much less than what, right, I was willing to pay. And then one third of that got paid by guy. And,

much less than what, right, I was willing to pay. And then one third of that got paid by guy. And,

01:00:54

so my only agenda

so my only agenda

01:00:56

in meeting war

in meeting war

01:00:58

was to just say thank you, Warren. Right? I didn't have. And now, of course, you are the big fanboy. Yeah. And, you know, meeting him and all that.

was to just say thank you, Warren. Right? I didn't have. And now, of course, you are the big fanboy. Yeah. And, you know, meeting him and all that.

01:01:05

Warren's agenda when he has these lunches

Warren's agenda when he has these lunches

01:01:09

is really different. His his agenda is

is really different. His his agenda is

01:01:12

he wants

he wants

01:01:14

the people who won that lunch

the people who won that lunch

01:01:16

to feel like they got a great bargain.

to feel like they got a great bargain.

01:01:19

So

So

01:01:20

he would take all our, what I would call, our lemonade lemon questions

he would take all our, what I would call, our lemonade lemon questions

01:01:24

and can turn them into lemonade.

and can turn them into lemonade.

01:01:26

So he's always is exactly what he does in the Berkshire meetings is he's a great teacher. And so he was trying to,

So he's always is exactly what he does in the Berkshire meetings is he's a great teacher. And so he was trying to,

01:01:35

give as much value

give as much value

01:01:37

as he could in that lunch. And, like, he told us when we met him, he said, look, I got nothing going on all afternoon.

as he could in that lunch. And, like, he told us when we met him, he said, look, I got nothing going on all afternoon.

01:01:44

Right? So when you guys are sick and tired of me, you just let me know, and I'll leave. Right?

Right? So when you guys are sick and tired of me, you just let me know, and I'll leave. Right?

01:01:49

We kept asking him questions for three hours, and then we were exhausted.

We kept asking him questions for three hours, and then we were exhausted.

01:01:54

And so we said, Warren, we just don't have anything else to ask you. You know? He said, okay. I'll I'll

And so we said, Warren, we just don't have anything else to ask you. You know? He said, okay. I'll I'll

01:01:59

I'll take off. No problem. And,

I'll take off. No problem. And,

01:02:01

in that lunch,

in that lunch,

01:02:03

I told him, I said, look, Warren,

I told him, I said, look, Warren,

01:02:07

my

my

01:02:07

my wife, then Harrina, I said, she's,

my wife, then Harrina, I said, she's,

01:02:11

a huge fan of yours, but her true love in life is Charlie.

a huge fan of yours, but her true love in life is Charlie.

01:02:15

Okay? And Warren got competitive. He said Charlie is a very boring guy. He's a very kind of pessimistic

Okay? And Warren got competitive. He said Charlie is a very boring guy. He's a very kind of pessimistic

01:02:21

always says no to everything.

always says no to everything.

01:02:23

I'm the guy who's really interesting. So he said, what I'm gonna do is you guys live in California

I'm the guy who's really interesting. So he said, what I'm gonna do is you guys live in California

01:02:29

in LA,

in LA,

01:02:30

I wanna set you guys up to meet Charlie for lunch. And then when you meet him for lunch, you're gonna find that he's useless, and I'm the guy. So I thought he was joking about that. Right? And two days later, I got a email from his assistant to Charlie's assistant copying us,

I wanna set you guys up to meet Charlie for lunch. And then when you meet him for lunch, you're gonna find that he's useless, and I'm the guy. So I thought he was joking about that. Right? And two days later, I got a email from his assistant to Charlie's assistant copying us,

01:02:44

basically saying, hey, I met this wonderful couple in California. And they seem to think you're more interesting. I think they just don't understand.

basically saying, hey, I met this wonderful couple in California. And they seem to think you're more interesting. I think they just don't understand.

01:02:53

So I want them to meet you so we could set the record straight. Right? And so This is really what he was saying. This is exactly what he said in the email. Right? Was he joking, or was he not And then I I, Charlie, the assistant,

So I want them to meet you so we could set the record straight. Right? And so This is really what he was saying. This is exactly what he said in the email. Right? Was he joking, or was he not And then I I, Charlie, the assistant,

01:03:05

sets us up to meet Charlie Fola. Now Warren,

sets us up to meet Charlie Fola. Now Warren,

01:03:08

you can bribe and have lunch with. Okay? Charlie, there's no bribing. This this is great. And so

you can bribe and have lunch with. Okay? Charlie, there's no bribing. This this is great. And so

01:03:15

we met Charlie. My my wife and I, we met Charlie in two thousand eight,

we met Charlie. My my wife and I, we met Charlie in two thousand eight,

01:03:20

at the California club in LA,

at the California club in LA,

01:03:22

And,

And,

01:03:23

I actually found that lunch a lot better than the buffet lunch. Okay. It was great because I think Charlie is just so direct, you know, And,

I actually found that lunch a lot better than the buffet lunch. Okay. It was great because I think Charlie is just so direct, you know, And,

01:03:32

and I never expected

and I never expected

01:03:35

these lunches or any of this to lead to any anything. You know, so it's just a one and done. But it led to a friendship with Charlie. He started,

these lunches or any of this to lead to any anything. You know, so it's just a one and done. But it led to a friendship with Charlie. He started,

01:03:44

asking us to come to his place for dinner and,

asking us to come to his place for dinner and,

01:03:49

I would meet him, like, four, five times a year for dinner. And then,

I would meet him, like, four, five times a year for dinner. And then,

01:03:53

we started playing bridge together. Usually, on Fridays, he would play bridge at the LA Country Club, I'd meet him about once a month or something

we started playing bridge together. Usually, on Fridays, he would play bridge at the LA Country Club, I'd meet him about once a month or something

01:04:00

to play bridge. And that would be lunch and then about four or five hours of bridge after that. So it was a it was a a

to play bridge. And that would be lunch and then about four or five hours of bridge after that. So it was a it was a a

01:04:07

a a

a a

01:04:08

wonderful deep friendship for fifteen years.

wonderful deep friendship for fifteen years.

01:04:12

Which I was unexpected, you know. Just never expected. So let's go back to the lunch. You ask them questions for three hours. Yeah. What were the interesting,

Which I was unexpected, you know. Just never expected. So let's go back to the lunch. You ask them questions for three hours. Yeah. What were the interesting,

01:04:21

questions and answers? I know you've said one that I wanna hear you you explain because I didn't fully

questions and answers? I know you've said one that I wanna hear you you explain because I didn't fully

01:04:25

I I I've heard the tidbit, but I wanna hear the full story, which was He said something about being a harsh

I I I've heard the tidbit, but I wanna hear the full story, which was He said something about being a harsh

01:04:31

grader of people.

grader of people.

01:04:33

Yes. What does that mean? Well, I I told I told Warren. I said Warren, you know, you are

Yes. What does that mean? Well, I I told I told Warren. I said Warren, you know, you are

01:04:40

both you and Charlie

both you and Charlie

01:04:41

are such good judges of humans and human nature.

are such good judges of humans and human nature.

01:04:45

Were you always

Were you always

01:04:47

that good at figuring people out?

that good at figuring people out?

01:04:49

So he says to me, ownership was taken.

So he says to me, ownership was taken.

01:04:52

I am useless

I am useless

01:04:53

at figuring people out. He said if you put me in a cocktail party

at figuring people out. He said if you put me in a cocktail party

01:04:57

with a hundred people,

with a hundred people,

01:04:59

and you gave me five or ten minutes to meet each person.

and you gave me five or ten minutes to meet each person.

01:05:03

I could tell you

I could tell you

01:05:05

three or four people, exceptional.

three or four people, exceptional.

01:05:08

And I could tell you three or four people you want nothing to do with.

And I could tell you three or four people you want nothing to do with.

01:05:12

And the remaining ninety two, I would have no opinion on because not enough time to

And the remaining ninety two, I would have no opinion on because not enough time to

01:05:18

figure them out. So

figure them out. So

01:05:19

but he's

but he's

01:05:21

but he also said that, look,

but he also said that, look,

01:05:24

what you do in life is

what you do in life is

01:05:27

those three or four people who are exceptional,

those three or four people who are exceptional,

01:05:29

you bring them into your inner circle.

you bring them into your inner circle.

01:05:33

And obviously

And obviously

01:05:34

the three or four people who are

the three or four people who are

01:05:36

you know, not not the great humans. You're not gonna have anything to do with them. But the third thing you do is you treat the ninety two

you know, not not the great humans. You're not gonna have anything to do with them. But the third thing you do is you treat the ninety two

01:05:45

just like the useless humans.

just like the useless humans.

01:05:47

And you exclude so he says

And you exclude so he says

01:05:49

be a harsh grader.

be a harsh grader.

01:05:51

So he says that when you have friendships,

So he says that when you have friendships,

01:05:55

And when you have people you work with, your peers, and all that, he says there's a gravitational pull.

And when you have people you work with, your peers, and all that, he says there's a gravitational pull.

01:06:02

If you hang out with people better than you, you're gonna get better. If you hang out with people worse than you, you're gonna get worse. So he said that one of the things that

If you hang out with people better than you, you're gonna get better. If you hang out with people worse than you, you're gonna get worse. So he said that one of the things that

01:06:11

most humans are not willing to do

most humans are not willing to do

01:06:15

is

is

01:06:16

loyalties get in the way for them. Right? So they may have a friend

loyalties get in the way for them. Right? So they may have a friend

01:06:21

who's kind of weird or quirky or has ethical issues.

who's kind of weird or quirky or has ethical issues.

01:06:25

But they've had a long friendship.

But they've had a long friendship.

01:06:27

So they'll keep that person

So they'll keep that person

01:06:30

going with them.

going with them.

01:06:31

That has detrimental impacts.

That has detrimental impacts.

01:06:34

So, basically,

So, basically,

01:06:37

I really took that to heart.

I really took that to heart.

01:06:39

And I said that,

And I said that,

01:06:41

I'm really gonna try to see if I can,

I'm really gonna try to see if I can,

01:06:46

focus on

focus on

01:06:47

the great relationships, you know, the great people.

the great relationships, you know, the great people.

01:06:50

And that's actually been,

And that's actually been,

01:06:53

a journey I've been on now

a journey I've been on now

01:06:55

for, like,

for, like,

01:06:57

you know, sixteen, seventeen years. It's been tremendous. It's it's great. Now it's it's unfair.

you know, sixteen, seventeen years. It's been tremendous. It's it's great. Now it's it's unfair.

01:07:03

Right?

Right?

01:07:04

Because you're treating the unknown

Because you're treating the unknown

01:07:06

the same as the useless people.

the same as the useless people.

01:07:08

But but that's the way life is. I think that sometimes you have to make these difficult choices,

But but that's the way life is. I think that sometimes you have to make these difficult choices,

01:07:14

because if you don't do that,

because if you don't do that,

01:07:16

then,

then,

01:07:17

the impact of that

the impact of that

01:07:20

is significantly negative. And one of the things I realized when I started to,

is significantly negative. And one of the things I realized when I started to,

01:07:25

get to know Charlie,

get to know Charlie,

01:07:27

I got to meet Charlie's friends.

I got to meet Charlie's friends.

01:07:29

So I would play bridge with his friends. I'd meet his friends.

So I would play bridge with his friends. I'd meet his friends.

01:07:33

And what I realized is

And what I realized is

01:07:35

his friends

his friends

01:07:37

was so off the charts.

was so off the charts.

01:07:39

They were so exceptional.

They were so exceptional.

01:07:41

I said, wow. This is like a different world. Right? And

I said, wow. This is like a different world. Right? And

01:07:45

I said I'm gonna take a shortcut.

I said I'm gonna take a shortcut.

01:07:47

I'm gonna make Charlie's friends, my friends,

I'm gonna make Charlie's friends, my friends,

01:07:50

because he's already done all the work. You get the filtering. Is you can get a better filter than Charlie Munker, right? And and so I

because he's already done all the work. You get the filtering. Is you can get a better filter than Charlie Munker, right? And and so I

01:07:58

I worked on building relationships

I worked on building relationships

01:08:01

with Charlie's friends and some of his family, and that's been beautiful. I mean, some just great friendships,

with Charlie's friends and some of his family, and that's been beautiful. I mean, some just great friendships,

01:08:08

and you know,

and you know,

01:08:09

I realized that there's such a

I realized that there's such a

01:08:12

huge delta

huge delta

01:08:14

in

in

01:08:15

off the chart top point one percent, top one percent of humans,

off the chart top point one percent, top one percent of humans,

01:08:20

and the rest. And, you know, we we talked about this. Adam Grant,

and the rest. And, you know, we we talked about this. Adam Grant,

01:08:24

wrote this wonderful book give and take. Right? And he categorizes

wrote this wonderful book give and take. Right? And he categorizes

01:08:29

people,

people,

01:08:30

in three buckets, right, the givers

in three buckets, right, the givers

01:08:32

the takers

the takers

01:08:33

and the matchers.

and the matchers.

