Other[Music][Music][Music][Music] Thank you for making time here prior to this special weekend. St. I always like our pregame tailgate party every year. So that's great. Whenever I go to a restaurant, I go there with the intention of trying out the new dishes and I always end up with the favorites. I want to give you a new set of questions. I want to try those new tasty dishes there at the restaurant. So that's going to be the premise and I'm not sure, yes, pun intended, if they will be tasteful. So Manis, are you are you ready to go?
OtherYeah, that sounds great to me. Give it a shot.
OtherAll right, let's see here how it goes. So the first question is I'm going to make this comparison of relationships, friendships with stocks in the portfolio. And so we know that the best things in life comes from compounding. And so we want to circle the wagons of our current
Questionercircle the wagons of our current friendships. But you probably perhaps also want to be open to new wonderful relationships. So assuming that you agree with that premise, how do you think about attracting the right people into your life and investing in these compounding relationships, circling the wagons, but then also start new friendships?
OtherWell, that's easier said than done. It's a challenge in the sense that I mean, if we were to do it, you know, let's say the way Mango would recommend, you know, we'd be looking at opportunity cost, right? And you know, what we own versus what might be possible to bring into the portfolio. One of the things to keep in mind is the mistress always appears to look better than the wife, but she may actually not be better. Appearances can be deceiving. We have to keep in mind that is this mistress really better or is the newness
Questionermistress really better or is the newness what is making it better? That's a challenge. And one way to think about it is, you know, Buffett has talked about the permanent holdings, right? I mean, he talks about some companies that he would not want to sell. Clearly Apple was not one of them. But you know he has held American Express for a very long time. He's held Coca-Cola for a very long time and the wholly owned businesses have all been held for a very long time. So I think that when I look at my portfolio there is clearly I would say a hierarchy in the sense that if I look at the portfolio I have today I like everything. If I didn't like it I would have made a change but I like everything. Now when something new comes in, you know, new mistress shows up. If the mistress is truly attractive, then we can take a look at the lowest
Questionerwe can take a look at the lowest conviction ideas. And you know, I think one should not be playing a game of 19 versus 20. Like, you know, the wife's a 19, the mistress is a 20. You know, that's probably not a good game because you can be off on that. But if something in the portfolio is a 6 and 1/2 out of 10 and the new kid on the block is 9 and 1/2 out of 10, then yeah, that should be a good candidate for considering a change. Now you have tax issues and other things, but you can think about it in those terms. But I think that's what makes investing very hard. If we go back to the early 1970s, right, and the early 1970s, there was this concept, late60s, early '7s, there was this concept of the Nifty50. And basically the idea was you bought these 50 happening blue chip stocks 2% into each one and you didn't really care what the valuations were or anything.
Questionerwhat the valuations were or anything.
Otherwhat the valuations were or anything. You just bought them all and you kept
Questionerthem. Ignore all the noise. Now what
Otherhappened in 7374 is that was a crash in slow motion.
QuestionerIt was a pretty big market correction. When you look at the peak of 73 to the
Otherbottom of 74, the Nifty50 got taken out back and shot. It was a bloodbath. And
Questionerby 1975, nobody would admit they were invested in the Nifty50. Now, there's some controversy whether Walmart was part of that Nifty50 or not. Some people think that Walmart had its IPO in 1970. Some people think that Walmart was one of the Nifty50. Now, just to make my case easier, we're going to assume Walmart was part of the Nifty50. So, let's say you invested in the Nifty50. You put $100,000 into the Nifty50 and $2,000 of the $100,000 went into Walmart. One of 50 bets. Now, let's also assume all the other 49 holdings go to zero. Now, there
Questionerother 49 holdings go to zero. Now, there were some real losers in there like Xerox and Polaroid and Kodak and IBM, etc., which actually IBM didn't go to zero, but the other guys did go to zero, but there was also ADP and KO and AMX and Disney and all of these companies in there. I'm taking everything to zero except Walmart. So, you have $2,000 that you put in. If you kept it invested for the last 55 years with 98% of the portfolio going to zero, your annualized returns are almost 15% a year and you blew out the S&P 500 with a 98% error rate. Okay. Now to do that one is you needed to recognize that Walmart was a beautiful wife and no mistress was better than this beautiful wife and you had to hang on to it. Okay. And of course in 1975 when the bloodbath took place everybody exited everything. Now I also want to point out that when Walmart went
Questionerwant to point out that when Walmart went public Sam Walton already transferred shares to his kids when Walmart was a private company. He actually paid almost no estate tax because the shares were transferred and was worth almost nothing. It has been 55 years since the Walmart IPO and it has been 33 years since Sam Walton died. The Walton family today owns 46% of Walmart. Okay, 55 years after the IPO. You know, there were a lot of helpers that came to the Walton family saying you should diversify and you should do this and you should do that and all these things. They told them all to get lost. They paid no taxes. They had no frictional costs. There has huge dividends. And there's a very strong message there. And this is not some outlier example. You know, we've seen a lot of studies where most of the returns in the stock market come from very small sliver of
Questionercome from very small sliver of companies. Even Warren Buffett has like companies. Even Warren Buffett has like companies. Even Warren Buffett has like a 3 or 4% hit rate. So most of the time a 3 or 4% hit rate. So most of the time a 3 or 4% hit rate. So most of the time when we encounter a mistress, we're when we encounter a mistress, we're when we encounter a mistress, we're going to be disappointed. It's wise going to be disappointed. It's wise going to be disappointed. It's wise words. I get tempted to say, "And if I words. I get tempted to say, "And if I words. I get tempted to say, "And if I sound wise, it's wisdom born out of sound wise, it's wisdom born out of sound wise, it's wisdom born out of pain." Anyways, it takes me here to the pain." Anyways, it takes me here to the pain." Anyways, it takes me here to the next question. I've heard you being next question. I've heard you being next question. I've heard you being asked quite a few times from from from asked quite a few times from from from asked quite a few times from from from students like, "What kind of advice students like, "What kind of advice students like, "What kind of advice would you give to someone who's not would you give to someone who's not would you give to someone who's not little money or who is 20 or 25? I would little money or who is 20 or 25? I would little money or who is 20 or 25? I would be curious to hear cuz I I just turned be curious to hear cuz I I just turned be curious to hear cuz I I just turned 40 and I know last year you turned 60. 40 and I know last year you turned 60. 40 and I know last year you turned 60. If we look away from the whole wife and If we look away from the whole wife and If we look away from the whole wife and mistress thing if if we can which advice mistress thing if if we can which advice mistress thing if if we can which advice would you give to yourself age 40 and 50 would you give to yourself age 40 and 50 would you give to yourself age 40 and 50 whenever it comes to life and why would whenever it comes to life and why would whenever it comes to life and why would they be different the two advice you they be different the two advice you they be different the two advice you know stig it's all about compounding and know stig it's all about compounding and know stig it's all about compounding and there are three variables with there are three variables with
Stig Brodersenthere are three variables with
