Ep. 153 - Guy Spier - The Investor Professor Podcast

Episode Transcript
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Speaker 1 (00:00):
Welcome back to the Investor Professor podcast. This is doctor
Ryan Peckham and this is episode one fifty three, a
special episode. This is my episode with Guy Speer. Guy
lucky enough to be able to interview Guy. Guy is
a graduate of the Harvard Business School, graduate of Oxford,
started the Aquamarine Fund, a hedge fund that is based

(00:20):
in Zurich, Switzerland. He's probably most well known for bidding
on the Warren Buffett charity lunch with his friend Monish Pabrai,
and then he turned that into a book called The
Education of a Value Investor, where he discusses kind of
his transformation as an investor that the younger version of
me is very thankful that he wrote, as you'll hear

(00:43):
here in the interview, that was a big book for
me as far as helping me when I was trying
to figure out my direction as an investor. And so
I am so thankful to be in the position to
interview him. Guy always a person who wants to pay
it forward, and he started doing his own charity lunch,
which I was fortunate enough to win last year, and

(01:06):
so I've had a couple of conversations with him over
the year, but this was the first time we actually
got to sit down have lunch together. We met in
New York City. The next day we rented a podcast
studio where we were able to do this interview. So
Guy brings with him a big audience. And so for
those of you who haven't heard my podcast before, I

(01:28):
hope that you will enjoy this interview, and I hope
that I'm kind of worthy of the listens. Just like
most of these times, you know, you get to meet
your mentor for the first time. It was a little
daunting to me. It takes me a little while to
get settled in. But like most things, you know, at
the end of the days following the interview, I have
thought of, you know, just a number of things I

(01:50):
wish I would have asked him. But I'm confident that
we will be able to do this again, and I'm
very thankful to now be able to call Guy my friend.
And without further ado, here is my interview with Guy Spear. Well, welcome, Guy,

(02:27):
it's great to be here. It is it's a professional
studio today. So one of the things I wanted to
start with first is normally people tell people thank you
at the end, but people stop listening towards the end.
So I wanted to reverse it today and tell you
thank you for the opportunity. But I also wanted to

(02:47):
say just thank you for being such a good member
of the finance community. We talked about this a little
bit yesterday and I guess we can unpack that. But
like you know, my experience with people in finance has
been where not everybody is the nicest, not everybody really
wants to help you out. And so I think that
you're just such a good steward of the financial community,
and for everybody that maybe won't get the chance to

(03:10):
meet you, I really truly want to say thank you
for the opportunity to be able to meet you and
just have this conversation with you.

Speaker 2 (03:16):
Well, it's Ryan, it's really kind of you to say
thank you, and it's a real pleasure to be here.
I have two things I can already riff off what
you just said. One is, you know, just gratitude. It's amazing.
I mean, we had just before I met you, we
had an investor in and we went round the table.
It was just after the election, and we knew that

(03:38):
people would be some people would be feeling jubilant, some
people would be feeling raw, and we asked everybody to
say something that they're grateful for and just and as
somebody said it so well, an attitude of gratitude, right, yeah,
is just a really smart weighted of your life. You
live a better life, so you're well on the way
by expressing gratitude. In terms of the finance community. I mean,

(04:03):
I certainly Warren Buffett has been the same and in
a way it's you know, it's kind of long term greedy,
right and and in what what comes up for me
when you say that before I hand the hand the
questioning back to you is that so, I mean, we
have such similar backgrounds and how we started off in finance,

(04:23):
and the people in those kinds of shops are seeing
their world as a as a game to win at
all costs, and they're not playing the infinite game. And
one of the things I think that drew us in
the direction that we went is that we saw people
like Warren Buffett playing the infinite game and in a
way to be generous to the finance community is what
Warren Buffett says, long term greedy with playing the infinite game.

(04:46):
So I thanks for the thanks, realized as a self
interest as well. It's the best way to play the
game in a way.

Speaker 1 (04:52):
Yeah, well in this this is a full circle moment
for me because when I read your book, you know,
I was starting out, I was young, was looking for guidance,
and I was in a small town and I was thinking, man, like,
do I need to be in New York. I'm like,
Buffet's not in New York. I read about this guy,
guy Spear, he moves from New York to Zurich. He's
and and it just gave me comfort that there was

(05:13):
other people out there. And we'll talk about like communities
and a little bit, you know, a little bit later.
But it's just one of those things where sometimes when
you're young and starting out, you're looking for somebody that
it's like, man, who who can I look to? Who
can I read about? Who can I you know, who
can be a mentor from afar that I feel like
I want to do it like that? And just you know,

(05:33):
having that direction, having somebody where you you say, Okay,
this is a person who I feel has done it
the right way. Let me let me kind of follow
in their footsteps. And and for for me, that was you,
and it was such an instrumental, instrumental time of my
life to build my practice that way. And then it's
such a neat experience to meet you and be like, hey,

(05:54):
the person that I thought he was, that's who he
actually is. Like I'm relieved.

Speaker 2 (05:58):
Yeah right, yeah, so and so well.

Speaker 1 (06:01):
You know, it's just a it's just a really neat
thing to and I and you know where I said like,
I feel like the finance gods are shining down on
me that they put me in this moment because I've
done things properly and to make the decisions to to
get where you know I am today and of course
where you are as well. So it's kind of a
kind of a fun thing.

Speaker 2 (06:19):
So two thoughts to riff off of that is one
is that that you know, I feel like now there's
a kind of like direct lineage to uh when you
say that to Warren Buffett, because I showed up and
you know, uh, Ryan and I yesterday were having lunched
in the same place where I did the charity launch

(06:41):
with Warren Buffett. We had a great time and we
went and checked the exact spot where I was sitting
with Warren Buffett, and one of the questions I had
for him, and you know, I was so extraor you
know that I was sick. I'd made myself sick. I
was so nervous. Okay, that bad. And one of the
questions I had for him was, you know, I sort
of like I I furtively sort of I didn't sort

(07:03):
of say pause and asked the question was It sort
of came out without me realized. I said, you know,
I'm thinking of moving to Zurich. What do you think
of that? Something like that, and I just remember Warren saying, look,
I think you can do this business from anywhere, and
and for me, I took that as a sign. It
gave me the confidence later that year to decide to
move to Zurich. I'm not sure if I had not

(07:25):
had the lunch, if i'd not asked that question to
Warren and he'd not given the response that he'd given that,
I would have even made the decision or made it
as confidently for sure. And so so you know, you
thank me for being saying you don't have to be
in Manhattan, and I thank Warren for saying I don't
have to be in Manhattan. It's all the same thing.
That's one thing, and then the second thing that I

(07:46):
think is, you know, and actually maybe you can tell me.
I'm curious. I think that it took me a long
while to realize that if you're not feeling like the
decision you're making is slightly scary, if you don't have
that kind of quickening of the pulse, then you're probably
not doing something right. And I'm not saying that you
should leave live life on the bleeding edge kind of

(08:08):
doing wingsuit flying or bungee jumping, right, but if you're
completely safe, then that's not okay as well. And it
seems to me that the things that I've done that
have worked out the best, I never felt completely safe.
It's as if if we live our lives waiting for
the light to turn you know, green, sorry, red green, red,

(08:31):
amber green, right, you know, it often never turns green.
All we get is amber. And the amber is as
bad as good as you're going to get. You're going
to have to go for it. And so for me,
that first chapter of my book was like like that.
I was like, wow, am I really going to write
about this? In a way. Moving to Zurich was like that,
and I'm sure that yeah, And that's when your life
becomes an adventure.

Speaker 1 (08:51):
And yeah, and I talk about that as being there's
a difference between taking on risk and being reckless, you know.
I mean, so when you talk about you know, there's
people that are just reckless with their decisions, but it's
a calculated risk, it's a And then it's also about consistency.
Like I'm not sure if you would have stayed in
you know, stayed in New York and you didn't have
that lunch, I mean, the business might have burned you

(09:12):
out because you would have felt like you were going
against the grain all the time. And it's the same
for me. It's like you want to do something that
you feel like you can keep its consistency. But that's
what investing is. It's being able to, you know, make
investments that are consistent to you and your personality that
you can stick with. Because usually the number one mistake
that investors make is they trade too often, they're in

(09:34):
the wrong stuff, and a lot of times they're doing
other things that aren't really true to their personality. And
so when I'm talking to young investors, you know, it's
all about reading a ton of stuff about how everybody
else is doing it. There's so many ways to make
money in the investment world. But you've got to do
enough research on each one of those so that you

(09:56):
can figure out which one is you know, the right
one for you, right, whether it's a value investor or
if somebody wants to be a short seller, they want
to do whatever. But you've got to have your knowledge
has to be to a point where you can actually
make that decision. I think there's an old saying that says,
if you read what is it, an hour a day
on a subject for seven years, you'll be a you'll

(10:17):
be an expert, or you'll be I was. I'm just
naive enough that when I read that, I'm like, oh,
I think I can commit to that. Like I'm you know,
not that I'm any kind of expert, but I'm but
I'm naive enough to say, Okay, well, the time's going
to pass, and I enjoy finance, so I'm gonna read
everything I can for the next however many years and
see what happens. And I feel like with my journey

(10:41):
for so many years, it's it's the same. It's the
absolute same as like compound investing. You don't really notice
and then all of a sudden you have like three
years that completely change your life.

Speaker 2 (10:50):
Yeah, you know, you know, well, so I'll give you two.
It's funny because sort of reactions to and extending the
point that you're making. So so the knowledge, I mean
it is this incremental sort of like one hour a
day to one percent better every day works out of
something insane amount every year. And knowledge is one thing.

(11:13):
But this idea that acting optimally in the situation given
the so it's acting in a way that you can
stay in the game. So I am blown away by
the Monishor's capacity to take you know, what would be
for me impossible risks to take, because if I lose out,

(11:35):
it would put me out of the game psychologically, whereas
Monish is able to lose having taken big risks, and
he has no problem staying in the game. So in
a sense, one of the reasons why I have to,
at least hopefully it's it's in reality, but in my
own mind take less big ballsy risk is that my

(11:55):
mentality is such that I will end up not staying
in the game if I take the really big balls risk.
So the knowledge, so I think that and I can
say this now, I think there's been many circumstances where
I've been able to say rationally, I ought to do this,
but you know, but I don't feel comfortable with it,
and to understand, well, actually you have to listen to
also your degree of comfort, because if it doesn't work out,

(12:19):
your psychology will stop you. So it's not just about
being rational in the world. I think many people and
I was naming somebody who's this amazing personality that I'm
not going to mention because I don't have his permission,
but where he's an unbelievably smart and wealthy guy, but
he needs to take very, very careful steps because he's
a bit like Ross Perrot. Ross Parro sold his business

(12:39):
and then kept everything in money market because that's the
way he felt safe. And one person would take two
billion of the sales proceeds and only put twenty million
in the stock market. Somebody else would put the whole
lot in the stock market and be fine. And probably
reckless is to leverage that ten times.

Speaker 1 (12:58):
And not understanding how much you've taken on. But we
get that. That's where you get the it's the intellectual
brain versus your emotional brain. Yes, and I've had this
conversation with many people where they'll tell me intellectually, I
know I should invest, but emotionally I just can't do it.
And so we talk about IQ. But there's also that

(13:18):
EQ and that's where the kind of the Bay behavioral
piece comes into play. Well, it's why is somebody that
risk averse or loss of verse? Right? You know, we're
twice as impacted by a loss as we are again,
and they use that against us in political ads and
things like that, and we hone in on it.