01:08:35

Right? Now the takers, you don't want anything to do with. You know, they're just gonna, like, want to extract whatever they can from you. So they're just not people you wanna,

Right? Now the takers, you don't want anything to do with. You know, they're just gonna, like, want to extract whatever they can from you. So they're just not people you wanna,

01:08:43

have in your life. The givers are people who are selflessly trying to help the planet

have in your life. The givers are people who are selflessly trying to help the planet

01:08:49

not really concerned about what comes back to them. Right?

not really concerned about what comes back to them. Right?

01:08:53

Those are the ones you wanna be with. And then the matchers, they're kinda doing math in their heads Oh,

Those are the ones you wanna be with. And then the matchers, they're kinda doing math in their heads Oh,

01:08:59

you know, Sean did this for me. So I'm gonna do something similar for him. They cannot and so even the matchers aren't that great. What you really wanna do is you wanna seek out the givers.

you know, Sean did this for me. So I'm gonna do something similar for him. They cannot and so even the matchers aren't that great. What you really wanna do is you wanna seek out the givers.

01:09:10

And more important than that is you wanna be a giver Right. And, and so the the interesting thing that he pointed out in that book is that when you're a giver,

And more important than that is you wanna be a giver Right. And, and so the the interesting thing that he pointed out in that book is that when you're a giver,

01:09:21

the universe conspires to help you.

the universe conspires to help you.

01:09:24

And I found it magical how and Warren and Charlie are great examples of givers.

And I found it magical how and Warren and Charlie are great examples of givers.

01:09:30

Everyone's trying to help them. In any way they can. And so that's the funny thing is that the matchers who are trying to do this, you know, equalization,

Everyone's trying to help them. In any way they can. And so that's the funny thing is that the matchers who are trying to do this, you know, equalization,

01:09:40

they end up losing

they end up losing

01:09:42

the best way to get the most is not ask for anything.

the best way to get the most is not ask for anything.

01:09:46

It'll all come to you. Right. You know? And so so these are wonderful models to incorporate. Yeah. There's even some game theory with that, which is

It'll all come to you. Right. You know? And so so these are wonderful models to incorporate. Yeah. There's even some game theory with that, which is

01:09:55

the cost of excluding somebody

the cost of excluding somebody

01:09:58

who might be good or might be great. Is quite is actually quite low to you, but the cost of accidentally including somebody

who might be good or might be great. Is quite is actually quite low to you, but the cost of accidentally including somebody

01:10:04

who might be have some toxicity or it's quite costly to you. And so you know, I think even in investments, he has the the good pile and then the the two hard pile.

who might be have some toxicity or it's quite costly to you. And so you know, I think even in investments, he has the the good pile and then the the two hard pile.

01:10:14

Warren has a lot of baseball analogies.

Warren has a lot of baseball analogies.

01:10:17

He says that in investing, there are no call strikes. Right? So in baseball,

He says that in investing, there are no call strikes. Right? So in baseball,

01:10:21

you're at the pitch. Three strikes you're out. Right? He says I can let a thousand balls go by. Thousand stocks go by and not swing. Right. Right?

you're at the pitch. Three strikes you're out. Right? He says I can let a thousand balls go by. Thousand stocks go by and not swing. Right. Right?

01:10:30

I I only need to swing when eight moons line up. Right? And so The fat pitch. Right. The fat pitch. Right. And so the thing is that we live in a world with infinite humans.

I I only need to swing when eight moons line up. Right? And so The fat pitch. Right. The fat pitch. Right. And so the thing is that we live in a world with infinite humans.

01:10:43

If there are infinite humans, it also implies

If there are infinite humans, it also implies

01:10:46

that there are infinite number of good humans.

that there are infinite number of good humans.

01:10:49

So

So

01:10:52

basically,

basically,

01:10:54

making a

making a

01:10:56

excluding a good human from your circle because you can't figure them out.

excluding a good human from your circle because you can't figure them out.

01:11:01

There's no penalty for that. Right. Because there's a infinite supply. Right. Just to put his ground for the wait for the In mathematical way, mathematically,

There's no penalty for that. Right. Because there's a infinite supply. Right. Just to put his ground for the wait for the In mathematical way, mathematically,

01:11:09

But but when you bring in a substandard

But but when you bring in a substandard

01:11:12

person,

person,

01:11:13

it just

it just

01:11:14

there's so many drains it's this negative. I wanna hit you with some of your big investing philosophies

there's so many drains it's this negative. I wanna hit you with some of your big investing philosophies

01:11:20

and give me the kind of the the punchy version of, like, what is that what is the phrase mean and how you use it. So,

and give me the kind of the the punchy version of, like, what is that what is the phrase mean and how you use it. So,

01:11:28

let's do one heads I win tails, I don't lose much.

let's do one heads I win tails, I don't lose much.

01:11:32

Well, I mean, I think this is classically

Well, I mean, I think this is classically

01:11:35

comes from the hotels. Right? The it's the the the dando philosophy.

comes from the hotels. Right? The it's the the the dando philosophy.

01:11:39

But but this is this is how we want to

But but this is this is how we want to

01:11:43

do all our bets with people, with stocks,

do all our bets with people, with stocks,

01:11:47

with everything. Asymmetric.

with everything. Asymmetric.

01:11:49

Yeah. Yeah. Basically, where

Yeah. Yeah. Basically, where

01:11:52

we always want to look for things where the the odds are so heavily in our favor.

we always want to look for things where the the odds are so heavily in our favor.

01:11:57

And, so

And, so

01:11:59

in investing,

in investing,

01:12:01

we do get these anomalies

we do get these anomalies

01:12:03

where you you take low risk. What's one that you've benefited from or what's an example in your portfolio or your career investing?

where you you take low risk. What's one that you've benefited from or what's an example in your portfolio or your career investing?

01:12:09

Where you felt like you you you recognize asymmetric upside, your your downside was capped, but your upside was high.

Where you felt like you you you recognize asymmetric upside, your your downside was capped, but your upside was high.

01:12:15

Well, I mean, I think that if I look at my first business, for example, right? I mean, I am taking thirty thousand for my four zero one k, which I can make up. And at that time, the

Well, I mean, I think that if I look at my first business, for example, right? I mean, I am taking thirty thousand for my four zero one k, which I can make up. And at that time, the

01:12:26

credit card laws were very different where

credit card laws were very different where

01:12:29

if you,

if you,

01:12:30

declared personal bankruptcy, you got a clean slate and actually didn't affect your credit because you couldn't file again for seven more years. Everyone will give you money after your file. Okay. So, actually, they've changed the laws now. But at that time,

declared personal bankruptcy, you got a clean slate and actually didn't affect your credit because you couldn't file again for seven more years. Everyone will give you money after your file. Okay. So, actually, they've changed the laws now. But at that time,

01:12:43

what I had, I realized that starting a business has high rates of failure. Right? And so I said, how do I,

what I had, I realized that starting a business has high rates of failure. Right? And so I said, how do I,

01:12:51

minimize the risk on that? And and this is what all entrepreneurs do. And I said, okay. So, basically,

minimize the risk on that? And and this is what all entrepreneurs do. And I said, okay. So, basically,

01:12:57

if this thing blows up, which there's some probability that could happen,

if this thing blows up, which there's some probability that could happen,

01:13:02

I got my job already. They they want to take me back, and I I clean up the slate. And and I'd also derisked it because the company was already cash flow positive

I got my job already. They they want to take me back, and I I clean up the slate. And and I'd also derisked it because the company was already cash flow positive

01:13:14

by the time I quit my job. Right? And so there was already a pipeline and such. And so repeatedly, what I've what I found is,

by the time I quit my job. Right? And so there was already a pipeline and such. And so repeatedly, what I've what I found is,

01:13:22

even even in investing,

even even in investing,

01:13:25

I mean, I'll give you an example. Like, for example, I think in two thousand three or two thousand four, there was a steel company,

I mean, I'll give you an example. Like, for example, I think in two thousand three or two thousand four, there was a steel company,

01:13:32

in Canada.

in Canada.

01:13:34

Ipsco.

Ipsco.

01:13:35

And,

And,

01:13:37

I noticed that they were trading,

I noticed that they were trading,

01:13:40

for three times earnings. Right? And

for three times earnings. Right? And

01:13:43

they the the stock was at forty five dollars. They had fifteen dollars a share of cash on their balance sheet. They had no debt, and they had contracts

they the the stock was at forty five dollars. They had fifteen dollars a share of cash on their balance sheet. They had no debt, and they had contracts

01:13:52

over the next couple of years

over the next couple of years

01:13:54

where they had said our earnings for the next two years are going to be fifteen dollars a share each year.

where they had said our earnings for the next two years are going to be fifteen dollars a share each year.

01:14:01

Given

Given

01:14:02

because these were these were these were not forecast.

because these were these were these were not forecast.

01:14:05

These were hard contracts. Right? So I said, okay. So the stock's at forty five. If I just buy the stock and hold it for two years, I got forty five dollars cash in the company. Now it was cyclical business.

These were hard contracts. Right? So I said, okay. So the stock's at forty five. If I just buy the stock and hold it for two years, I got forty five dollars cash in the company. Now it was cyclical business.

01:14:16

Thirty or could be zero, could be negative. But I said I I own all the plant equipment, everything for free. Right? So my my I made the investment. I put ten percent of assets into IpsCO.

Thirty or could be zero, could be negative. But I said I I own all the plant equipment, everything for free. Right? So my my I made the investment. I put ten percent of assets into IpsCO.

01:14:30

And I said, all I wanna do is I wanna see what Mr. Market does with this talk in two years. Just gonna hang out and see what happens. So

And I said, all I wanna do is I wanna see what Mr. Market does with this talk in two years. Just gonna hang out and see what happens. So

01:14:37

we make the investment and then a year later, the company announces that we're gonna have one more year of fifteen dollars.

we make the investment and then a year later, the company announces that we're gonna have one more year of fifteen dollars.

01:14:44

Okay? So now you're gonna have sixty versus forty five. Right?

Okay? So now you're gonna have sixty versus forty five. Right?

01:14:49

And by now, the stock has kind of gone up and it's sitting at about ninety dollars.

And by now, the stock has kind of gone up and it's sitting at about ninety dollars.

01:14:54

Double in one year. So

Double in one year. So

01:14:57

I said, okay.

I said, okay.

01:14:59

It's still very cyclical business.

It's still very cyclical business.

01:15:01

Maybe we should take our chips off the table. And while I'm thinking about all that, one day I wake up,

Maybe we should take our chips off the table. And while I'm thinking about all that, one day I wake up,

01:15:06

and the stock's at one fifty five.

and the stock's at one fifty five.

01:15:09

Some Swedish company came and offered one sixty to buy them.

Some Swedish company came and offered one sixty to buy them.

01:15:13

Five minutes later, I sold the company and moved on. Right? So what I what I'm saying is that

Five minutes later, I sold the company and moved on. Right? So what I what I'm saying is that

01:15:17

that's what we're looking for. Right? We and in the equity markets, because these are auction driven markets,

that's what we're looking for. Right? We and in the equity markets, because these are auction driven markets,

01:15:23

when you look in areas which are hated and unloved,

when you look in areas which are hated and unloved,

01:15:27

you will find these anomalies.

you will find these anomalies.

01:15:31

Last year, for example, I spent about

Last year, for example, I spent about

01:15:33

seven or eight months

seven or eight months

01:15:36

studying the coal industry.

studying the coal industry.

01:15:39

Four letter word.

Four letter word.

01:15:41

Hate and unloved.

Hate and unloved.

01:15:43

More than anything else. Yeah.

More than anything else. Yeah.