Questionerthere are three variables with compounding your starting capital the compounding your starting capital the compounding your starting capital the rate of return and the length of the rate of return and the length of the rate of return and the length of the runway now what we really need is a very runway now what we really need is a very runway now what we really need is a very long runway a long runway is a marvelous long runway a long runway is a marvelous long runway a long runway is a marvelous thing you know Warren Buffett bought his thing you know Warren Buffett bought his thing you know Warren Buffett bought his first stock when he was 11 years old. He first stock when he was 11 years old. He first stock when he was 11 years old. He said, you know, he was wasting his time said, you know, he was wasting his time said, you know, he was wasting his time until then. Okay, but he bought his until then. Okay, but he bought his until then. Okay, but he bought his first stock when he was 11 years old. first stock when he was 11 years old. first stock when he was 11 years old. He's going to be 95 this year. Okay, so He's going to be 95 this year. Okay, so He's going to be 95 this year. Okay, so 84 year runway and counting, which is 84 year runway and counting, which is 84 year runway and counting, which is great. So, one of the things that I had great. So, one of the things that I had great. So, one of the things that I had assumed when I was 40 years old is that assumed when I was 40 years old is that assumed when I was 40 years old is that I was going to be leaving planet Earth I was going to be leaving planet Earth I was going to be leaving planet Earth on June 11th, 2044, when I was 80, one on June 11th, 2044, when I was 80, one on June 11th, 2044, when I was 80, one day short of my 80th birthday. And then day short of my 80th birthday. And then day short of my 80th birthday. And then recently I went to God Google and I recently I went to God Google and I recently I went to God Google and I asked God Google when am I leaving? And asked God Google when am I leaving? And asked God Google when am I leaving? And of course when you ask God Google you're of course when you ask God Google you're of course when you ask God Google you're going to get an answer. And the and God going to get an answer. And the and God going to get an answer. And the and God Google said you're going to be leaving Google said you're going to be leaving
QuestionerGoogle said you're going to be leaving on June 11th 204. So I got 10 moreon June 11th 204. So I got 10 moreon June 11th 204. So I got 10 more years. 10 more years is a beautifulyears. 10 more years is a beautifulyears. 10 more years is a beautiful thing. Not because I like my fellowthing. Not because I like my fellowthing. Not because I like my fellow humans but because I like a long runway.humans but because I like a long runway.humans but because I like a long runway. And so as we talk today, I have 29 yearsAnd so as we talk today, I have 29 yearsAnd so as we talk today, I have 29 years and 3 months and a few days left. Okay,and 3 months and a few days left. Okay,and 3 months and a few days left. Okay, which is great. It's incredible. So mywhich is great. It's incredible. So mywhich is great. It's incredible. So my 40-year self, the one big piece of40-year self, the one big piece of40-year self, the one big piece of learning that I wish my 40-year-old selflearning that I wish my 40-year-old selflearning that I wish my 40-year-old self had was that I had a flawed model ofhad was that I had a flawed model ofhad was that I had a flawed model of investing. And it stuns me that I hadinvesting. And it stuns me that I hadinvesting. And it stuns me that I had this flawed model of investing forthis flawed model of investing forthis flawed model of investing for almost my entire investing career. Italmost my entire investing career. Italmost my entire investing career. It only dawned on me in the last few yearsonly dawned on me in the last few yearsonly dawned on me in the last few years that the way I'm doing things is quitethat the way I'm doing things is quitethat the way I'm doing things is quite stupid. So my model when I was 40 andstupid. So my model when I was 40 andstupid. So my model when I was 40 and even when I was like in my 50s, earlyeven when I was like in my 50s, earlyeven when I was like in my 50s, early 50s was that you try to buy a business50s was that you try to buy a business50s was that you try to buy a business for half or less than it's worth. Andfor half or less than it's worth. Andfor half or less than it's worth. And when it gets valued at 90% or more ofwhen it gets valued at 90% or more ofwhen it gets valued at 90% or more of intrinsic value, it's time to move on.intrinsic value, it's time to move on.intrinsic value, it's time to move on. Bring in the next mistress. And that
OtherBring in the next mistress. And that sounds rational, but it's the dumbest thing. And the reason it's the dumbest thing is we don't know what intrinsic value is. We may have a guess at it, but the great businesses surprise to the upside and they really kind of blow your mind in terms of what they are actually able to do. I mean, you know, Warren Buffett was having difficulty playing 25 million for Seas Candy. Basically the dividends that they've received in the last few decades is approaching 3 billion. You know more than 100x of what they invested. They still have the business which is doing very well but the dividends have been 100 more than 100x right and they would have never guessed that in their wildest dreams that it's going to give us two and a half three billion in dividends and counting. So we are never able to really appreciate how great some good
Questionerappreciate how great some good businesses can be. We also may not fully understand which businesses are the great ones till after we've owned them for a while. So basically the advice to my 40-year-old would be that listen idiot. You're going to get some companies in the portfolio that are truly exceptional. You will know that they are exceptional. I don't need to go into the past to tell you which ones are going to be exceptional. You will know. Just change your framework which is that when you own an exceptional business, a fraction of an exceptional business, do not sell it at 90% of intrinsic value, do not sell it when it's fully priced. Do not sell it when it's overpriced. You can possibly think about selling it when it's egregiously overpriced. And when you figure out the difference between overpriced and
Questionerdifference between overpriced and egregiously overpriced, call me collect.
Questioneryou know the call me collect dig the 30some things just missed that they don't know what that phrase means no
Otheryou're absolutely right uh you know I remember in the early days whenever I was I was traveling you know so I don't think I had a cell phone I don't think really anyone had a cell phone other than some highf flyers but then you would go into like a convenience store and you would get like a phone card and then you would plug that card into a phone booth and then you could call people in my case I couldn't ask anyone to do call collect so I had to use a pocket. I didn't have as many friends as you.
QuestionerSo, there's a friend of mine, just to digress for a second, there's a friend of mine in Chicago, and when he had his first son, he was diehard Buffett Munger
Questionerfirst son, he was diehard Buffett Munger fan. When he had his first son, he named him Charlie War. His first name was Charlie, middle name was Warren, last name is Overberman. Charlie Warren Overberman. And I remember when Charlie Warren Overman was born. And when Charlie Warren over man turned 20, he contacted me and I said, "Charlie Warren, do you know? Do you know I know your whole life story?" So anyway, when Charlie Warren was born, his dad sent a picture of his to Warren and Charlie. And Warren sent him a note back saying, "When Charlie Warren has a stock tip, his first stock tip, call me collect." This is a beautiful story. It's true. One of the things that I had read about with Marcus Aurelius with his stoic philosophy is that adversity is a blessing. To encounter adversity and overcome it is a great blessing. And you know now that's a
Otherblessing. And you know now that's a quote but when I look back in my life and I look back at all the difficult times in my life it were those difficulties that led to the greater growth and higher highs. And we cannot tell this when we are going through these painful periods. Mer said that no one is immune. Everyone's going to have reverses in life. We are not going to be able to have a life without reverses. And the good news is when there's a reverse we should be excited. So now what happens is I'm almost like an observer. If I encounter adversity now I know that I don't know how it's going to help me. I don't know how I'm going to get out of it. I'm you know in the middle of it obviously there are a lot of challenges but I know I have the confidence to know that this is a beautiful thing. I should be grateful and I know this will lead to higher
Questionerand I know this will lead to higher highs. I just don't know how. So play the cards and life will work out. When was the time where you felt like an extra dollar wouldn't increase your happiness and you can make up that dollar to whatever kind of amount you want. Basically, I'm asking when did you feel like any additional cash would make any difference your life quality?
