Other[Music][Music][Music][Music] we have a special guest Mr Manish bab towe have a special guest Mr Manish bab towe have a special guest Mr Manish bab to kick off our idea this year uh Manish iskick off our idea this year uh Manish iskick off our idea this year uh Manish is a highly respected value investor uha highly respected value investor uha highly respected value investor uh he's an author we have his books herehe's an author we have his books herehe's an author we have his books here he's a philanthropist I'll talk about ithe's a philanthropist I'll talk about ithe's a philanthropist I'll talk about it a bit and the founder of pabraa bit and the founder of pabraa bit and the founder of pabra investment fund monish is a YPO goldinvestment fund monish is a YPO goldinvestment fund monish is a YPO gold member in Austin he's originally frommember in Austin he's originally frommember in Austin he's originally from California he transferred in when weCalifornia he transferred in when weCalifornia he transferred in when we when he moved to Austin inwhen he moved to Austin inwhen he moved to Austin in 2021 and uh the way he started his2021 and uh the way he started his2021 and uh the way he started his entrepreneurship journey is in 1991 heentrepreneurship journey is in 1991 heentrepreneurship journey is in 1991 he borrowed heavily on his credit card debtborrowed heavily on his credit card debtborrowed heavily on his credit card debt almost draw downalmost draw downalmost draw down $75,000 and completely borrowed from his$75,000 and completely borrowed from his$75,000 and completely borrowed from his 401k to start his first IT consulting401k to start his first IT consulting401k to start his first IT consulting business uh he grew that to 20 millionbusiness uh he grew that to 20 millionbusiness uh he grew that to 20 million and sold it in 2001 during do bubble uhand sold it in 2001 during do bubble uhand sold it in 2001 during do bubble uh to a company called uh salmonto a company called uh salmonto a company called uh salmon Associates so uh he is a hustler he is aAssociates so uh he is a hustler he is aAssociates so uh he is a hustler he is a Salesman he isSalesman he isSalesman he is founder uh today is a managing partnerfounder uh today is a managing partnerfounder uh today is a managing partner at pabra investment farm he modeled itat pabra investment farm he modeled it
Otherat pabra investment farm he modeled it on the bushire hatway and buff Fon the bushire hatway and buff Fon the bushire hatway and buff F partnership model of 1960 which he whenpartnership model of 1960 which he whenpartnership model of 1960 which he when he shut down in 1970 my memory serves mehe shut down in 1970 my memory serves mehe shut down in 1970 my memory serves me right uh however the most meaningfulright uh however the most meaningfulright uh however the most meaningful thing about monish is he's athing about monish is he's athing about monish is he's a philanthropist uh in 2005 he startedphilanthropist uh in 2005 he startedphilanthropist uh in 2005 he started Daka foundation without much further AdoDaka foundation without much further AdoDaka foundation without much further Ado let's welcome Manish
QuestionerPAB okay great to be here and thank youPAB okay great to be here and thank youPAB okay great to be here and thank you for having me and I had a very long Fivefor having me and I had a very long Fivefor having me and I had a very long Five Mile commute to get here so anyway it'sMile commute to get here so anyway it'sMile commute to get here so anyway it's always it's always a pleasure for me toalways it's always a pleasure for me toalways it's always a pleasure for me to speak to wipers uh this is my 27th yearspeak to wipers uh this is my 27th yearspeak to wipers uh this is my 27th year in YPO I used to have a headful of hairin YPO I used to have a headful of hairin YPO I used to have a headful of hair when I first started and gradually thatwhen I first started and gradually thatwhen I first started and gradually that all went away I think like many of youall went away I think like many of youall went away I think like many of you probably know that it is absolutely trueprobably know that it is absolutely trueprobably know that it is absolutely true that the more you engage with YPO thethat the more you engage with YPO thethat the more you engage with YPO the exponential the payback so it actuallyexponential the payback so it actuallyexponential the payback so it actually change my life in more ways than I canchange my life in more ways than I canchange my life in more ways than I can count so it's been it's been a greatcount so it's been it's been a greatcount so it's been it's been a great organization great journey for me and
Questionerorganization great journey for me and some you know just obviously tremendoussome you know just obviously tremendoussome you know just obviously tremendous lifelong friendshipslifelong friendshipslifelong friendships so I'd like to start with a story youso I'd like to start with a story youso I'd like to start with a story you know maybe we'll talk about two or threeknow maybe we'll talk about two or threeknow maybe we'll talk about two or three stories and then we'll see what you guysstories and then we'll see what you guysstories and then we'll see what you guys want to talk about after that so inwant to talk about after that so inwant to talk about after that so in 1626 there were some Dutch settlers in1626 there were some Dutch settlers in1626 there were some Dutch settlers in what we know today as the island ofwhat we know today as the island ofwhat we know today as the island of Manhattan and actually the Indian nameManhattan and actually the Indian nameManhattan and actually the Indian name for it is manah they kind of tweaked itfor it is manah they kind of tweaked itfor it is manah they kind of tweaked it to Manhattan and the Dutch wanted to buyto Manhattan and the Dutch wanted to buyto Manhattan and the Dutch wanted to buy the island from the Native Americans andthe island from the Native Americans andthe island from