01:15:45

I mean, a lot of endowments

I mean, a lot of endowments

01:15:47

and funds are not even allowed to invest in the coal industries. It's so much hatred for it.

and funds are not even allowed to invest in the coal industries. It's so much hatred for it.

01:15:53

So you got excited. The math the math was like this.

So you got excited. The math the math was like this.

01:15:57

If they're the business

If they're the business

01:15:59

that

that

01:16:00

is going to exist for fifty years.

is going to exist for fifty years.

01:16:03

On average, it's gonna produce a billion a year in cash flow. That's gonna be distributed to shareholders.

On average, it's gonna produce a billion a year in cash flow. That's gonna be distributed to shareholders.

01:16:11

Available to buy for less than two billion.

Available to buy for less than two billion.

01:16:15

Where do I sign?

Where do I sign?

01:16:17

Okay.

Okay.

01:16:18

That was a coal industry.

That was a coal industry.

01:16:20

Okay?

Okay?

01:16:21

And so

And so

01:16:22

it's like you

it's like you

01:16:24

you

you

01:16:25

in auctioned markets,

in auctioned markets,

01:16:28

you repeatedly repeatedly run into these things

you repeatedly repeatedly run into these things

01:16:31

where things, you know, there's companies emerging from bankruptcy, there's

where things, you know, there's companies emerging from bankruptcy, there's

01:16:35

things that people just don't like.

things that people just don't like.

01:16:38

There's

There's

01:16:39

different reasons why things get mispriced. Right. You talked about, like,

different reasons why things get mispriced. Right. You talked about, like,

01:16:43

private markets,

private markets,

01:16:45

versus public auctions and why you think public auctions present more of these dislocations, more of these opportunities. Well, I think I think that,

versus public auctions and why you think public auctions present more of these dislocations, more of these opportunities. Well, I think I think that,

01:16:53

let me put it this way.

let me put it this way.

01:16:55

Let's say this home of mine

Let's say this home of mine

01:16:58

was a publicly traded company, okay, listed on the NYSE, right?

was a publicly traded company, okay, listed on the NYSE, right?

01:17:03

Every day its price would change. Right? It would be wiggling here and there. And if I look at the

Every day its price would change. Right? It would be wiggling here and there. And if I look at the

01:17:09

average,

average,

01:17:11

public company on the New York Stock Exchange.

public company on the New York Stock Exchange.

01:17:15

The

The

01:17:17

twelve month range of the stock

twelve month range of the stock

01:17:20

might be

might be

01:17:21

seventy to one forty

seventy to one forty

01:17:23

in twelve months. If I just throw a dart

in twelve months. If I just throw a dart

01:17:26

and any company in the New York tax chain, and I just look at the fifty two week range on that stock price,

and any company in the New York tax chain, and I just look at the fifty two week range on that stock price,

01:17:32

it's going to be

it's going to be

01:17:33

sixty to a hundred.

sixty to a hundred.

01:17:35

Seventy to one thirty. So in a fifty percent swing. It's a big swing. Right?

Seventy to one thirty. So in a fifty percent swing. It's a big swing. Right?

01:17:41

Yeah. My home

Yeah. My home

01:17:43

which maybe might go up four percent in a year of in a good year, maybe, three three percent

which maybe might go up four percent in a year of in a good year, maybe, three three percent

01:17:49

would be

would be

01:17:50

vacillating in value, it would be sometimes trading twenty, thirty percent more than it's worth and sometimes trading twenty, thirty percent less than it's worth. And if I had a realtor friend and I said to him, listen,

vacillating in value, it would be sometimes trading twenty, thirty percent more than it's worth and sometimes trading twenty, thirty percent less than it's worth. And if I had a realtor friend and I said to him, listen,

01:18:03

can I call you every day and just tell me what my house will work? Guy would think I was stupid. But

can I call you every day and just tell me what my house will work? Guy would think I was stupid. But

01:18:09

I would call him on Monday and say, Hey, what's my house would? He said, oh, it's about two million. I said, oh, thank you. I call him the next day. He said, still worth two million. Okay. Third day. He said, listen idiot.

I would call him on Monday and say, Hey, what's my house would? He said, oh, it's about two million. I said, oh, thank you. I call him the next day. He said, still worth two million. Okay. Third day. He said, listen idiot.

01:18:19

It's two million. Okay. And after a month, he would tell me, oh, it's moved to two million

It's two million. Okay. And after a month, he would tell me, oh, it's moved to two million

01:18:25

thirty thousand.

thirty thousand.

01:18:27

Okay. And then again, he would be at two million thirty thousand for a while. Okay. It wouldn't move because it's an intelligent buyer facing an intelligent seller. And so

Okay. And then again, he would be at two million thirty thousand for a while. Okay. It wouldn't move because it's an intelligent buyer facing an intelligent seller. And so

01:18:37

you're not typically going to get

you're not typically going to get

01:18:40

a

a

01:18:42

company like IpsCO available as the whole company

company like IpsCO available as the whole company

01:18:46

for the price you can buy some shares. Right. Because the whole company,

for the price you can buy some shares. Right. Because the whole company,

01:18:52

there's an intelligent guy. The Swedish company paid four times that price to to buy the company. Right? And so that's just the nature of so reason I like the

there's an intelligent guy. The Swedish company paid four times that price to to buy the company. Right? And so that's just the nature of so reason I like the

01:19:02

I've always liked public markets.

I've always liked public markets.

01:19:04

Is because there is so much irrationality.

Is because there is so much irrationality.

01:19:07

And if you're just willing to

And if you're just willing to

01:19:10

be patient,

be patient,

01:19:11

you know, in a year in a year if I can make two good investments,

you know, in a year in a year if I can make two good investments,

01:19:16

it's a good year.

it's a good year.

01:19:18

Okay. So we don't need a lot of activity. Right. We just need to be patient

Okay. So we don't need a lot of activity. Right. We just need to be patient

01:19:23

and wait for the times when,

and wait for the times when,

01:19:27

something weird

something weird

01:19:29

is causing a mispricing.

is causing a mispricing.

01:19:31

Right.

Right.

01:19:32

So,

So,

01:19:33

let me ask you a few questions. So number one,

let me ask you a few questions. So number one,

01:19:37

should,

should,

01:19:38

in your opinion, should somebody just buy the index,

in your opinion, should somebody just buy the index,

01:19:41

low cost index fund, or actively invest?

low cost index fund, or actively invest?

01:19:45

The index is a really good way to go.

The index is a really good way to go.

01:19:48

The index is too dumb to know that it owns Nvidia,

The index is too dumb to know that it owns Nvidia,

01:19:52

and it's even

and it's even

01:19:54

more dumb

more dumb

01:19:56

it's even more done than it won't it'll never sell Android.

it's even more done than it won't it'll never sell Android.

01:19:59

Okay? Or it's owned Apple the last ten years. I never sold it. For example,

Okay? Or it's owned Apple the last ten years. I never sold it. For example,

01:20:03

So I would say for the overwhelming majority of

So I would say for the overwhelming majority of

01:20:07

humans, probably more than ninety nine percent of humans,

humans, probably more than ninety nine percent of humans,

01:20:10

you're best off just buying an index.

you're best off just buying an index.

01:20:13

And I think that the,

And I think that the,

01:20:15

the

the

01:20:16

US equity markets and the US financial

US equity markets and the US financial

01:20:20

services industry is so efficient

services industry is so efficient

01:20:22

that the frictional cost for honing owning an index through an ETF is

that the frictional cost for honing owning an index through an ETF is

01:20:28

you know, single digit basis points, you know, less than,

you know, single digit basis points, you know, less than,

01:20:33

one tenth or one percent, less than zero point zero five percent or one percent. And so on. So it's very it's very small. And so I think it's very smart

one tenth or one percent, less than zero point zero five percent or one percent. And so on. So it's very it's very small. And so I think it's very smart

01:20:42

to,

to,

01:20:44

go with indexing. Mhmm. Absolutely. Yeah. For for the vast majority of people. Yeah. For almost everyone. And for whom who shouldn't do that? Well, if you are if you have the talent and the patience

go with indexing. Mhmm. Absolutely. Yeah. For for the vast majority of people. Yeah. For almost everyone. And for whom who shouldn't do that? Well, if you are if you have the talent and the patience

01:20:57

to figure out what a business is worth.

to figure out what a business is worth.

01:21:00

And then,

And then,

01:21:02

you know, have the ability to buy those businesses well below what they're worth

you know, have the ability to buy those businesses well below what they're worth

01:21:06

and patiently hold them.

and patiently hold them.

01:21:09

Those sliver of humans that can do that.

Those sliver of humans that can do that.

01:21:12

Would be better off just

Would be better off just

01:21:14

doing it that way. Right. If I said, what's the number one trait

doing it that way. Right. If I said, what's the number one trait

01:21:18

that makes a great investor? What comes to mind? Patients.

that makes a great investor? What comes to mind? Patients.

01:21:22

If you are a guy who loves to watch paint dry,

If you are a guy who loves to watch paint dry,

01:21:26

you know, you paint a wall and just sit there and watch it dry,

you know, you paint a wall and just sit there and watch it dry,

01:21:30

you will do very well. Did you ever watch Seinfeld?

you will do very well. Did you ever watch Seinfeld?

01:21:34

Some episodes, not not not religiously. The thing is that,

Some episodes, not not not religiously. The thing is that,

01:21:37

Elaine

Elaine

01:21:38

Elaine is on a flight,

Elaine is on a flight,

01:21:40

with her boyfriend. Okay? I forget the name of her boyfriend and the and I think if you pull up Google, you can probably find this clip.

with her boyfriend. Okay? I forget the name of her boyfriend and the and I think if you pull up Google, you can probably find this clip.

01:21:48

The boyfriend

The boyfriend

01:21:50

is

is

01:21:51

just staring at the seat back in front of him. Okay?

just staring at the seat back in front of him. Okay?

01:21:54

And so Elaine says to him,

And so Elaine says to him,

01:21:58

Would you like something to read?

Would you like something to read?

01:22:00

He keeps looking at the feedback. It says no.

He keeps looking at the feedback. It says no.

01:22:03

Do you wanna talk about something. And he says, no. He just he just doing nothing. He's just looking at the seat back in front of it. Right?

Do you wanna talk about something. And he says, no. He just he just doing nothing. He's just looking at the seat back in front of it. Right?

01:22:12

By the end of the flight, she's broken up with him. Yeah.

By the end of the flight, she's broken up with him. Yeah.

01:22:18

He would have made a great true.

He would have made a great true.

01:22:23

That's what you need.

That's what you need.

01:22:25

You can be if you can be happy,

You can be if you can be happy,

01:22:27

or, like, you know, Pascal,

or, like, you know, Pascal,

01:22:29

Pascal had a great quote. He says that all man's miseries

Pascal had a great quote. He says that all man's miseries

01:22:33

stem from his inability to sit quietly in a hole in a room alone and do nothing. Right. Right. And so if you have this ability to watch paint dry, watch the back of airplane seat for a few hours.

stem from his inability to sit quietly in a hole in a room alone and do nothing. Right. Right. And so if you have this ability to watch paint dry, watch the back of airplane seat for a few hours.

01:22:45

And just be in a Nirvana state,

And just be in a Nirvana state,

01:22:48

this is the this is the work you need to be doing. I don't know if you know this, but you have,

this is the this is the work you need to be doing. I don't know if you know this, but you have,

01:22:52

fans in a subreddit on Reddit I don't know if you've ever have you ever been on I haven't done my done much. So I went when I was doing my research for this, I'm seeing what do people think about about you? What questions do people have? And I go and one of the best comments. I thought it was such a great compliment. They go.

fans in a subreddit on Reddit I don't know if you've ever have you ever been on I haven't done my done much. So I went when I was doing my research for this, I'm seeing what do people think about about you? What questions do people have? And I go and one of the best comments. I thought it was such a great compliment. They go.

01:23:06

The day I knew that this is my guy I wanna follow, he's on CNBC. He's on a TV show. And they're asking for stock picks. So give me a stock pick, and they go around the corner and everybody gives their stock. It's gonna be this. It's gonna be this. It's gonna go up. And they go to you. And he go, I don't really give public stock tips like this.

The day I knew that this is my guy I wanna follow, he's on CNBC. He's on a TV show. And they're asking for stock picks. So give me a stock pick, and they go around the corner and everybody gives their stock. It's gonna be this. It's gonna be this. It's gonna go up. And they go to you. And he go, I don't really give public stock tips like this.