WarrenI felt that when I was I think around 33 or 34 years old, I wouldn't be able to consume the wealth I had at that point and I knew right then that incremental spending at that point would not increase happiness. I was aware of the fact that after 33 or 34 that basically there was going to be very strong likelihood of extra wealth but trying to come up with some way to spend it or even spend part of it would not have increased happiness. I always even now I always look at how can I make myself
Otheralways look at how can I make myself happier. I it's a constant I'm very very happy with life right? If there are things that money can do that could make me happier, I'd be the first to execute on that. Right? So, but there are very few things at this point. I mean, I when you get past a certain base level, it's not going to increase happiness. I mean, I really appreciate that Buffett and Mer had many conversations between themselves about their homes, right? Mer built his home in the 1960s. I visited that house many times for having meals with him. He raised his kids over there and he'd been living in that home for like six decades. Very happy. It's a ranch home. You would pass it. You would not even look at it twice. You know, it wouldn't stand out in any way. And we've seen Buffett's house as well. You know, that's like he's been there for more
Questionerthat's like he's been there for more than 70 years, right? And so both of these individuals talked to each other about this and they noticed that they had friends who were obviously much less wealthy than them who were buying big mansions and whatever else, right? They just didn't see that doing any of that was going to make them happier. In fact, I subscribe Mer and Buffett are a little bit different in the sense that when Munger passed away, he had maybe half a dozen or more homes. I mean, I know there was one in Newport Beach, there might be a couple in Hawaii, there was at least two or three in Santa Barbara, and then he had his home in LA and so on. So, he had at least half a dozen homes. Then, of course, in in Minnesota, where he went fishing and so on. He would tell me that Warren had a second home in Laguna Beach, which his wife
Otherhome in Laguna Beach, which his wife wanted to go for the, you know,wanted to go for the, you know,wanted to go for the, you know, Christmas holidays and all that. And heChristmas holidays and all that. And heChristmas holidays and all that. And he said that before Suz's ashes had turnedsaid that before Suz's ashes had turnedsaid that before Suz's ashes had turned cold, he had put that house up for sale.cold, he had put that house up for sale.cold, he had put that house up for sale. Okay. So he had one second home whichOkay. So he had one second home whichOkay. So he had one second home which his wife wanted and he was happy to dohis wife wanted and he was happy to dohis wife wanted and he was happy to do that for her. He used to start writingthat for her. He used to start writingthat for her. He used to start writing the annual letter from the Laguna homethe annual letter from the Laguna homethe annual letter from the Laguna home when he went there in December but hewhen he went there in December but hewhen he went there in December but he didn't need it right. I look at mydidn't need it right. I look at mydidn't need it right. I look at my friend Guy for example who has manyfriend Guy for example who has manyfriend Guy for example who has many homes and to me that's a headache. Ihomes and to me that's a headache. Ihomes and to me that's a headache. I think if I had a second home, not onlythink if I had a second home, not onlythink if I had a second home, not only would it not make me happier, it wouldwould it not make me happier, it wouldwould it not make me happier, it would actually make me unhappy because itactually make me unhappy because itactually make me unhappy because it would just add burdens, you know, likewould just add burdens, you know, likewould just add burdens, you know, like my books would get split and I wouldmy books would get split and I wouldmy books would get split and I would have to have two setups, you know, andhave to have two setups, you know, andhave to have two setups, you know, and then I'm I'm spending time travelingthen I'm I'm spending time travelingthen I'm I'm spending time traveling between these two setups for what, youbetween these two setups for what, youbetween these two setups for what, you know, on a daily basis, I eat two meals,know, on a daily basis, I eat two meals,know, on a daily basis, I eat two meals, right? I eat brunch and I eat dinner.
Warrenright? I eat brunch and I eat dinner. The brunch I eat every day is the exact same brunch I eat every day when I'm in Austin. And I've been having that same brunch for several years. No desire to change it. Any change would make it worse, would make me unhappier. So, I'm happy with no travel. I'm happy with one home. There's very few things that money can do that can make you happier. And there's many things money can do that can make you unhappy. That's wonderful. Thank you for bringing that up, Manish.
QuestionerI would make the argument that you could make significantly more money than you do now if you really wanted to doing things you didn't want to do. I don't really know how, but let's say uh you would take some endowment money or something and they would want to redeem at any point in time or you couldn't invest in this and that sector,
Questionerinvest in this and that sector, whatever. It it doesn't really matter.whatever. It it doesn't really matter.whatever. It it doesn't really matter. And perhaps that's completely all. Let'sAnd perhaps that's completely all. Let'sAnd perhaps that's completely all. Let's say we add $100 million to your netsay we add $100 million to your netsay we add $100 million to your net worth and we just, you know, we justworth and we just, you know, we justworth and we just, you know, we just learned it's not going to make alearned it's not going to make alearned it's not going to make a difference. you could give that moneydifference. you could give that moneydifference. you could give that money away, but if you give away $100 millionaway, but if you give away $100 millionaway, but if you give away $100 million or $200 million, you probably don't getor $200 million, you probably don't getor $200 million, you probably don't get extra benefit utility out of giving, youextra benefit utility out of giving, youextra benefit utility out of giving, you still help a ton whenever you do that.still help a ton whenever you do that.still help a ton whenever you do that. So, assuming those crazy premises areSo, assuming those crazy premises areSo, assuming those crazy premises are right, how do you think about this? Doright, how do you think about this? Doright, how do you think about this? Do you feel you have a responsibility to doyou feel you have a responsibility to doyou feel you have a responsibility to do things you don't want to do for moneythings you don't want to do for moneythings you don't want to do for money that doesn't make you any happier so youthat doesn't make you any happier so youthat doesn't make you any happier so you can give away that money and improvecan give away that money and improvecan give away that money and improve other people's lives? I know that was aother people's lives? I know that was aother people's lives? I know that was a crazy long question.