Speaker 2 (13:36):
That's why I want to introduce you to this pus. Yeah,
he's thinking, I'm thinking very much of him. But and
something I don't understand actually is that one of the
beautiful things that the stock market gives you is the
ability And I've done it many times, I guess is
to just do it, to do you know, ten percent
less of it to one percent of what I could do.

(13:57):
So so take the first step. And there are many
positions I would say where I took the first step
and I just didn't want to take another step and
I ended up setting it out again. Yeah, and that's okay.
And so so what's beautiful about the investment world is
that you don't have to be either role you can
be in the middle, you know.

Speaker 1 (14:14):
Yeah, and the sizing of positions is a big key.
And I truly think like when we talk about like
the New World, everybody being able to trade on their
cell phones, you know, it's not like there's not that
cost of like I'm gonna have to pay a commission
if I get out of this stock, right, It's the
pain can be over like that, right, you can sell
whenever you want. The pain is over, the roller coasters over.

(14:37):
But the problem is when people are trading so often
that they never get above their cost basis enough to
feel like they have this cushion. Right, So like the
dividend based strategy, you know, it takes three to five
years to really notice those dividends are buying more shares
and like you really hit momentum with that, yeah, And
so like I'm constantly discussing those people. I'm like, man,

(15:01):
you've got to be in it long enough to get
away from your cost basis to see the dividends coming
back into your account, to see them buying more shares.
But many investors never allow themselves to even get to
that point.

Speaker 2 (15:12):
And maybe, I mean, what comes up for me when
you say that is that rather than thinking about investing
the result, which is always you know how much money
is in your account at the end of the day,
that's all you can do with it. Is to think
about investing as a practice, where you know, the point
in buying the shares of whatever company one thinks one
wants to buy shares of is actually to develop one's

(15:36):
practice of investing rather than how much money did I make?
So what is my practice? And actually something that I
Larren's never really talked about it in this way, but
he clearly acts in this way, which is every time
I think about it, I think I ought to write
some kind of an essay or thought piece about it.
Is that A simple question to ask is if I,

(15:57):
if I the action, my proposed action buy or sell,
take a profit. If I now apply the rules that
I'm applying in this situation for the rest of my
life in every similar situation, how will it work out?
And you know, so many times I think I'm offered
opportunity to do something for expediency's sake, But actually, if

(16:22):
I play that out, if I say, okay, if I
did that every time, it's clearly not going to lead
to a good result. And that helps me to make
the good decision in the moment. And I would give
you know, an example that really really helped me early on,
which I learned fromonished, was this idea of when I
buy something, I can't trade it for two years. Yeah
you know so. And so the point is not to say, oh,

(16:46):
my god, but this happened and I'm worried, or I
really need to take a profit, and or it's to
say it's to say, wait, I'm not doing this to
take profits or to be a good trader or to
play to my fears. I'm doing this to build my
investing practice. And I know if I build that practice
over time, I'm going to end up in an extraordinarily
good place. So maybe they you know, we talk about

(17:06):
in businesses about KPIs what is your what is what
is your intermediate goal, which we often will lead to
good results. Maybe that's what we need to build into
investor psychology. Don't think about the value of your pult FIO,
think about your investing practice.

Speaker 1 (17:20):
Well, and it's just when somebody's younger and they're just
starting out, it's trying to get the habit of saving
and investing. You know, whether even if it's fifty dollars.
Even if it's fifty dollars a month, I mean I
used to do. I started off doing fifty dollars a month,
and I'd buy one share of Coca Cola. Yeah, but
I just I love the habit. I love the thought

(17:42):
of just investing. So I wanted to find something that
was small enough that I knew, like it's a good stock,
pays a dividend, that kind of thing. It wasn't necessarily
that I did a ton of research on Coca Cola.
I liked the business I knew, but it was more
about just I loved the thought of being able to
buy something, like of actually being able to invest. And
I think that you know, you have to whatever capacity

(18:03):
you can. You have to figure out a way to
start those habits. Yes, because even though I started with
fifty dollars, it's the habit.

Speaker 2 (18:10):
Yes.

Speaker 1 (18:10):
And so as I started making more money, you start
saving more money, you start investing more money. But then
all of a sudden, you're developing momentum because you see
the you see it start to do well in you
know that habit is kind of ingrained early.

Speaker 2 (18:22):
But what I sense in you rewinding a couple of sentences.
And it's fascinating because I felt the same way, not
about investors, but in other ways. Is that you I mean,
I wouldn't say that you're desperate, but you you've experienced
something yourself. So forgive me. I'm going to reflect for
two things. One is I don't know you. I've only
met you yesterday. But there's something really special. Is that

(18:45):
you have a very very good in a scorecard. In fact,
you don't you know. One of these great lessons from
the buffet launch was, you know, would you rather be
known as the best lover in the world but your
wife know that you're the worst, Or would you rather
you and your wife know that you're the best lover
in the world, but the world to think that you're
the worst. You want to live life by a Nina

(19:07):
Ska scorecard such that it doesn't matter what people think,
and you actually do that extraordinarily naturally. So for you know,
for the listener, Yeah, you're quietly getting better at things,
and you draw great satisfaction from knowing that you're getting better,
knowing that your your client portfolio is growing, knowing that
your capacity to teach is getting better, and you'd draw

(19:31):
great and you don't care that the world knows or
doesn't know, which is something really really special.

Speaker 1 (19:36):
Well, I appreciate that. I appreciate that.

Speaker 2 (19:38):
It's very clear to me, and it's wonderful and I
you know, and that's what you know, You're the kind
of person I need in my life because it helps
me to be more like this way. So that so
that kind of those things compound. So that's the one thing.
But here's where in your capacity as a teacher, I
sense of frustration, which is really and I want to

(19:59):
ask you about it, which is this you're trying to
get your students to experience the same thing. You're like,
if you could just start the practice, if you could
just take that tiny.

Speaker 3 (20:07):
Step, you don't the rewards will come in time, And
don't call me up on day two and say, but
the rewards haven't come that you know. It's like, you know,
watch cattle never boils or something right, and it's really hard.
I mean, I don't know if you've had any success
in teaching that.

Speaker 1 (20:24):
Yeah, I mean I have, But I mean normally in
a class of like thirty to thirty five people or whatever,
I mean, I can tell that like five of them
are locked in that I'm really connecting with five or whatever,
and I think that number is starting to grow. But
I think that it's one of those things too. It's
what's the old. When the student is ready, the teacher

(20:44):
will appear. So I've had people that come back to
me later, and that's where I really like, I get
super excited because if somebody will reach back out to
me five years later or seven years later and they say, hey,
I remember you said this in class, and so those memories,
they can't unlearn the things I teach them. Right, So
I'm planting the seed just like you know, I don't

(21:05):
know when the tree is gonna grow. I don't know
how big the tree is gonna be, but I know
that that they can't unlearn the things that I told them,
because they will message me and they'll say, if I
would have only bought Apple when we were talking about
it in your class, you know, they they remember those moments.

Speaker 2 (21:21):
You know, I'm just gonna I'm gonna I'm gonna drop
a name that nobody knows probably but but but Steve
might hear this, and then so if I had only
bought Apple when Steve Wollman at the Berkshire meeting, talked
to me about it, yeah, in like two thousand and four. Yeah, yeah,
but I think that what's interesting, and I don't fully

(21:44):
understand your ecosystem. But over time, even the people who
are attracted into your life will be attracted into your life
because they've heard a story about you. It's one of
those people former students has written to you, will talk
to somebody in a cocktail party, and even you know,
you might get parents of students at the university who

(22:07):
say you must take his class because you learn a lot,
and so you subtly and quietly, over the years, the
group of students that you teach, the group of people
in your life will be more oriented towards your message,
you know.

Speaker 1 (22:20):
Yeah, it's a compound effect on a you know, it's
the same thing.

Speaker 2 (22:25):
And it's so interesting how many people that you come
across in your life understand that, you know, compounding money
great not you know, but they but many people seem
to stop there, and you don't. They don't realize that actually,
there's so many other things one can compound.

Speaker 1 (22:40):
Right, It works in every other area of your life. Yeah,
and yeah, it's the same as goals. It's the same
as exercise. It's the same. You know, all of these
things are connected.

Speaker 2 (22:50):
I can't believe despite understanding the power of compounding in
financial markets. Well, I might be going down a rabbit here.
But I was a guy who did a lot of
sports at university amateur, just for myself. I wasn't a
great athlete or anything. And then you know, going into

(23:11):
the working world, I would, I would, you know, I
do a huge amount of sport on the weekend and
then do nothing for you know, Monday, Wednesday, Thursdays. Monday, Tuesday, Wednesdays,
I recovered. Then Thursday I might drag myself off somewhere.
So I had a very I was delivering my body
very intermittent doses of exercise, and then they'd be traveled,
and then I'd injure myself because I'd really pushed myself

(23:32):
for a weekend.

Speaker 1 (23:33):
Warrior is the kind of sports.

Speaker 2 (23:35):
Yet it's only in the last three or four years
that I found myself a coach who when he's not
coaching me, he spends a very little time coaching me.
He coaches a pro cycling team and so he goes
running with me and I learned yesterday you're a runner.
And he says, you're running too fast. We've set a
pace in the page, and I'm like, but I don't

(23:56):
even feel like i'm running. I don't feel like even
I'm I'm trying to. Like, Yeah, that's exactly the feeling
that I want you to get. And he said, if
you make four out of five of your workouts feel
like this, you'll find you can build the consistency. And
I'm my fifties, So in my fifties, I understood that
I was not evailing myself of the compounding effect and

(24:17):
exercise because I was just I was like, I was
the equivalent of the trader right now by so yeah,
you know, get out of the market, get in the market,
and I wasn't learning to just consistently deliver myself an
extraordinarily gentle dose of exercise on a daily base. In
a way, that's what seems to me that a lot
of what you're tilling people around you is like deliver
yourself a very gentle dose of investing. And you think

(24:41):
it's nothing buying one share of Coca Photo, but it's
actually a lot.

Speaker 1 (24:44):
Yeah. And it's the same thing with reading. I mean,
it's like, you know, investing yourself mentally, physically, financially right.
And it's those little but because people we do it with
like New Year's resolutions, I'm going to read a book
every two days. I mean that you said something that
you're not going to be. It's all about the consistency
and the sustainability of those choices, like can you sustain

(25:05):
the choices that you've set for yourself? And you're talking
about buffet. I've been thinking about this the like for
for the last five minutes. I am haunted. I'm haunted.
But yeah, by him saying that he would be worth
more money today had he never sold anything, you know,
if he had never sold out of anything, even the ones,
even the ones that went to zero, like he would

(25:26):
have done. So yeah, he did the like that he
would be worth more money if he would have just
let his winners win. And it's the same like Peter
Lynch said that one of his worst investments, which everybody
says is one of his greatest, but he went to
the original like four home depots and he invested in
it and it went up like forty times as money
and sold out and then it went up four hundred times.

Speaker 2 (25:49):
But so so you know, I'm I'm not going to
take umbrage, but I'm going to.

Speaker 1 (25:54):
Take issue go for it.

Speaker 2 (25:55):
So so first of all, and now I'm haunted because
I've been you know, well what Warren Buffet should haunted
by that as well, because he just sold out of
like what half of his Apple position, So he should
be haunted. Warren. If you're not haunted, you should be,
although we may find out there are very good reasons
for it. And I'm haunted because I've I've sold out
or am I reduced my exposure in a number of cases.