the Native Americans and they had a guy The Negotiator Peterthey had a guy The Negotiator Peterthey had a guy The Negotiator Peter Peter minu who was a Trader so they sentPeter minu who was a Trader so they sentPeter minu who was a Trader so they sent Peter to make a deal with the IndiansPeter to make a deal with the IndiansPeter to make a deal with the Indians and the deal was done for 60 gildersand the deal was done for 60 gildersand the deal was done for 60 gilders which is about $24 at the time so forwhich is about $24 at the time so forwhich is about $24 at the time so for basically $24 thebasically $24 thebasically $24 the Indians handed over the the rights toIndians handed over the the rights toIndians handed over the the rights to the island of Manhattan to the to thethe island of Manhattan to the to thethe island of Manhattan to the to the Dutch and when people hear that they sayDutch and when people hear that they sayDutch and when people hear that they say well you know the Indians kind of gotwell you know the Indians kind of got
Warrenwell you know the Indians kind of got taken you know because you look at like it was very Prim land and great natural harbors and all of that you know if the Indians had a let's say trust officer or investment manager who was going to take this $24 and invest it for the benefit of the tribe and let's say the guy wasn't that great but could do maybe 7% a year we have we have something known as the the rule of 72 some of you might be familiar with it maybe who's familiar with the rule of 72 we have a couple of folks so the rule of 72 is a very easy way mentally to understand how long it takes for money to double so if I have a 7% rate of return I can just do 72 divide by 7 it's approximately 10 so you would just say it's 10 years and if I was for example getting a 10% return if I do 72 divide by 10 it's 7even so it works pretty well for a pretty large
Questionerworks pretty well for a pretty large range of percentages so it's a good back of the envelope way to understand you know what different interest rates will do in terms of you know Building Wealth over time so if the Indians were getting a 7% rate of return every 10 years that money would double right so 1636 it would be $48 and 1646 it'd be $96 and we'd keep going right now if you do 10 doubles you know that's 2 to the^ of 10 right so 10 doubles would take 100 years so every 10 years we're doubling if you go for 100 years that becomes 2 ^ 10 and 2 ^ 10 is 1,24 so again because we want to keep the math simple just throw away the 24 so basically 10 doubles at 7% means whatever you started with you would have a thousand times that so if you start with $24 in 1626 then by 1726 it's 24,000 it's 1,000x because of that 7% and 1826 it's 24
Questioner1826 it's 24 million andmillion andmillion and 1926 it's 241926 it's 241926 it's 24 billion andbillion andbillion and 2026 it's 24 trillion and now we are2026 it's 24 trillion and now we are2026 it's 24 trillion and now we are 2023 we're not 2026 so it say take about2023 we're not 2026 so it say take about2023 we're not 2026 so it say take about 23% off so maybe around 20 billion 1923% off so maybe around 20 billion 1923% off so maybe around 20 billion 19 and a half 20 billion 20 trillion isand a half 20 billion 20 trillion isand a half 20 billion 20 trillion is where Indians had invested it they wouldwhere Indians had invested it they wouldwhere Indians had invested it they would have about 19 or 20have about 19 or 20have about 19 or 20 trillion and so then you know you asktrillion and so then you know you asktrillion and so then you know you ask well would the 19 or 20 trillion be morewell would the 19 or 20 trillion be morewell would the 19 or 20 trillion be more than undeveloped land inthan undeveloped land inthan undeveloped land in Manhattan so the entire wealth of theManhattan so the entire wealth of theManhattan so the entire wealth of the United States you know every man womanUnited States you know every man womanUnited States you know every man woman and child everything we have is aboutand child everything we have is aboutand child everything we have is about 150150150 trillion so it's unlikely that that justtrillion so it's unlikely that that justtrillion so it's unlikely that that just undeveloped land in Manhattan would beundeveloped land in Manhattan would beundeveloped land in Manhattan would be 1/8 of that that's not likely we've got1/8 of that that's not likely we've got1/8 of that that's not likely we've got plenty of other things in the countryplenty of other things in the countryplenty of other things in the country and there's another way to kind of doand there's another way to kind of doand there's another way to kind of do this basically Manhattan is about 6 26this basically Manhattan is about 6 26this basically Manhattan is about 6 26 square miles and when you convert thatsquare miles and when you convert thatsquare miles and when you convert that to square feet youto square feet youto square feet you basically today if you were buyingbasically today if you were buyingbasically today if you were buying pretty Prime land in Manhattan you'd pay
Questionerpretty Prime land in Manhattan you'd pay about ,000 a square foot for it and this works out to something like 32,000 a square foot so basically the Indians got overpaid at $24 okay and the screw up was that they didn't invest it properly so one of the things about compounding is that Einstein called it the 8 wonder of the world and the reason it's the eight wonder of the world is that we are not used to thinking exponentially we're used to thinking linearly but compounding doesn't work linearly it works in a kind of a log scale getting your arms around that concept it's a simple concept but it takes some thinking to to get around it and if I take another story when Columbus sailed for America you know 1491 it's rumored that Queen Isabella you know she was a great venture capitalist she funded him with $30,000 for the voyage and if we leave aside the the psychic