QuestionerYeah, I mean Icrazy long question. Yeah, I mean Icrazy long question. Yeah, I mean I think that for me it's a totalthink that for me it's a totalthink that for me it's a total no-brainer that I would never want to dono-brainer that I would never want to dono-brainer that I would never want to do something that would reduce my joy andsomething that would reduce my joy andsomething that would reduce my joy and happiness in life by even one
Otherhappiness in life by even one iota. So if I'm going to do something which makes me you know there's more travel, there's more human interaction, the life is more frantic and all that, it wouldn't be of much interest. Now I would end up with more money to give away, right? The giving away money for me has never been about any legacy or anyone patting me on the back or in any way feeling good. I was not looking I still am not looking for any kind of reward of any kind from that activity. It's actually was designed and it was this is how I conceived it almost two decades ago and it's how it is today is I like playing games and I like playing math games and Dakshana you know and I tell this to the students when I meet them I said I'm so sorry to disappoint you but you're part of a math game in my head I'm not actually doing
Othergame in my head I'm not actually doing this because I have some great love to make your life better. I know that your life is becoming a lot better which is wonderful but for me it's really more about the cold calculus of the game. That is what is most exciting. So the game I'm playing is that I have a compounding engine that is hopefully increasing wealth for the next 29 years and months so on and I have an engine which is trying to give that wealth away. Right now if we are able to compound at let's say a 15% rate of return right so life is all about doubles it would double every 5 years so approximately six doubles six doubles is 64x right so that's a significant amount of money multiplication plus I'm getting fees on other people's money and all that so it' be more than that you know there's some taxes but probably will still end up being more so to me the
Charliestill end up being more so to me the great challenge and I don't know whether I'll be able to meet this challenge and I'll be disappointed if I didn't meet the challenge but it's a really tough challenge is one day before I die June 10th 204 I want to have $10,000 left on maybe even 500 $5,000 left that'd be even better okay now if a day before I die there's 3 billion left I have failed I lost the game now the difficulty with this challenge is I don't want to give the money to red cross because the red cross is with due respect suboptimal right so for me the challenge is be left with 10,000 but to have it given away in a manner that any critical observer would to say that was fantastic not my friend saying that was fantastic someone who's a critic looks at it and says that was fantastic he may have had other flaws but this was fantastic okay so
Otherflaws but this was fantastic okay so that's what I'm looking for is an objective observer saying now that was cool right now to me it's extremely challenging because as the numbers get larger giving money away is more difficult than making it and I have a lot of respect for Chuck Freeny you know there's a book the billionaire who was and which is a great book and Chuck Freeni died with very little money rented apartment in San Francisco awesome but that journey is not an easy journey but it's a fun journey it's a really fun game for me so this is like you know from my point of view it's like threedimensional test chess for the next 29 years where I know the compounding end is pretty autopilot. I that part I have no concerns about. It's the other side because for example the current program that we run at Duana where we're spending about $3 million a year once we
Otherspending about $3 million a year once we are spending about 7 million a year we are spending about 7 million a year we cannot spend any more money in that cannot spend any more money in that cannot spend any more money in that endeavor. We run out of seats and brains endeavor. We run out of seats and brains endeavor. We run out of seats and brains and all of that. So what if I had a hand all of that. So what if I had a hand all of that. So what if I had a h 100red million a year to give away which 100red million a year to give away which 100red million a year to give away which hopefully will happen at some point. hopefully will happen at some point. hopefully will happen at some point. Well that program can only take 7 Well that program can only take 7 Well that program can only take 7 million. I don't know today what I would million. I don't know today what I would million. I don't know today what I would do with the other 93 million. And if the do with the other 93 million. And if the do with the other 93 million. And if the other 93 million doesn't go into other 93 million doesn't go into other 93 million doesn't go into endeavors that make the critics say that endeavors that make the critics say that endeavors that make the critics say that was awesome, that's terrible. So that's was awesome, that's terrible. So that's was awesome, that's terrible. So that's the challenge. That's the whole focus of the challenge. That's the whole focus of the challenge. That's the whole focus of this life is playing this game. Whenever this life is playing this game. Whenever this life is playing this game. Whenever I see you on these calls with some of I see you on these calls with some of I see you on these calls with some of the scholars from from uh from Dakshana, the scholars from from uh from Dakshana, the scholars from from uh from Dakshana, I can I can tell that you moved and they I can I can tell that you moved and they I can I can tell that you moved and they tell you that they met you and they've tell you that they met you and they've tell you that they met you and they've seen you and it's just a beautiful it's seen you and it's just a beautiful it's seen you and it's just a beautiful it's a wonderful moment. And then you tell a wonderful moment. And then you tell a wonderful moment. And then you tell them that they're a part of the game
Otherthem that they're a part of the game that you're playing. And I could just see like the panic in their eyes and they're like, "Where is this dude going with this?" You know, I like to have fun with them. One time I went with a friend of mine, young guy from the US to a Dakna campus and he looks like Mark Zuckerberg, okay? He looks very similar to Mark Zuckerberg. And we decided before we went on the campus that I'm going to call him Zach, okay? And I'm going to just say, "Oh, this is my friend Mark Zuckerberg. You know, I call him Zach. And he founded a company you might have heard of, Facebook, and he's going to hang out with us." Okay. It reminded me, it was so funny. The thing is one time Bill Gates was in some very rural village in India with Melinda Gates, and they go into the hut of a very, very poor old lady in that village. So, it's Melinda
Otherlady in that village. So, it's Melinda Gates, Bill Gates, and this old lady in this small hut. She doesn't have much. She's very poor. And there were a lot of reporters etc. But they were not allowed to come in the hut while the gates were having the interaction. Then the gates left. Okay. And then the reporters went in to talk to this lady. And they said, "Do you know who that was?" He says, "Oh no, some foreigners came." You know, says, "Some foreigners came." The reporter said, "Yeah, but you know that that was the richest person in the world." And the lady said, "All foreigners are rich." Okay. Now, she was right because in her life experience, she had never met a white person who was not significantly wealthier than her. And for her, the calibration difference between the reporter who was white and Bill Gates who was white was
OtherBill Gates who was white was meaningless. Right? So, when I was inmeaningless. Right? So, when I was inmeaningless. Right? So, when I was in the DNA stallers telling them this isthe DNA stallers telling them this isthe DNA stallers telling them this is Zuck, what I saw in their faces was theZuck, what I saw in their faces was theZuck, what I saw in their faces was the same thing that I would have seen in thesame thing that I would have seen in thesame thing that I would have seen in the face of the league. They said all offace of the league. They said all offace of the league. They said all of Monisha's friends are happening. What'sMonisha's friends are happening. What'sMonisha's friends are happening. What's unusual aboutunusual aboutunusual about that? They just took it in stride.that? They just took it in stride.that? They just took it in stride.
QuestionerThat's that's a fantastic story. ThankThat's that's a fantastic story. ThankThat's that's a fantastic story. Thank you for sharing that with us, man. Andyou for sharing that with us, man. Andyou for sharing that with us, man. And so whenever we say it, we we'reso whenever we say it, we we'reso whenever we say it, we we're referring to the Indian Institute of ofreferring to the Indian Institute of ofreferring to the Indian Institute of of Technology, which is not a random place.Technology, which is not a random place.Technology, which is not a random place.