(26:19):
And so here here just to go back to a
previous point, it's easy enough with retrospect safe. I hadn't
sold out, I would be dot dot dot and you know,
and I think of you know, I was. I was
in India a couple of weeks ago, and I had
an investment in a company called Krizzle, and I sold out,
you know, four hundred and five hundred. I am painful
to think of the number. But let's not forget the

(26:41):
behavioral side of it. You need to be able to
stay in the game. And I can't speak for Warren Buffett,
but you know, if your company is trading it, it
was somebody described one of the companies I own as
trading at infinite earnings. I mean, I can say it's
like Ferrari is extraordinarily high valuation, but it's an extraordinary asset.

(27:03):
But if behaviorally the thing's gone up ten times on you.
And I mean Nick Sleep sold out of half of
his Apple Amazon position, right, So I'm making an obvious point.
So so don't be that haunted by it, and in
a way, what in a way, maybe just bring it back,
you know, forget about being haunted by that. Follow the practice.

Speaker 1 (27:23):
Yeah yeah, well and also too, you don't you know,
you can look back and see those things, but there
could be another investment. Like the money's got to come
from somewhere, so you know, I talk about that with clients.
A lot will trim, a position will add to it,
and they'll say, man, we missed out, and I'm like, yeah,
but we put the money over here and this one did. Well.
You know, it's you know, it's that mental accounting that

(27:45):
people do. It is just that it just tortures you.

Speaker 2 (27:49):
People pay a lot of tricks, and I our mind
pays a lot of tricks on us. And I can
tell you what is sort of shocking to me and
surprising to me is I made a conscious decision, you know,
after the financial crisis, I got rid of my Bloomberg monitor.
Then I decided I needed it. Then there was a
period of time when I had it, but I didn't
switch it on. And I now I actually use it

(28:11):
more often than I used to. But I do not.
I do not have any process for checking stock prices.
I uh, you know, I see them when I see
them and inever, but I don't. There's no point at
which I monitor the spreadsheet. There's no point at which
I switch on the Bloomberg or type you know, but

(28:32):
the price has come through to me anyway. I know
what the stocks are more or less, and in a way,
I mean, this is the point, isn't A seemed to
Leb has made it so well. I don't know if
you've he's got he does the mathematics of this. The
more often you check the price, the more often you're
going to see a decline. And the less often you
check the price, you know, so if you want to
make yourself miserably, check miserable. Check the price every day,

(28:55):
and you'll get many days where the price is down.
The less you check, the more the price is going
to be up, that's going to be down to just
don't check very often.

Speaker 1 (29:01):
Yeah, that's that's my opic risk aversion. So the more
often you check, the riskier they. You know, the more
often you check your holdings, the riskier they start to appear,
because you're starting to see every you know, you're sitting
every uptick, every down tick, you're seeing them bounce around.

Speaker 2 (29:15):
Right. So I've never had that expression, my all pick
risk aversion. Yeah, and that's so beautiful. I don't know
where that comes from, but yeah, absolutely, it don't be
my all pick.

Speaker 1 (29:26):
Yeah, I mean that's that's yeah, I mean it because
everything every time you see an uptick or it's it's
almost a call to action, Yeah I got to do something, Yeah,
I got to you know. And so that's leads me
to a great point, is just talking to you about
like and I call that noise, right, It's like, how
do I reduce the noise? And so you've kind of
set things up where you you have reduced So what

(29:46):
are the things that you've done like that you reduce
the amount of like just noise that's in your head.

Speaker 2 (29:51):
You know, I've done many things, but there are many
more things that I would like to do, and and
so so the things I have done so you know,
don't check the stock price every day, have a reading
room with no devices where you can't even check the
stock price, move to Zurich. You know, the people I
choose to hang out with, choose to hang out with

(30:14):
people who understand that mindset or embody that mindset better
than I do. Choose to hang around people who are
interested in businesses, not in stock prices, where you can
have fun conversations about what makes quality business, whether a
business's motor is improving or not, whether a CEO who
came in is doing a good job or not. Rather
than it's up to day, it's down today. I took

(30:35):
some profits, look at the options, all of those things,
so it's not like I. So I try and move
away from those people. So and then, you know, have
in the vehicle that I run. We encourage our investors
to they get a better deal in terms of the
fees that they pay if they go into a share
class that doesn't allow them. So set up the investment

(30:58):
relationship where they can't put the money their hands on
the money on a daily basis. In fact, we have
a share class where you can only put your hands
on the money every fifteen years. So it's kind of saying, look,
we really want to know that you're with us for
a long time, and we'll charge you next to nothing.
So having said that, those are all great, not terrible
things to do, but there's so much more. And this

(31:22):
is where it pisses me off, because Warren every lesson
I learned, Warren already knows. And so the ultimate is
to be in Warren's shoes, where you just have a
sort of like and it doesn't matter how big. You
have a pipe of cash that's flowing in every year
or every quarter. And in a way, and I'm certain

(31:46):
that Warren would agree with me, the size of the
pipe is less important than the consistency of the pipe.
And so what enables Warren And look, it's just the
nature of the world that you and I inhabit. By
everything that I've said that you know, my cash in
and outflows are highly dependent on sentiment in the market.

(32:08):
And much as I would like my investors not to
be affected by sentiment in the market, they are so
so my cash inflows and outflows are correlated to sentiment,
and I hate it, but it is the way it is.
It is, yeah, and so I am constantly trying to
figure out how can I move to a different kind
of a world. By contrast, in Warren's insurance business, what's

(32:32):
amazing is is insurances quite possibly in many circumstances counter cyclical.
So in a world where risk goes up or perception
of risk goes up, people are suddenly hyper focused on
the possibility of planes flying into billions into the buildings,
they all want to buy insurance. And so you potentially
have cash inflows at exactly the right time rather than
cash outflows. And whether it's through the insurance business or

(32:56):
through wholly owned businesses that provide a funnel of cash,
that's one of the things that enables. So what's my
point to you, and is that a lot of this
is psychology, but there's there's but building that the circumstances
of your environment. And what I would say is people say, oh, yeah,
how cool you went to Zurich, so it's all calm.
The answer is, yeah, it's all calm and Zurich. But

(33:16):
it's not going to stop sentiment in the market affecting
my investors, who certainly want to pull their money, whether
they're because my being in Zurich doesn't impact that at all. Right,
you need and and and Yeah, longer share classes helps,
but the really good way to do it is to
kind of like have the vehicle that utterly seals that
up right way. So that's the that's that's for me

(33:37):
a kind of a holy grail that you are so kind.
I mean you said yesterday, well you're you're on the
path to that, and I I genuinely, I mean, if
I get to that in my lifetime, I'll be really grateful,
but I'm not sure that I will. I mean, it's
and I look at people who are extraordinarily talented, like
Bill Ackman, and he understands this far better than I do.
I'm sure, And he's got vehicles like pushing public could

(34:01):
trained the vehicle, but but somehow it's not Berkshire. You know. Uh,
Tom Gainer has a at markl.

Speaker 1 (34:08):
Yeah, yeah, it's yeah. And it's so it's such a
specific thing it's so hard to replicate. I mean, you know,
like you said yesterday, we're talking about Buffett and you're like,
you know, he put the you know, the blueprint out there.
Why haven't more people done it.

Speaker 2 (34:21):
It's really hard.

Speaker 1 (34:23):
Yeah, yeah, it's really hard, you know. And I wonder
as we look to this transition to like AI and
everybody's you know, the information overload. I think about the
noise just going back to noise and how much data
is out there and how many calls to action? You know,
will AI help that? Will it hurt it? Well, I
mean it's like most things, it's going to be a

(34:44):
double edged sword. It'll have good things, now, you know
those kind of things. I mean I used it last
quarter to go through you know, hedge fund reports and like, hey,
go through all the go through all the reports, tell
me who raised their cash ten percent, who raised their
cash twenty percent? And literally in ten seconds, it told
me all the fun so I'd raised cash.

Speaker 2 (35:03):
Wow.

Speaker 1 (35:03):
So from a research standpoint, it really you know, helped
me out. And then I was like, oh, is this accurate?
You know, like you know, because now I'm like, you know,
I don't want to be making so I was a
little cautious, so I went I actually went through and looked,
and and then there were some points where it was
unhelpful because I was like, well, tell me what were
the most traded stocks by what were the most traded

(35:26):
by stock stocks with by orders for hedge funds over
the last quarter, and it was Apple, Amazon, you know,
Navidia And I'm like, okay, well tell me what the
biggest cells were. Okay, it's Apple, Amazon, and the VID.
You know, it's all the same. You know, they ended
up being the same. But I'm just trying to figure
out how to use that. And then how what what

(35:46):
businesses is AI not going to not going to impact?

Speaker 2 (35:49):
Yeah?

Speaker 1 (35:49):
Right, So this is the Charlie Munger, you know, invert always.

Speaker 2 (35:52):
Inverts a beautiful question.

Speaker 1 (35:54):
You know, and and thinking about Bill Gates and Warren
Buffett talking about you know, Bill Gates is like, you know,
Warren Man, the computer is going to change the world,
and he's like, how's it going to change how people
chew gum? Yeah, He's like, what are you talking about?
You know? But I think about that, like what what
businesses are is it not really going to impact? And
then also what businesses are gonna have to spend a

(36:16):
ton of money two, you know, to have AI, but
they're gonna they're going to absorb the cost and they're
not going to be able to pass it through to
the customer. So that that I think is like the
key over the next three to five years.

Speaker 2 (36:31):
And it may be that these kind of like uh, Google, Apple,
Meta and Cot, they're going to become like department stores
where they just have to go to spend enormous amounts
increasing their AI and it's not going to help at all.
Whereas if you run a dialysis company, uh, if you
if you're giving people dialyses, or if you're run you're

(36:53):
giving people massages, or if you're giving anything that's got
a real human element to it, then then those companies
are going to end up to much better because there's
just no amount of AI that can help those people
do better dialysis. And at the end of the day,
you need to go into the dialist center or do
home dialysis whatever it is, you know. Yeah, I mean
also interesting for me, I mean I talked about Bloomberg,

(37:14):
but you know, so I have Bloomberg, which a monitor
costs twenty five thousand dollars a year, and then I
have been using a lot of perplexity, which is grown
by leaps and bounds, and I use perplexity for investment
research as much like as I use Bloomberg, and perplexity
cost me twenty bucks a month, and perpexity is reading

(37:36):
everything all the time. Yeah and so, and it's fascinating
and you're coming up. I mean, something that came up
in a conversation recently is that you need to get
good at forming the right question, and if you form
the wrong question for the AI, you're going to get
not great results.

Speaker 1 (37:52):
Yeah, that is the key, and that that was my
worry when I typed you know, I'm like, did I
ask it right? Did it give me the right prompt back?
Did I You know, I need to check this, I
mean spending the time to see like is it accurate?

Speaker 2 (38:05):
So what I loved what made me adopt perplexity, And
I'm probably talking either people listening to this who know
way more about it than I do, is that asking
chat GPT questions and I don't know who's where it's
getting it from, and I don't trust the answers, but perplexity,
at least for most of the time I've used it,
I understand they now got copyright issues that are coming up,
but it would give me sources. So I'd ask a

(38:28):
question and it would give me the sources for where
it drew the answers from. So then I go straight
and then I can go and read the sources and
it gives me the top ten sources. I think Google
doesn't like it very much because now it's bypassing Google.
Google doesn't get to show the ads. So I really
like that. But you know, I mean, you've been asking
questions of AI that I haven't even thought about, like

(38:49):
tell me, you know, tell me funds that have outperformed,
that have now established new positions and something, so we
go look and see why they've bought what they've bought
for example. Yeah, I mean, I mean, I I at
the end of the day, AI has come up so
fast and it seems to be improving so fast that
I just admit lack of knowledge and helplessness. In a way,

(39:14):
I hope that my role gets to survive. I'm going
to do my best. Yeah, but I don't claim any
special knowledge and I don't claim any special insight about
how the world was unfold Yeah.