Otherand if we leave aside the the psychic benefits of finding a new hemisphere benefits of finding a new hemisphere people would say well that was a tremendous return on the 30,000 that you know found the Americans right but if we take a even lower rate of return than the 7% you know so we let's say that that 30,000 was on a 5% rate of return and so if we take the rule of 72 you know 72 divid 5 is approximately 15 so the money would double every 15 years and 1491 to 2023 is 532 years little more like yeah yeah 532 years so if we do 532 and we divide that by 15 it's approximately 35 so what that means is that we had 35 periods where the money would double right basically so you start in 1491 with 30,000 and in 1506 you would have 60,000 and then 1521 you'd have 12,000 you keep going so 2^ 35 is 2^ 10 * 2^ 10 * 2^ 10 * 2^ 5 right if it's split it up so that's 1,000 * 1,000 * 1,000 *
Other* 1,000 ** 1,000 * 32 so that's 32 billion if you started with a dollar in 1491 you would have 32 billion today but she gave him 30,000 and 30,000 at the 5% compounded that's about 1,000 trillion and the entire wealth of planet Earth is 500 trillion so even Queen Elizabeth Isabella didn't get a great deal she gave Columbus too much money and he didn't even though he found the Americas he couldn't make it happen so you know there was a there was a newspaper article a few years back where they said that there was some janitor who worked at a college all his life you know very basic salary Etc and people were surprised that when he passed away his estate had given $4 million to the college as a gift and so they all reported like wow this was a you know huge gift and this guy was he's never like you know ran a business or did anything but actually the 4 million
Ted Weschleranything but actually the 4 million because the journalists are not because the journalists are not because the journalists are not mathematically mathematically mathematically astute is actually not a big number it astute is actually not a big number it astute is actually not a big number it the number should have been much higher the number should have been much higher the number should have been much higher because he lived a modest lifestyle and because he lived a modest lifestyle and because he lived a modest lifestyle and when my younger daughter was when my younger daughter was when my younger daughter was 18 she she got a summer job just before 18 she she got a summer job just before 18 she she got a summer job just before she started college and she saved about she started college and she saved about she started college and she saved about 5,000 from working in the summer and so 5,000 from working in the summer and so 5,000 from working in the summer and so I told her listen you can the law allows I told her listen you can the law allows I told her listen you can the law allows you to put the entire you to put the entire you to put the entire 5,000 in an 5,000 in an 5,000 in an IRA and if you trust me and you give me IRA and if you trust me and you give me IRA and if you trust me and you give me a part of attorney on that Ira I can do a part of attorney on that Ira I can do a part of attorney on that Ira I can do some things with it she said yeah yeah some things with it she said yeah yeah some things with it she said yeah yeah whatever you know that's fine so we whatever you know that's fine so we whatever you know that's fine so we opened an IRA and she gave me power of opened an IRA and she gave me power of opened an IRA and she gave me power of attorney on that you know managing that attorney on that you know managing that attorney on that you know managing that account and and I told her listen account and and I told her listen account and and I told her listen because you're so young we can because you're so young we can because you're so young we can concentrate very intensely I could put concentrate very intensely I could put concentrate very intensely I could put it in one stock for example and you know it in one stock for example and you know it in one stock for example and you know she went to school at NYU she went to school at NYU she went to school at NYU so I used to pick her up like in
Questionerso I used to pick her up like in Northern California like 1 or 2 in the morning and usually driving home 40 mi from LAX so I said okay this is a good time to teach her lessons on compounding you know and so I said you know that 5,000 that you gave me you know if if we get a like a like a 15% return on that Which is higher than the index but let's just bear with me for a second rule of 72 I told her you would double every 5 years and you're 18 so I said that what would that money be at the the age of 68 and you know I pull all these numbers out to make all the math easy for me you know so from 68 from 18 is 50 years low and behold it's 10 doubles low and behold we know 10 doubles is 1,000 and so you start with 5,000 and you're at 5 million at 68 so suddenly she's Wide Awake she says Whoa how did that happen okay like what what did
Otherthat happen okay like what what did repeat everything again so I repeatedrepeat everything again so I repeatedrepeat everything again so I repeated everything again for her right and so Ieverything again for her right and so Ieverything again for her right and so I said but you're going to be 19 andsaid but you're going to be 19 andsaid but you're going to be 19 and you're going to have another summer jobyou're going to have another summer jobyou're going to have another summer job and we hope you'll also save some moneyand we hope you'll also save some moneyand we hope you'll also save some money and we'll put it in that Ira again andand we'll put it in that Ira again andand we'll put it in that Ira again and atatat 69 there'll be another 5 million and now69 there'll be another 5 million and now69 there'll be another 5 million and now you're at 10 million and I said at someyou're at 10 million and I said at someyou're at 10 million and I said at some point you're going to graduate get offpoint you're going to graduate get offpoint you're going to graduate get off my payroll you know that might happenmy payroll you know that