QuestionerI should say you just mentioned BillI should say you just mentioned BillI should say you just mentioned Bill Gates before he you know just to youGates before he you know just to youGates before he you know just to you know elevate it. He said that if youknow elevate it. He said that if youknow elevate it. He said that if you could only hire for one place it wouldcould only hire for one place it wouldcould only hire for one place it would be it would be IT and you know notbe it would be IT and you know notbe it would be IT and you know not whatever kind of I school. So here's awhatever kind of I school. So here's awhatever kind of I school. So here's a link to all the letters that Manishlink to all the letters that Manishlink to all the letters that Manish wrote at to Debanda Foundation. Afterwrote at to Debanda Foundation. Afterwrote at to Debanda Foundation. After reading reading the letters, let's tryreading reading the letters, let's tryreading reading the letters, let's try to break it down into three sections. So
Otherto break it down into three sections. So we we want to make sure you have the best possible education. Then we want to make sure that we identify the scholars with the most potential. And then we also want to make sure that you know they're below the poverty line. What we found is that you identifying scholars below the poverty line might not sound like the hard task, but I I would say it's probably the hardest nut to crack. It's very difficult. It's not easy. It's not easy because there's such a strong incentive for the scholars family to misreport their social economic status.
QuestionerPlease paint some color around this and and how you have solved it at Dakshana.
OtherIt's a constant battle. So one of the issues that Dakshana faces is the quality of our coaching services that we offer to our scholars to get them ready for IIT is better than the private
Otherfor IIT is better than the private sector offers. Okay. So if you are a middleclass family or a rich family and you had a choice, you would want your son or daughter trained at Duana. Okay. Now when we offer that level of quality in what we are giving, it means that everyone's trying to crash the gate. Okay. Some people are very direct with us. It's like, you know, I'll get messages saying, I'm happy to donate $50,000 to Duxana if you will take my kid. Okay, take the kid for one seat. I'll give you 50,000. Okay, and 50,000 is a lot more than it would cost them to get coaching somewhere else. So, they they're putting a value which is above what the private sector charges, right? Now, obviously, this creates a lot of incentives. And the other thing what Dakshina has tried to do is we really want to go to the bottom of society and my definition
Questionerthe bottom of society and my definition of bottom many other nonprofits in India find is too extreme but we're really looking for absolutely nothing families at the bottom. Right? So what we have done is that for our main campus where we take kids after they finished high school we actually have in-person interviews. as you know we have bad debt here on tip which I I shouldn't say but we have some advertisers that don't pay and to some extent that's part of the business model you know it's like you have bad debt you don't know who it is and trying to minimize it but if you want to make sure that everyone prepays and you can do it metaphorically what that would mean for an NGO like it would be more expensive for you to go that route and have zero bad debt but then you lose out a ton so I I would imagine like how do you think about that is that
Questionerlike how do you think about that is that bad debt that you at the time was 5 to 8% I'll imagine that it's less now but Like is that bad debt you have where some just and that's just the way it is.
OtherYeah. I mean I think on the one hand if we go extreme on that we'll be excluding deserving people which is not good and so there is a balance uh there's a balance we have to do. So it's like in any business if you're a retailer you have annual shrink inventory shrinks and you're running a business you're going to have some bad debts. I mean the thing is you can have policies that reduce that and so on. That's why Walmart came up with a greeter, right? The greeter would that that drop the shrink a lot. At the end of the day, what we've always tried to do with Dakshina is we run it like a business. We run it the way you run your business. This metric of what
Otherrun your business. This metric of what percentage of kids are we supporting that we shouldn't have supported is a very important metric and we try to get accurate statistics on that and all I'm trying to do is that next year is slightly better than this year. on all fronts. That's the only objective at DuNa is that we try to do a slightly better job on 20 different variables next year than we did this year. And if we keep doing that, it ends up becoming world class. Whenever I'm I'm speaking with a team, I would basically clone that from you, I should say, money, and then say it's so hard to give away money and so easy to make it because of the feedback loop. And then they sort of like look at you and you're like sort of like an arrogant foreigner like why why are you saying it's so easy to make? But you know it's like yes you know where
Otheryou know it's like yes you know where where I'm going to go with this like inwhere I'm going to go with this like inwhere I'm going to go with this like in capitalism there's a feedback loop ifcapitalism there's a feedback loop ifcapitalism there's a feedback loop if you don't bank money you know you'veyou don't bank money you know you'veyou don't bank money you know you've done something wrong so what I said todone something wrong so what I said todone something wrong so what I said to the team is that we have one KPI I'vethe team is that we have one KPI I'vethe team is that we have one KPI I've cloned this here from Dana so equivalentcloned this here from Dana so equivalentcloned this here from Dana so equivalent to IIT that number needs to be as highto IIT that number needs to be as highto IIT that number needs to be as high as possible that is the single metricas possible that is the single metricas possible that is the single metric we're looking at then whenever you dowe're looking at then whenever you dowe're looking at then whenever you do that and let's say you would for examplethat and let's say you would for examplethat and let's say you would for example give bonuses if it's a certain levelgive bonuses if it's a certain levelgive bonuses if it's a certain level then you run into the issue that youthen you run into the issue that youthen you run into the issue that you have people who then have incentive tohave people who then have incentive tohave people who then have incentive to admit students that probably doesn'tadmit students that probably doesn'tadmit students that probably doesn't come from below the party line But youcome from below the party line But youcome from below the party line But you know there's a probably higherknow there's a probably higherknow there's a probably higher probability that they're going to pass.probability that they're going to pass.probability that they're going to pass.
QuestionerHow do you navigate that in yourHow do you navigate that in yourHow do you navigate that in your organization? Do they get bonuses basedorganization? Do they get bonuses basedorganization? Do they get bonuses based on different metrics? Is it because it'son different metrics? Is it because it'son different metrics? Is it because it's different metrics throughout thedifferent metrics throughout thedifferent metrics throughout the organization or how do you handle that?
Otherorganization or how do you handle that?organization or how do you handle that? Well, yeah. I mean that's a reallyWell, yeah. I mean that's a reallyWell, yeah. I mean that's a really important thing. So incentives are aimportant thing. So incentives are aimportant thing. So incentives are a very big part of Dakshina. Our teams arevery big part of Dakshina. Our teams arevery big part of Dakshina. Our teams are very well incented even though many ofvery well incented even though many ofvery well incented even though many of them are joined because of the callingthem are joined because of the callingthem are joined because of the calling and the purpose. There is a separationand the purpose. There is a separationand the purpose. There is a separation of church and state. So the facultyof church and state. So the facultyof church and state. So the faculty which is really focused on teaching thewhich is really focused on teaching thewhich is really focused on teaching the kids has no control over who we admitkids has no control over who we admitkids has no control over who we admit and the people who are focused on who weand the people who are focused on who weand the people who are focused on who we admit are not compensated directly basedadmit are not compensated directly basedadmit are not compensated directly based on the results. So we've kind ofon the results. So we've kind ofon the results. So we've kind of separated those two and even withinseparated those two and even withinseparated those two and even within those groups I'm looking at it our CEO'sthose groups I'm looking at it our CEO'sthose groups I'm looking at it our CEO's looking at it. So when we do selectionslooking at it. So when we do selectionslooking at it. So when we do selections a large amount of our success depends ona large amount of our success depends ona large amount of our success depends on our selections. We have to make sureour selections. We have to make sureour selections. We have to make sure we've got the brilliance. We have towe've got the brilliance. We have towe've got the brilliance. We have to make sure we are below the poverty linemake sure we are below the poverty linemake sure we are below the poverty line and really deserving kids there. We haveand really deserving kids there. We haveand really deserving kids there. We have tried to make sure that the incentivestried to make sure that the incentives
Othertried to make sure that the incentives are in alignment and then on the other side when we care about the results those guys had nothing to do with who we picked. So they just purely focused on the results. Fantastic. Thank thank you for sharing. I should obviously say I would encourage everyone to read the the wonderful letters. Even if you're not interested in philanthropy, they're just interesting to learn about you know the business model of giving away money. So one of the things I really like in the letters is that you're not shy about really attacking the toughest problems. I think that whenever I speak to people about our organization and what we want to do, there is this natural tendency to focus on getting the best teachers. One of the problems that we've been looking at is should we for example target specifically students that come from
Questionerspecifically students that come from abusive homes and one way to do that is to build housing and then get them out and you so on and so forth. So I guess my question to you is have you identified problems where you've just said this is just too hard. Like it's wonderful if we can solve it but we just don't want it's just too hard. We want to do hard things but not things that are this hard. And how do you how do you figure that out within your organization?