Speaker 1 (39:23):
I mean, I yeah, I mean, I'm right there with you.
That's why I was trying to think. I think sometimes
I think about you know, just going back to the
original thought is like everybody's over here competing on how
is AI going to you know, change all these businesses.
And that's why I'm like, which ones is it not
going to change? I'm going for the I'm trying to

(39:44):
go for the easier fruit, you know, I'm trying to
go for the easier Like who's it not going to impact?
And I think that those kind of like just those
kind of question prompts just in your head can make
you think, Like going back we talked about Coca Cola,
it's not really going to impact how people drink Coca Cola.
Maybe they'll drink because they'll be sitting in front of
computer asking you know, all these questions, you know, So
just things like that where maybe Coca Cola can use

(40:07):
it to make their internal, you know, business more efficient,
more profitable. But as far as like the you know,
the end consumer, it shouldn't have much of an impact.
As far as changing people's habits, I always think about habits,
like how do peoples you know? For me, that was
a big deal. Like during COVID, I thought about like Amazon,
and I thought about how many there was a whole

(40:29):
generation of consumers that normally did not shop on Amazon,
older consumers that COVID changed their habits and they realized
how easy it was to order on Amazon. So they
got this whole customer base that they probably would have
spent billions upon billions of dollars trying to attract. COVID
made it happen for them. Basically, Yeah, accelerated it overnight.

(40:51):
But those habits are sticky. When people change their habits,
it's very difficult for people to then go back, you know,
the other way they stay.

Speaker 2 (41:00):
And who would have thought. I mean that was you know,
amongst many many painful moments and investments that I've missed.
And I can tell the painful story about me and Amazon.
But so you say, I say, you know, laptops and windows,
and people are like Microsoft Windows, and I say, yeah, today,
it's Microsoft, Tomorrow it's somebody else. The technology, the way

(41:22):
it's delivered is not that important. Is an Intel chip
or somebody else's chip. And Amazon they were aggregating a
whole bunch of suppliers and presenting a web page. And
you say, yeah, but somebody else could present the web page.
But then somehow through the aggregation and also the distribution centers,
because it turned out that timeliness of delivery was important.

(41:44):
So there's a whole logistical system behind it that is
actually very very hard to replicate and that actually seems
to have an extraordinary and lasting value. But I come
back every time to the place which feels and I
can argue for why it's safe is that when you
get to the place where there's nothing that gets in
between you and the consumer. For example, you chose chewing gum,

(42:08):
you know, it's like and they like the brand, and
they reach for the brand that they're familiar with, or
count lines the chocolates that you put on there in
all these kind of convenience stores we talked about dialysis.
I mean, there are plenty of places where you just
it's very very hard to get in between the product
that was already being delivered to the consumer and what
the consumer wants. And so those are probably the places

(42:29):
to focus on.

Speaker 1 (42:31):
And that convenience factor. You know, you talked about Amazon,
but the convenience of giving getting your package delivered this
you know. I mean, it's it's interesting, it's the path
at least resistance.

Speaker 2 (42:42):
It's something that I don't know why it comes up
for me as as I thought of So actually when
I when I come visit you in Texas, there's a
company and I'm just going to say their name. I
probably shouldn't, but you know, so I did a screen.
One of the screens that I love just looks for
companies that have succeeded in rowing their sales while at
the same time reducing their share can't. And that's a

(43:05):
good one. Yeah, And because it's very hard to manipulate
revenues revenues per share, and it's very hard to be
you know, if a company genuinely reduces its share count
of a period of years, that's not very easy to do.
And maybe I won't mention the company anyway they because
because it might be really good and I haven't done.
But they they manufacture right near to where you are,

(43:28):
somewhere a summer in Texas. So it's like, so, you know,
because it might end up being a really good investment idea,
we can talk about it offline. Yeah, But but then
the question is the product that they manufacture is not
like Wrigley's gum. You know, your the preference might be
that product today, but it might be another product in
the future, and you know, and and the willingness to

(43:52):
stay with that product is many, many different factors that
go into it. But you can't be sure that the
consumer will stay with it.

Speaker 1 (43:59):
Yeah, well, I mean you brought up Intel and today,
I mean it's an historic day. Intel got booted from
the Dow to day and the video got put in.
But wow, and that happened today. You know how painful
is Intel down? Not that we're checking stock press on
a daily basis, but I don't know how much it's
down today. But it's been a really bad couple of
years from them. I mean when they cut their dividend,

(44:19):
I mean that was really.

Speaker 2 (44:20):
But yeah, so, I mean Intel is technology, but think
of this. So a company that has come up for
me in the past that I don't know that well,
but Arctic Cat. They make snowmobiles.

Speaker 1 (44:33):
Oh right, yeah, so.

Speaker 2 (44:35):
It's a it's a really powerful brand, highly profitable business.
But but why why do you buy Arctic Cat? You know, anybody?
Not anybody, but anybody who you know, Honda to make
something like that or another one that was really really
eye opening for me. So I used to ride motorcycles
and I owned a Harley Davidson for a short while,

(44:57):
and I was big into BMW motorcycles. And so that's
the financial crisis and Berkshire Hathaway makes a loan to
Harley Davidson, and at the Berkshire meeting, I can't remember
the exact question, but it comes clear to me that
Warren was fine making the loan a high your loan
to Harley Davidson, but they wouldn't have brought the shares right.

(45:21):
And Warren Warren said, you know, you know, who knows
whether the brand is something to the effect of who
knows whether the brand is around in one hundred years.
And I'm thinking, if these damn buyers to too Harley
Davidson into their skin and you're wondering whether it's not
weren't going to be around? I mean, I mean, and
actually Harley Davidson is having a really hard time appealing

(45:42):
to a new generation. So people my age all know Harley,
but in order to grow and to be relevant, they
need to appeal to people in their twenties. And are
they appealing to people in their twenties? Not obvious. So
this sort of you know that that can tech technology
can be booted out, that need can stop the wave
is one thing. But a powerful brand like Harley Davidson,

(46:04):
and I think think many people say it's a powerful brand,
but I think that people don't realize when I try
to talk to them about brands and about consumer preferences
and unchanging compussumer preferences. They'll bring all sorts of products
in there and assume that they're all the same. And
it's actually a narrow subset of consumer brands that actually

(46:24):
have that incredible sticking power.

Speaker 1 (46:26):
Correct.

Speaker 2 (46:26):
Yeah, I think that, you know, and Warren Buffett nails
them all. You know, Coca Cola is one of them.
I think that, you know, Budweise is another, and and
you know, Harley Davidson. I mean, the jury's out, you
know so well.

Speaker 1 (46:39):
And it's that's that's one of the reasons why, like
I personally don't like apparel companies, Like I'm not I
don't have a good fashion sense or I don't.

Speaker 2 (46:48):
But it's just fine.

Speaker 1 (46:49):
But it just yeah, thank you, But it just changes,
you know, like every generation wants like their clothes or
their you know, they want their style. It's about a
five year it's about a five year switchover, you know,
And how am I supposed to know what's going to be?
I just find those like I put those in the
too difficult to figure out. Plus it's just a highly
competitive business. I mean the private margins or razor thin on.

(47:12):
You know, when you're competing, it's just it's just too
it's just too difficult for me.

Speaker 2 (47:15):
But I'll have fun with that. So so apparel, absolutely,
But then there are some So Abercrombie and Fitch just
came up in conversation. It turns out that there was
some kind of sexual abuse going on in that company.
And the time when I was living in Manhattan, some
investors I respected, very very highly owned chairs in Abercrombie

(47:36):
and Fitch. I remember on Fifth Avenue walking into their
store and it was a special environment of the armies
of teens waiting to buy their clothes. And now it's
kind of like an also run so Joel Greenblatz a
family member of his who's a very smart investor specialized

(47:57):
in retail and those kinds of consumers, which is kind
of fascinating. But then and I'm not sure that so
then you get you move into or I would argue
you can move into a space called luxury, which has
a parallel in it. But actually I think that those

(48:18):
brands are extraordinarily sustainable over multiple generations. So a brand
that is kind of on the border. I think it
so you can talk about luxury and you can talk
about premium. I think that Polar Ralph Leeren is actually
premium rather than luxury, and luxury examples LVMH or Dior'.

(48:39):
There's a book by a guy called Don Thompson called
The Cureus Economics of Luxury Fashion, if I'm not mistaken,
and he explains how the economics of the luxury sector
are very very different.

Speaker 1 (48:51):
And so it's a great point.

Speaker 2 (48:54):
And so what's fascinating And this is like Charlie Munger said,
in the investing world, it's completly churning and changing. So
you're absolutely I think that you're absolutely right. We're absolutely right.
The vast majority of apparel is very very hard to predict.
But then there are there are some luxury brands which
are also in apparel, which may be very very easy
to predict, and and and and and you wouldn't want

(49:15):
to I wouldn't. Well. Let you know, if if you
own a conglomerate where you own where you own the
brand Ralph Lauren, and you also own the brand LVMH,
you know, would you be as confident investing in the
LVMH brand as you would in the Ralph Lauren brand.
And there's another example starm going on. But there's so

(49:38):
much fun to talk about because I've thought about it,
as you can see quite a bit. So I can
remember there's a guy at Sanford Bouncing called Lucas Salka.
He's like a genius who's an analyst for luxury brands and.

Speaker 1 (49:52):
Coach.

Speaker 2 (49:54):
Coach is a very well known American brand, and and
I think it was him he who said Coach will
never make the transition from and in fact, there are
people luxury analysts who say that in order to be
a true luxury brand, you kind of have to have
European heritage, and Coach has an American brand. But then
but then LVMH goes and buys Tiffany's, and Tiffany's is

(50:16):
an American brand, and you come with that argument of like, yeah,
but it's an American brand, You're never going to be
able to convert it in luxury. It's premium, it's not luxury.
And and they, I mean, every piece of evidence that
I've seen tells me that they've LVIMH, by investing enormous
amounts of money, are going to earn a high return
on their investor capital in converting Tiffany's from premium to luxury.

(50:40):
And I urge anybody listening to this to or watching
this to go visit their store and Manhattan to go
check it out. What's my point, Whenever you come with
these generalizations, they'll be kind of wrinkles.

Speaker 1 (50:51):
Which it's Lulu, you know, the yoga you know, all
the yoga pants. I mean, that's another apparel. But I mean,
I'm yeah, I mean, but there's there's that are just
so difficult.

Speaker 2 (51:01):
Lulu Lemon is so interesting. I as a friend in
Zurich who used to have a podcast, she doesn't do
it anymore, and she loved talking about Lululemon. And it
seems that if you're a certain kind of female investor,
probably Lulu Lemon's a really, really fun company to own.
And you know, it may be, you know, when you
look at this behavioral side and the psychological side, even

(51:22):
though you and I would feel very uncomfortable owning an
apparel brand for our long term investing, it might be
the right way for certain kind of woman to step
into investing despite all the disadvantages.