01:23:24

And they're like, well, you got your own TV. You gotta do something. And they're like, the comment was he refused

And they're like, well, you got your own TV. You gotta do something. And they're like, the comment was he refused

01:23:30

to just, like, randomly name a pick or tell people to go buy something.

to just, like, randomly name a pick or tell people to go buy something.

01:23:34

And the TV hosts were, like, why are you on TV? And he was, like,

And the TV hosts were, like, why are you on TV? And he was, like,

01:23:38

That's not what I do. Anything that he just stayed steadfast. And I thought it was such a great compliment, but also so so big of a contrast from you go watch Kramer or these guys, and it's like, you go on and it's, like, overstimulation

That's not what I do. Anything that he just stayed steadfast. And I thought it was such a great compliment, but also so so big of a contrast from you go watch Kramer or these guys, and it's like, you go on and it's, like, overstimulation

01:23:51

telling you you gotta do something right now, the opposite of patients, basically.

telling you you gotta do something right now, the opposite of patients, basically.

01:23:55

Is that should people avoid that?

Is that should people avoid that?

01:23:58

Yeah. I mean, I I think that it's a big red flag if you're taking stock tips from the guy on TV.

Yeah. I mean, I I think that it's a big red flag if you're taking stock tips from the guy on TV.

01:24:03

I think that's just not gonna end well. You know, the guy on TV is not gonna be there when he's down thirty percent. Right. He's he's off somewhere. Not available. Have you seen the reverse Kramer index?

I think that's just not gonna end well. You know, the guy on TV is not gonna be there when he's down thirty percent. Right. He's he's off somewhere. Not available. Have you seen the reverse Kramer index?

01:24:13

It's not a shame, babe. People just whenever he said do the exact opposite, and you're up, like, you're crushing the market. If you just did the exact opposite of this guy. Yeah. So, I mean, I think I think that, like I said, I think indexing is a great way to go for most people. I mean, so, you know, I wish I wish

It's not a shame, babe. People just whenever he said do the exact opposite, and you're up, like, you're crushing the market. If you just did the exact opposite of this guy. Yeah. So, I mean, I think I think that, like I said, I think indexing is a great way to go for most people. I mean, so, you know, I wish I wish

01:24:32

in high school, so even middle school,

in high school, so even middle school,

01:24:35

compounding was part of the curriculum from an investing point of view. And and, you know, just,

compounding was part of the curriculum from an investing point of view. And and, you know, just,

01:24:40

it's really simple, but but, you know, the people, people don't

it's really simple, but but, you know, the people, people don't

01:24:44

pay attention to the math. You know,

pay attention to the math. You know,

01:24:47

there are three variables

there are three variables

01:24:49

that,

that,

01:24:50

matter with compounding. Right? I mean, one is the starting capital you have. The second is

matter with compounding. Right? I mean, one is the starting capital you have. The second is

01:24:57

the,

the,

01:24:59

the annualized rate of return you get, and the third is the length of the runway. Right? Now there's something known as the rule of seventy two, which is a kind of mathematical just for Very helpful rule. Explain it. It's it's a beautiful learn this luckily, one teacher in college.

the annualized rate of return you get, and the third is the length of the runway. Right? Now there's something known as the rule of seventy two, which is a kind of mathematical just for Very helpful rule. Explain it. It's it's a beautiful learn this luckily, one teacher in college.

01:25:14

She used to be a student. She came back to teach set because she's like, I wish

She used to be a student. She came back to teach set because she's like, I wish

01:25:19

We actually taught things that were relevant in the real world. So she took it on herself, became a teacher to come back and teach personal finance. And the one thing she did was she's like, you know, compounding is the eighth wonder of the world. Let me just tell you the rule of seventy two. Very simple math. So the rule of seventy two is just a mathematical quirk that's happens to work. So for example,

We actually taught things that were relevant in the real world. So she took it on herself, became a teacher to come back and teach personal finance. And the one thing she did was she's like, you know, compounding is the eighth wonder of the world. Let me just tell you the rule of seventy two. Very simple math. So the rule of seventy two is just a mathematical quirk that's happens to work. So for example,

01:25:36

if I'm getting,

if I'm getting,

01:25:37

seven percent return a year, and I wanna know how long is it gonna take for this money to double, I can take seventy two divided by seven it's approximately

seven percent return a year, and I wanna know how long is it gonna take for this money to double, I can take seventy two divided by seven it's approximately

01:25:46

ten. Ten years to ten years. Right? Now if I have a ten percent interest rate that I'm getting.

ten. Ten years to ten years. Right? Now if I have a ten percent interest rate that I'm getting.

01:25:51

And again, if I do seventy to divide by ten, it's seven years. So you can you can switch between the years or the interest rate, and it tells you the other one. Right. And and this is

And again, if I do seventy to divide by ten, it's seven years. So you can you can switch between the years or the interest rate, and it tells you the other one. Right. And and this is

01:26:03

the most important thing in life

the most important thing in life

01:26:07

is how long does something take to double?

is how long does something take to double?

01:26:09

Okay. Because that basically leads to everything else. So For example, if you look at someone like Warren Buffett, right? He started

Okay. Because that basically leads to everything else. So For example, if you look at someone like Warren Buffett, right? He started

01:26:17

he started his compounding journey

he started his compounding journey

01:26:19

when he was like ten or eleven years old.

when he was like ten or eleven years old.

01:26:22

I think he's he would say it's when he was seven years old.

I think he's he would say it's when he was seven years old.

01:26:26

He's gonna be

He's gonna be

01:26:28

ninety four this year. Okay. That's a eighty seven year runway so far.

ninety four this year. Okay. That's a eighty seven year runway so far.

01:26:34

Right?

Right?

01:26:35

Now the thing is that

Now the thing is that

01:26:37

If you have a really long runway,

If you have a really long runway,

01:26:40

then

then

01:26:41

a low rate of compounding

a low rate of compounding

01:26:43

would still get you a big number.

would still get you a big number.

01:26:46

Or if you have a shorter runway and a higher rate would again get you the same result. So

Or if you have a shorter runway and a higher rate would again get you the same result. So

01:26:53

it's very important in life.

it's very important in life.

01:26:57

And that's why I think that I wish they do this in high school is to start that engine early.

And that's why I think that I wish they do this in high school is to start that engine early.

01:27:03

So for example, let's let's take a situation

So for example, let's let's take a situation

01:27:07

of someone who's just finished college, right? Twenty two years old,

of someone who's just finished college, right? Twenty two years old,

01:27:12

they got some job maybe, like, making, like, you know, seventy, eighty thousand a year or something.

they got some job maybe, like, making, like, you know, seventy, eighty thousand a year or something.

01:27:16

And they they put away

And they they put away

01:27:19

ten thousand dollars in their four zero one k. Right, they're twenty two years old.

ten thousand dollars in their four zero one k. Right, they're twenty two years old.

01:27:24

In

In

01:27:25

an index, right, that index has done ten percent a year.

an index, right, that index has done ten percent a year.

01:27:29

Now what that means is the ten percent a year means that that ten thousand

Now what that means is the ten percent a year means that that ten thousand

01:27:33

will double every seven years.

will double every seven years.

01:27:36

So

So

01:27:37

let's take a situation

let's take a situation

01:27:39

where

where

01:27:41

the person is now sixty four years old.

the person is now sixty four years old.

01:27:45

Right? Now they started at twenty two. It's sixty four, so it's forty two years.

Right? Now they started at twenty two. It's sixty four, so it's forty two years.

01:27:51

Forty two years is six doubles.

Forty two years is six doubles.

01:27:55

Right?

Right?

01:27:56

I do this to make it easy. Right. Okay. So six doubles. Right?

I do this to make it easy. Right. Okay. So six doubles. Right?

01:28:00

That's two to the power of six.

That's two to the power of six.

01:28:02

Two to power six is sixty four.

Two to power six is sixty four.

01:28:05

So that ten thousand

So that ten thousand

01:28:07

that the person saved at twenty two is six hundred and forty thousand

that the person saved at twenty two is six hundred and forty thousand

01:28:11

at sixty four.

at sixty four.

01:28:13

But that's not all they have. At twenty three, they save eleven thousand.

But that's not all they have. At twenty three, they save eleven thousand.

01:28:18

That's

That's

01:28:19

again sitting

again sitting

01:28:20

at some big number, and you keep going.

at some big number, and you keep going.

01:28:23

And, you know, sometimes we see these news articles. There's some guy who's a janitor

And, you know, sometimes we see these news articles. There's some guy who's a janitor

01:28:28

or some college

or some college

01:28:29

and he gives four million to the college and lived in a one bedroom apartment, whatever. Right?

and he gives four million to the college and lived in a one bedroom apartment, whatever. Right?

01:28:36

Why are we surprised?

Why are we surprised?

01:28:38

Okay. If you actually run the math, he actually didn't even save that much. And he didn't even have that such a great compounding engine. It's not like he found Apple twenty years ago or something. That's not what happened. What what happened was that there was a consistency. And so, actually, my

Okay. If you actually run the math, he actually didn't even save that much. And he didn't even have that such a great compounding engine. It's not like he found Apple twenty years ago or something. That's not what happened. What what happened was that there was a consistency. And so, actually, my

01:28:54

my

my

01:28:55

pushback to my dad when he was telling me to start a business

pushback to my dad when he was telling me to start a business

01:28:59

is I was telling him at that time. I said, look, I got a four zero one k. I got thirty thousand in the four zero one k. Right? I'm gonna I'm continuing with fifteen percent a year. My employer, at that time, was matching the first two percent. So it was becoming seventeen percent

is I was telling him at that time. I said, look, I got a four zero one k. I got thirty thousand in the four zero one k. Right? I'm gonna I'm continuing with fifteen percent a year. My employer, at that time, was matching the first two percent. So it was becoming seventeen percent

01:29:15

tax free, basically. It's tax deferred, and my income's going up over time. So

tax free, basically. It's tax deferred, and my income's going up over time. So

01:29:22

I was when I first started working, my salary was thirty one thousand. Right? So I'm saving

I was when I first started working, my salary was thirty one thousand. Right? So I'm saving

01:29:28

forty five hundred a year. Right? But

forty five hundred a year. Right? But

01:29:31

if I was still working, my my my pay would have been hundreds of thousands

if I was still working, my my my pay would have been hundreds of thousands

01:29:35

or more.

or more.

01:29:36

And I'm putting away a lot of money. So by the time I get to retirement, it's like it's

And I'm putting away a lot of money. So by the time I get to retirement, it's like it's

01:29:42

game over, you know, the

game over, you know, the

01:29:44

lots of for cash available. No problem. And I never missed the money because it was pretax

lots of for cash available. No problem. And I never missed the money because it was pretax

01:29:50

Right. Taken out. So it's just great. So I think I think I I I wish that,

Right. Taken out. So it's just great. So I think I think I I I wish that,

01:29:57

young people understand that, yeah, listen. You can pursue lottery tickets

young people understand that, yeah, listen. You can pursue lottery tickets

01:30:01

you can pursue entrepreneurial dreams. You can do all of that. That's fine. But on the side, keep this going.

you can pursue entrepreneurial dreams. You can do all of that. That's fine. But on the side, keep this going.

01:30:09

And start it early. Let it be boring. Let it be a stupid index fund vanguard

And start it early. Let it be boring. Let it be a stupid index fund vanguard

01:30:14

and whatever. And, and that's it.

and whatever. And, and that's it.

01:30:18

The tortoise is gonna win the race. Right. You know, what's the, circle the wagon's philosophy?

The tortoise is gonna win the race. Right. You know, what's the, circle the wagon's philosophy?

01:30:24

Well, the circle of the wagon's philosophy actually came out of,

Well, the circle of the wagon's philosophy actually came out of,

01:30:28

when I was thinking about Buffett's letter last year to the shareholders, the,

when I was thinking about Buffett's letter last year to the shareholders, the,

01:30:33

twenty twenty three letter, he he pointed

twenty twenty three letter, he he pointed

01:30:36

out that

out that

01:30:37

in fifty eight years of running Berkshire.

in fifty eight years of running Berkshire.

