May 12, 2025 • 41 mins
BUFFETT! – With the recent retirement announcement from Warren Buffett, Chris
Boyd, Jeff Perry, and Brian Regan reflect on the amazing life and the many financial
lessons of Warren Buffett. Brian leads the conversation with a brief biographical
summary of Buffett’s early years and reflections of how Buffett influenced his views on
investing. Jeff weighs in with Buffett’s dislike of using leverage and specifically credit
cards. Chris ends the episode discussing how Buffett plans to distribute his wealth
through the “Giving Pledge.”
For more information or to reach TEAM AMR, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Well, welcome to another show of Something More
with Chris Boyd.
So glad to have you with us.
I'm here with Jeff Perry, my regular co
-host, and we are joined today by Brian
(00:42):
Regan, senior portfolio manager for the AMR team
at Wealth Enhancement, the legend of Warren Buffett.
And he announced recently that he is going
to be retiring early retirement after what, 60
years?
How long has it been, Brian, of investment
(01:02):
history there?
I think he said he made his first
investment when he was eight years old.
So 87 years, let's call it.
Warren Buffett is in his 90s.
He was born August 30, 1930.
So he is 94, seems to be 95,
not too far off, 95.
(01:22):
Legendary investor, amassed enormous amounts of wealth.
And not because he has this sense that
he wants to go spend a lot of
money or anything.
He just is someone who loves to create
investing companies that create wealth.
(01:45):
And he's been a legend.
We'll talk about some of the business structure
decisions.
We'll talk about some of his investment decisions
and a little bit about his history and
story.
But that's what we're focusing on today in
this episode.
I'm glad everyone's here with us to enjoy
this.
So I have some notes about Warren Buffett,
(02:10):
but Brian, I'm going to start by giving
you the opportunity to get us started.
Well, I'll say that, for better or worse,
I don't really feel like I've been lucky
enough to find a mentor in this business.
But thank God it's the 21st century and
(02:31):
you can read and listen to as much
as from anybody as you can possibly want.
And Charlie Munger and Warren Buffett have had
a huge influence on my life personally.
Rest in peace, Charlie Munger.
He died a couple of years ago.
And Warren's still with us, just retiring.
But I was thinking about this when I
(02:51):
was driving my son to school today.
What would my net worth be if I
was never introduced to Warren Buffett?
And it's hard to tell, but it's undoubtedly
at least twice as high as it would
be otherwise, I think.
And he's had a remarkable career and evolution
as an investor.
And if you just pay attention to him,
(03:15):
I think you'll avoid a lot of headaches
and you'll get to what's important very quickly.
And I think there's a few tenets of
his teachings that we'll probably talk about that
I think are worth talking about and worth
emphasizing today and well beyond when I'm in
(03:38):
the ground.
So I think this is an important conversation
and one that we shouldn't just have once,
but probably revisit the teachings of Warren Buffett
as often as possible.
So the thing that I think investors, we've
seen him in times of crisis be a
voice of calm and a sense of perspective,
(04:02):
thinking most recently in the financial crisis.
And let's face it, some of the opportunities
he took advantage of in the midst of
that saved companies, but gave him a tidy
profit through his company.
At the same time, he's kind of got
(04:23):
this folksy way about him that, and he's
very down to earth when it comes to
his presentation, his demeanor, very relatable for considering
the kind of wealth this man has.
Lives, what is it?
Lives in the same house since he first
got married or whatever.
(04:45):
I mean, he's a very interesting individual in
that respect, but I think what we want
to ultimately do is talk about his lessons
for investing, and probably want to talk about
these annual meetings and things like that as
well.
So let's start with maybe his early life.
(05:11):
He went to college at Columbia, met Ben
Graham as a mentor, but maybe even before
that, we can talk about a little bit
of entrepreneurial spirit that he demonstrated.
Yeah.
So he was from Omaha, Nebraska, where he
(05:31):
still lives.
As a young kid, he actually worked in
Charlie Munger's father's grocery store, an amazing fortuitous,
these geniuses who ended up being partners for
many decades of their life, had a very
(05:52):
geographically close relationship as well as personally close
relationship.
But yeah, he did stints at Columbia, he
did stints at Wharton School, Wharton Business School,
and he finished his graduate degree in Nebraska.
But he met Ben Graham, who he started
(06:16):
working as an analyst under initially, first thing
out of college.
And after a couple of years of that,
he decided he was ready to start his
own partnership.
And the Buffett partnership from 1957 to 1969
returned about 32% annually a year.
Which is mind numbingly amazing, 32% a
(06:40):
year.
At that time, he specialized in what he
called cigar butt investing.
So cigar butt investing was, you're buying a
company that has more cash on its balance
sheet than the company is trading for.
And this is something that you could do
in the late 50s and early 60s a
little easier than you can now.
(07:01):
Information was not as publicly available, it was
not as easy to trade stocks.
He could buy small companies and he could
buy them whole.
And this is what he did and very,
very successfully.
So this is a pretty short term trading
strategy, as you can imagine, right?
He'd buy a stake in the company, get
(07:21):
on the board or talk to the board
and try to get them to disseminate the
cash out to shareholders.
And that was a very successful strategy for
years until he met Charlie Munger and they
ran separate partnerships for a long time.
I don't know how many years, but Charlie
Munger was very successful in his own right.
(07:43):
He didn't start his career in finance.
He was in the military service.
He was the only person I ever heard
of to go to Harvard Law School without
an undergraduate degree.
He did go to Caltech, but never graduated.
He went there because of military service, because
(08:04):
he was basically a genius in the military,
identified that.
And he started as a lawyer.
He made most of his money as a
lawyer.
And when he met Warren Buffett through a
doctor that they had a mutual acquaintance with
in Omaha, they had dinner together and became
fast friends.
(08:24):
And what Charlie changed in Warren and something
that I really admire is Warren had this
amazingly successful strategy.
And Charlie said, you know what would be
even better?
If we bought really good businesses and helped
them for a really, really long time.
And one of the things that I admire
in him as a human being, and there's
a lot to admire in him as a
human being, I mean, for years, he never
(08:45):
had any ethical issues.
Vivi, I'm sorry, you got to go see
your mother.
He never really had any significant ethical issues.
And he changed his investment philosophy, which is
really hard to do to go from something
that's successful to going to something that's overwhelmingly
successful.
One of the things that he did was
(09:06):
he bought GEICO pretty early.
So GEICO stands for the Government Employees Insurance
Corporation.
And it was a failing insurance company.
Why don't we pause for a minute there?
What honey?
What do you need?
I'm not using it.
I'm putting it away.
(09:28):
Oh yeah.
But then it was GEICO, the Government Employee
Insurance Corporation is what GEICO stands for.
And one of the innovative things about GEICO
was that he realized he could use the
float.
So float is you pay your insurance premiums
and those premiums, you don't have a liability
right away.
You don't crash your car immediately.
(09:49):
You don't die if you have life insurance.
What the insurance company does is they invest
it.
And when Warren figured this out, he said,
this is free capital that I can invest.
And he made that the cornerstone of Berkshire
Hathaway.
Berkshire Hathaway is the name of his firm
now, but it was really a failing textile
company and not a good investment.
He'll be the first one to tell you
that it was an awful investment, but he
(10:12):
ended up using it as a holding company
and putting GEICO under that umbrella and building
out both operating companies and investment securities under
that umbrella.