Speaker 1 (51:34):
Yes, yeah, yeah, well, and that's like when you're talking
about somebody starting investing, I mean you want them to
pick something that they have a personal interest in, because
otherwise they won't they won't have anything to relate it to.
They at least they'll start looking at it, tracking it.
I mean, you want it to be something that, like
if you were to start investing with like a ten
year old kid, you'd say, hey, what are the things

(51:55):
that are in this person's world? Like, what's going to
be the thing that's going to spark that that interest?
You know?

Speaker 2 (52:01):
So so my daughter, so she wanted a school bag
and she'd identified I don't know if it's luxury or premium.
So we went and got her a long Shan bag,
which is like wonderful durable bags, and they're you know,
they're they kind of make the person who carries it
feel pretty good without being maybe like an equivalent to

(52:22):
the Swatch brand. Yeah, you know, it's not hyper expensive,
but you know it's not like a Birkin bag. So right, anyway,
and then we were I decided that was kind of fun.
So we're planning a trip to Milan and she's very
excited to visit various luxury brands. It turns out that
she wanted to visit like she was sixteen years old.
She wanted brands I've never heard of. Where I visit

(52:44):
her in the store. So I sit and have my coffees.
She's going to these so so meet me at she
texts me. She says, meet me at X y Z store.
I walk into the store a brand I've never heard of,
and every every person in there looks a lot just
like my daughter. There's sixteen year old girls by anyway,
and like But but before we went on that trip,

(53:05):
because I thought she was going to drag me through
lvmhdor all of those, I said, that's fine, but I
have a I've created Charles Schwab accounts for each of
my three children. I said, but but I you need
we're going to buy shares of ALVAMH and that she's
got shares of hermies, And I said, you need to
understand that there are smart business people who making I

(53:28):
think the technical expression has shit tons of money right
out of you and people like you, and I never
ever want you to think just as a consumer. I
want you to go into those stores and understand there's
a game that's being played and there's capitalists on the
other side. Who performing money extraction operations of people like us.

Speaker 1 (53:46):
That's exactly right, and I hope.

Speaker 2 (53:47):
The lesson went in well.

Speaker 1 (53:48):
But it's like, so going back to your Abercrombie in
the early days, like you know, you talk about consumer
behavior and just marketing behavior, where they would have the
music turned up way loud, the light the lighting would
be so dark, you know. So you got this loud music,
the lighting, you know, the lighting's dim and they have

(54:09):
like just a spotlight on pairs of jeans. Same thing
happens daughter, you know, teenage goes in there and says,
you know, hey, Dad, I got these pants I want
to buy. The parent comes in there, they got the
music blaring, they can't see because their eyes are trying
to adjust, you know, and they're just like, here's my
credit card, Like I just want out of this story
as fast as possible. You know. They're just trying to

(54:30):
get the parents to make that quick decision, like I
just want out of this environment. You know.

Speaker 2 (54:34):
But in those stores, what I remember in Manhattan was
that you had these I mean mainly males. You had
like these scantily dressed, very very attractive looking males, which
probably got the female hormones pumping, you know, and then
they're like desperate to dress like them or dress in
a way that would make them appealing to those males.
I mean, there's a whole kind of thing that's going

(54:56):
on in the store, a psychological thing, which, by the way,
is what happens at at the luxury stores. You can
tell the luxury store because there'll be somebody at the
door who lets you in. Right, You're always going to
be greeted at the door and you walk in and
this this feeling like, well, you know, what are you
doing here? And like are you going to show your
stuff and buy something or you're just going to be
one of these creepy people who look so they they

(55:16):
have already created a psychology around that, and Abercrombie we're
doing that.

Speaker 1 (55:21):
It's the are we going to let you in? It's
the scarcity are we gonna Are you part of this
club or are you just outside looking in?

Speaker 2 (55:27):
So you know, I don't mind mentioning this company, and
please let's go and do some research on it, because
I think it's just an apparel brand, but it might
be more. And it's this company guest genes and they
have I think they have a very powerful brand and
it's a beauty cells and they take a particular version

(55:50):
of beauty. They get these brand ambassadors and hey it works.
And so I don't know how many genes.

Speaker 1 (55:56):
You are.

Speaker 2 (55:58):
Very cheap right now, right, yeah, And and so they
I think that probably it's a pass, but it's a
don't understand. We'll never understand, right, But it's interesting.

Speaker 1 (56:09):
Yeah, no, I think, yeah, you have to look. And
a lot of these brands, like we talked about, where
they go. Man, we spent a lot of time on
a parel that I didn't think we'd spend No, exactly,
but like that's fine, but they go through. They're cool
for one generation, yeah, another the next generation picked something
else because they want to wear something that was different
than their brothers, sister They want their own brand. And

(56:29):
then and they they they do a really good job
of finding the right time to recycle them where they
come back, you know, with a vengeance if you will,
when everybody kind of left them for dead.

Speaker 2 (56:40):
And so and it's something I don't I mean, even
within the luxury well that I've been trying to understand
more of, there's there was a turn round of Gucci
in that kind of way where they succeeded and it's
if I'm not mistaken, carrying that owns Gucci. They succeeded
in making the brand relevant again to new generations. So
it looked like that was there has been an also

(57:01):
run older generation and they rejuvenated it. Having said that,
I used to spend a lot of time thinking and
looking at a German company called Is was a luxury brand,
and I think it hit the graveyard. So you just
you know, I would not be able to tell whether
a Gucci is going to turn into a or whether

(57:25):
it's going to be rejuvenated in that way. And I
spent more time than any looking at the LVMH stable
of brands, and Alvimh has so many companies and old
brands in their portfolio, and I think that part of
what makes that such an interesting company is that there's
a there's a huge stable of in a way also

(57:48):
round brands that can be rejuvenated at the right moment
with the right person. So they've got this kind of
catalog of stuff that can be taken out at the
right moment, and they have the brands that are running
like in is doing research into luxury brands, is so
much fun because you're kind of walking around the tony
parts of town. So, yeah, there's a store that so

(58:10):
ELVIERMH is also real estate play because because luxury brands
have to be sold in certain parts of town, and
so Alvimh knows how to develop parts of town. So
there's a part in Paris, a place in Paris, a
store which was called last time many ten of building
that they went and renovated for an insane amount of right,
and it's become like a powerhouse retail center. And there's

(58:33):
a whole part of the ground floor that is dedicated
to this La Veuve Clico, a brand of champagne. And
they're pumping that right now. But there are a thousand
other brands that they could pump in the future. It
just seems to be working for them right now, so
they push it.

Speaker 1 (58:48):
Yeah, it's yeah, and the best brands in the world
are good at that. It's like Nike taking designs that
they made in nineteen eighty eight and saying, hey, here's
the retro version of the of the shoe, you know,
in this basketball shoe.

Speaker 2 (59:00):
Yeah, but I mean, I know how long you want
to talk about? So what what? What woke me up,
and so I don't know why my wife wanted a suitcase.
So we went to we went to the store on
the store in Zurich that has different brands of suitcases.
I think it was Yell Molly and they had she
was interested in these kind of metal suitcases and there's

(59:22):
some very Samsonite metal, very nice. Then we go to
Globals and there's a specific rim of a store Rimoval
was acquired by LVMH. And there I see a photograph
of Lewis Hamilton with the rim of a suitcase and
that one is functionally equivalent to the Samsonite one three

(59:47):
times the price, but the sam Snite one. As I
tell you the story, I just say yeah, yeah, and
sam Snite and metal. But now I go into the
the the rim of one and I say, yeah, metal
and Lewis Hamilton, Formula one, going to Ferrari, all of
those things. And it was amazing to me because I
realized that they were taking a stupid mental piece of

(01:00:07):
metal luggage and turning it into a cultural idea and
also promoting Lewis Hamilton. So Lewis Hamilton is looking to
be ond his Formula one career. What is he going
to be doing and does he like the fact that
he's going to be plastered all over the place's image.
And it's nothing wrong with being associated with the luggage.
I mean, it's high quality luggage, those things. And I

(01:00:30):
realized how they're promoting cultural icons. They're taking people like
Chris Hamilton and making their career even better, or they're
doing that now with both Roger Federer and Rafael Nadal.
And then you don't even know what products they're going
to be promoting, you know, they're just like, yeah.

Speaker 1 (01:00:49):
But this is like a great, great thing to point
out is I think so many finance people, you know,
the people are going to be watching this listening to this.
They spend so much time on all the quantitative data.
And this whole conversation we've had is like qualitative stuff
like the emotional side, the habits of people, the perception
of a brand, you know, all of those things that

(01:01:09):
also factor into the value of a business. That isn't
so easy for somebody to like pinpoint when you think
about just the number side of a balance sheet, so
to speak. Whereas and I think that is what a
lot of investors they you know, they maybe they do
a great job on all the balance sheet, cash flows,

(01:01:30):
all of that. But I think sometimes they underestimate the brand,
the habits of people, the perceptions of people, you know,
all of these things that don't you just can't quite
you know, put a put a put a number two.

Speaker 2 (01:01:42):
I mean the business, I mean, look the balance Who
was I talking to recently? Where was it? Yes, so
I was in Saint Louis an investment conference called Tulipomania wonderful,
wonderful investment conference, and there was a conversation being so
there was a guy that was an amazing bank at
analyst that we're out side of.

Speaker 1 (01:02:00):
Yeah, And so.

Speaker 2 (01:02:04):
In the if you've got a high enough rating in
the banking world, you can manipulate what your balance sheet
looks like, especially for short periods of time. So you can,
like just before the end of the quarter, go and
buy a bunch of short term instruments that mature a
day or two later that make your Baran sheet look very,

(01:02:24):
very different, and then they mature, and then the Barans
sheet goes back to what it was. And so it
turns out that before two thousand and eight there were
huge manipulations going on like this, where the barance sheets
were far more leveraged, but just before the end of
every quarter they would engage in a bunch of transactions
to artificially bring the leverage down. And I'm not sure

(01:02:48):
I can in real time explaining, but you know, somebody
wants to get back to me. You can look at
it together and verify exactly what they did. So the
Baran sheet is just a snapshot in time the company itself.
I mean, look, we have in the accounting world. We
have conversations about what accounting standard to apply. Often the
accounting world allows you to apply different standards. The accounts

(01:03:13):
of the map, not the territory, and so they are
a representation of what's happened in the business, but they're
not the business, correct, And so the accounts are the map,
not the territory. And actually, how do we discover the territory?
I mean, the territory is vast and complex, and accounting
is a really good way to get a kind of
a sense of what's going on. And then we have

(01:03:35):
to do in a way what the accountants do. And
they say it in the most important part of the
accounts is the introductory letter, where they say we evaluated
on a test basis, but often they'll tell you the
kinds of things that they did, so you get a
sense of whether things are skewed in one way or another.
And all we can do is collect evidence in various
different ways, which is inevitably not going to be the

(01:03:56):
complete picture. So we develop our But so the accounts
are not the not the territory. They're just a map.
We go and do investment research, channel checks, talk to people, anecdotes,
and that's not the territory either. So we just get
a sense of what might be going on and what
we have to do. And some you know, Baysian probability.
Given what I know about the world, given what the

(01:04:19):
base rates are in the world, what is the significance
of this piece of data coming in? Do I discount
it or is it significant? And that that is a
subtle evaluation, And I don't think people realize it's not
about hit. Obviously, you want to understand the three different
accounting statements. You want to understand all the way the
notes get written. But then I think the way you're

(01:04:40):
really getting somewhere is where you're getting a sense of
whether this company is understating or overstating. Are they is
the orientation of the group of people who put together
these accounts to hide all the good stuff that you've
got they've got, or to use all the accounting rules
in it to show as little as possible, or are

(01:05:01):
they trying to show or they under pressure to show
as a lot as possible.