01:30:41

There were only twelve decisions that he had made

There were only twelve decisions that he had made

01:30:45

that had moved the needle for Berkshire. Now Berkshire had a tremendous

that had moved the needle for Berkshire. Now Berkshire had a tremendous

01:30:49

run. They've compounded,

run. They've compounded,

01:30:51

I mean, till recently, we're compounding it twenty plus percent a year for fifty eight years. That's,

I mean, till recently, we're compounding it twenty plus percent a year for fifty eight years. That's,

01:30:56

you know, if you're doing, if you're twenty percent a year, you are doubling every three and a half years. Okay?

you know, if you're doing, if you're twenty percent a year, you are doubling every three and a half years. Okay?

01:31:02

And

And

01:31:03

that means after thirty five years, it's a ten doubles,

that means after thirty five years, it's a ten doubles,

01:31:08

and fifty eight is another twenty three years.

and fifty eight is another twenty three years.

01:31:12

So you've got another,

So you've got another,

01:31:15

what, one six

what, one six

01:31:17

six stuff. So sixteen doubles.

six stuff. So sixteen doubles.

01:31:20

Two to the power sixteen. Now the way to do two to the power sixteen is two to the power ten times two to the power six. Two to the power ten round number is one thousand. It's a thousand x, right, and total power six is sixty four. It's sixty four thousand

Two to the power sixteen. Now the way to do two to the power sixteen is two to the power ten times two to the power six. Two to the power ten round number is one thousand. It's a thousand x, right, and total power six is sixty four. It's sixty four thousand

01:31:34

times

times

01:31:36

what you started with.

what you started with.

01:31:38

Okay? If you started with a hundred dollars, it's six point four million.

Okay? If you started with a hundred dollars, it's six point four million.

01:31:43

Okay, hundred dollars to six point four million. Okay. So he he's saying

Okay, hundred dollars to six point four million. Okay. So he he's saying

01:31:49

I would calculate in the last fifty years, fifty eight years. Buffet's made

I would calculate in the last fifty years, fifty eight years. Buffet's made

01:31:53

three or four hundred, at least four hundred different investment decisions.

three or four hundred, at least four hundred different investment decisions.

01:31:58

He's saying

He's saying

01:31:59

twelve

twelve

01:32:01

are the ones that mattered. Right?

are the ones that mattered. Right?

01:32:04

The god of investing

The god of investing

01:32:06

has a four percent hit rate.

has a four percent hit rate.

01:32:08

That's the god of investing. That's why we should index. Right. What what are the rest of us mere mortals supposed to do?

That's the god of investing. That's why we should index. Right. What what are the rest of us mere mortals supposed to do?

01:32:14

Now the thing is that the I was thinking about his twelve bets. Right? And I I I thought about, okay, which was the twelve. And I think he never mentioned that, but you could guess which one. C's would be one of them. Coke could be another one. AmEx,

Now the thing is that the I was thinking about his twelve bets. Right? And I I I thought about, okay, which was the twelve. And I think he never mentioned that, but you could guess which one. C's would be one of them. Coke could be another one. AmEx,

01:32:27

Gillette, capsities, Washington Post, you know, if you can come up with a name, you know,

Gillette, capsities, Washington Post, you know, if you can come up with a name, you know,

01:32:33

Berkshire Energy, a G chain, hiding a G chain, probably were the biggest bet for them, but paid off huge for them. But what's the story with a g the the there's something about the recruiter for him?

Berkshire Energy, a G chain, hiding a G chain, probably were the biggest bet for them, but paid off huge for them. But what's the story with a g the the there's something about the recruiter for him?

01:32:43

So what I realized when I thought about these twelve bets was

So what I realized when I thought about these twelve bets was

01:32:47

it wasn't the buy decision.

it wasn't the buy decision.

01:32:49

The biodecision is important.

The biodecision is important.

01:32:52

The important thing was they never sold.

The important thing was they never sold.

01:32:55

Cs

Cs

01:32:56

stayed in the stable.

stayed in the stable.

01:32:58

For fifty years.

For fifty years.

01:33:00

Coke has been in this table for forty plus years. Right? So it wasn't the buy decision.

Coke has been in this table for forty plus years. Right? So it wasn't the buy decision.

01:33:06

It was the paint drying decision.

It was the paint drying decision.

01:33:09

Okay. That was the important thing. So

Okay. That was the important thing. So

01:33:12

when you find yourself in the happy position,

when you find yourself in the happy position,

01:33:16

of

of

01:33:17

a small ownership in a great business.

a small ownership in a great business.

01:33:21

Just find something else to do with your time.

Just find something else to do with your time.

01:33:24

Play bridge or whatever. Have you have you considered golf?

Play bridge or whatever. Have you have you considered golf?

01:33:28

I have. Yeah. Gulf is great. And and so

I have. Yeah. Gulf is great. And and so

01:33:32

if you ask Charlie, he would say

if you ask Charlie, he would say

01:33:34

the single best decision, best investment Berkshire Hathaway ever made,

the single best decision, best investment Berkshire Hathaway ever made,

01:33:38

was the search fee they paid to hire a jeep chain.

was the search fee they paid to hire a jeep chain.

01:33:42

Okay.

Okay.

01:33:43

Now a G chain walks into their offices in nineteen eighty six, nineteen eighty five, actually,

Now a G chain walks into their offices in nineteen eighty six, nineteen eighty five, actually,

01:33:49

never having worked in the insurance business. Right?

never having worked in the insurance business. Right?

01:33:54

From scratch

From scratch

01:33:55

without

without

01:33:56

them putting a bunch of capital or anything,

them putting a bunch of capital or anything,

01:33:59

the business he's created for them

the business he's created for them

01:34:02

today

today

01:34:04

probably has a value

probably has a value

01:34:06

north of

north of

01:34:07

a hundred billion.

a hundred billion.

01:34:09

Okay.

Okay.

01:34:10

I mean, it just gets lost in Berkshire, but Berkshire's so big. But

I mean, it just gets lost in Berkshire, but Berkshire's so big. But

01:34:14

I'll give you I'll give you an example of,

I'll give you I'll give you an example of,

01:34:18

of a,

of a,

01:34:20

a discussion I had with Charlie. I think that there's maybe

a discussion I had with Charlie. I think that there's maybe

01:34:23

two, three months before he passed away. So he was telling me that,

two, three months before he passed away. So he was telling me that,

01:34:29

you know, Berkshire, Berkshire Hathaway writes,

you know, Berkshire, Berkshire Hathaway writes,

01:34:33

super catastrophe insurance, like, you know,

super catastrophe insurance, like, you know,

01:34:35

insurance against hurricanes,

insurance against hurricanes,

01:34:38

earthquakes, and so on. Right? And,

earthquakes, and so on. Right? And,

01:34:41

many, many years,

many, many years,

01:34:43

they've when people are looking for earthquake insurance in Florida

they've when people are looking for earthquake insurance in Florida

01:34:47

of hurricane insurance in Florida.

of hurricane insurance in Florida.

01:34:50

Ajit will look at the rates being offered and just take a pass.

Ajit will look at the rates being offered and just take a pass.

01:34:54

Okay. Be basically,

Okay. Be basically,

01:34:55

he would find his two competitor, whatever else people are not giving enough. Okay.

he would find his two competitor, whatever else people are not giving enough. Okay.

01:35:01

What he did in twenty twenty three

What he did in twenty twenty three

01:35:03

And they mentioned it at the at a meeting, actually, is that,

And they mentioned it at the at a meeting, actually, is that,

01:35:09

he

he

01:35:10

wrote

wrote

01:35:13

hurricane insurance,

hurricane insurance,

01:35:15

on Berkshire's behalf,

on Berkshire's behalf,

01:35:17

reinsurance

reinsurance

01:35:18

with a maximum payout

with a maximum payout

01:35:20

of fifteen billion dollars.

of fifteen billion dollars.

01:35:22

So

So

01:35:23

if if these hurricanes had hit, now,

if if these hurricanes had hit, now,

01:35:26

basically, the math is like this. I just wanna explain how how Ajit's mind works.

basically, the math is like this. I just wanna explain how how Ajit's mind works.

01:35:32

Berkshire would pay out on a big catastrophe, like in,

Berkshire would pay out on a big catastrophe, like in,

01:35:36

earthquake,

earthquake,

01:35:37

hurricanes,

hurricanes,

01:35:38

three to five percent of the total

three to five percent of the total

01:35:40

insured loss incurred.

insured loss incurred.

01:35:43

So for them to have a fifteen billion payout,

So for them to have a fifteen billion payout,

01:35:46

you would have to have had an event

you would have to have had an event

01:35:49

with insured losses in Florida of three hundred billion

with insured losses in Florida of three hundred billion

01:35:52

beyond Andrew and beyond Katrina. Right. Is beyond all of those. Right? So it's it'll be need to be a really big event

beyond Andrew and beyond Katrina. Right. Is beyond all of those. Right? So it's it'll be need to be a really big event

01:36:00

to for them to have a fifteen billion out. The premium he collected,

to for them to have a fifteen billion out. The premium he collected,

01:36:06

to write that fifteen billion policy, take a guess.

to write that fifteen billion policy, take a guess.

01:36:09

Take a guess.

Take a guess.

01:36:10

Five billion. He collected five billion. Oh, okay. And and I'm sweating that guess. No. No. But but he collected that's exactly what he collected.

Five billion. He collected five billion. Oh, okay. And and I'm sweating that guess. No. No. But but he collected that's exactly what he collected.

01:36:19

How much did he pay out in twenty three?

How much did he pay out in twenty three?

01:36:21

Zero.

Zero.

01:36:22

There was one that came through. My guess would be they might have paid out three, four hundred million. Okay. You know, some three hundred. Select five billion. And and what Charlie said to me is

There was one that came through. My guess would be they might have paid out three, four hundred million. Okay. You know, some three hundred. Select five billion. And and what Charlie said to me is

01:36:32

Ajit's done this about six times.

Ajit's done this about six times.

01:36:35

Okay, where

Okay, where

01:36:36

he's picked the years

he's picked the years

01:36:38

that he's written these policies because what was happening in most years

that he's written these policies because what was happening in most years

01:36:42

is the premium offered was two billion.

is the premium offered was two billion.

01:36:45

It just took a pass. Right.

It just took a pass. Right.

01:36:47

Right. A lot of all the other insurers wrote that policy.

Right. A lot of all the other insurers wrote that policy.

01:36:51

Book, you took a pass. Right. No call strikes. Right. And and and now, for example,

Book, you took a pass. Right. No call strikes. Right. And and and now, for example,

01:36:56

we've had,

we've had,

01:36:59

we had some unusual,

we had some unusual,

01:37:01

losses. Like, for example,

losses. Like, for example,

01:37:04

that,

that,

01:37:05

that ship in Baltimore.

that ship in Baltimore.

01:37:06

Right? Now that's going to end up being about three three to five billion in losses. Right? And it's the biggest maritime loss. In

Right? Now that's going to end up being about three three to five billion in losses. Right? And it's the biggest maritime loss. In

01:37:16

global history.

global history.

01:37:17

It's going to change

It's going to change

01:37:19

premiums for ships

premiums for ships

01:37:21

in the future.

in the future.

01:37:22

Berkshire will probably be writing when everyone else is saying I don't want to do that. You know, it's like the cat who sat on a hot stove and doesn't want to sit on any hot or cold stoves ever again. You know, you have a thing over there I saw in your office that says it's like a placard. It says trouble is opportunity. Absolutely. That's a that's a cool story of that. It's a court by John Templeton.

Berkshire will probably be writing when everyone else is saying I don't want to do that. You know, it's like the cat who sat on a hot stove and doesn't want to sit on any hot or cold stoves ever again. You know, you have a thing over there I saw in your office that says it's like a placard. It says trouble is opportunity. Absolutely. That's a that's a cool story of that. It's a court by John Templeton.

01:37:45

And I actually, they're the good friend of mine, Primhosa in Canada,

And I actually, they're the good friend of mine, Primhosa in Canada,

01:37:49

as they call him, Berkshire Hathaway of Canada.

as they call him, Berkshire Hathaway of Canada.

01:37:53

Wandbuffalo Canada. And,

Wandbuffalo Canada. And,

01:37:55

I had seen that,

I had seen that,

01:37:57

that plaque on in his on his desk, and somebody sent it to me. And so it's a great quote. I mean, I think that that's what what we are trying to do with investors is we,

that plaque on in his on his desk, and somebody sent it to me. And so it's a great quote. I mean, I think that that's what what we are trying to do with investors is we,

01:38:07

want

want

01:38:08

we we need to be fearful when the world is greedy

we we need to be fearful when the world is greedy

01:38:12

and we need to be greedy when the world is fearful.

and we need to be greedy when the world is fearful.