might happenmy payroll you know that might happen when you're like 22 or something and youwhen you're like 22 or something and youwhen you're like 22 or something and you might save likemight save likemight save like 10,000 in a year not 5,000 and maybe at10,000 in a year not 5,000 and maybe at10,000 in a year not 5,000 and maybe at some point you're saving likesome point you're saving likesome point you're saving like 20,000 and so I asked her I said when20,000 and so I asked her I said when20,000 and so I asked her I said when you're likeyou're likeyou're like 70 how much money you going to have and70 how much money you going to have and70 how much money you going to have and she said my head is about to explode youshe said my head is about to explode youshe said my head is about to explode you know she said it's too big a number soknow she said it's too big a number soknow she said it's too big a number so the janitor at the 4 million wethe janitor at the 4 million wethe janitor at the 4 million we shouldn't be surprised butshouldn't be surprised butshouldn't be surprised but the funny thing isthe funny thing isthe funny thing is that people end up you know I mean Ithat people end up you know I mean Ithat people end up you know I mean I think I think when I when you look at
Questionerthink I think when I when you look at the statistics of how much people have on average in Ira when they turn 65 or 70 or how much they have in 401ks it's a pathetically small number right I mean for the country you look at the averages it's like a I think I think the IRA average is maybe 150,000 or something it's a it's a small number for someone who's been putting money away for their whole lives and the and the I think the reason the reason for that is so if you go back to these dynamics of these rates of returns and these runways so Buffett was asked one time that look if a genie shows up and the genie says Mr Buffett you're like such a good guy I want to give you any wish you want so Warren said I only want one wish he says that when they look at my corpse when I'm dead they should say man he was old okay and he doesn't want to live a
Questionerold okay and he doesn't want to live a long time because he likes to hang outlong time because he likes to hang outlong time because he likes to hang out with us he just wants a very long Runwaywith us he just wants a very long Runwaywith us he just wants a very long Runway ofofof compounding and that's all he carescompounding and that's all he carescompounding and that's all he cares about so in his case his compoundingabout so in his case his compoundingabout so in his case his compounding Journey started at the age of 11 WarrenJourney started at the age of 11 WarrenJourney started at the age of 11 Warren had by I think by 12 or 13 he hadhad by I think by 12 or 13 he hadhad by I think by 12 or 13 he had figured out the rule of 72 andfigured out the rule of 72 andfigured out the rule of 72 and compounding and all of that and so nowcompounding and all of that and so nowcompounding and all of that and so now you know he was born inyou know he was born inyou know he was born in 1930 and he just turned1930 and he just turned1930 and he just turned 93 so he's been running that compounding93 so he's been running that compounding93 so he's been running that compounding engine for 82 years he ended up theengine for 82 years he ended up theengine for 82 years he ended up the richest person in the world quite arichest person in the world quite arichest person in the world quite a quite a while back but he's been givingquite a while back but he's been givingquite a while back but he's been giving away a lot of his money you know givaway a lot of his money you know givaway a lot of his money you know giv away 5% of the total for quite quite aaway 5% of the total for quite quite aaway 5% of the total for quite quite a few years that's been going on if Warrenfew years that's been going on if Warrenfew years that's been going on if Warren had not given away any money and justhad not given away any money and justhad not given away any money and just kept everything untilkept everything untilkept everything until today he'd be the wealthiest guy todaytoday he'd be the wealthiest guy todaytoday he'd be the wealthiest guy today by quite a distance even ahead of Elonby quite a distance even ahead of Elonby quite a distance even ahead of Elon and ahead of the lvmh guy and all ofand ahead of the lvmh guy and all ofand ahead of the lvmh guy and all of that and so basically with compounding
Questionerthat and so basically with compounding there are three variables that come in right so the three there really three numbers that matter it's the St starting amount you know we saw the starting amount with the Indians and with Queen Isabella and so on it's the length of the runway right and it's the rate of return and these three are interchangeable so what I mean by that is that if I had 10 years and a 7% return or if I had 7 years and a 10% return the end number is the same in both cases because the rule of 72 so you can interchange the rate of return with the duration and you can get back and forth on that and so when we when we look at kind of okay so you know we have a lot of entrepreneurs here who done very well very successful it's really important to take something you know I wish this event was not with you guys problem is
Otherevent was not with you guys problem is half your runways are gone you know I'm talking to you at the wrong time it it needed to be a yng event you know the ymg guys I can do something with okay so when you have a ymg event let's have me back absolutely because this crowd like you know I already lost so much of the runway you know it's useless you know that but the yng crowd I mean you know they're all going to live to over 100 and maybe over 110 or 120 a 100-year Runway what could be more orgasmic than that you know that's like the ultimate ultimate situation so basically if you have a very long Runway you know like Isabella or the the Indians and so on then obviously very small amounts to start with and even relatively small rates of return ends up with a large number but if you take a normal human human lifetime our lifetimes you know we start at let's say