OtherYeah. So I think stig you have to be realistic. It's not just difficult it's impossible to optimize for more than one variable. So when we are trying to do selections for example we only have two things we're looking at. We're looking at the brilliance and we're looking at the soio economic status of the family. We have a couple other things like we give some preference to girls. We give preference
Otherpreference to girls. We give preference to disabled and so on. But we basically don't get into a lot of stuff beyond that because if we start going into things like like you said abusive households and all of that that's going to become a very complicated problem. We find a lot of issues in the homes of the families where the kids have come from but we wouldn't have known that at the beginning. It comes out in drips and drabs over time. So, I would say that that would be a really difficult thing to add to your plate. I would not go there. I think that if you're going to try to work with abused kids, don't try to work with brilliant abused kids. Just work with abused kids with whatever you need to do to help them because I think now you're trying to put too many variables into the same thing. It becomes really hard. So, it's important
Otherbecomes really hard. So, it's important to keep things as simple as possible.to keep things as simple as possible.to keep things as simple as possible. It's important to make sure everyoneIt's important to make sure everyoneIt's important to make sure everyone understands that game plan and they'reunderstands that game plan and they'reunderstands that game plan and they're not going to understand the game plan ifnot going to understand the game plan ifnot going to understand the game plan if it becomes complicated and then itit becomes complicated and then itit becomes complicated and then it works. One of the things that has reallyworks. One of the things that has reallyworks. One of the things that has really helped Daksha you were talking about youhelped Daksha you were talking about youhelped Daksha you were talking about you know hiring teachers etc is our oldestknow hiring teachers etc is our oldestknow hiring teachers etc is our oldest alums are now early 30s 33 34 years oldalums are now early 30s 33 34 years oldalums are now early 30s 33 34 years old and something like more than half theand something like more than half theand something like more than half the folks we hire now are our alums. So morefolks we hire now are our alums. So morefolks we hire now are our alums. So more and more of our alums are making up theand more of our alums are making up theand more of our alums are making up the faculty. More and more of our alums arefaculty. More and more of our alums arefaculty. More and more of our alums are making up a lot of our management team.making up a lot of our management team.making up a lot of our management team. All the way except the CEO. When I goAll the way except the CEO. When I goAll the way except the CEO. When I go one level below the CEO at Duina, it'sone level below the CEO at Duina, it'sone level below the CEO at Duina, it's all alums. And for these individuals,all alums. And for these individuals,all alums. And for these individuals, it's not about the paycheck. It's veryit's not about the paycheck. It's veryit's not about the paycheck. It's very clear to me when I meet them that theirclear to me when I meet them that theirclear to me when I meet them that their passions for Duana vastly exceed mine.passions for Duana vastly exceed mine.passions for Duana vastly exceed mine. They're not stupid like me playing someThey're not stupid like me playing some
QuestionerThey're not stupid like me playing some game, okay? They they actually deeplygame, okay? They they actually deeplygame, okay? They they actually deeply care about the mission, you know? Socare about the mission, you know? Socare about the mission, you know? So they have a purity I don't have you knowthey have a purity I don't have you knowthey have a purity I don't have you know it's beautiful to see actually it'sit's beautiful to see actually it'sit's beautiful to see actually it's amazing to see. Wonderful. So years agoamazing to see. Wonderful. So years agoamazing to see. Wonderful. So years ago you recommended Peter Thiel's wonderfulyou recommended Peter Thiel's wonderfulyou recommended Peter Thiel's wonderful talk competition is for losers and thattalk competition is for losers and thattalk competition is for losers and that talk was just such an such an eyetalk was just such an such an eyetalk was just such an such an eye openener for me. I went from thinkingopenener for me. I went from thinkingopenener for me. I went from thinking that companies have a mode or thinkingthat companies have a mode or thinkingthat companies have a mode or thinking most companies have a mode. I read ummost companies have a mode. I read ummost companies have a mode. I read um Rose Greenwell's wonderful book uhRose Greenwell's wonderful book uhRose Greenwell's wonderful book uh competition demystified and I did thatcompetition demystified and I did thatcompetition demystified and I did that after after going through that talk andafter after going through that talk andafter after going through that talk and he also talks about that most companieshe also talks about that most companieshe also talks about that most companies don't don't have a mode but execution indon't don't have a mode but execution indon't don't have a mode but execution in itself can be a mode you know thereitself can be a mode you know thereitself can be a mode you know there there's this story that you know youthere's this story that you know youthere's this story that you know you sometimes talk about with you know thosesometimes talk about with you know thosesometimes talk about with you know those two gas stations and then some you knowtwo gas stations and then some you knowtwo gas stations and then some you know one owner goes out you know does aone owner goes out you know does aone owner goes out you know does a little extra and the other doesn't but
Questionerlittle extra and the other doesn't but like I'm sort of like curious to hear if we can sort of bring that up to a level and talking about how do you how do you look at execution ution being the mode and how do you evaluate from the outside if a company has an execution mode?
QuestionerYeah. So the evidence tells us, you know, going back to the beginning of our conversation where I said if you just held your Walmart shares and everything else went to zero, you did really well. And we look at Buffett's example where, you know, 3 4% of what he invested in has truly moved the needle. The rest hasn't done that much. So what those two pieces of data tell you is that enduring modes are few and far between. It's just the nature of capitalism that everything gets competed away. Now, if you are someone like ASML or you're someone like Nvidia, those are some more that are
CharlieNvidia, those are some more that are going to stay for some time because he got a head start and and ASML may stay forever. I mean, that's like black magic. So, it is really anomalies in capitalism that lead to modes. It's very difficult to actually conceive of a business and then start a business saying I'm going to have XYZ mode and actually be successful at doing that. Even when we look at a business like Coca-Cola or we look at business like American Express, these started moless, there were no modes. The founders had no idea what a moat is. They kind of stumbled along and in some cases their original business model died and a new business model emerged accidentally and they made it. So almost impossible to start out with the idea that I'm going to create a moat and moes are very rare. I would say that approach businesses and
QuestionerI would say that approach businesses and their moes with very jaundice ties. So I I'm a bit on the fence of asking you this question Mish uh because I kind of feel like I'm going to paint myself into a corner. You often get this question about your serval competence and you gracious respond. You know if you ask that question then you probably don't know enough. And I kind of like feel I still have a question about circle competence. It's just how do I ask it without what is shooting me down? Anyways, whenever it comes to regulation, it's such a black box for for so many of us. And it's really interesting to hear you talk about different regulation whenever it comes to different businesses and how you identify it and so on and so forth. Assuming that we don't have a circle of competence whenever it comes to regulation, which we probably don't by
Questionerregulation, which we probably don't by asking this question, but how do we ask this question, but how do we ask this question, but how do we train that as lay people? No degree in train that as lay people? No degree in train that as lay people? No degree in law or anything like that. as lay law or anything like that. as lay law or anything like that. as lay people, how do we train that regulation people, how do we train that regulation people, how do we train that regulation figuring out the impact of a of a figuring out the impact of a of a figuring out the impact of a of a business angle?