So him with Charlie Munger changed how they
did things from basically a hedge fund to
a holding company conglomerate that emphasized great management
(10:36):
and good companies.
And the trillion dollars later, it's one of
the most amazing organizations in the world.
One of his first forays into this, let's
buy a great company and hold it, is
See's Candy.
He talks about it all the time.
It's a relatively small company, considering that they
(10:57):
own 2% of Apple, which is a
$3 trillion company.
But he'll talk about See's Candy all the
time because See's Candy was the first company
he bought that on a valuation basis might've
seemed expensive, but it ended up being the
cheapest company you could have possibly imagined.
And you guys hear me say a lot
that I don't really appreciate PE ratios.
(11:19):
I think this is a good example why,
and one of the ways that I got
around that was to listening to Warren.
If you have a great company that's consistent
and growing, you might want to pay up
a little bit of a premium rather than
buying a business that's not doing so well
that might not be with us for much
longer.
It might be a better value actually for
(11:40):
paying more for the earnings.
And I think that's one of the great
lessons that he's personally given me.
When you come to personal lessons too, I've
used float in my life.
The idea of float is something that I
have actively tried to do, but it was
a lot easier to do during the 0
% interest era.
(12:02):
But I'll give you some examples.
When I graduated from college, I had a
job I didn't make any money whatsoever to
speak of, and I wanted to study for
the CFA.
Now the company that I worked for would
pay for your books and your registration, but
only if you passed.
(12:23):
So that means I needed to find a
way to come up with, let's call it
a thousand dollars to get the books and
the registration.
I got a 0% credit card.
That was essentially my float.
But that was a float and the investment
was me actually doing the work and passing
the test.
Five years ago, I bought a new car
at 0% interest that ended up being
(12:45):
my float.
That money stayed in my bank account rather
than going towards the car payment.
I invested that money.
I made nice returns.
And ultimately that car was probably, ended up
costing me half as much as it would
otherwise.
I own two homes with an interest rate
around 3%.
One of them, I actually make an operating
(13:08):
earnings on.
That's float.
When I rent that other house, I make
sure I get payment upfront before I deliver
the house to the tenant so I can
invest that money for free.
That's free money.
So I encourage people, and this is the
exact opposite of whatever Dave Ramsey will say.
I think it's kind of next level thinking
(13:28):
to utilize float in debt intelligently in your
life and you'll probably be better off for
it.
I started off this conversation by saying, I'm
order of magnitude wealthier because of some of
the lessons that I've learned from Warren Buffett.
That's a good example of how that happened.
Going back a little bit, one of the
(13:50):
interesting things that I heard in the aftermath
of Warren announcing his retirement was people reflecting
like you are, Brian.
One of them was that Massachusetts and Rhode
Island connection of the textile mills that you
referenced.
So we have a local connection to Massachusetts.
The comment was, if you had invested $100
(14:12):
in those shares of Berkshire Hathaway around the
textile mills time in 1965, today it would
be worth $2.8 million.
That's just talking about building wealth and capitalism.
To me, that's what Warren Buffett's legacy is
(14:35):
as a business person of being a capitalist,
being a moral capitalist, not an immoral capitalist,
different show, different time, but someone who's built
wealth, built companies, cared about the people, his
employees along the way very much, cared about
his shareholders very much.
Now the legacy of Warren Buffett is all
(14:58):
these lessons that he has left and all
that money he's made, he's trying to give
it away.
His quote this weekend at the meeting was,
he didn't think he'd be able to give
it away.
It's too much.
While that's on topic, maybe we can come
back to this giving pledge and what's happening
there.
(15:18):
Let's talk more about this concept of economic
moats that is a foundational concept.
What does go into maybe some examples of
companies that Buffett has bought because of this
(15:38):
principle and the advantages that they've provided?
Brian, I'm going to ask you to do
that.
Sure.
I think there's some great examples.
He first bought Coca-Cola in 1988.
Coca-Cola had gone through some spans where
they made some pretty drastic mistakes.
(15:58):
New Coke?
That's one.
I think that happened a little later, but
they were actually investing in movie theaters and
they were trying to afford to integrate.
Warren identified then at that very, very cheap
price that what they sell is sugar and
it's distributed globally.
(16:22):
Ultimately, that's a great business.
They don't even own the bottling.
That's where all the expenses are.
He was one of the first people to
come on to this idea of a great
brand with capital light business.
He doesn't really invest in technology, but he
did that before the internet in Coca-Cola
(16:43):
when the stock was absolutely hated.
He still holds it today.
It pays in dividends per year more than
he paid for it in 1988.
It's just a remarkable example of identifying a
great business and holding it.
Not selling it after you make a quick
buck, but actually holding it for the long
term because it's a great business and a
(17:05):
great business model and has that moat that
Chris was talking about.
Another example is American Express.
Again, he bought this company when it was
absolutely hated, but what he identified was this
was a globally recognized brand that was important
to not just consumers, but it was almost
(17:27):
a status symbol.
He recognized this early.
American Express is different from Visa and MasterCard
in the idea that they actually are a
bank as well as a card provider.
They aren't just processing the transaction, but they're
actually extending the credit as well.
It was a bit of a risk.
This was before MasterCard and Visa even really
(17:49):
existed.
He still holds that today.
Another great example.
I mentioned earlier that Berkshire Hathaway owns 2
% of all of Apple.
It's a remarkable thing.
He says he'll be the first one to
tell you that he doesn't invest in technology,
but what he did was he recognized that
(18:11):
an iPhone is not technology so much as
a consumer product.
If you look at it as a necessary
thing in people's lives rather than a technology
product, then you can understand it more easily
and not dismiss it.
What he would say is it's within his
(18:32):
circle of competence.
This is something that I've taken into account
in my life and tried to use that
investing philosophy.
You don't necessarily need to know how the
iPhone is made.
You need to know why it's important, how
it fits into people's everyday lives, and how
(18:54):
it's going to continue to grow revenue into
the future.
I don't necessarily know the ins and outs
of NVIDIA, for example, or how they actually
build their H100 chips or their Blackwell chips,
but I don't really think it matters.
I understand what a GPU is.
I understand why it's important.
(19:16):
I understand what people are trying to do
from a competitive advantage to compete with them.
I understand that generally people are behind and
that software is really the competitive advantage and
that NVIDIA has the CUDA software, which is
going to be hard to overcome.
Similar to how Microsoft was a dominant platform,
Windows was a dominant platform on all PCs
(19:36):
back in the late 80s and early 90s.
I think that the lesson is you can
stay within your circle of competence, but your
circle of competence, things might sneak in there
that you don't necessarily need to know.
I live in a house, but I don't
know how to build one.
You can find what's important in the business
(19:57):
model.
There's this notion of durable, competitive advantages, this
economic moat.
Maybe that's brand strength, scalability, customer loyalty.
Difficulty to enter the market.
Yeah, keep going.
It's just these kinds of qualities that not
(20:18):
something that's speculative or a fad, but something
that's long lasting.
Brian, you look like you were about to
chime in there.
Yeah.
One of the big ones that I look
for personally is backlogs.
Stocks tend to get hammered in market or
the sector, but you'll notice that some companies
have backlogs with deposits on them.
(20:40):
Sometimes they're non-refundable deposits.
I'll give you an example.
We own Toll Brothers.
We've owned Toll Brothers for a long time.