01:38:15

And so, basically,

And so, basically,

01:38:17

when the world is running away from call,

when the world is running away from call,

01:38:20

we need to run towards call. Right. So

we need to run towards call. Right. So

01:38:23

I'm always looking at what is hated and unloved.

I'm always looking at what is hated and unloved.

01:38:28

Right? And usually, you will get a lot of mispricing when something is hating and and unloved.

Right? And usually, you will get a lot of mispricing when something is hating and and unloved.

01:38:33

Right.

Right.

01:38:34

Tell me about Bitcoin. Are you a fan of, crypto Bitcoin? Are you a believer? Outside my circle of competence.

Tell me about Bitcoin. Are you a fan of, crypto Bitcoin? Are you a believer? Outside my circle of competence.

01:38:40

And I would say that if you put a gun to my head, I would say it's gonna end badly.

And I would say that if you put a gun to my head, I would say it's gonna end badly.

01:38:45

Why is that?

Why is that?

01:38:47

It's in the eye of the beholder.

It's in the eye of the beholder.

01:38:49

There is no intrinsic

There is no intrinsic

01:38:51

value

value

01:38:53

as I understand it to Bitcoin.

as I understand it to Bitcoin.

01:38:55

Now

Now

01:38:56

you can argue that there isn't an intrinsic value

you can argue that there isn't an intrinsic value

01:39:00

to the dollar.

to the dollar.

01:39:02

But it has a full faith in credit.

But it has a full faith in credit.

01:39:05

Of the US government, which is then backed by the

Of the US government, which is then backed by the

01:39:08

hardworking American people.

hardworking American people.

01:39:10

So, basically, I think that, I think that it's,

So, basically, I think that, I think that it's,

01:39:15

For me, it's in the two hard pile, but I think for most people, I would just say take a pass.

For me, it's in the two hard pile, but I think for most people, I would just say take a pass.

01:39:20

Right. Most people who have invested in Bitcoin

Right. Most people who have invested in Bitcoin

01:39:24

couldn't really tell you,

couldn't really tell you,

01:39:28

why it's

why it's

01:39:30

or what it's gonna be worth and why it should be worth

or what it's gonna be worth and why it should be worth

01:39:35

Okay. Fair enough. So one of the reasons I wanted to fly here is because it's fun to

Okay. Fair enough. So one of the reasons I wanted to fly here is because it's fun to

01:39:39

meet these kinda outlier investors or even just hear the stories. And I've heard you tell a couple stories about guys I've never heard of that, I would love for you to to tell the story because I think most people have never heard of these people. So Tell me about,

meet these kinda outlier investors or even just hear the stories. And I've heard you tell a couple stories about guys I've never heard of that, I would love for you to to tell the story because I think most people have never heard of these people. So Tell me about,

01:39:54

Nick Sleep. Who's Nick Sleep or,

Nick Sleep. Who's Nick Sleep or,

01:39:57

Junjannwala? Whichever is your favorite. Give me give me one of the the stories Well, I think Nick is, Nick is a wonderful guy, and there's a book called,

Junjannwala? Whichever is your favorite. Give me give me one of the the stories Well, I think Nick is, Nick is a wonderful guy, and there's a book called,

01:40:06

Richard

Richard

01:40:07

Richard Weiser Happier that came out two, three years ago. And then the chapter on him. Nick is very, he's a recluse. He doesn't do,

Richard Weiser Happier that came out two, three years ago. And then the chapter on him. Nick is very, he's a recluse. He doesn't do,

01:40:15

interviews and such. I was actually surprised he even talked to the author, but it's worth reading the the book. And,

interviews and such. I was actually surprised he even talked to the author, but it's worth reading the the book. And,

01:40:22

you know, him he he and his partner, Zach,

you know, him he he and his partner, Zach,

01:40:26

they would come into their office and basically

they would come into their office and basically

01:40:30

just sit

just sit

01:40:31

and read annual report after annual report till they were blue on the face. You know? I mean, they were just and,

and read annual report after annual report till they were blue on the face. You know? I mean, they were just and,

01:40:37

and and

and and

01:40:38

they would,

they would,

01:40:39

want to see if they could understand,

want to see if they could understand,

01:40:43

different businesses and

different businesses and

01:40:45

that exercise of reading the annual report led them to the annual report of

that exercise of reading the annual report led them to the annual report of

01:40:51

Amazon.

Amazon.

01:40:52

Right? And

Right? And

01:40:54

For example, I I've

For example, I I've

01:40:56

been a customer of Amazon known Amazon for a long time, etcetera, familiar with the business, but every time I would take a cursory glance at Amazon,

been a customer of Amazon known Amazon for a long time, etcetera, familiar with the business, but every time I would take a cursory glance at Amazon,

01:41:04

it looked very expensive.

it looked very expensive.

01:41:06

On a earnings basis, a PE basis, it looked really expensive.

On a earnings basis, a PE basis, it looked really expensive.

01:41:10

And the reason it looked expensive is they were investing

And the reason it looked expensive is they were investing

01:41:13

so far ahead of the curve on the growth

so far ahead of the curve on the growth

01:41:16

that

that

01:41:18

what what should have been categorized as CapEx wasn't was just categorized as expenses.

what what should have been categorized as CapEx wasn't was just categorized as expenses.

01:41:23

So the US government was early funding their growth because there were no taxes.

So the US government was early funding their growth because there were no taxes.

01:41:27

Being collected.

Being collected.

01:41:28

Now

Now

01:41:30

what what,

what what,

01:41:31

Nick and Zach were able to do because they were just sitting in their

Nick and Zach were able to do because they were just sitting in their

01:41:35

office with no distractions reading year after year of buffets,

office with no distractions reading year after year of buffets,

01:41:38

of Bezos's letters.

of Bezos's letters.

01:41:40

And the Bezos letters are worth reading. I mean, I think they're they're very clear,

And the Bezos letters are worth reading. I mean, I think they're they're very clear,

01:41:45

he clearly laid out in those letters

he clearly laid out in those letters

01:41:49

what he was up to, right, that he's

what he was up to, right, that he's

01:41:52

basically that that

basically that that

01:41:54

he wasn't he wasn't,

he wasn't he wasn't,

01:41:57

completely candid, but he was, basically, you could tell that the business had very high returns on capital, and he was investing,

completely candid, but he was, basically, you could tell that the business had very high returns on capital, and he was investing,

01:42:05

he was throwing a lot of things against the wall, but basically they were very low risk bets.

he was throwing a lot of things against the wall, but basically they were very low risk bets.

01:42:10

If any single bet didn't work, it didn't wouldn't sink the company.

If any single bet didn't work, it didn't wouldn't sink the company.

01:42:13

And,

And,

01:42:15

so for example, one of the bets they made was AWS,

so for example, one of the bets they made was AWS,

01:42:19

right, which became a huge, and they didn't know it was gonna become as big as it did. But but basically,

right, which became a huge, and they didn't know it was gonna become as big as it did. But but basically,

01:42:25

they also made a bet on fire. Amazon Fire, which didn't work. But, basically, I think what,

they also made a bet on fire. Amazon Fire, which didn't work. But, basically, I think what,

01:42:31

what Nick and Zach realized is that

what Nick and Zach realized is that

01:42:35

here was a very gifted capital allocator

here was a very gifted capital allocator

01:42:37

who understood

who understood

01:42:39

all the different facets of building a team

all the different facets of building a team

01:42:43

going after different markets. He actually disrupted multiple industries.

going after different markets. He actually disrupted multiple industries.

01:42:47

And so they had placed,

And so they had placed,

01:42:49

a bet on Amazon.

a bet on Amazon.

01:42:52

And,

And,

01:42:53

and because Amazon was doing so well,

and because Amazon was doing so well,

01:42:57

it was becoming

it was becoming

01:42:59

a larger and larger portion

a larger and larger portion

01:43:01

of their fund. And in the UK, there are more regulations

of their fund. And in the UK, there are more regulations

01:43:06

on hedge funds than we have in the US. The UK regulator was telling them that we see

on hedge funds than we have in the US. The UK regulator was telling them that we see

01:43:12

this

this

01:43:13

position as very high risk,

position as very high risk,

01:43:17

and you guys need to diversify.

and you guys need to diversify.

01:43:20

So they were getting pressure,

So they were getting pressure,

01:43:22

and

and

01:43:23

they felt that they understood the business so well.

they felt that they understood the business so well.

01:43:26

So

So

01:43:27

they looked at each other. They were they were managing, I think, two or three billion.

they looked at each other. They were they were managing, I think, two or three billion.

01:43:32

They had made hundreds of millions in

They had made hundreds of millions in

01:43:35

for each of them.

for each of them.

01:43:37

And,

And,

01:43:38

they said, look,

they said, look,

01:43:40

we are independently

we are independently

01:43:41

wealthy. We never thought we'd be here.

wealthy. We never thought we'd be here.

01:43:44

We're young,

We're young,

01:43:46

why do we have to listen to some regulator? Right. We could return on the capital

why do we have to listen to some regulator? Right. We could return on the capital

01:43:51

to all our investors.

to all our investors.

01:43:53

And,

And,

01:43:55

what what Nick said is if I return the capital,

what what Nick said is if I return the capital,

01:43:58

I'm gonna put everything into three stocks. And these are three stocks

I'm gonna put everything into three stocks. And these are three stocks

01:44:02

he owned maybe a dozen stocks, but he was gonna go into three stocks. The three stocks he was gonna put one third each in two was, one third Berkshire, one third Amazon, one third cost. Go. Right? And

he owned maybe a dozen stocks, but he was gonna go into three stocks. The three stocks he was gonna put one third each in two was, one third Berkshire, one third Amazon, one third cost. Go. Right? And

01:44:15

so he said I'm very comfortable with these three talks. They're very

so he said I'm very comfortable with these three talks. They're very

01:44:19

built to last businesses.

built to last businesses.

01:44:22

And he did that.

And he did that.

01:44:23

And

And

01:44:24

what what happened,

what what happened,

01:44:26

a few years after they hung up their boots,

a few years after they hung up their boots,

01:44:29

is,

is,

01:44:30

it's really funny. The,

it's really funny. The,

01:44:32

Amazon still kept, you know, it's a juggernaut. It still kept going.

Amazon still kept, you know, it's a juggernaut. It still kept going.

01:44:37

And so

And so

01:44:38

it became

it became

01:44:39

seventy, eighty percent of the pie. So instead of them being one third each, it was eighty, ten, ten, for example. Right?

seventy, eighty percent of the pie. So instead of them being one third each, it was eighty, ten, ten, for example. Right?

01:44:46

And,

And,

01:44:49

Nick decided that, oh, maybe I should take some chips off the table here. And so he cut the Amazon position in half and bought,

Nick decided that, oh, maybe I should take some chips off the table here. And so he cut the Amazon position in half and bought,

01:44:58

another business, which has not done well.

another business, which has not done well.

01:45:02

Sideways.

Sideways.

01:45:03

And that goes back back to Buffett's point of twelve that worked in fifty eight years

And that goes back back to Buffett's point of twelve that worked in fifty eight years

01:45:09

is

is

01:45:11

we are not going to if Warren Buffett has a four percent hit rate,

we are not going to if Warren Buffett has a four percent hit rate,

01:45:15

the rest of us are gonna have a two percent hit rate. Okay.

the rest of us are gonna have a two percent hit rate. Okay.

01:45:18

So

So

01:45:20

but you also need to get rich just one. So I think that what worked really well for Nick and Zach was they took the Buffett lesson, which is that once you have a great business,

but you also need to get rich just one. So I think that what worked really well for Nick and Zach was they took the Buffett lesson, which is that once you have a great business,

01:45:32

just leave it alone. Now even after he was sloppy,

just leave it alone. Now even after he was sloppy,

01:45:35

and he took chips off the table from eighty percent or whatever,

and he took chips off the table from eighty percent or whatever,

01:45:39

still done very well. Right. And and I think one of the things that, investors forget

still done very well. Right. And and I think one of the things that, investors forget

01:45:45

is that,

is that,

01:45:47

if you look at the

if you look at the

01:45:49

the Walton family,

the Walton family,

01:45:52

none of them are running Walmart.

none of them are running Walmart.