Questionerlifetimes you know we start at let's saylifetimes you know we start at let's say 18 or 20 or 22 and we go till 80 or 9018 or 20 or 22 and we go till 80 or 9018 or 20 or 22 and we go till 80 or 90 or 100 you you get a 60 to 80 yearor 100 you you get a 60 to 80 yearor 100 you you get a 60 to 80 year Runway that's a good size because if youRunway that's a good size because if youRunway that's a good size because if you take take the SNP which is done about 9%take take the SNP which is done about 9%take take the SNP which is done about 9% a year for the last 100a year for the last 100a year for the last 100 years basicallyyears basicallyyears basically 72 divide by 9 is 8 right so if you if72 divide by 9 is 8 right so if you if72 divide by 9 is 8 right so if you if in thein thein the SNP we are doubling every 8 years rightSNP we are doubling every 8 years rightSNP we are doubling every 8 years right and and what that means is that if youand and what that means is that if youand and what that means is that if you have a 60-yearhave a 60-yearhave a 60-year Runway then you know you know it's likeRunway then you know you know it's likeRunway then you know you know it's like 7 and7 and7 and 1/2 doubles it's all about the number of1/2 doubles it's all about the number of1/2 doubles it's all about the number of doubles you know that's all that mattersdoubles you know that's all that mattersdoubles you know that's all that matters here so 7 doubles ishere so 7 doubles ishere so 7 doubles is 128 you know and eight doubles is 256 so128 you know and eight doubles is 256 so128 you know and eight doubles is 256 so 7 and a half maybe like 150 so whatever7 and a half maybe like 150 so whatever7 and a half maybe like 150 so whatever you start with you have 150x that whereyou start with you have 150x that whereyou start with you have 150x that where you end with but since you're adding toyou end with but since you're adding toyou end with but since you're adding to your savings every year that numberyour savings every year that numberyour savings every year that number keeps increasing so basically Ally itkeeps increasing so basically Ally itkeeps increasing so basically Ally it would dwarf in many cases what might bewould dwarf in many cases what might bewould dwarf in many cases what might be a great exit at some point in youra great exit at some point in youra great exit at some point in your business because the exit might come
Questionerbusiness because the exit might come when you're 50 or something reduced Runway time whereas the savings have been going on for 30 years so basically the game and I think why do people not end up ultra wealthy is they get in their own way you know so Charlie Munger warned Buffett's partner one of his best quotes is never interrupt compounding unnecessarily okay so don't interrupt it so what that means is if you're in a index we don't care about the market we just dollar cost average every month the savings are going in and it's irrelevant what's happening to the market or economy or whatever we just keep on that program and most humans are not like the janitor they're not able to stay with the program they are too smart for their own good the other thing about investing is it's a very strange industry in the sense that people who
Questionerindustry in the sense that people who pay the lowest frictional costs win sopay the lowest frictional costs win sopay the lowest frictional costs win so the Richer you are rich people like tothe Richer you are rich people like tothe Richer you are rich people like to think that they have got some exclusivethink that they have got some exclusivethink that they have got some exclusive guy some fund manager some hedge fundguy some fund manager some hedge fundguy some fund manager some hedge fund guy very bad idea that guy will get richguy very bad idea that guy will get richguy very bad idea that guy will get rich skimming off theskimming off theskimming off the top and if you bought the Vanguard youtop and if you bought the Vanguard youtop and if you bought the Vanguard you know S&Pknow S&Pknow S&P ETF your frictional cost are like fiveETF your frictional cost are like fiveETF your frictional cost are like five basis points a yearbasis points a yearbasis points a year 0.005% if you're at some hedge fund or0.005% if you're at some hedge fund or0.005% if you're at some hedge fund or something it's like you know one and 20something it's like you know one and 20something it's like you know one and 20 2 and 20 or something most of them after2 and 20 or something most of them after2 and 20 or something most of them after fees are going to be behind the S&Pfees are going to be behind the S&Pfees are going to be behind the S&P and so even a 1% or 2% or 3% Delta inand so even a 1% or 2% or 3% Delta inand so even a 1% or 2% or 3% Delta in returns if the 9% goes to 7% orreturns if the 9% goes to 7% orreturns if the 9% goes to 7% or 6%6%6% over a few decades will be a massiveover a few decades will be a massiveover a few decades will be a massive Delta you know as as we've seen with soDelta you know as as we've seen with soDelta you know as as we've seen with so it's an interesting field in the senseit's an interesting field in the senseit's an interesting field in the sense that Joethat Joethat Joe public has an advantage over the wiperspublic has an advantage over the wiperspublic has an advantage over the wipers because Joe public has no access tobecause Joe public has no access tobecause Joe public has no access to hedgehedgehedge funds and Joe public is forced to go tofunds and Joe public is forced to go tofunds and Joe public is forced to go to Vanguard and buy the S&P and then Joe