During the pandemic, it traded down to, I'd
say, a fourth of its land value, so
the land that they actually owned.
Not only that, they're a luxury home builder
and they take non-refundable deposits from their
clients.
You can actually see years out how many
(21:02):
houses they're going to build.
I talk about consistency and growth and predictability,
and Chris is talking about moats and Warren
Buffett.
That's a good example.
You know, even through hard times, how many
houses and how much revenue Toll Brothers can
lock in the book.
That is just an example of one of
these competitive advantages that Chris is talking about.
(21:24):
Another really interesting thing to talk about when
it comes to Warren Buffett is leverage or
lack of leverage.
Cash, the retention of cash, and lack of
debt.
Do you want to talk a little bit
about that principle of using debt cautiously in
(21:48):
some respects?
Is that a fair characterization, do you think?
I mean, you had some comments earlier about
moats, but it does seem like in the
dire times, there have been, they've had a
lot of cash on the books and ready
to put it to work with opportunities.
What are your thoughts?
(22:10):
I love his quote.
He has a lot of quotes on every
subject.
He's been around a long time, but he
says two things to avoid in this world
is liquor and leverage.
Brian, to your earlier point about you using
credit cards, I don't think he'd agree with
you.
He is pretty outspoken about the use of
(22:32):
credit cards and the dangers that people get
into them with them.
He encourages people not to use them.
Yeah.
He's kind of complicated on the subject.
Yes, he says over and over and over
(22:52):
and over again, don't use margin, be careful
with debt.
I think it's very, very good advice.
We talked about float earlier.
Float is basically a liability, which is debt.
It's intelligent debt, is what it is.
It's debt that is long lasting and fairly
predictable.
Not predictable in the sense that when people
(23:13):
are going to get in a car accident,
but predictable in the sense that you have
actuaries that can kind of statistically game out
how long that cash is going to sit
on your balance sheet.
Then when you have a surplus, so if
you invest that money and you do really
well and you have a surplus, well then
that ends up being free money that you
can invest.
I think what Jeff said is true.
(23:36):
I don't think he won't be a proponent
of credit card debt.
The example that I gave was 0%
credit card debt and it was termed out
for a year.
I think he is a proponent of using
debt in a smart way.
Float is a good example, but even in
(23:57):
recent years, he's been buying Japanese banks and
he borrowed in yen at 0%, so he
hedged his currency rate, but he actually took
out some debt.
So, there's not like there's no debt on
Berkshire Hathaway's balance sheet.
There's debt on their balance sheet.
(24:18):
When he says that, I think he's saying,
hey look, I'm a genius and I'm the
best investor in the world.
I know how to use debt intelligently.
You can learn from me if you want
to be like that.
Or if you're not a genius and not
the greatest investor in the world, it might
(24:39):
be smart just to stay away from it
altogether.
I'm not sure he would have framed it
like that.
He's a pretty humble guy.
He is a humble guy and I'll say
it for him.
I admire the guy greatly.
What can I say?
Oh, sorry.
(24:59):
Go ahead.
There's all kinds of great anecdotal stuff in
terms of the isms.
That could be its own show someday, but
Jeff, go ahead.
I think one of the interesting questions is
what motivates Warren Buffett?
Brian, you've talked about some of the successes
(25:20):
in his history and Chris, you noted that
he lives in the same house that he's
lived in and he's known to be humble
and conservative.
What motivates the guy to keep going?
What drives him?
It seems like he just loves what he
does.
It's a passion for the process, not about
(25:43):
money anymore.
It's a passion for the process.
I'm sure he's a competitive guy.
He wants to win in the sense of
finding these great deals, these great values and
benefit.
In the process, it benefits the company oftentimes
(26:06):
too.
If you've got Warren Buffett as a buyer,
you know there's continuity that's not just a
quick turnover.
One of the things I admire about him
as a man is I think he actually
really does care about his shareholders.
One of the reasons why Berkshire A shares
are so expensive is because he wants to
keep the same shareholders.
(26:27):
I think he generally looks upon them as
partners.
There's a reason why the Berkshire Hathaway annual
event is in a stadium.
It's important to him that these people come
and feel like they're part of the organization.
That is admirable and a lot that you
(26:51):
could take away from in your own life
and your own business.
I think at this point, he cares about
leaving a lasting legacy.
I don't know how much time you guys
have, but he's not infallible.
It's not like he's never made any bad
investments.
I find that just as interesting as some
(27:11):
of his wins.
He's not shy about talking about it.
One of the things about being a very
rich man is he can just say, I
gooped up.
I made a mistake.
It's harder for other people to do that
for marketing purposes or lack of humility or
(27:33):
the fact that if you're raising a surrender
flag all the time, who's going to want
to hire you?
He will tell you that he made a
mistake and he'll tell you what he did
wrong.
There is an enormous amount of value in
learning from that.
One of the things that I found is
he goes back to the same mistakes over
(27:55):
and over again sometimes.
He'll be the first one to tell you.
One of the things that stood out to
me recently, I think he talked about this
in the last week's annual meeting.
He's lost money on airlines multiple times.
I think it was the 80s, the airlines
(28:15):
started to get deregulated.
There was more and more airlines available and
they started to compete on price.
Warren Buffett thought that this was an interesting
technology.
And people are going to want to fly
and I don't think he was wrong about
that.
But what he was wrong about was the
fact that it wasn't a good business.
(28:35):
And then he owned it again going into
the pandemic.
So he got killed on airlines twice.
One, I think it was Continental Airlines.
He might have got creamed on decades ago.
And then I know he owned multiple airlines
going into the pandemic and creamed on that
again.
And it's just kind of interesting, he's human.
(28:57):
Even the greats make mistakes like that.
Yeah, good point.
You talked about the annual meeting.
I've never been.
Sounds like it's an amazing event.
I wish I had gone while he was
there.
But tell us a little bit about the
shareholder letter as well, because it sounds like
(29:21):
there's a few people that just write these
shareholder letters that are filled with perspective.
I put Jamie Dimon in that category, but
Warren Buffett- He's on the top of
the list.
Yeah.
So he's written one annually and they're all
online and they're all available.
And it is a educational process to go
(29:44):
back and read them.
And we had an intern a couple of
years ago and I made him read them.
And I don't think he got through all
of them, but I'm not even quite sure
he tried.
But I thought that was a good way
of, hey, look, go learn from this guy.
That's an excellent exercise.
There's also a book, The Complete History of
(30:05):
Berkshire Hathaway, which I've read, which is interesting.
There's a good biography called Snowball, which is
interesting.
It talks about him as a kid, he
started a vending machine operation and he was
putting that in grocery stores.
This guy was an entrepreneur from jump.
(30:29):
Those are all great, great reading.
And if you're not a reader, I recommend
The Acquired Podcast.
The Acquired Podcast has multiple parts.
It's like seven hours of listening on The
Complete History of Berkshire Hathaway to have their
own interview with Charlie Munger, like weeks before
he died.
If you're interested in this, I can't recommend
(30:50):
that more on learning from these individuals.
Also, these events are on YouTube.
Just watch them.
I mean, he's 95 years old.
He stood on stage, did not know the
questions in advance, and spoke for four hours
right before he announced his retirement.
That's pretty amazing.
(31:10):
And I'm telling you, I listened to at
least half of it on two times speed.
And he sounds like a bit of a
chipmunk at two times speed, but still as
sharp as he was a decade ago.