01:45:54

Sam Walton passed away a long time ago. It's been several decades since Sam Walton passed away.

Sam Walton passed away a long time ago. It's been several decades since Sam Walton passed away.

01:45:59

The Walton have, for the most part,

The Walton have, for the most part,

01:46:02

kept the Walmart stock. And for most of them, it's almost the entire net worth in a single stock. Right? So more concentrated than even Nick sleep. Right?

kept the Walmart stock. And for most of them, it's almost the entire net worth in a single stock. Right? So more concentrated than even Nick sleep. Right?

01:46:13

And,

And,

01:46:15

it's not a business that they control.

it's not a business that they control.

01:46:18

It's not a business that they run it's not a business that they're on the board of.

It's not a business that they run it's not a business that they're on the board of.

01:46:24

None of them gives them sleepless nights. Right? And,

None of them gives them sleepless nights. Right? And,

01:46:28

so

so

01:46:29

for example,

for example,

01:46:30

in two thousand,

in two thousand,

01:46:34

eighteen, I started visiting Turkey

eighteen, I started visiting Turkey

01:46:38

And I was just looking at things hated and unloved at that time, and I saw that the Turkish markets

And I was just looking at things hated and unloved at that time, and I saw that the Turkish markets

01:46:43

were screening

were screening

01:46:44

really cheap.

really cheap.

01:46:46

Every one of the brothers are saying sitting Turkey. And I have a really good friend of mine in Istanbul.

Every one of the brothers are saying sitting Turkey. And I have a really good friend of mine in Istanbul.

01:46:52

Very good investor

Very good investor

01:46:54

a classic Ben Graham investor.

a classic Ben Graham investor.

01:46:56

And I told him, Hey, Tyler, I'd I'd love to visit Istanbul, and I'd love to if we could visit

And I told him, Hey, Tyler, I'd I'd love to visit Istanbul, and I'd love to if we could visit

01:47:04

all the companies in your portfolio

all the companies in your portfolio

01:47:06

starting with the company with the your strongest conviction, biggest position

starting with the company with the your strongest conviction, biggest position

01:47:10

to the smallest position. And I said, don't take me to see any companies

to the smallest position. And I said, don't take me to see any companies

01:47:15

where you don't have money in. Okay? He said, well, it should be a blast. So I went in two thousand eighteen first time to Istanbul

where you don't have money in. Okay? He said, well, it should be a blast. So I went in two thousand eighteen first time to Istanbul

01:47:22

the bluefish on the bosphorus was great.

the bluefish on the bosphorus was great.

01:47:25

And

And

01:47:26

all these different businesses we saw were great, you know. And I didn't really

all these different businesses we saw were great, you know. And I didn't really

01:47:30

do much work. He told me what places we were going to, but I just said, let me meet the companies first.

do much work. He told me what places we were going to, but I just said, let me meet the companies first.

01:47:36

I went back in twenty nineteen,

I went back in twenty nineteen,

01:47:39

and

and

01:47:41

we're driving to this company. And I like I said, all these Turkish names and companies, I said, I will do the work on the back end. I'm I'm not gonna spend time. So as we're driving over, I said, hi there. Remind me what company are we going to? What's the what's the cliff notes version? He said, okay. He says, this company gonna visit, Racas,

we're driving to this company. And I like I said, all these Turkish names and companies, I said, I will do the work on the back end. I'm I'm not gonna spend time. So as we're driving over, I said, hi there. Remind me what company are we going to? What's the what's the cliff notes version? He said, okay. He says, this company gonna visit, Racas,

01:48:02

has a sixteen million market cap, sixteen million dollar market cap,

has a sixteen million market cap, sixteen million dollar market cap,

01:48:06

and he says, liquidation value of the business that we sold it today is eight hundred million.

and he says, liquidation value of the business that we sold it today is eight hundred million.

01:48:11

So I said,

So I said,

01:48:13

is it a fraud?

is it a fraud?

01:48:15

He said, he said, no. I'm I'm invested in the company. And so I said, you're telling me the company is trading for two two percent

He said, he said, no. I'm I'm invested in the company. And so I said, you're telling me the company is trading for two two percent

01:48:23

of liquidation value. He said, yeah.

of liquidation value. He said, yeah.

01:48:27

I said why? He said it's tricky.

I said why? He said it's tricky.

01:48:29

You know, everything's cheap. I said, but this is the outlier

You know, everything's cheap. I said, but this is the outlier

01:48:33

cheap. Okay. And

cheap. Okay. And

01:48:35

RASAS basically

RASAS basically

01:48:37

is a very simple business. They

is a very simple business. They

01:48:39

the largest warehouse operator in Turkey. They rent out all these warehouses.

the largest warehouse operator in Turkey. They rent out all these warehouses.

01:48:44

These are ninety nine percent leased, inflation indexed,

These are ninety nine percent leased, inflation indexed,

01:48:48

and,

and,

01:48:49

they're leased to Amazon, IKEA car for

they're leased to Amazon, IKEA car for

01:48:52

Mercedes Toyota,

Mercedes Toyota,

01:48:54

like blue chip clients,

like blue chip clients,

01:48:56

and

and

01:48:57

all of that. Right? So I went and,

all of that. Right? So I went and,

01:48:59

met the father and son who run the company and the founders.

met the father and son who run the company and the founders.

01:49:04

And,

And,

01:49:05

And then after that, I went and visited a bunch of the warehouses,

And then after that, I went and visited a bunch of the warehouses,

01:49:09

and I couldn't find anything wrong with it.

and I couldn't find anything wrong with it.

01:49:12

Basically,

Basically,

01:49:13

and he was absolutely right if you just went to any realtor in Turkey

and he was absolutely right if you just went to any realtor in Turkey

01:49:19

and said, this is their AD warehouses.

and said, this is their AD warehouses.

01:49:23

Give me a value in each one. He would just look at the rent,

Give me a value in each one. He would just look at the rent,

01:49:27

and he would tell you, okay, you know, you're looking at about seventy eighty dollars a square foot. For each warehouse. They had twelve million square feet. It was about a billion dollars, and there was two hundred million of debt. So with eight hundred million degradation value.

and he would tell you, okay, you know, you're looking at about seventy eighty dollars a square foot. For each warehouse. They had twelve million square feet. It was about a billion dollars, and there was two hundred million of debt. So with eight hundred million degradation value.

01:49:40

And sixteen million market cap. Okay. And so then I thought, okay, this thing probably,

And sixteen million market cap. Okay. And so then I thought, okay, this thing probably,

01:49:46

trades by appointment.

trades by appointment.

01:49:48

And maybe you can't buy the stock, but Turkey has very high trading volume because they're all gamblers.

And maybe you can't buy the stock, but Turkey has very high trading volume because they're all gamblers.

01:49:54

And,

And,

01:49:56

so I found that when I when I started buying the stock,

so I found that when I when I started buying the stock,

01:49:59

that huge volumes are available. And I I spent eight million dollars

that huge volumes are available. And I I spent eight million dollars

01:50:05

to get a third of the company.

to get a third of the company.

01:50:07

Okay.

Okay.

01:50:08

Now

Now

01:50:10

the way I look at it is that, you know, when you look at, you know, Buffett's letter with the twelve positions or you look at Nick Sleep with Amazon. Right?

the way I look at it is that, you know, when you look at, you know, Buffett's letter with the twelve positions or you look at Nick Sleep with Amazon. Right?

01:50:20

The family that runs the business, they have maybe

The family that runs the business, they have maybe

01:50:24

forty, forty five percent ownership. Right?

forty, forty five percent ownership. Right?

01:50:28

I'm an outside investor

I'm an outside investor

01:50:30

at thirty three percent.

at thirty three percent.

01:50:31

No board sheet, but the way I look at Ressa's

No board sheet, but the way I look at Ressa's

01:50:35

is the way the Walton family looks at the Walmart stock.

is the way the Walton family looks at the Walmart stock.

01:50:39

Right?

Right?

01:50:40

I said,

I said,

01:50:42

and what what I've noticed since then, since twenty nineteen

and what what I've noticed since then, since twenty nineteen

01:50:45

is

is

01:50:47

they have increased the value of that business. So I would say that

they have increased the value of that business. So I would say that

01:50:52

probably today,

probably today,

01:50:54

the business might be worth

the business might be worth

01:50:56

one and a half to two billion,

one and a half to two billion,

01:50:58

somewhere in that range. And I think they'll con because I've never seen them make any decisions that were stupid.

somewhere in that range. And I think they'll con because I've never seen them make any decisions that were stupid.

01:51:04

They're very smart about the decisions.

They're very smart about the decisions.

01:51:07

It's very well run.

It's very well run.

01:51:08

So

So

01:51:10

I say, okay. Basically,

I say, okay. Basically,

01:51:13

we are done.

we are done.

01:51:16

We will keep that business. I don't care about the stock price.

We will keep that business. I don't care about the stock price.

01:51:20

So the sixteen million market cap now

So the sixteen million market cap now

01:51:23

is about five hundred million,

is about five hundred million,

01:51:25

you know, in four years. And, you know, the Turkish lira, which

you know, in four years. And, you know, the Turkish lira, which

01:51:30

when we were investing, it was five lira to the dollar.

when we were investing, it was five lira to the dollar.

01:51:34

Today,

Today,

01:51:35

it's approaching thirty three lira to the dollar. Turkish liras collapsed.

it's approaching thirty three lira to the dollar. Turkish liras collapsed.

01:51:41

In dollars,

In dollars,

01:51:43

we're up almost thirty x. Right?

we're up almost thirty x. Right?

01:51:48

But,

But,

01:51:49

the business is worth more. Right. And so the thing is that it's exactly what what Buffet says is that basically,

the business is worth more. Right. And so the thing is that it's exactly what what Buffet says is that basically,

01:51:56

just leave it alone.

just leave it alone.

01:51:58

And,

And,

01:51:59

as long as that family and that father and son are running the business,

as long as that family and that father and son are running the business,

01:52:04

we will just,

we will just,

01:52:06

keep our stake and, and,

keep our stake and, and,

01:52:08

let it keep running. So, basically, the idea is that,

let it keep running. So, basically, the idea is that,

01:52:13

I'm also going to when I look back, I'm gonna find there were a few

I'm also going to when I look back, I'm gonna find there were a few

01:52:19

things that moved the needle big time,

things that moved the needle big time,

01:52:21

and the rest it. Right. And and the key to moving the needle is inactivity.

and the rest it. Right. And and the key to moving the needle is inactivity.

01:52:27

And so that's what you you gotta be. Just you gotta

And so that's what you you gotta be. Just you gotta

01:52:30

be very patient and be very inactive. Right. You talked about,

be very patient and be very inactive. Right. You talked about,

01:52:34

Bezos being a capital allocator.

Bezos being a capital allocator.

01:52:37

Buffett, obviously, capital allocator for Berkshire.

Buffett, obviously, capital allocator for Berkshire.

01:52:40

And

And

01:52:42

what, you know, who are the other, I guess, like, if I just throw some names at you or some companies at you, like, I'm curious to hear your take on how well they allocate capital because we know how maybe they how good their brand is or their product is,

what, you know, who are the other, I guess, like, if I just throw some names at you or some companies at you, like, I'm curious to hear your take on how well they allocate capital because we know how maybe they how good their brand is or their product is,

01:52:53

but, we were talking about this yesterday. There's a transition from you're a product manager where your focus is building product and your people manager where you're building an organization.

but, we were talking about this yesterday. There's a transition from you're a product manager where your focus is building product and your people manager where you're building an organization.

01:53:02

And then you're a money manager, and you're now

And then you're a money manager, and you're now

01:53:05

you know, you're sitting on a hundred billion dollars, you have to figure out some way to invest it. This is like, you know, so tell me, meta or Facebook. What do you think how do you think they've done with the capital allocation?

you know, you're sitting on a hundred billion dollars, you have to figure out some way to invest it. This is like, you know, so tell me, meta or Facebook. What do you think how do you think they've done with the capital allocation?

01:53:16

Well, I think I think it was really surprising to see how

Well, I think I think it was really surprising to see how

01:53:21

he did a one eighty.

he did a one eighty.