WarrenVanguard and buy the S&P and then Joe public ends up ahead so please be like Joe public but the other thing is that you know don't be like Joe public where Joe public leaves his job and goes to Hawaii on a vacation with the 401K before starting the next job don't do that never interrupt compounding unnecessarily when I when I started my first business I was 25 I pulled 30,000 for my 401k that worked out in the sense that I mean in the end the the exits and all were fine generally speaking taking those tax deferred assets into consumption is not a good idea not to mention the penalties and all of that so that's my message to you is basically keep it simple Vanguard S&P modest lifestyle and Max the savings and try to stay healthy so the runway is long but since you guys are mostly over the hill focus on getting this message to your
Questioneryour kids there they still can be salvaged you know we can do stuff with them and maybe get them to get jobs when they're like 13 or 14 because the IRA actually has no minimum age so you can actually start the IRA know 3 months old as long as they made the money you know so you got to make sure they make the money it has to be earnings from wages so try to figure out some gig that they can work on when they're like 2 years old and get the compounding started early so maybe we can talk about what you guys want to talk about thank
Warrenyou thank you Manish I think your speech reminds me of a Charlie M saying you know take a simple idea and take it seriously think most of us forget the taking the seriously part having said that uh I'll open up uh for everybody Q&A and uh I I have one questions to begin with why do we have to delay gratification to make our
Questionerto delay gratification to make our grandkids Rich when we have only one life and why do we have to think about the scale where we are making our grandkids trust kids when we can actually live and have a meaningful life and a rich life where it's not just about wealth but it's also about experiences and uh relationships friendships
Questionersure so well the good news is that since you're wipe yours you can walk and chew gum at the same time and so you don't need to delay gratification you can gratify yourself all you want and still have a compounding engine running running at the same time you don't have to make a choice and the other piece we didn't really talk about here is that large inheritances do more harm than good one of the best exercises I had in YPO in Forum I think this was uh maybe around close to 20 years ago maybe 18 19 years
Questionerclose to 20 years ago maybe 18 19 years ago is that and some of you might have done this is a eulogy exercise have you guys done the eulogy exercise you guys might be too young for that but it's coming the eulogy exercise is coming so basically the exercise was you know we were on a for retreat I think some beach in Mexico and uh we were supposed to prepare this before we left and it was like the exercise was that yesterday you died and your best friend's going to deliver your eulogy at your memorial service and write the eulogy as if you your best friend assume that you were one day shy of your 80th birthday when you died and I remember when I did that I've done the eulog exercise a few times but at that time I was 40 and so I knew what happened in the first 40 years I had no idea what happened in the second 40 years so I had to kind of extrapolate
Questioner40 years so I had to kind of extrapolate and thinking okay how many grandkids do I have and you know what's going on and where am I living and all these things and so we we all sat around a fire on a beach in Mexico and we basically had about five or seven minutes each and we each read out our eulogy with no processing in between and then we all went for dinner and then the second part of the exercise was that if something didn't make it into your eulogy why are you spending time on it right so basically kind of forces you to think about what's important and not important you know we spend our time on so many unimportant things and so that was a powerful kind of a message but one of the one of the things I took away from that exercise and I I got some of this from there's a guy who passed away recently you might I don't know if you see saw the news on that but have you
Questionersee saw the news on that but have you guys heard of Chuck Frei so Chuck Frei there's a book which I think it's a good book to read it's called the billionaire who wasn't and it's his story so Chuck fre was a very successful entrepreneur his first business was in the dutyfree shops those are like you know the 90% margin business anyway so he made a few billion dollars on that then he uh started uh General Atlantic Partners which is a Top Flight venture capitalist fund and and basically Chuck's objective was that when he passed away he wanted to pass away with zero over his lifetime he gave away I think about 9 billion and he also tried really hard to give it away anonymously so wherever whenever he gave the money many places when he gave the money they had no idea who the donor was or in most cases like if he gave a lot of money to Cornell that was his Alum I
Warrenof money to Cornell that was his Alma and made them sign contracts they couldn't disclose it was him and so on and so most of the giving was Anonymous in the end so he he just passed away about a month ago in the end he moved to San Francisco with his with his wife he had a rented apartment and he was left with I think about 6 years ago he was left with 2 million and he basically was winding that down and I I don't think he died with more than a few hundred thousand so anyway Chuck's my hero I like Chuck and so I had a talk with my kids a while back and I said you know the large inheritances are just not going to be helpful to you and both actually are completely on board with it they actually don't want they're not looking for anything and actually what my I got divorced about four years ago what my ex-wife and I had done is every year we