Well, I wanted to come back to one
thing that we just kind of skipped past
(31:31):
a little bit because we got a little
sidetracked.
But it seems that Berkshire has this capacity
and tendency to retain cash and to build
up cash, which oftentimes provides them opportunities.
They don't pay a dividend on their stock,
right, Brian?
(31:52):
But is that part of how these companies
that are productive pay into essentially this accumulation
of profitability from these various companies that Berkshire
owns?
And that gives them an opportunity to say,
how are we going to deploy this?
And sometimes that leads them with cash when
(32:13):
things happen.
Yeah.
So basically it's a conglomerate where they pay
dividends back to the home office and the
home office is Warren Buffett.
And so Warren Buffett not only has the
float, but he has the earnings from these
operating companies.
And he says that he paid a dividend
once and he regretted it.
And the reason being is he thinks that
(32:34):
that cash is more valuable under his advisement
than it is in our pockets.
It's tough to argue that.
He's right.
I mean, there's no argument.
I mean, he's absolutely right.
And we own Berkshire Hathaway shares for our
discretionary plans.
And I am unfazed by the amount of
(32:58):
cash that he has, because what I know
what's going to happen is if he gets
that fat pitch, he's going to invest it.
He's going to invest it well.
Now, part of the reason that he owns
all that cash is because of those liabilities
that I mentioned before in the float.
So he's not just being irresponsible.
I've talked many times before about how insurance
companies are almost impossible to analyze because you
do not know their contracts that they're underwriting.
(33:20):
And you don't know how they're investing the
excess.
You don't know how they're investing that float.
And one of the ways that I get
exposure to insurance companies is by buying Berkshire
Hathaway.
I know that they have those liabilities covered.
I'm unconcerned about it.
And I know that he is massively concerned
about it.
Let's talk about Solomon and maybe the financial
(33:41):
crisis a little bit.
Some of these instances where people have turned
to Warren Buffett in challenging times.
Yes, I think John Goodfriend was the CEO
of Solomon Brothers when they rigged the Treasury
auction.
And if that sounds hyperbolic, it's not.
(34:02):
That's what happened.
The traders in Solomon Brothers rigged the Treasury
auction.
So as you can imagine, that wasn't good
for the company, which is no longer with
us.
But Warren Buffett owned preferred shares in the
company at the time against Charlie Munger's advisement.
So they begged him to become the CEO
(34:25):
of the company to use his reputation, which
was very solid, to put a foothold under
the disaster that had become Solomon Brothers from
the scandal.
And as much as he disliked it, he
was able to, let's just say, save the
(34:46):
foundation of what the company was.
And I think he eventually sold it.
He didn't want any part of it.
And from what I understand, the biggest lessons
that he came out of that is he
spent a lifetime, he was in his early
70s, late 60s when this happened.
He spent his lifetime building up a great
reputation, and being attached to Solomon Brothers sullied
(35:08):
it real quick.
So one of the things that he learned
from this is know who you're getting into
bed with.
And be very, very careful about how you
judge both the character of people, but also
the businesses that you invest in.
When it comes to the financial crisis, he
was one of the people who stepped in
and put a foundation on the Goldman Sachs.
(35:30):
He was basically the first person that company
out.
I believe he got preferred shares at 10%.
This is at a time when interest rates
were put to zero, still getting 10%
preferred shares that could convert to common.
A brilliant stroke, a brilliant stroke.
I was a junior in college at that
(35:51):
time, so a little fuzzier on the details
and the exact investment.
It was amazing stuff though.
To the extent, that's essentially what it was.
I think he did that most notably in
the one you mentioned, but I think he
did it in some smaller opportunities as well.
In any case, and I think there was
(36:12):
a lot of effort to try to see
if he would do more in the midst
of that.
But it's one of those instances where I
think at that time, the public was familiar
with Warren Buffett in the midst of those
times because he was on CNBC quite a
(36:34):
bit trying to offer perspective and help people
to make sense of what was going on,
how to behave.
What's the expression about blood in the streets?
But you want to be a buyer when
there's blood in the streets type of thing.
In any case, just an amazing legacy and
(37:00):
lots of lessons to be learned, lots to
- I suspect there's more coming from him
in the remaining time he has with us.
We didn't mention this, but that giving pledge.
Warren Buffett has pledged his wealth to go
to charitable purposes.
(37:21):
I think almost all of it's the Gates
Foundation, as obviously the Gates have made that
pledge as well.
I think it started that process of trying
to urge the super wealthy who've had this
(37:42):
enormous wealth to identify how are they going
to have an impact with their wealth after
they're gone?
What are they going to do with it?
What kind of impact?
You see lots of other wealth people have
made similar pledges to some extent.
I think it's an important thing in a
(38:05):
society where we don't talk about this often.
Oftentimes there's this sense of, is it right?
Is it fair that so few people can
amass so much wealth?
That's the nature of capitalism that it doesn't
mean other people are unfair, that they can't
(38:27):
do that.
It's just that these people have had great
success.
I think it's also societally, there is a
virtue to this notion that maybe it's something
that we want to give people the opportunity
to decide how they want that money to
be influencing society long-term rather than have
(38:52):
it be a taxed decision by government.
In any case, another topic for another day
as well.
I think the good news is even after
he's gone, which I hope isn't for a
very, very long time just because he's retiring
doesn't mean he's leaving here, but his son
and daughter are going to take up that
mantle.
(39:13):
The philanthropic ventures are going to continue and
I think he's going to make sure that
in his estate planning, if you will, to
bring it back full circle, that wealth is
going to be given to good causes for
generations to come.
I think that is great news.
We talked about what's motivating him.
(39:33):
Maybe that's motivating him.
The wealthier he can become, the more philanthropic
he can be and the better off the
world will be.
I actually believe that to be true with
a guy like Warren Buffett.
With other people, I just think they're mostly
being self-serving, but with him, I think
it's genuine and it's true.
One thing I wanted to bring up because
(39:54):
I imagine we're probably running out of time,
but I know this is near and dear
to Jeff's heart particularly and definitely to me
too.
Warren says it's impossible to time the market.
He doesn't even try.
That's coming from a guy who seems to
be awfully good at it.
He is awfully good at it.
What lessons do we take from that?
Well, he's not timing.
He's looking for great value.
(40:17):
You tend to get great values at bottoms
and you tend to get excessive values at
tops.
I think that's the lesson that I take
from that.
Don't necessarily try to time the market.
I think you could throw out your charts
for the most part altogether, but look for
good value.
(40:37):
Look for actual businesses.
You're investing in businesses, even when you're buying
an individual stock, even if you're buying one
share, you're buying into the prospects and cash
flows of that business.
If you evaluate your stocks on that basis,
I think Warren has shown that over generations
and generations, and I think this will continue
to be true for generations, that that is
(40:59):
the best way to invest and outperform by
finding great businesses and investing in them.
Not market timing, and one of your favorites,
Chris, having a robust liquidity bucket.
Yeah, there you go.
Well, I think these are some of the
lessons.
If you are in a position where you
(41:20):
think investing is challenging, and it is, it's
something you sometimes can benefit from getting help
in the process and a helpful perspective on
how to approach things, whether it's good times
or bad.
If that's something that you'd benefit from, please
(41:42):
don't hesitate to reach out to our firm
to see if we could be a resource
to you.
We offer a complimentary consultation and would be
happy to speak with you.