Speaker 1 (01:05:04):
I mean, put.

Speaker 2 (01:05:05):
Photo company in my nestle under you know, not easy.
I mean CEO, the previous CEO, March, and I have
been there for six or seven hours. But now they're
going through a period where revenue growth is disappointing the market.
I can imagine that, and I have no idea what happened,
and I haven't done that kind of forensic evaluation. That

(01:05:25):
the at least some members of the management team would
have been under pressure to try and show things a
little better than they were, right, I mean literally, you know,
saying four percent reel and tunnel growth keeps you your job.
Showing two percent real tunnel growth loses your job, right,
And none of the board of NESLE would want to
own up to that, But that probably was the case.
So you know, what's my point? The manipulation to show

(01:05:50):
more than you have doesn't necessarily come out of a
desire to be fraudulent, right, dishonest. It's just that there's
a natural pressure that comes up.

Speaker 1 (01:05:57):
It's a human instinct of yeah.

Speaker 2 (01:05:58):
Has changed, circumstan answers arise. So so yeah, it's really
really I mean what I I don't know. I mean,
I'll ask you a question, Okay, how much time to
assume an intelligent lay person who's capable of learning all
the accounting concepts that they need to learn. At what

(01:06:19):
point in your accounting journey do you flip from being
somebody who's trying to understand the accounts to being somebody
who can say it's not about understanding, it's about which
direction are they skewed? What kind of people produce these accounts?
What were the pressures they were under? Is is this
something where I'm going to get nasty negative surprises or

(01:06:42):
might get nasty? Am I going to get very positive surprises?

Speaker 1 (01:06:45):
Yeah? I think that that journey is going to be
different for everybody. And you know, how much time do
people spend? I mean, if you take an intro to
you know, accounting or whatever you're you're just barely able
to understand the death missions and all that. I mean,
it just takes amount of time. My truthful answer to
this is that you get burned and you lose a

(01:07:08):
lot of money on an investment, and then you start,
and then you start, and then it gets branded into
your head. This is me, this is lenn Energy. I'm
looking right at you. My worst investment I ever made.
But like you know, you you have a very painful
moment where you lose a lot of money and you
really and you have to reverse engineer and say what

(01:07:29):
did I do wrong? Like what did I not see?
Like what was there that I did not see?

Speaker 2 (01:07:34):
And you know, and then Suddy, the accounts are completely different.

Speaker 1 (01:07:38):
Yeah, and then and then you you sit there and
but you have to as an investor, if you want
to get better, you have to be Everybody always wants
to talk about their stocks that were great, and I
always want to ask people, like, what was the worst
investment you ever made? Because those are the ones nobody make.
Nobody goes into an investment and goes, man, I hope
I really lose a lot of money on this one.
I mean, the expectation is you're making the investment because

(01:07:59):
you expect to make money. So when it goes against
what you thought was going to happen, I mean, that's
where real learning takes place. Is like where did I
mess up? Like what did I not see?

Speaker 2 (01:08:10):
So I've went while we're talking about accounting, and see
we flipped from from Brandon to accounting. So it's all good.
And we spent a little time banking there. But and
because you, as somebody who's not met Ryan before, I
think that I'm very much looking forward at the right
moment sitting in one of your classes and observing you.
Because because I got the sense that you're a really

(01:08:32):
good educator, really really good. I mean you you teach
people stuff that they wouldn't learn otherwise. And so I
have a question for you about accounting that has puzzled me.
And maybe you know. The answer is that So I
was I was good at mathematics, and that was a
subject I was good at, you know, matrices, differential equations, calculators.

(01:08:55):
I mean I didn't take maths anywhere near as far
as I would have liked to, but but I could
get my brain around math. So now I'm at business
school and we do accounting, and I mean, let's face
it is, it's you know, sometimes you have to multiply
and divide, but most of the time you're adding them subtracted.
That's about it, right, And so that there's just arithmetic

(01:09:19):
really that you're doing. You're not you're not doing calculus right,
or doing matrices, you're not doing all sorts of really
hard things to understand. But but despite the mathematics being
so simple, I think that I really started to get
a sense of how they're not. It took me a
long while of working with that stuff to start to

(01:09:41):
get a sense of how the numbers move, and how
the income statement affects the equity part of the of
the baron sheet, how the cash flow differs from the
income statement, you know, how different versions of recrul is
going to affect and and why why, when, when the
concept the mathematics is so simple, does it take so

(01:10:02):
long to really learn that? And I actually think that
I got the bare minimum. If I would have worked
in an audit firm, right, CPA correct, I would have
been way better. Why does it take so long?

Speaker 1 (01:10:17):
I think because every business is different, you know, so
when you look at like if it's an oil and
gas company versus a technology company versus you know, like
I used to how did I'm the weird question to
ask you? But how did you learn how to read
like balance sheets and things like that, Like I would
I would. For me, what I would do is I
would take like who I thought was the best business

(01:10:38):
in their industry, and I would look at their numbers.
It's a very tedious process by the way. I would
look at their numbers, and then I would compare other
people that competed against them to basically figure out a
way to compare, like why is this company doing so
much better than the others? And that was really the
only way I could figure out how to do it
was to take who was like the industry leader at

(01:11:00):
that moment and compare people to them. Yeah, And that
was really the only way I could figure out to
really start to learn what made a company different from another.

Speaker 2 (01:11:09):
So you're taking companies in the same industry, the same business,
and you look and you're looking at their accounts, and
then you're seeing why why the account's different. For example,
you see that one company has negative working coups or
someone has positives. Like, wow, that's a big difference, I'd
say for me, So I remember, and you know, I
was really arrogant going into business school and and and

(01:11:31):
then you know, they I think there's something where they said,
before you arrive, you need to read this book. It
was a very very basic book and accounting where you know,
in each chapter it was a lemonade. Stat They built
you up a little sort of business with the barns
sheet incomes and they sort of explained how you built
upon yourself using t accounts and double entry bookkeeping, and

(01:11:52):
that was really just a revelation to me. I was like,
oh my god, this is so fucking cool right away.
So it started off with with that account course or
the pre business school accounting book that I had to read,
and then yeah, I did. I did a couple of
accounting courses. One was a professor Richard Nolan, amazing professor
and you might know him actually because he was a

(01:12:14):
different generation, I guess, and I actually did for a
short while. I didn't finish the course. I did tax
factors in accounting. So but then then you've got the
interaction between the management accounts and your tax accounts, which
again teaches you a lot about a cruels and a
whole bunch of stuff. And so I guess, you know,

(01:12:35):
it was it was through doing different case studies at
business school that I think I got up a long
learning curve. I think that's something. And again you tell
me something slightly frustrating about the new world of Winner
takes All, is you know, I mean, I can forgive

(01:12:55):
myself a little bit for Amazon, for example, because they
were able to do things that were just impossible to understand. Yeah,
at least not unless if you were just reading the accounts.
Maybe if I would have been spending time with Jeff Bezos,
if I would have been really listening to the.

Speaker 1 (01:13:09):
Well, yeah, in the early years, if you did, if
you didn't work for Amazon, I mean the first ten
years where you know every you didn't know if they
were going to go out of business. I mean you
can it's one of those like nobody unless you worked there,
you knew him, you know, it would have been I
don't know how you would have backed up like that
you wanted to make that investment.

Speaker 2 (01:13:27):
But and here's the point, is that so Amazon was
appeared to be a highly unprofitable company spending vast amounts
of money, and you looked at it. I looked at
it and just went They're unprofitable company, spending vast amounts
of money. And I remember writing to a friend Amazon
maybe the first company in the history of capitalism to

(01:13:50):
have gone through this incredible market cap and to have
never actually made money for investors because the owner is
so insanely dedicating to delivering a good deal that he's
going to underprice everything forever, all the time, and there
will be no actual cash returant to investors. Of course,
that was utterly wrong, But so I don't know if
Jeff Bezos knew or he just had a countree he's

(01:14:11):
willing to take the massive bet that these investments.

Speaker 1 (01:14:14):
Would pay off at some point.

Speaker 2 (01:14:16):
And then, and let's just remember that for every Amazon,
there are dozens, if not hundreds, of companies and an
investor group around them and a management team who are
doing what they think is the same thing, and they're
spending enormous amounts of money in the expectation that this
will turn into a profitable business. Or there are companies

(01:14:37):
like in the chip industry that every five years they
have to bet the whole company, and you know, you're
never sure if they're going to get through to the
next cycle of JEMs.

Speaker 1 (01:14:46):
I think about that with Intel. I think about the
reverse of that, where like investor pressure of hey, you
need to pay us a dividend. You need to start
rewarding shareholders, right, So Intel does this dividend, which prevents
them from doing as much research and development. And then
all of a sudden, because they're giving maybe maybe they're
using capital to return to shareholders. You having a video

(01:15:09):
over here that's doing all the research and development, and
they fly past them and it's like, wait, what just happened?
You know, they didn't even see them. They just hurt them, you.

Speaker 2 (01:15:16):
Know, and yeah, and then it was already too late,
and it's and it's over. And that's a problem with
you know. So I in running screens, I'm trying to
find screens where where you're measuring numbers that are not
easily manipulatable by the management. So if you talk about
ebit dah numbers or those are all and manipulation is
not fair. They get skewed for understandable reasons in one

(01:15:38):
direction or another. So how much signal is there, how
much noise? So so shack count is not easily manipulated,
sales is not easily manipulated. But then you know, if
I'm doing a screen for companies that have reduced their sharecount,
I mean, I I think that for me a company
that has a rapidly increasing share count is utterly disgusting

(01:15:58):
to that the max that I'm willing to go as
a company that's increasing its share count by two three
percent every year, which also already a little disgusting to me.
But but you know, you know, you talked about Intel
maybe should have spent more money on R and D
and going for b HAG projects than returning money to shareholders,
And I'm sort of saying, yeah, but how do I

(01:16:19):
screen for that right? And that I you know, it's
really hard because because you just and it's worth saying that.
Imagine we're, you know, a two person board of Intel
and you come along and say, hey, listen, guy, I
think we should cut the dividend and just reinvest in.
And then there's like twenty different investment research projects as
an investment sort of a research R and D within Intel,

(01:16:42):
you know, and all the organizations are totally sort of
like useless spending the money correctly and what we actually
know then we even if I were to agree with
you in our partly tactical two member board, you know,
what you know, is it going to go into the
skunk works that will actually create the next and video
Chip or is it going to be in these three
organizations that.

Speaker 1 (01:17:00):
IBM o ah right, yeah, no, that's true. Well, and
plus we could talk about like is it because once
founder lad and they have the ultimate like what I
say goes and they don't have to deal you know,
the founder led version versus you know, a much older
company where you know, maybe it becomes a lot more
bureaucratic and you know you don't have that entrepreneurship mindset. Yeah,

(01:17:21):
you know of like like Amazon, it's always day one
or whatever they you know that they say to try
to keep that entrepreneurial Yeah, that drive alive.

Speaker 2 (01:17:30):
So I'll give you something else in building up my
little business, which comes up from each is fun, which
you so Ryan, You're worried you didn't have the right questions.
You can see every conversation is different. So this is
I've never said this before, and it's fun to say it,
and I'm curious to see where you come up. How
about it? So we talked about compounding. So I realized,

(01:17:51):
you know, as I'm I'm getting a little better known
that people are sending me investment ideas and I think.