Questionerex-wife and I had done is every year we used to Max the gift to the kids you know the ugma accounts and the the maximum gift you can give 177,000 whatever and and of course that I used to invest that and it was very concentrated so they actually got a few million dollars uh when they turned 18 the good thing with the ugma is that you got no lawyers it's a act of Congress but you get the kids get full control at 18 and I wanted them to have full control at 18 because I my perspective was that if my wife and I had not transferred value valestransferred value vales till they were 18 trying to say you're going to get so much at 30 and so much at 40 and all of that was nonsense so I at 13 or 14 I told them that when you get this money at 18 you can buy Ferraris you can buy drugs you can do whatever you want you have full control and in both cases what they did was at
Ted Weschlerand in both cases what they did was at 18 they just turned it over to me to manage you know they didn't touch it and my idea was that this would take care of their college but we were doing well and we could take care of their college so the money never got touched and they are actually now using it my daughter's using it because she's an entrepreneur the other one basically didn't want us to support her she wanted to pursue a PhD so she used that for some of her Beyond normal graduate level standard of living and uh so actually they did better than what I thought they would do and so I said okay you got the money then then what's left I just like to play math games you know so I play bridge I play Blackjack I play compounding games and so there's two games I'm playing there one game which is compounding the money and you know I have about 900 million of other people's
Otherhave about 900 million of other people's money that I get overrides on but I get overrides in a nice way uh I have no I no management fee so 1/4 over 6% comes to me it's my investor than I on the same page they all like that so anyway the thing is that there's a compounding engine which I am focused on and then there's a giving engine and so far D we've given away about 30 million and my objective is that so I'm going to die on June 11th 2054 and on June 10th 2054 I want to be down to $100 and we'll see if we succeed but we're going to try so basically there's one game of growing it another game of giving and also I don't want to give it to Red Cross I don't want stupid things happening with the money so one of the things about the the giving has been which actually worked out better than I thought is that it has very high social
Questionerthought is that it has very high social Returns on invested Capital so it worksReturns on invested Capital so it worksReturns on invested Capital so it works well both ways so I would say to answerwell both ways so I would say to answerwell both ways so I would say to answer your question you can walk and chew gumyour question you can walk and chew gumyour question you can walk and chew gum you can enjoy life but don't plan onyou can enjoy life but don't plan onyou can enjoy life but don't plan on largelargelarge sums it's not a good idea othersums it's not a good idea othersums it's not a good idea other questions don't and you can blame mequestions don't and you can blame mequestions don't and you can blame me just tell your kids there was thisjust tell your kids there was thisjust tell your kids there was this Indian guy with a mustache he told meIndian guy with a mustache he told meIndian guy with a mustache he told me you know it's not me I'd love to hearyou know it's not me I'd love to hearyou know it's not me I'd love to hear more about your story and yourmore about your story and yourmore about your story and your background and how you got to where youbackground and how you got to where youbackground and how you got to where you are rightare rightare right now okay well maybe there might benow okay well maybe there might benow okay well maybe there might be anotheranotheranother event well I mean I think one of the oneevent well I mean I think one of the oneevent well I mean I think one of the one of the things I always try to follow inof the things I always try to follow inof the things I always try to follow in life is that that if on Monday morninglife is that that if on Monday morninglife is that that if on Monday morning I'm not excited to go to work I do twoI'm not excited to go to work I do twoI'm not excited to go to work I do two things number one I don't go to work andthings number one I don't go to work andthings number one I don't go to work and number two I hit the reset button and itnumber two I hit the reset button and itnumber two I hit the reset button and it happened three times in my life when Ihappened three times in my life when Ihappened three times in my life when I had to hit the reset button and eachhad to hit the reset button and eachhad to hit the reset button and each time was you know going into the abysstime was you know going into the abyss
Questionertime was you know going into the abyss but it led to Greater growth and so Ibut it led to Greater growth and so Ibut it led to Greater growth and so I was an engineer work working at a techwas an engineer work working at a techwas an engineer work working at a tech company and getting very bored we hadcompany and getting very bored we hadcompany and getting very bored we had shipped the product they didn't reallyshipped the product they didn't reallyshipped the product they didn't really have much for us to do and I switchedhave much for us to do and I switchedhave much for us to do and I switched from engineering to Internationalfrom engineering to Internationalfrom engineering to International marketing within that within thatmarketing within that within thatmarketing within that within that company which was tremendous I mean justcompany which was tremendous I mean justcompany which was tremendous I mean just lot of learning and growth and thenlot of learning and growth and thenlot of learning and growth and then again a couple of years after that thatagain a couple of years after that thatagain a couple of years after that that was kind of platting out and I left towas kind of platting out and I left towas kind of platting out and I left to start my own business so that was thestart my own business so that was thestart my own business so that was the second reset and then I in AR aroundsecond reset and