Everybody, thanks for being with us, guys.
Thank you.
Until next time, keep striving for something more.
(42:45):
Transcribed by https://otter.ai https://otter.ai
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Well, welcome to another show of Something More
with Chris Boyd.
So glad to have you with us.
I'm here with Jeff Perry, my regular co
-host, and we are joined today by Brian
(00:42):
Regan, senior portfolio manager for the AMR team
at Wealth Enhancement, the legend of Warren Buffett.
And he announced recently that he is going
to be retiring early retirement after what, 60
years?
How long has it been, Brian, of investment
(01:02):
history there?
I think he said he made his first
investment when he was eight years old.
So 87 years, let's call it.
Warren Buffett is in his 90s.
He was born August 30, 1930.
So he is 94, seems to be 95,
not too far off, 95.
(01:22):
Legendary investor, amassed enormous amounts of wealth.
And not because he has this sense that
he wants to go spend a lot of
money or anything.
He just is someone who loves to create
investing companies that create wealth.
(01:45):
And he's been a legend.
We'll talk about some of the business structure
decisions.
We'll talk about some of his investment decisions
and a little bit about his history and
story.
But that's what we're focusing on today in
this episode.
I'm glad everyone's here with us to enjoy
this.
So I have some notes about Warren Buffett,
(02:10):
but Brian, I'm going to start by giving
you the opportunity to get us started.
Well, I'll say that, for better or worse,
I don't really feel like I've been lucky
enough to find a mentor in this business.
But thank God it's the 21st century and
(02:31):
you can read and listen to as much
as from anybody as you can possibly want.
And Charlie Munger and Warren Buffett have had
a huge influence on my life personally.
Rest in peace, Charlie Munger.
He died a couple of years ago.
And Warren's still with us, just retiring.
But I was thinking about this when I
(02:51):
was driving my son to school today.
What would my net worth be if I
was never introduced to Warren Buffett?
And it's hard to tell, but it's undoubtedly
at least twice as high as it would
be otherwise, I think.
And he's had a remarkable career and evolution
as an investor.
And if you just pay attention to him,
(03:15):
I think you'll avoid a lot of headaches
and you'll get to what's important very quickly.
And I think there's a few tenets of
his teachings that we'll probably talk about that
I think are worth talking about and worth
emphasizing today and well beyond when I'm in
(03:38):
the ground.
So I think this is an important conversation
and one that we shouldn't just have once,
but probably revisit the teachings of Warren Buffett
as often as possible.
So the thing that I think investors, we've
seen him in times of crisis be a
voice of calm and a sense of perspective,
(04:02):
thinking most recently in the financial crisis.
And let's face it, some of the opportunities
he took advantage of in the midst of
that saved companies, but gave him a tidy
profit through his company.
At the same time, he's kind of got
(04:23):
this folksy way about him that, and he's
very down to earth when it comes to
his presentation, his demeanor, very relatable for considering
the kind of wealth this man has.
Lives, what is it?
Lives in the same house since he first
got married or whatever.
(04:45):
I mean, he's a very interesting individual in
that respect, but I think what we want
to ultimately do is talk about his lessons
for investing, and probably want to talk about
these annual meetings and things like that as
well.
So let's start with maybe his early life.
(05:11):
He went to college at Columbia, met Ben
Graham as a mentor, but maybe even before
that, we can talk about a little bit
of entrepreneurial spirit that he demonstrated.
Yeah.
So he was from Omaha, Nebraska, where he
(05:31):
still lives.
As a young kid, he actually worked in
Charlie Munger's father's grocery store, an amazing fortuitous,
these geniuses who ended up being partners for
many decades of their life, had a very
(05:52):
geographically close relationship as well as personally close
relationship.
But yeah, he did stints at Columbia, he
did stints at Wharton School, Wharton Business School,
and he finished his graduate degree in Nebraska.
But he met Ben Graham, who he started
(06:16):
working as an analyst under initially, first thing
out of college.
And after a couple of years of that,
he decided he was ready to start his
own partnership.
And the Buffett partnership from 1957 to 1969
returned about 32% annually a year.
Which is mind numbingly amazing, 32% a
(06:40):
year.
At that time, he specialized in what he
called cigar butt investing.
So cigar butt investing was, you're buying a
company that has more cash on its balance
sheet than the company is trading for.
And this is something that you could do
in the late 50s and early 60s a
little easier than you can now.
(07:01):
Information was not as publicly available, it was
not as easy to trade stocks.
He could buy small companies and he could
buy them whole.
And this is what he did and very,
very successfully.
So this is a pretty short term trading
strategy, as you can imagine, right?
He'd buy a stake in the company, get
(07:21):
on the board or talk to the board
and try to get them to disseminate the
cash out to shareholders.
And that was a very successful strategy for
years until he met Charlie Munger and they
ran separate partnerships for a long time.
I don't know how many years, but Charlie
Munger was very successful in his own right.
(07:43):
He didn't start his career in finance.
He was in the military service.
He was the only person I ever heard
of to go to Harvard Law School without
an undergraduate degree.
He did go to Caltech, but never graduated.
He went there because of military service, because
(08:04):
he was basically a genius in the military,
identified that.
And he started as a lawyer.
He made most of his money as a
lawyer.
And when he met Warren Buffett through a
doctor that they had a mutual acquaintance with
in Omaha, they had dinner together and became
fast friends.
(08:24):
And what Charlie changed in Warren and something
that I really admire is Warren had this
amazingly successful strategy.
And Charlie said, you know what would be
even better?
If we bought really good businesses and helped
them for a really, really long time.
And one of the things that I admire
in him as a human being, and there's
a lot to admire in him as a
human being, I mean, for years, he never
(08:45):
had any ethical issues.
Vivi, I'm sorry, you got to go see
your mother.
He never really had any significant ethical issues.
And he changed his investment philosophy, which is
really hard to do to go from something
that's successful to going to something that's overwhelmingly
successful.
One of the things that he did was
(09:06):
he bought GEICO pretty early.
So GEICO stands for the Government Employees Insurance
Corporation.
And it was a failing insurance company.
Why don't we pause for a minute there?
What honey?
What do you need?
I'm not using it.
I'm putting it away.
(09:28):
Oh yeah.
But then it was GEICO, the Government Employee
Insurance Corporation is what GEICO stands for.
And one of the innovative things about GEICO
was that he realized he could use the
float.
So float is you pay your insurance premiums
and those premiums, you don't have a liability
right away.
You don't crash your car immediately.
(09:49):
You don't die if you have life insurance.
What the insurance company does is they invest
it.
And when Warren figured this out, he said,
this is free capital that I can invest.
And he made that the cornerstone of Berkshire
Hathaway.
Berkshire Hathaway is the name of his firm
now, but it was really a failing textile
company and not a good investment.
He'll be the first one to tell you
that it was an awful investment, but he
(10:12):
ended up using it as a holding company
and putting GEICO under that umbrella and building
out both operating companies and investment securities under
that umbrella.
So him with Charlie Munger changed how they
did things from basically a hedge fund to
a holding company conglomerate that emphasized great management
(10:36):
and good companies.
And the trillion dollars later, it's one of
the most amazing organizations in the world.
One of his first forays into this, let's
buy a great company and hold it, is
See's Candy.
He talks about it all the time.
It's a relatively small company, considering that they
(10:57):
own 2% of Apple, which is a
$3 trillion company.