QuestionerOne has to approach circle of competence with a lot of humility when you say okay there's this business it can be impacted by regulations changes in regulations how do I handicap that right and the answer is it may be that that question leads to putting that business in the too hard pile so I think what humans have difficulty with a lot of humans have difficulty with giving up they don't want to give up like you're saying okay I like this business I've seen this business I spent some time on the business but I don't understand this part of it and how do I get to understanding that part of it and I think Buffett and Mer's answer would be
Questionerthink Buffett and Mer's answer would be that 99% of businesses need to go in the two hard pile so basically that's where people have difficulty where they're not willing to easily give up I think it was in 2014 or something thereabouts where I used to go with guys every year to Omaha on first day because I had asked Buffett's assistant Debbie if she would go to lunch with us and she said, "I'd love to go to lunch with you guys. I mean, I actually love Debbie, you know." And so she said, "But when you come for the annual meeting, Friday is like a zoo at the office. All these celebrities coming. I can't move." Okay. But she said, "If you come on Thursday, I can come to lunch with you guys on Thursday." So we started going to Omaha Thursday morning and then we'd go meet Debbie for lunch. And one year, I think it was in 2014. By the way, the lunches
Otherit was in 2014. By the way, the lunches with Debbie, which we had for several years, blew away the lunch with war. Like it was so much fun. And I used to always tell Debbie, I start the conversation with Deb like that. I said, Deb, Debbie, between us girls, can we talk? Can we really talk? She said, "Monish, what do you want to know? Anything you want to know, I'm going to tell you." Okay? And then we would talk about all kinds of things. It was just great. So one year in 2014 when we went to have lunch with Debbie and we come to the 14th floor of Kit Plaza the elevator opens and Warren is standing there. So I thought okay he's maybe going in the elevator somewhere but it turned out he was standing in the lobby of the elevator to greet us. Okay Fortune 10 CEO coming to the elevator for meeting two yo-yos who he doesn't have an
Questionertwo yo-yos who he doesn't have an appointment with. Okay. So, I start talking to Warren and I think he'll take the elevator down. And then he says, "Do you guys want a tour of headquarters?" I said, "Warren, if you want to waste your time with a couple of yo-yos, we are all game." Okay. And so he said, "Let me give you a tour." So he's showing us all the memorabilia in the office. And he showed up the letter he sent to Long-Term Capital Management when he was trying to buy that business and then the first shares of Burlington and his Coke machine, his Coke fountain. He has got his private coke fountain and he was like showing how it works and then finally he takes us to his private office to show us his office right and I noticed that on his desk there's a box which says too hard and I heard about this is a box which says too hard and the box was empty so I said war the two
Otherthe box was empty so I said war the twothe box was empty so I said war the two hard pile everything supposed to go inhard pile everything supposed to go inhard pile everything supposed to go in the too hard pile you have all thesethe too hard pile you have all thesethe too hard pile you have all these piles of papers nothing's in the twopiles of papers nothing's in the twopiles of papers nothing's in the two hard pile what's going on he said ohhard pile what's going on he said ohhard pile what's going on he said oh that's just an illusion Monish, he takesthat's just an illusion Monish, he takesthat's just an illusion Monish, he takes a bunch of papers and dumps it in thea bunch of papers and dumps it in thea bunch of papers and dumps it in the two hard pile. See, it's completely fulltwo hard pile. See, it's completely fulltwo hard pile. See, it's completely full now. And we're going to put more in itnow. And we're going to put more in itnow. And we're going to put more in it so it's even more full. But a guy likeso it's even more full. But a guy likeso it's even more full. But a guy like Warren needs to have a box on his desk.Warren needs to have a box on his desk.Warren needs to have a box on his desk. If you go to God Google and say BuffettIf you go to God Google and say BuffettIf you go to God Google and say Buffett too hard picture, it'll show a picturetoo hard picture, it'll show a picturetoo hard picture, it'll show a picture of him in his office with the two hardof him in his office with the two hardof him in his office with the two hard pile box. Okay, God Google will show youpile box. Okay, God Google will show youpile box. Okay, God Google will show you whatever you want. Okay? So you can seewhatever you want. Okay? So you can seewhatever you want. Okay? So you can see that box. Okay? And so someone asthat box. Okay? And so someone asthat box. Okay? And so someone as disciplined as Ward needs a physical boxdisciplined as Ward needs a physical boxdisciplined as Ward needs a physical box to remind him that most things he cannotto remind him that most things he cannotto remind him that most things he cannot understand. This is a very high IQ guy.understand. This is a very high IQ guy.understand. This is a very high IQ guy. This is, you know, a guy who's a childThis is, you know, a guy who's a childThis is, you know, a guy who's a child prodigy and all of that, right? He still
Questionerprodigy and all of that, right? He still has the humility to understand that 99% of stuff I'm not going to understand. So this regulation question, the moment you encounter something like that, be very comfortable with saying no very fast to almost everything. There should be 10 companies in the world that you understand and there should be 10,000 that you have no clue about. That's wonderful. And then I should say well I'm in that lucky situation that being an investor in popular funds I don't even need to understand it. And then you of course can say that you know in let's say in your your one of your funds you know raises is just you know what 60% like it's a massive part of it right like so I'm probably the only one of your investors who feel like you're not too concentrated. Anyways, you can you can you can quote me on that. I hope I
Questionercan you can quote me on that. I hope I don't speak out of school whenever I I Idon't speak out of school whenever I I Idon't speak out of school whenever I I I mention that. So, I get asked by a tonmention that. So, I get asked by a tonmention that. So, I get asked by a ton of people. So, why like apparently youof people. So, why like apparently youof people. So, why like apparently you you have this podcast you you sit aroundyou have this podcast you you sit aroundyou have this podcast you you sit around you you're a bit of a yo-yo. You justyou you're a bit of a yo-yo. You justyou you're a bit of a yo-yo. You just sit at reading in 10ks. You don't reallysit at reading in 10ks. You don't reallysit at reading in 10ks. You don't really understand too many. So, you only investunderstand too many. So, you only investunderstand too many. So, you only invest in five. Why do you also invest within five. Why do you also invest within five. Why do you also invest with money? So, one of the things I say tomoney? So, one of the things I say tomoney? So, one of the things I say to tell people is that you know it it gavetell people is that you know it it gavetell people is that you know it it gave me a lot of comfort investing with youme a lot of comfort investing with youme a lot of comfort investing with you because you know you set up the firstbecause you know you set up the firstbecause you know you set up the first fund what 1999 and then the two othersfund what 1999 and then the two othersfund what 1999 and then the two others shortly after. I guess my question isshortly after. I guess my question isshortly after. I guess my question is how long should a track record be andhow long should a track record be andhow long should a track record be and how much should it outperform before youhow much should it outperform before youhow much should it outperform before you can say with a 90% certainty 95%can say with a 90% certainty 95%can say with a 90% certainty 95% certainty that it's skill and not luck.certainty that it's skill and not luck.certainty that it's skill and not luck.