Speaker 1 (01:17:56):
This is great.

Speaker 2 (01:17:58):
I need you know, it may be that a good
investment idea can come from anywhere. So I'm curious to
see what people send me. So I do another version
of compounding, which I change my internal or I change
my process that somebody sends me a good investment idea,
or even I give them some kind of reward. I

(01:18:18):
write a thank you note, I engage with them back
if it's a really well written investment idea, invite them
to my value X conference, like all sorts of different
things to kind of encourage that. And it's just like
quiet way. So now I have a steady stream of
really interesting ideas and I really really appreciate them. That's
that process started maybe five years ago. Now I realize

(01:18:41):
that there's a bias because you know, and there's this
bias exists in Value Investors Club, by the way, which
is that there are investment ideas which write themselves up
well and where the person who has it is motivated
to write it up either because it's easy to write
up and or because it reflects on them in a

(01:19:02):
good light. But there's a whole class of investment ideas
that may are less likely to get written up and
are even better. And actually, you know, in the same
way that if you're if I was effectively scouting for
bench capital deals on the East coast, I knew that
if a deal had come from you for the West Coast,

(01:19:23):
the probability that was a good deal was extraordinarily low
because it had failed all.

Speaker 1 (01:19:26):
The low right it already, it had gone through everybody already.

Speaker 2 (01:19:29):
So you know that you're kind of like it. It's
very not one hundred percent likely to be a DoD,
but far more likely to be a DoD. So you know,
if if an investment idea is getting written up, you
know what, yeah, what does that say about the idea
that the guy the guy writing it up, did he
already buy shares? Is it not worth buying shares? But

(01:19:50):
it tells a good story.

Speaker 1 (01:19:51):
It's a very humble thing to ask yourself, like you know,
like we talk about that. You know, I'm from West Texas,
so it's the oil and gas field. But like, if
somebody's coming to you with an oil deal, like it's
probably terrible because it would have already been invested in
by thirty five other people or whatever, like like why
is it on my why how did this end up
on my desk?

Speaker 2 (01:20:10):
And even further, if it ended up in your desk,
if it ended if an oil and gas deal ends
up on my desk, let's talk about me, because I
think you're quite close to the industry. It's it's an
idea that is anybody, any insider, didn't want to invest in,
but it's still a good enough story that it stayed

(01:20:32):
alive on account of the story, not an account of
the quality of the actual investment.

Speaker 1 (01:20:37):
Yeah, so yeah, it's I don't I think about this
with like tip investment tips, like I mean, we're getting
into social media and people are going to watch this
on social media. But everybody's got a system. I had
a guy, I had a potential client come to me
one time and said, hey, can you double my money
every month? And I said, hey, if I could double
money every month, I would just double my money every

(01:20:59):
month and I wouldn't be here.

Speaker 2 (01:21:01):
They've stopped doing it that. I've had more than one
the guy who sort of writes to me and says,
I I've earned you know, I'm on thirty five percent annualized,
and would you like me to come work for you
as an analyst or and you know, the words back
is congratulations. At thirty five percent annalyzed any amount of money,

(01:21:22):
and I did the calculation. Any amount of money that
you've invested has turned into vast amounts and you certainly
don't need to come to work for me as an
analyst and wishing you the very best.

Speaker 1 (01:21:32):
Right, I guess people have to try it.

Speaker 2 (01:21:35):
But so what I'm and I'm not sure I've figured
it out yet, is I want to receive. I love
to read stuff. I want to receive stuff, and I'm
grateful to the people who send it to me, and
I seek to reward them for sending me stuff. But
there's another layer of identifying the best possible ideas, which

(01:21:55):
I think ultimately comes down to conversations with people. And
interestingly enough, my own conference Value X is not the
best place for me because I can't you need this
kind of conversation that the ideas that were and it's
not the one that the guys presented. So at Value
X people present ideas investment ideas worth sharing, and but

(01:22:18):
it's it's the idea that the guy shares at the
bar afterwards. Everybody is always asking for more bar time,
right yeah, yeah, because and I don't know why that is,
but and that actually puts me into I think probably
a disadvantage because I don't want to hang out in
a bar, you know, I want to read stuff and
I kind of like not interested in bars. But that's
where and I don't know, maybe maybe asking this question,

(01:22:39):
maybe asking you, I wonder I think having broad conversations
with all sorts of people is.

Speaker 1 (01:22:47):
Also well, that's but that's what you've done well. Like
you know, I told you yesterday, like you're a super
connector right, like, so you connect with so many people,
so many people kind of pass through your your your
your world, so to speak. And so as that world
gets bigger, it gets harder and and then it's you know,
where do those good ideas come from? But I think
you've done a great job of like value X and

(01:23:10):
you're putting you know, you're creating the rooms for those
conversations to be had, whereas otherwise those those conversations wouldn't
be had because I think that, you know, we need
to mention it. But at some point, obviously Warren Buffett
is going to pass away, and the Berkshire hath the
Way meeting is not going to be the same. It's
not it's it's not going to be you know, you know,

(01:23:32):
I mean, like sorry the spoiler alert, you know, but
it won't be I'm not saying like that the aura
will will kind of dissipate. I don't think you'll have
the number of people that will go there. I think that,
but but but the but the want from those investors
will be there, and they'll want to go to something,
and you have done a great job of creating value,

(01:23:52):
you know. I think that could be an issue. Is
there's going to be a lot of people who are
going to want to go to that conference.

Speaker 2 (01:23:57):
So you know, I you know, I it's yeah. I
mean I now feel a little bit of the sadness
that you just expressed because one day Warrant won't be around.
And I think that the meeting won't do die down
as quickly as many people think, because people like me
and many others will come back. There'll be all sorts

(01:24:17):
of other good things going on there. So but you
can say that fifty years after the Warren Buffett's demise,
maybe the meeting will be quite small. There's I don't
look forward to Warren's demise, but but I actually look
forward when they introduced when Berksher introduced the B class,
those inflow of new shareholders, and many of the shoulders

(01:24:40):
didn't know why they were there, and they kind of like,
we're a bit annoying for those of us who knew
why we were there. And so you know, if it
thins out the crowd a little bit, that won't bother
me all that much. And another thing that I would
say that I mean I learned, I think primarily through
Monish is this kind of connecting type stuff and processes

(01:25:00):
and systems for becoming a connector. Because we had a
conversation yesterday about whether you know who's a greater introvert
and who's a greater extrovert. And I'm not into cocktail
parties and glad handing and shaking hands and being in bars.
So if you and the good news is is that
if you're somebody like me and you still want to
be a connector in a networker, there are ways to

(01:25:21):
do it where you don't have to go to bars.
But it creates a lot of noise, and so in
combination with with kind of putting on conferences like the
one you were in at Berkshire Hathaway, that noise needs
to be somehow managed so that you get the good
stuff through and I can say that I've been through

(01:25:42):
iterations where it's something I've done, like writing my book
created a lot of noise. Doing these podcasts in a
way creates a lot of noise, and there's a proportion
of the noise is really really signal, I guess. But
finding the right ways to filter that signal from the
noise is It's a chain being challenge. As as my
presence in the world evolves, I need to do different

(01:26:06):
things and I need to update.

Speaker 1 (01:26:07):
How do you how do you manage the expectations of
as things have gotten bigger, like like, oh, you wrote
a book, you should you know, like you know, every
investment you make should be you know, perfect, you know?
I mean, how do you manage how to or how
have you managed those expectations?

Speaker 2 (01:26:22):
I mean the first and easy and fun answers badly.
I I so to the extent that I've been invited
to things and I go, I my imposter syndrome increases
or it stays the same, right, And I would actually
say to a lot of people, if you're not feeling
imposter syndrome, then you know you're not working hard enough

(01:26:45):
or something. So it's okay to feel imposter syndrome. That
that's don't expect if you, if you somebody who wants
to live a successful life, don't expect that that you
can have that success without feeling like an impostor. Right,
And maybe if you're a highly narcissistic personality that I
mentioned Trump, he doesn't feel like he's an impost but

(01:27:06):
I think a lot of people very truly do feel
like impostasy.

Speaker 1 (01:27:09):
I think that goes back to very the start of
the conversation about taking risk, Like, if you're taking risk,
you're putting yourself out there a little bit more. You're
taking a risk, you know, Like I think you naturally
will have it a little bit of imposter syndrome for sure.

Speaker 2 (01:27:22):
So if you're not slightly uncomfortable, then you're not probably
not living your life. Right. What comes up for me
is I remember playing with my daughter where I would
kind of like pretend to be some wild animal and
I was going to bite her neck, you know, and
it was fascinating because if I did it, if I

(01:27:43):
did it not enough, it was kind of boring and whatever.
If I did it too much, she you know, the
quality of her little squeals and yells should get to
a level where she was not having fun anymore, and
you had to find the sweet spot. And the sweet
spot was awesome, you know. And it took me a
while to realize that because well I can do this
even better. Yeah, Oh, she's not having fun anymore in

(01:28:04):
the way. That's how we need to manage ourselves, is
get to that sweet spot of like just the right amount, right.

Speaker 1 (01:28:11):
Yeah.

Speaker 2 (01:28:11):
I think that maybe is easier for you and me
than people who are real adrenaline freaks, where if they're
not taking what did you call it, not calculated risks
but reck reckless Yeah, they only feel a live where
they're taking reckless rest. So maybe those people shouldn't listen
to us.

Speaker 1 (01:28:25):
Well, I think I explain that though when I'm talking
to students about like the stock market, I think it's
very important for new investors to realize that, yes, we
talk about this thing, the stock market, but there's so
many layers to it, you know, the people who are
day traders, the people who are just option traders that
you know, you can you can treat it as a casino.
I mean you can literally go into it and be

(01:28:46):
like Red Black, you know, you know, doing crazy things
and so there's there's multiple levels of market. It's like,
which part do you want to be a part of?
Do you want to be on the surface where you
get all the waves going, you know, and you're and
you're feeling all the you know, all the movements, or
do you want to move lower in the water where
it's calmer because you've you know, taken the time to

(01:29:07):
kind of build that solid foundation where you're able to
you know, be underneath all the fray that's happening on top.

Speaker 2 (01:29:13):
And the answer to your question of as things have
grown bigger, how do I manage it? And I think
it's a responsive to what you're saying right now, is
that So this is true for me, I can't say
it's true for everybody. But it's about building systems, and
systems don't come naturally to me. I'm not a systematic guy.
I'm a guy who's curious and goes down rabbit holes.

(01:29:36):
And but in a way, for me, it's even more
important to build systems, the systems that will help me,
and the systems have to modify and change. I mean,
you know, I was something that I learned from Monish.
So I meet Monish and then the next thing I know,
or I only met him by phone or by email.
I've he invites me to his partnership meeting, and so

(01:29:59):
that was a system for monest to draw people into
it as investment business, and it was really clever and
I was like, my god, So I started doing it.
And so, you know, we used to include an invitation
in our annual report to a partnership meeting, to our
partnership meetings. Now at some point, too many people are

(01:30:19):
coming to the partnership meeting and kind of like people
who are not a contributor, a drain of energy. So
we've had to modify the way we do the invitations.
And so you modify your systems as you go along.
It may be that, you know, I mean, it's interesting.
So I was at, maybe we can get him to

(01:30:41):
have a conversation with Chris bloom Strand amazing guy, the
world's best analyst of Boutcher Hathaway there is out there.
You can just go find him is on Twitter, he's
got a website. Read his annual letters. It's just incredible,
and he's often drawn for commentary. So I was at
a cocktail party at his home and I saw value
line and I used to get value line, and then

(01:31:03):
I stopped getting it, and I was like, dang, I
know it's not that expensive. I want the right line back.
But I'm going to treat value line differently now. So
what I used to do is like keep the thing
on the shelf and replace the replace the new one,
and take the old one out. Now I'm going to
buy value line and I'm going to treat it like
the economists is. I'm just going to take it with

(01:31:24):
me and flip through basically right and tear out pages
of the interesting to me. So that's a modification of
my process.