But he'll talk about See's Candy all the
time because See's Candy was the first company
he bought that on a valuation basis might've
seemed expensive, but it ended up being the
cheapest company you could have possibly imagined.
And you guys hear me say a lot
that I don't really appreciate PE ratios.
(11:19):
I think this is a good example why,
and one of the ways that I got
around that was to listening to Warren.
If you have a great company that's consistent
and growing, you might want to pay up
a little bit of a premium rather than
buying a business that's not doing so well
that might not be with us for much
longer.
It might be a better value actually for
(11:40):
paying more for the earnings.
And I think that's one of the great
lessons that he's personally given me.
When you come to personal lessons too, I've
used float in my life.
The idea of float is something that I
have actively tried to do, but it was
a lot easier to do during the 0
% interest era.
(12:02):
But I'll give you some examples.
When I graduated from college, I had a
job I didn't make any money whatsoever to
speak of, and I wanted to study for
the CFA.
Now the company that I worked for would
pay for your books and your registration, but
only if you passed.
(12:23):
So that means I needed to find a
way to come up with, let's call it
a thousand dollars to get the books and
the registration.
I got a 0% credit card.
That was essentially my float.
But that was a float and the investment
was me actually doing the work and passing
the test.
Five years ago, I bought a new car
at 0% interest that ended up being
(12:45):
my float.
That money stayed in my bank account rather
than going towards the car payment.
I invested that money.
I made nice returns.
And ultimately that car was probably, ended up
costing me half as much as it would
otherwise.
I own two homes with an interest rate
around 3%.
One of them, I actually make an operating
(13:08):
earnings on.
That's float.
When I rent that other house, I make
sure I get payment upfront before I deliver
the house to the tenant so I can
invest that money for free.
That's free money.
So I encourage people, and this is the
exact opposite of whatever Dave Ramsey will say.
I think it's kind of next level thinking
(13:28):
to utilize float in debt intelligently in your
life and you'll probably be better off for
it.
I started off this conversation by saying, I'm
order of magnitude wealthier because of some of
the lessons that I've learned from Warren Buffett.
That's a good example of how that happened.
Going back a little bit, one of the
(13:50):
interesting things that I heard in the aftermath
of Warren announcing his retirement was people reflecting
like you are, Brian.
One of them was that Massachusetts and Rhode
Island connection of the textile mills that you
referenced.
So we have a local connection to Massachusetts.
The comment was, if you had invested $100
(14:12):
in those shares of Berkshire Hathaway around the
textile mills time in 1965, today it would
be worth $2.8 million.
That's just talking about building wealth and capitalism.
To me, that's what Warren Buffett's legacy is
(14:35):
as a business person of being a capitalist,
being a moral capitalist, not an immoral capitalist,
different show, different time, but someone who's built
wealth, built companies, cared about the people, his
employees along the way very much, cared about
his shareholders very much.
Now the legacy of Warren Buffett is all
(14:58):
these lessons that he has left and all
that money he's made, he's trying to give
it away.
His quote this weekend at the meeting was,
he didn't think he'd be able to give
it away.
It's too much.
While that's on topic, maybe we can come
back to this giving pledge and what's happening
there.
(15:18):
Let's talk more about this concept of economic
moats that is a foundational concept.
What does go into maybe some examples of
companies that Buffett has bought because of this
(15:38):
principle and the advantages that they've provided?
Brian, I'm going to ask you to do
that.
Sure.
I think there's some great examples.
He first bought Coca-Cola in 1988.
Coca-Cola had gone through some spans where
they made some pretty drastic mistakes.
(15:58):
New Coke?
That's one.
I think that happened a little later, but
they were actually investing in movie theaters and
they were trying to afford to integrate.
Warren identified then at that very, very cheap
price that what they sell is sugar and
it's distributed globally.
(16:22):
Ultimately, that's a great business.
They don't even own the bottling.
That's where all the expenses are.
He was one of the first people to
come on to this idea of a great
brand with capital light business.
He doesn't really invest in technology, but he
did that before the internet in Coca-Cola
(16:43):
when the stock was absolutely hated.
He still holds it today.
It pays in dividends per year more than
he paid for it in 1988.
It's just a remarkable example of identifying a
great business and holding it.
Not selling it after you make a quick
buck, but actually holding it for the long
term because it's a great business and a
(17:05):
great business model and has that moat that
Chris was talking about.
Another example is American Express.
Again, he bought this company when it was
absolutely hated, but what he identified was this
was a globally recognized brand that was important
to not just consumers, but it was almost
(17:27):
a status symbol.
He recognized this early.
American Express is different from Visa and MasterCard
in the idea that they actually are a
bank as well as a card provider.
They aren't just processing the transaction, but they're
actually extending the credit as well.
It was a bit of a risk.
This was before MasterCard and Visa even really
(17:49):
existed.
He still holds that today.
Another great example.
I mentioned earlier that Berkshire Hathaway owns 2
% of all of Apple.
It's a remarkable thing.
He says he'll be the first one to
tell you that he doesn't invest in technology,
but what he did was he recognized that
(18:11):
an iPhone is not technology so much as
a consumer product.
If you look at it as a necessary
thing in people's lives rather than a technology
product, then you can understand it more easily
and not dismiss it.
What he would say is it's within his
(18:32):
circle of competence.
This is something that I've taken into account
in my life and tried to use that
investing philosophy.
You don't necessarily need to know how the
iPhone is made.
You need to know why it's important, how
it fits into people's everyday lives, and how
(18:54):
it's going to continue to grow revenue into
the future.
I don't necessarily know the ins and outs
of NVIDIA, for example, or how they actually
build their H100 chips or their Blackwell chips,
but I don't really think it matters.
I understand what a GPU is.
I understand why it's important.
(19:16):
I understand what people are trying to do
from a competitive advantage to compete with them.
I understand that generally people are behind and
that software is really the competitive advantage and
that NVIDIA has the CUDA software, which is
going to be hard to overcome.
Similar to how Microsoft was a dominant platform,
Windows was a dominant platform on all PCs
(19:36):
back in the late 80s and early 90s.
I think that the lesson is you can
stay within your circle of competence, but your
circle of competence, things might sneak in there
that you don't necessarily need to know.
I live in a house, but I don't
know how to build one.
You can find what's important in the business
(19:57):
model.
There's this notion of durable, competitive advantages, this
economic moat.
Maybe that's brand strength, scalability, customer loyalty.
Difficulty to enter the market.
Yeah, keep going.
It's just these kinds of qualities that not
(20:18):
something that's speculative or a fad, but something
that's long lasting.
Brian, you look like you were about to
chime in there.
Yeah.
One of the big ones that I look
for personally is backlogs.
Stocks tend to get hammered in market or
the sector, but you'll notice that some companies
have backlogs with deposits on them.
(20:40):
Sometimes they're non-refundable deposits.
I'll give you an example.
We own Toll Brothers.
We've owned Toll Brothers for a long time.
During the pandemic, it traded down to, I'd
say, a fourth of its land value, so
the land that they actually owned.
Not only that, they're a luxury home builder
and they take non-refundable deposits from their
clients.
You can actually see years out how many
(21:02):
houses they're going to build.
I talk about consistency and growth and predictability,
and Chris is talking about moats and Warren
Buffett.
That's a good example.
You know, even through hard times, how many
houses and how much revenue Toll Brothers can
lock in the book.