OtherYeah, that's a great question. I wouldYeah, that's a great question. I wouldYeah, that's a great question. I would say you need plenty of time. You needsay you need plenty of time. You needsay you need plenty of time. You need more than 10 years and preferablymore than 10 years and preferablymore than 10 years and preferably something like 20 years. Simple as that.
Questionersomething like 20 years. Simple as that.something like 20 years. Simple as that. How do you think in terms of in terms ofHow do you think in terms of in terms ofHow do you think in terms of in terms of of over performance? I know like it's Iof over performance? I know like it's Iof over performance? I know like it's I know it's sort of re unreasonableknow it's sort of re unreasonableknow it's sort of re unreasonable question cuz it's tough to come up withquestion cuz it's tough to come up withquestion cuz it's tough to come up with you know an equation just call collectyou know an equation just call collectyou know an equation just call collect me whenever you have the equation moneyme whenever you have the equation moneyme whenever you have the equation money but you know like of course there's abut you know like of course there's abut you know like of course there's a difference between have you beaten thedifference between have you beaten thedifference between have you beaten the S&P 500 or whatever kind of index forS&P 500 or whatever kind of index forS&P 500 or whatever kind of index for like.1% or 5% or 10 like you know we alllike.1% or 5% or 10 like you know we alllike.1% or 5% or 10 like you know we all know like what Buffett did in your earlyknow like what Buffett did in your earlyknow like what Buffett did in your early days of the Buffett partnership. But howdays of the Buffett partnership. But howdays of the Buffett partnership. But how do you I know that I'm I'm teeing it updo you I know that I'm I'm teeing it updo you I know that I'm I'm teeing it up for you in a terrible way, but like howfor you in a terrible way, but like howfor you in a terrible way, but like how much outperformance would you need tomuch outperformance would you need tomuch outperformance would you need to see over let's say 20 years before wesee over let's say 20 years before wesee over let's say 20 years before we can say ooh this is this is skill thiscan say ooh this is this is skill thiscan say ooh this is this is skill this is not.1%. This is truly scale. Well, Iis not.1%. This is truly scale. Well, Iis not.1%. This is truly scale. Well, I
Otherwould just like to point out somethingwould just like to point out somethingwould just like to point out something that when Ted Wexler was being hired bythat when Ted Wexler was being hired bythat when Ted Wexler was being hired by Burkshshire Hathaway, I think he joined
QuestionerBurkshshire Hathaway, I think he joinedBurkshshire Hathaway, I think he joined in 2010 thereabouts, I think around thenin 2010 thereabouts, I think around thenin 2010 thereabouts, I think around then and maybe a little bit later, but 2007and maybe a little bit later, but 2007and maybe a little bit later, but 2007 to 2009, he was down more than 70%. So,to 2009, he was down more than 70%. So,to 2009, he was down more than 70%. So, they hired a guy who when they looked atthey hired a guy who when they looked atthey hired a guy who when they looked at the recent past before they hired him,the recent past before they hired him,the recent past before they hired him, it looked horrible. The numbers lookedit looked horrible. The numbers lookedit looked horrible. The numbers looked horrible. he was 30 points behind thehorrible. he was 30 points behind thehorrible. he was 30 points behind the S&P in those years. Okay. But they stillS&P in those years. Okay. But they stillS&P in those years. Okay. But they still hired him because they looked kind ofhired him because they looked kind ofhired him because they looked kind of past they looked at the kind of longerpast they looked at the kind of longerpast they looked at the kind of longer term record and went with that. So Iterm record and went with that. So Iterm record and went with that. So I think the thing is that when we look atthink the thing is that when we look atthink the thing is that when we look at someone like let's say Steve Balmer, yousomeone like let's say Steve Balmer, yousomeone like let's say Steve Balmer, you know, there have been three CEOs atknow, there have been three CEOs atknow, there have been three CEOs at Microsoft and I talked to some MicrosoftMicrosoft and I talked to some MicrosoftMicrosoft and I talked to some Microsoft investors who hate the period of owninginvestors who hate the period of owninginvestors who hate the period of owning the stock when Steve Balmer was CEO. Butthe stock when Steve Balmer was CEO. Butthe stock when Steve Balmer was CEO. But it was really wasn't fully Steveit was really wasn't fully Steveit was really wasn't fully Steve Balmer's fault. He came in when theBalmer's fault. He came in when theBalmer's fault. He came in when the stock was ridiculously overvalued and hestock was ridiculously overvalued and hestock was ridiculously overvalued and he left when it was ridiculously
Questionerleft when it was ridiculously undervalued. And then Satya comes in with an undervalued company and he hits it out of the park. So I mean he created a lot of value but he was his starting point was a value stock. And so we can get a lot of distortions even looking at 10-year periods because of this notion because you know markets can be very overvalued. So, I would say that anyone when they're compared to the S&P in the last decade is going to not be looking great because the S&P is coming off an incredible 10 years. But the next 10 years, a lot of yo-yos will probably beat the S&P. Okay? Because it's so elevated, right? And so even the index, one has to calibrate the index where are you looking at a normalized index or are you looking at an overheated index. So I think the selection of an investment manager is one of the most difficult things to do.
Otherone of the most difficult things to do. one of the most difficult things to do. Very very hard to do. All right. Well, Very very hard to do. All right. Well, Very very hard to do. All right. Well, Manish, thank you for being with me on Manish, thank you for being with me on Manish, thank you for being with me on this this this metaphorical restaurant trying all these metaphorical restaurant trying all these metaphorical restaurant trying all these new dishes here. I don't know if it was new dishes here. I don't know if it was new dishes here. I don't know if it was tasteful or not. Uh but any concluding I tasteful or not. Uh but any concluding I tasteful or not. Uh but any concluding I very much enjoyed the conversation very much enjoyed the conversation very much enjoyed the conversation steak. It was fantastic. We got to steak. It was fantastic. We got to steak. It was fantastic. We got to sample a bunch of new dishes. We did. We sample a bunch of new dishes. We did. We sample a bunch of new dishes. We did. We did. We mixed it up with some of the did. We mixed it up with some of the did. We mixed it up with some of the oldest gold, but we got some new dishes oldest gold, but we got some new dishes oldest gold, but we got some new dishes in there, too. in there, too. in there, too.
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