Speaker 1 (01:31:31):
So and I think that's you know, as you get
more success and all those I think about protecting the habits,
protecting my day that allowed me to do the things
that got to me to where where I am like,
you have to protect those things that because you got
to allow yourself the time. As you have like more
demands on your time, I think it gets harder.

Speaker 2 (01:31:49):
You know what's funny is for me, something kind of
opposite has happened, which is that twenty five years ago
I was like a man with a Bloomberg. I think
they used to put all two men of Bloomberg and
i'd meet I was single and done. So people say, wow,
you mean you the CEO of the business, and I
would say, yeah, I'm also the Maleman.

Speaker 1 (01:32:08):
The reception is right, right, you know.

Speaker 2 (01:32:11):
And I think that the last twenty five years, I've
spent more than half my time on admin side stuff,
keeping the thing ticking, over doing the things that I
need to do in order for it to be a business.
And it's only in the last five years that I've
been freed up from that and I can focus more

(01:32:32):
on research, for example. And so sometimes we have to
do certain things just to keep the balls up in
the air, and eventually we find the people something that
you haven't asked me the question, but it came up
for me earlier today, and it's a piece of wisdom
that for me that I appreciate being to repeat it,

(01:32:53):
which is that for the longest time, I was trying
to find people who helped me to help me, who
were just like me. You do want somebody like me
helping you, You need somebody are very different mindset, and
I didn't believe those people exist, but they do exist,
and they're awesome. And yeah, so you know, for me,
I think that the time I have to do investment

(01:33:15):
research has expanded.

Speaker 1 (01:33:16):
Actually, yeah, that's good. That's a great place to be
able to go to.

Speaker 2 (01:33:21):
I mean, I'm something that worries me actually, and so
here I'm going on an edge where it kind of
like I'm going to tell a truth about me that
kind of scares me a little bit, but it is.
The truth is that I love learning about all sorts
of things. I'm having an enormous amount of fun in
the rucksack that I brought to. This is a book

(01:33:42):
of the history of the of the Renaissance in Europe.
Why am I reading that? I just want to know,
you know, there are so many parts of the Renaissance
that I don't know. And so I go to somebody
who ought to be a mutual friend. Off he is,
And yet, Sarah Madan, who's the guy who hosted at
the Google talk that you brought up yesterday, And I say, Sarah,

(01:34:02):
I'm really What bothers me is that I'm spending time
doing that. But I can be pretty clear that that
is not going to lead to better investment idea better
investment decision making. So I feel he had an interesting
answer for me, he said. Christopher Nolan Nolan, one of
the most amazing movie directors. Oppenheimer. I mean, it turns

(01:34:23):
out that even so Guy, I think that the name
of the actors, Guy Pierced. Why am I blanking on
the movie?

Speaker 1 (01:34:34):
It's about.

Speaker 2 (01:34:36):
A number of other movies that where he did it Interstellar?
Is that right? And oh, I'm just blanking. But it's
about a guy who has an accident or he suffers
from an attack where he is only has he only
remembers the last fifteen minutes of his life and everything
before the accident, and so he's done some amazing movies

(01:34:57):
and he plays with time and and Sarah tells me, look,
that guy has a habit of just exploring with no
particular reason in mind, and you don't know where that
will lead you. So it's a good thing to be doing.

Speaker 1 (01:35:10):
And I think that just to be a good investor,
you have to be a student of the world because
there's so much going on, there's so many different kinds
of companies. I think that natural curiosity for most of
the investors that I've talked to, the good and you know,
the best investors, they have that natural curiosity because it
takes them down a certain path and then they discover
this company or this you know, investment that they could
potentially do.

Speaker 2 (01:35:30):
Yeah, except that I have a voice in my head.
We all have voices in our heads that we need
to pay attention to. I have a voice in my
head saying why are you doing this is a waste
of time? Right, And and then I also have this
image in my mind, and it was really you know,
one of a huge takeaway for me from the From
the Buffet launch was that, Yeah, and it came across

(01:35:52):
in wall sorts of different ways. Warren has a very
narrow focus. Sure, and that's not It's not like he
wakes up every month and says I need to have
a narrow focus because I want to be a really
good investor. That just is who he is, Right, he
has that narrow focus. So you know, I can come
and start talking to Warren about Christopher Nolan movies and
he'd be like, yeah, whatever, right, Yeah, Hey, warn I

(01:36:13):
got a new book about that, about Chris Nolan's process.
He'd like, yeah, send it to send it to a
friend because I'm not interested in Yeah, well, I am
interested in reading it.

Speaker 1 (01:36:21):
Well, it's like yesterday I said, you know, I started
studying Warren Buffett got introduced to Charlie Munger, and I said, man,
I thought I was I thought I was a Buffet,
But I'm more of a Charlie, you know. I think
that's what a lot of people, because Charlie had so
many other interests, you know, the architecture piece, like he
was just so naturally curious on so many other things.
And it's okay, I mean, that's okay, you know, it's
okay to lean into that.

Speaker 2 (01:36:42):
But I I Charlie Munger disappointed me and and it
kind of left me cold. And I profoundly disagree with him,
and actually so Chris Bloomstrand regrets that he didn't take
one or two opportunities he could have gone had dinner
with Charlie Monger. I never was around a table like

(01:37:02):
with Charlie Monger, but I would have asked him this question,
which is, Charlie, you leave me cold when you say
you don't read literature anymore. It really does leave me cold.
And I just, you know, if you are such a
renaissance man, how can you say that you don't And
he did, he said it, and I kind of found that,
and I don't know what to make of it because
it's at odds with your idea of him being a

(01:37:23):
truly renaissance man.

Speaker 1 (01:37:25):
Right, Yeah, yeah, that's a good points. That's a great point. Yeah.
So I think we're we might have to do a
part too where we're out of time. We're out of time.
It goes, it goes quick, it always goes faster. I
got like all these questions. There's so much we didn't
We didn't try a few more. I wanted to, like,
I don't know if I've ever heard like how you
got interested in investing? You'll have to be quick, but like,

(01:37:46):
where did your love for investing come from?

Speaker 2 (01:37:49):
So I think that in my case, and I can
identify in others I am. I have a an anxious
side to my personality, so financial security was important to me.
I remember my father getting an HP twelve C calculator
when I was you know, sort of like high single
digits age, and we would have been living in Iran

(01:38:12):
at the time. I don't know when the HP twelve
C came out.

Speaker 1 (01:38:15):
It's still out. My torture my students with that still.

Speaker 2 (01:38:18):
But I remember reading the Little Instruction Book then and
discovering compound interest, and I remember playing around with rates
of interest and initial sums, and I was blown away.
It was like so exciting to me, and you know,
I really need to think about it more because it's
before we're on Buffett.

Speaker 1 (01:38:37):
Before, I mean, yeah, the spark has to be Yeah, And.

Speaker 2 (01:38:40):
I was like, but I could see with the calculator
that if you put in a number and you had
a rate of interest, turned into a huge amount of money,
and I thought that was really really cool.

Speaker 1 (01:38:52):
Yeah. Yeah, No, I'd talk about it all the time,
like I'm amazed that I get to like make money
off of these companies and I never have to step
foot in side of them and it's legal.

Speaker 2 (01:39:02):
Yeah.

Speaker 1 (01:39:02):
Yeah, I mean, it's just an amazing thing that I
can invest in. I can invest in Amazon or Apple
or Coca Cola or all these amazing, amazing businesses. I mean,
it's amazing that we're at a point, you know, in
world history that you have the ability to do that,
To be able to be able to do that, I
think it's just that it's pure fundamental. I mean, obviously
there's a lot of things that go wrong with it,

(01:39:23):
but a lot of like just pure fundamentally, it's an amazing,
amazing thing to be able to actually be able to
do that.

Speaker 2 (01:39:30):
So I came across that. But then I was I
was twenty five or twenty four. I remember telling a friend,
you know, if I could get one hundred million dollars
to trust me, then I think that those investors are
not going to worry about where my children go to
school and what holidays I take. Right. So that was
age twenty four, twenty five something like that. But I

(01:39:51):
was a really slow starter.

Speaker 1 (01:39:52):
If you like, yeah, I think, well, I mean the
key is that you started the consistency of moving one
leg in front of the other. I mean you have to,
like I mean, that's the way it starts. I don't
think people you know, you don't. You don't start like
where you're at. I think that's the thing that I
try to talk to students about and just people watching
this is that you have to start from where you're at,

(01:40:14):
and you have to be consistent and make consistent decisions
and make a conscious effort to progress a little bit
every single day.

Speaker 2 (01:40:21):
And something that I would leave the listeners with in
this installment episode, which is a conversations I've been having
with one of my children. So taking the first step,
So one of my children's considering career in law, and
you know, taking the first step doesn't mean you're about
to become a lawyer, just means you to a step

(01:40:43):
in that direction. And what I was sharing with her
is you take a step and then you re evaluate
the world and you can even take a step back
if it was the wrong step. But it doesn't mean
that the direction you took you're going to continue. You
can go left, right, you can you can redirect, but
but there's a you can own. You bring yourself to
a certain point through thought, then you have to take

(01:41:04):
a step. Yes, and just that one step is all
you need to do, and it will change your perspective.
And I feel like I come across a lot of
people who have kind of analyzed it out ten thousand
steps out and they're trying to figure out whether they
should take the first step.

Speaker 1 (01:41:19):
It's like no, no, yeah. Well it's like like with investing,
Like you can read all the investment books you want
to read, you can do all the stuff, but at
some point you got to be on the dance floor.
You get you got to make the first investment because
it changes. Because most people, especially when it comes to risk,
they think their risk tolerance is one thing, but their
risk tolerance is something completely different when their money is

(01:41:40):
actually out there, you know, I mean it's and it's like,
if you haven't made the investment, we can't even have
this conversation.

Speaker 2 (01:41:47):
Yes, you know, everybody is a long term invested in
guests until they you know, down fifty percent.

Speaker 1 (01:41:52):
Yeah, it's the it's the Mike Tyson quote. It's the
everybody has a plan until they get punched in the face,
which is a Which is a great way to end this.
So I really want to thank you. Thank you, thank
you for taking this opportunity, for giving me this opportunity.

Speaker 2 (01:42:06):
Thank you very much, well, Ryan, thank me for giving
thank you for giving me the opportunity. I've learned an
enormous amount from you already, and it's a real pleasure
to be to have this friendship relationship. And what I
said at the very beginning about you having an in
a schoolcard, it's really true. And I think that the

(01:42:28):
more friends I have who have an inner school cars,
the better I'll be at emphasizing the inner schoolcard of
my life. So thank you so much for being a
part of my life.

Speaker 1 (01:42:36):
Thank you for the kind words I truly, truly appreciate it.
Thank you,

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Ep. 153 - Guy Spier

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Ep. 153 - Guy Spier