That is just an example of one of
these competitive advantages that Chris is talking about.
(21:24):
Another really interesting thing to talk about when
it comes to Warren Buffett is leverage or
lack of leverage.
Cash, the retention of cash, and lack of
debt.
Do you want to talk a little bit
about that principle of using debt cautiously in
(21:48):
some respects?
Is that a fair characterization, do you think?
I mean, you had some comments earlier about
moats, but it does seem like in the
dire times, there have been, they've had a
lot of cash on the books and ready
to put it to work with opportunities.
What are your thoughts?
(22:10):
I love his quote.
He has a lot of quotes on every
subject.
He's been around a long time, but he
says two things to avoid in this world
is liquor and leverage.
Brian, to your earlier point about you using
credit cards, I don't think he'd agree with
you.
He is pretty outspoken about the use of
(22:32):
credit cards and the dangers that people get
into them with them.
He encourages people not to use them.
Yeah.
He's kind of complicated on the subject.
Yes, he says over and over and over
(22:52):
and over again, don't use margin, be careful
with debt.
I think it's very, very good advice.
We talked about float earlier.
Float is basically a liability, which is debt.
It's intelligent debt, is what it is.
It's debt that is long lasting and fairly
predictable.
Not predictable in the sense that when people
(23:13):
are going to get in a car accident,
but predictable in the sense that you have
actuaries that can kind of statistically game out
how long that cash is going to sit
on your balance sheet.
Then when you have a surplus, so if
you invest that money and you do really
well and you have a surplus, well then
that ends up being free money that you
can invest.
I think what Jeff said is true.
(23:36):
I don't think he won't be a proponent
of credit card debt.
The example that I gave was 0%
credit card debt and it was termed out
for a year.
I think he is a proponent of using
debt in a smart way.
Float is a good example, but even in
(23:57):
recent years, he's been buying Japanese banks and
he borrowed in yen at 0%, so he
hedged his currency rate, but he actually took
out some debt.
So, there's not like there's no debt on
Berkshire Hathaway's balance sheet.
There's debt on their balance sheet.
(24:18):
When he says that, I think he's saying,
hey look, I'm a genius and I'm the
best investor in the world.
I know how to use debt intelligently.
You can learn from me if you want
to be like that.
Or if you're not a genius and not
the greatest investor in the world, it might
(24:39):
be smart just to stay away from it
altogether.
I'm not sure he would have framed it
like that.
He's a pretty humble guy.
He is a humble guy and I'll say
it for him.
I admire the guy greatly.
What can I say?
Oh, sorry.
(24:59):
Go ahead.
There's all kinds of great anecdotal stuff in
terms of the isms.
That could be its own show someday, but
Jeff, go ahead.
I think one of the interesting questions is
what motivates Warren Buffett?
Brian, you've talked about some of the successes
(25:20):
in his history and Chris, you noted that
he lives in the same house that he's
lived in and he's known to be humble
and conservative.
What motivates the guy to keep going?
What drives him?
It seems like he just loves what he
does.
It's a passion for the process, not about
(25:43):
money anymore.
It's a passion for the process.
I'm sure he's a competitive guy.
He wants to win in the sense of
finding these great deals, these great values and
benefit.
In the process, it benefits the company oftentimes
(26:06):
too.
If you've got Warren Buffett as a buyer,
you know there's continuity that's not just a
quick turnover.
One of the things I admire about him
as a man is I think he actually
really does care about his shareholders.
One of the reasons why Berkshire A shares
are so expensive is because he wants to
keep the same shareholders.
(26:27):
I think he generally looks upon them as
partners.
There's a reason why the Berkshire Hathaway annual
event is in a stadium.
It's important to him that these people come
and feel like they're part of the organization.
That is admirable and a lot that you
(26:51):
could take away from in your own life
and your own business.
I think at this point, he cares about
leaving a lasting legacy.
I don't know how much time you guys
have, but he's not infallible.
It's not like he's never made any bad
investments.
I find that just as interesting as some
(27:11):
of his wins.
He's not shy about talking about it.
One of the things about being a very
rich man is he can just say, I
gooped up.
I made a mistake.
It's harder for other people to do that
for marketing purposes or lack of humility or
(27:33):
the fact that if you're raising a surrender
flag all the time, who's going to want
to hire you?
He will tell you that he made a
mistake and he'll tell you what he did
wrong.
There is an enormous amount of value in
learning from that.
One of the things that I found is
he goes back to the same mistakes over
(27:55):
and over again sometimes.
He'll be the first one to tell you.
One of the things that stood out to
me recently, I think he talked about this
in the last week's annual meeting.
He's lost money on airlines multiple times.
I think it was the 80s, the airlines
(28:15):
started to get deregulated.
There was more and more airlines available and
they started to compete on price.
Warren Buffett thought that this was an interesting
technology.
And people are going to want to fly
and I don't think he was wrong about
that.
But what he was wrong about was the
fact that it wasn't a good business.
(28:35):
And then he owned it again going into
the pandemic.
So he got killed on airlines twice.
One, I think it was Continental Airlines.
He might have got creamed on decades ago.
And then I know he owned multiple airlines
going into the pandemic and creamed on that
again.
And it's just kind of interesting, he's human.
(28:57):
Even the greats make mistakes like that.
Yeah, good point.
You talked about the annual meeting.
I've never been.
Sounds like it's an amazing event.
I wish I had gone while he was
there.
But tell us a little bit about the
shareholder letter as well, because it sounds like
(29:21):
there's a few people that just write these
shareholder letters that are filled with perspective.
I put Jamie Dimon in that category, but
Warren Buffett- He's on the top of
the list.
Yeah.
So he's written one annually and they're all
online and they're all available.
And it is a educational process to go
(29:44):
back and read them.
And we had an intern a couple of
years ago and I made him read them.
And I don't think he got through all
of them, but I'm not even quite sure
he tried.
But I thought that was a good way
of, hey, look, go learn from this guy.
That's an excellent exercise.
There's also a book, The Complete History of
(30:05):
Berkshire Hathaway, which I've read, which is interesting.
There's a good biography called Snowball, which is
interesting.
It talks about him as a kid, he
started a vending machine operation and he was
putting that in grocery stores.
This guy was an entrepreneur from jump.
(30:29):
Those are all great, great reading.
And if you're not a reader, I recommend
The Acquired Podcast.
The Acquired Podcast has multiple parts.
It's like seven hours of listening on The
Complete History of Berkshire Hathaway to have their
own interview with Charlie Munger, like weeks before
he died.
If you're interested in this, I can't recommend
(30:50):
that more on learning from these individuals.
Also, these events are on YouTube.
Just watch them.
I mean, he's 95 years old.
He stood on stage, did not know the
questions in advance, and spoke for four hours
right before he announced his retirement.
That's pretty amazing.
(31:10):
And I'm telling you, I listened to at
least half of it on two times speed.
And he sounds like a bit of a
chipmunk at two times speed, but still as
sharp as he was a decade ago.
Well, I wanted to come back to one
thing that we just kind of skipped past
(31:31):
a little bit because we got a little
sidetracked.
But it seems that Berkshire has this capacity
and tendency to retain cash and to build
up cash, which oftentimes provides them opportunities.
They don't pay a dividend on their stock,
right, Brian?
(31:52):
But is that part of how these companies
that are productive pay into essentially this accumulation
of profitability from these various companies that Berkshire
owns?