01:53:22

I mean,

I mean,

01:53:23

I think,

I think,

01:53:25

Mark basically

Mark basically

01:53:27

moved from being a spendthrift

moved from being a spendthrift

01:53:29

to being a hotel.

to being a hotel.

01:53:31

You know?

You know?

01:53:32

He

He

01:53:33

I mean, literally, I I just can't,

I mean, literally, I I just can't,

01:53:36

I think it was remarkable to see

I think it was remarkable to see

01:53:39

an entrepreneur

an entrepreneur

01:53:40

pivot that way. Right. So, you know, Meta was a country club. You know, they had all this spending going on. In all these areas, and

pivot that way. Right. So, you know, Meta was a country club. You know, they had all this spending going on. In all these areas, and

01:53:49

he really tightened it up. I mean, I was really I mean, and it showed up in the numbers. Mhmm. They I mean, Facebook is a great business, you know, all the different, brands they have and different properties they have are tremendous.

he really tightened it up. I mean, I was really I mean, and it showed up in the numbers. Mhmm. They I mean, Facebook is a great business, you know, all the different, brands they have and different properties they have are tremendous.

01:54:03

It is the norm in capitalism

It is the norm in capitalism

01:54:06

that great businesses will be sloppy

that great businesses will be sloppy

01:54:09

with how they execute. I think normally it's very rare to find

with how they execute. I think normally it's very rare to find

01:54:14

a great business,

a great business,

01:54:16

which is also

which is also

01:54:17

tight fisted.

tight fisted.

01:54:19

And meta wasn't tight fisted,

And meta wasn't tight fisted,

01:54:22

but it is now.

but it is now.

01:54:24

And, so that was just wonderful to see. So I think Yeah. I think the capital allocation there is excellent now. Right. What do you think about, Elon Musk, fellow, fellow, Texas resident?

And, so that was just wonderful to see. So I think Yeah. I think the capital allocation there is excellent now. Right. What do you think about, Elon Musk, fellow, fellow, Texas resident?

01:54:36

The United States, this is one of the just, the most beautiful things about the United States, is Elon wasn't born here.

The United States, this is one of the just, the most beautiful things about the United States, is Elon wasn't born here.

01:54:44

Okay.

Okay.

01:54:45

And he wasn't educated

And he wasn't educated

01:54:46

in his first

in his first

01:54:48

twenty years of life over here.

twenty years of life over here.

01:54:51

We, the United States, got a finished product, basically.

We, the United States, got a finished product, basically.

01:54:55

And, he's created tremendous value, tremendous jobs,

And, he's created tremendous value, tremendous jobs,

01:55:00

and disrupted multiple industries.

and disrupted multiple industries.

01:55:04

I think I think Elon is, exceptional

I think I think Elon is, exceptional

01:55:07

allocate our capital.

allocate our capital.

01:55:08

Yeah. It's a terrific, actually. And Tesla gets a lot of there's a lot of conversation. Is Tesla overvalued?

Yeah. It's a terrific, actually. And Tesla gets a lot of there's a lot of conversation. Is Tesla overvalued?

01:55:14

Is it undervalued? Is it and, you know, too frothy. Well, I guess what's your take on, when you look at a business like Tesla, how does your mind

Is it undervalued? Is it and, you know, too frothy. Well, I guess what's your take on, when you look at a business like Tesla, how does your mind

01:55:22

analyze a business like Tesla? It would it goes into the two hard pile.

analyze a business like Tesla? It would it goes into the two hard pile.

01:55:26

I I would I would I would I would say this. I would say that

I I would I would I would I would say this. I would say that

01:55:30

Elon is not human.

Elon is not human.

01:55:31

Okay. He's beyond human.

Okay. He's beyond human.

01:55:34

If you just think about all the things he's done. I mean, now the neural net,

If you just think about all the things he's done. I mean, now the neural net,

01:55:39

and, and,

and, and,

01:55:41

you know,

you know,

01:55:42

boring company and, you know, what he's doing with SpaceX and all that. It's,

boring company and, you know, what he's doing with SpaceX and all that. It's,

01:55:48

it's just really very remarkable

it's just really very remarkable

01:55:51

the execution is off the charts.

the execution is off the charts.

01:55:54

And, I think I think, like I said, I think it's just,

And, I think I think, like I said, I think it's just,

01:55:59

unbelievable in terms of what he's been able to accomplish. So I will all respect. I think I think Elon understands

unbelievable in terms of what he's been able to accomplish. So I will all respect. I think I think Elon understands

01:56:06

capital allocation really well.

capital allocation really well.

01:56:08

And I think,

And I think,

01:56:09

all the businesses that he,

all the businesses that he,

01:56:12

he gets involved with or he found,

he gets involved with or he found,

01:56:14

they do so well because

they do so well because

01:56:17

he

he

01:56:18

gets so much out of the people, which basically means he gets so much out of the capital. Right? I mean, he's his hiring is so good.

gets so much out of the people, which basically means he gets so much out of the capital. Right? I mean, he's his hiring is so good.

01:56:27

The teams that he's building are so exceptional

The teams that he's building are so exceptional

01:56:30

that, I mean, when you're hiring a software engineer,

that, I mean, when you're hiring a software engineer,

01:56:34

they could be an engineer who's worth ten ten million a year, and they could be another guy worth a hundred thousand a year. And he can tell the difference. Right. And so he's, that's that's a great skill to have. Yeah. I love that. We'll end with this. We have Charlie,

they could be an engineer who's worth ten ten million a year, and they could be another guy worth a hundred thousand a year. And he can tell the difference. Right. And so he's, that's that's a great skill to have. Yeah. I love that. We'll end with this. We have Charlie,

01:56:48

you know, here and he passed away and you were friends with him What's,

you know, here and he passed away and you were friends with him What's,

01:56:53

maybe your your favorite story or lesson from, from Charlie Munguer? Yeah. I mean, I I, obviously, I miss Charlie. I think,

maybe your your favorite story or lesson from, from Charlie Munguer? Yeah. I mean, I I, obviously, I miss Charlie. I think,

01:57:01

he he was one of a kind. I think he was just a and and I I've been thinking last

he he was one of a kind. I think he was just a and and I I've been thinking last

01:57:06

several weeks, several months about so many of the lessons and things, but of the things Charlie said in one of the last interviews,

several weeks, several months about so many of the lessons and things, but of the things Charlie said in one of the last interviews,

01:57:14

he gave,

he gave,

01:57:18

someone asked him, I think, what would you like on your gravestone?

someone asked him, I think, what would you like on your gravestone?

01:57:22

And he said,

And he said,

01:57:24

I tried to be useful.

I tried to be useful.

01:57:26

And I think those those words are tried to be useful,

And I think those those words are tried to be useful,

01:57:31

encapsulate

encapsulate

01:57:32

Charlie really well.

Charlie really well.

01:57:34

If you look at Warren Buffett's tribute to him that he did this year in the letter,

If you look at Warren Buffett's tribute to him that he did this year in the letter,

01:57:39

Charlie selflessly

Charlie selflessly

01:57:40

helped Warren,

helped Warren,

01:57:42

a lot. I mean, without Charlie Munga, there's no Berkshire Hathaway,

a lot. I mean, without Charlie Munga, there's no Berkshire Hathaway,

01:57:47

even though you had a warren buffett there.

even though you had a warren buffett there.

01:57:50

And

And

01:57:51

I

I

01:57:52

twice, I went to Charlie when I was facing,

twice, I went to Charlie when I was facing,

01:57:57

difficult personal situations.

difficult personal situations.

01:57:59

Nothing related to investing. Right?

Nothing related to investing. Right?

01:58:02

Extremely helpful to me. On point, I just did exactly what he told me to do, and those issues disappeared.

Extremely helpful to me. On point, I just did exactly what he told me to do, and those issues disappeared.

01:58:09

Right? And so

Right? And so

01:58:11

Charlie always was trying

Charlie always was trying

01:58:14

to see

to see

01:58:15

how can I help

how can I help

01:58:17

the world

the world

01:58:19

in all the institutions that he touched?

in all the institutions that he touched?

01:58:21

You know, his memorial

You know, his memorial

01:58:23

was at the Harvard Best Lake School in California and LA.

was at the Harvard Best Lake School in California and LA.

01:58:28

Transformed

Transformed

01:58:29

that institution. He was at the board of the Good Sam's hospital transformed

that institution. He was at the board of the Good Sam's hospital transformed

01:58:33

the hospital, Berkshire Hathaway transformed.

the hospital, Berkshire Hathaway transformed.

01:58:36

I met so many partners he had in different businesses.

I met so many partners he had in different businesses.

01:58:40

Always gave them the better deal. And,

Always gave them the better deal. And,

01:58:44

I think in every way possible,

I think in every way possible,

01:58:47

he

he

01:58:48

I think that was just absolutely correct. He

I think that was just absolutely correct. He

01:58:51

selflessly tried to be useful.

selflessly tried to be useful.

01:58:54

And,

And,

01:58:54

you know, Charlie, I don't think Charlie believed in god. I don't think he believed in religion. Right? And I think he didn't believe in legacy. He I think he believed that when we're gone, we're gone.

you know, Charlie, I don't think Charlie believed in god. I don't think he believed in religion. Right? And I think he didn't believe in legacy. He I think he believed that when we're gone, we're gone.

01:59:05

It's ashes and dust. Right?

It's ashes and dust. Right?

01:59:09

Till one day before he passed away, he was in the hospital. He knew he was dying. He was trying to get one last grant done to a nonprofit.

Till one day before he passed away, he was in the hospital. He knew he was dying. He was trying to get one last grant done to a nonprofit.

01:59:18

No upside to him. He's dying. Correct. Right?

No upside to him. He's dying. Correct. Right?

01:59:23

Six days,

Six days,

01:59:25

six days before he passed away. He was buying a stock.

six days before he passed away. He was buying a stock.

01:59:28

Okay.

Okay.

01:59:29

You know,

You know,

01:59:30

a stock we discussed,

a stock we discussed,

01:59:32

you know, and,

you know, and,

01:59:33

I'd sent a right up on. So,

I'd sent a right up on. So,

01:59:36

I'm just saying that I think Charlie extracted

I'm just saying that I think Charlie extracted

01:59:40

everything he could from his mind and his body.

everything he could from his mind and his body.

01:59:43

The other thing was that he never complained.

The other thing was that he never complained.

01:59:46

Lost sight in one eye

Lost sight in one eye

01:59:49

many decades ago. He was almost blind in the other eye.

many decades ago. He was almost blind in the other eye.

01:59:54

He

He

01:59:55

cared most about reading.

cared most about reading.

01:59:57

Right? That was most important to him. And I saw him one time, and the second I was giving him a very serious problem where he could have gone blind This was maybe ten years ago in the second eye.

Right? That was most important to him. And I saw him one time, and the second I was giving him a very serious problem where he could have gone blind This was maybe ten years ago in the second eye.

02:00:08

Even when he was facing the prospect of complete blindness,

Even when he was facing the prospect of complete blindness,

02:00:14

he was so stoic.

he was so stoic.

02:00:16

Never

Never

02:00:17

said, oh, poor me,

said, oh, poor me,

02:00:19

self pity,

self pity,

02:00:21

his response to me was I'm gonna have to learn braille.

his response to me was I'm gonna have to learn braille.

02:00:25

You know, you know, that's that's how he was Right. Gonna deal with it. You know?

You know, you know, that's that's how he was Right. Gonna deal with it. You know?

02:00:29

And so I think, yeah, they'll I think it's just great.

And so I think, yeah, they'll I think it's just great.

02:00:33

We have such a big rich body of work that he left for Charlie's Almanac.

We have such a big rich body of work that he left for Charlie's Almanac.

02:00:37

And, I think a lot to learn from him. Right. Well, thank you for sharing that. And, thank you for doing this. This is hopefully your, you know, process of, of sharing some of your wisdom. So Thank you for doing this. It's a pleasure. I really enjoyed the session. Thank you, right on. Okay. Alright.

And, I think a lot to learn from him. Right. Well, thank you for sharing that. And, thank you for doing this. This is hopefully your, you know, process of, of sharing some of your wisdom. So Thank you for doing this. It's a pleasure. I really enjoyed the session. Thank you, right on. Okay. Alright.

02:00:53

Sounds good. Thank you.

Sounds good. Thank you.

Sync with video