And that gives them an opportunity to say,
how are we going to deploy this?
And sometimes that leads them with cash when
(32:13):
things happen.
Yeah.
So basically it's a conglomerate where they pay
dividends back to the home office and the
home office is Warren Buffett.
And so Warren Buffett not only has the
float, but he has the earnings from these
operating companies.
And he says that he paid a dividend
once and he regretted it.
And the reason being is he thinks that
(32:34):
that cash is more valuable under his advisement
than it is in our pockets.
It's tough to argue that.
He's right.
I mean, there's no argument.
I mean, he's absolutely right.
And we own Berkshire Hathaway shares for our
discretionary plans.
And I am unfazed by the amount of
(32:58):
cash that he has, because what I know
what's going to happen is if he gets
that fat pitch, he's going to invest it.
He's going to invest it well.
Now, part of the reason that he owns
all that cash is because of those liabilities
that I mentioned before in the float.
So he's not just being irresponsible.
I've talked many times before about how insurance
companies are almost impossible to analyze because you
do not know their contracts that they're underwriting.
(33:20):
And you don't know how they're investing the
excess.
You don't know how they're investing that float.
And one of the ways that I get
exposure to insurance companies is by buying Berkshire
Hathaway.
I know that they have those liabilities covered.
I'm unconcerned about it.
And I know that he is massively concerned
about it.
Let's talk about Solomon and maybe the financial
(33:41):
crisis a little bit.
Some of these instances where people have turned
to Warren Buffett in challenging times.
Yes, I think John Goodfriend was the CEO
of Solomon Brothers when they rigged the Treasury
auction.
And if that sounds hyperbolic, it's not.
(34:02):
That's what happened.
The traders in Solomon Brothers rigged the Treasury
auction.
So as you can imagine, that wasn't good
for the company, which is no longer with
us.
But Warren Buffett owned preferred shares in the
company at the time against Charlie Munger's advisement.
So they begged him to become the CEO
(34:25):
of the company to use his reputation, which
was very solid, to put a foothold under
the disaster that had become Solomon Brothers from
the scandal.
And as much as he disliked it, he
was able to, let's just say, save the
(34:46):
foundation of what the company was.
And I think he eventually sold it.
He didn't want any part of it.
And from what I understand, the biggest lessons
that he came out of that is he
spent a lifetime, he was in his early
70s, late 60s when this happened.
He spent his lifetime building up a great
reputation, and being attached to Solomon Brothers sullied
(35:08):
it real quick.
So one of the things that he learned
from this is know who you're getting into
bed with.
And be very, very careful about how you
judge both the character of people, but also
the businesses that you invest in.
When it comes to the financial crisis, he
was one of the people who stepped in
and put a foundation on the Goldman Sachs.
(35:30):
He was basically the first person that company
out.
I believe he got preferred shares at 10%.
This is at a time when interest rates
were put to zero, still getting 10%
preferred shares that could convert to common.
A brilliant stroke, a brilliant stroke.
I was a junior in college at that
(35:51):
time, so a little fuzzier on the details
and the exact investment.
It was amazing stuff though.
To the extent, that's essentially what it was.
I think he did that most notably in
the one you mentioned, but I think he
did it in some smaller opportunities as well.
In any case, and I think there was
(36:12):
a lot of effort to try to see
if he would do more in the midst
of that.
But it's one of those instances where I
think at that time, the public was familiar
with Warren Buffett in the midst of those
times because he was on CNBC quite a
(36:34):
bit trying to offer perspective and help people
to make sense of what was going on,
how to behave.
What's the expression about blood in the streets?
But you want to be a buyer when
there's blood in the streets type of thing.
In any case, just an amazing legacy and
(37:00):
lots of lessons to be learned, lots to
- I suspect there's more coming from him
in the remaining time he has with us.
We didn't mention this, but that giving pledge.
Warren Buffett has pledged his wealth to go
to charitable purposes.
(37:21):
I think almost all of it's the Gates
Foundation, as obviously the Gates have made that
pledge as well.
I think it started that process of trying
to urge the super wealthy who've had this
(37:42):
enormous wealth to identify how are they going
to have an impact with their wealth after
they're gone?
What are they going to do with it?
What kind of impact?
You see lots of other wealth people have
made similar pledges to some extent.
I think it's an important thing in a
(38:05):
society where we don't talk about this often.
Oftentimes there's this sense of, is it right?
Is it fair that so few people can
amass so much wealth?
That's the nature of capitalism that it doesn't
mean other people are unfair, that they can't
(38:27):
do that.
It's just that these people have had great
success.
I think it's also societally, there is a
virtue to this notion that maybe it's something
that we want to give people the opportunity
to decide how they want that money to
be influencing society long-term rather than have
(38:52):
it be a taxed decision by government.
In any case, another topic for another day
as well.
I think the good news is even after
he's gone, which I hope isn't for a
very, very long time just because he's retiring
doesn't mean he's leaving here, but his son
and daughter are going to take up that
mantle.
(39:13):
The philanthropic ventures are going to continue and
I think he's going to make sure that
in his estate planning, if you will, to
bring it back full circle, that wealth is
going to be given to good causes for
generations to come.
I think that is great news.
We talked about what's motivating him.
(39:33):
Maybe that's motivating him.
The wealthier he can become, the more philanthropic
he can be and the better off the
world will be.
I actually believe that to be true with
a guy like Warren Buffett.
With other people, I just think they're mostly
being self-serving, but with him, I think
it's genuine and it's true.
One thing I wanted to bring up because
(39:54):
I imagine we're probably running out of time,
but I know this is near and dear
to Jeff's heart particularly and definitely to me
too.
Warren says it's impossible to time the market.
He doesn't even try.
That's coming from a guy who seems to
be awfully good at it.
He is awfully good at it.
What lessons do we take from that?
Well, he's not timing.
He's looking for great value.
(40:17):
You tend to get great values at bottoms
and you tend to get excessive values at
tops.
I think that's the lesson that I take
from that.
Don't necessarily try to time the market.
I think you could throw out your charts
for the most part altogether, but look for
good value.
(40:37):
Look for actual businesses.
You're investing in businesses, even when you're buying
an individual stock, even if you're buying one
share, you're buying into the prospects and cash
flows of that business.
If you evaluate your stocks on that basis,
I think Warren has shown that over generations
and generations, and I think this will continue
to be true for generations, that that is
(40:59):
the best way to invest and outperform by
finding great businesses and investing in them.
Not market timing, and one of your favorites,
Chris, having a robust liquidity bucket.
Yeah, there you go.
Well, I think these are some of the
lessons.
If you are in a position where you
(41:20):
think investing is challenging, and it is, it's
something you sometimes can benefit from getting help
in the process and a helpful perspective on
how to approach things, whether it's good times
or bad.
If that's something that you'd benefit from, please
(41:42):
don't hesitate to reach out to our firm
to see if we could be a resource
to you.
We offer a complimentary consultation and would be
happy to speak with you.
Everybody, thanks for being with us, guys.
Thank you.
Until next time, keep striving for something more.
(42:45):
Transcribed by https://otter.ai https://otter.ai
Popular Podcasts
United States of Kennedy
United States of Kennedy is a podcast about our cultural fascination with the Kennedy dynasty. Every week, hosts Lyra Smith and George Civeris go into one aspect of the Kennedy story.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.