then I in AR aroundsecond reset and then I in AR around 1999 so I heard about Warren Buffett1999 so I heard about Warren Buffett1999 so I heard about Warren Buffett accidentally in '94 I was 30 years oldaccidentally in '94 I was 30 years oldaccidentally in '94 I was 30 years old at the time and when I read about him Iat the time and when I read about him Iat the time and when I read about him I said there were a couple of bigsaid there were a couple of bigsaid there were a couple of big epiphanies for me so i' had never youepiphanies for me so i' had never youepiphanies for me so i' had never you know gone to business school or investedknow gone to business school or investedknow gone to business school or invested or bought a stock or any of that butor bought a stock or any of that butor bought a stock or any of that but what what really surprised me aboutwhat what really surprised me aboutwhat what really surprised me about Buffett when I read about him in '94
QuestionerBuffett when I read about him in '94 because the first couple of biographies on him had just come out is that basically the framework he was using to make investments is the exact same framework we use as entrepreneurs the the framework to making investments in the stock market and the framework I would use for example when I was running my it business to figure out okay you know where do I want to invest the extra excess Capital I'm looking at the highest return lowest risk possibilities right in the business that's what all of you are doing and so actually Buffett has a quote he said I'm a better businessman because I'm an investor and I'm a better investor because I'm a businessman so he had this very business approach to investing which made a lot of sense to me and at the same time what I noticed at that time was that I didn't
QuestionerI noticed at that time was that I didn't know there was a hedge fund industry butknow there was a hedge fund industry butknow there was a hedge fund industry but I knew there was a mutual fund industryI knew there was a mutual fund industryI knew there was a mutual fund industry when I looked at the mutual fundwhen I looked at the mutual fundwhen I looked at the mutual fund industry I saw that these mutual fundsindustry I saw that these mutual fundsindustry I saw that these mutual funds had hundreds of stockshad hundreds of stockshad hundreds of stocks they had like 80% annual turnover andthey had like 80% annual turnover andthey had like 80% annual turnover and they were violating all these basicthey were violating all these basicthey were violating all these basic framework rules of Ben Graham and Warrenframework rules of Ben Graham and Warrenframework rules of Ben Graham and Warren Buffett and so I said it's reallyBuffett and so I said it's reallyBuffett and so I said it's really strange you know you kind of havestrange you know you kind of havestrange you know you kind of have like people who say that I don't believelike people who say that I don't believelike people who say that I don't believe in gravity so whether you believe inin gravity so whether you believe inin gravity so whether you believe in gravity or not it's going to affect yougravity or not it's going to affect yougravity or not it's going to affect you so I had a theory at that time that ifso I had a theory at that time that ifso I had a theory at that time that if someone who hadsomeone who hadsomeone who had no investingno investingno investing experience up applied buffets frameworkexperience up applied buffets frameworkexperience up applied buffets framework tototo investing that person should do betterinvesting that person should do betterinvesting that person should do better than the 90% of yoyo's runningthan the 90% of yoyo's runningthan the 90% of yoyo's running funds and you know an idea is like anfunds and you know an idea is like anfunds and you know an idea is like an everyone has one it doesn't meaneveryone has one it doesn't meaneveryone has one it doesn't mean anything so I I had sold a small portionanything so I I had sold a small portionanything so I I had sold a small portion of my business at that time I had aboutof my business at that time I had aboutof my business at that time I had about a million dollars after taxes and
Questionera million dollars after taxes and everything so I said okay I'll take the million I'll invest it in the public markets and I want to see what happens I want to see what I can do it went really well I think in in 5 years the million was 13 million it was like north of 70% of year and so I said Well Done Mish I knew you could do this and so I was more and more interested in investing and compounding less and less interested in running an IT business with 170 people and my job turned into basically hurting cats you know you know about about hurting cats I think you're like everyday hurting cats and so I said I don't want to hurt cats I'm done with hurting cats I just want to sit in my room with zero employees and just invest and so I had a I called our Forum moderator I said my head is all screwed up I don't want to go to work on Monday there's nobody to
Questionergo to work on Monday there's nobody to go to work on Monday there's nobody to resign to I don't know what the I'm resign to I don't know what the I'm resign to I don't know what the I'm supposed to do you know because I'm supposed to do you know because I'm supposed to do you know because I'm ready to hit the reset button so I had ready to hit the reset button so I had ready to hit the reset button so I had a nice session with my forum and they a nice session with my forum and they a nice session with my forum and they said something really simple to me they said something really simple to me they said something really simple to me they said you can own the business without said you can own the business without said you can own the business without running it I said oh why did I think running it I said oh why did I think running it I said oh why did I think about that that's a great idea and so about that that's a great idea and so about that that's a great idea and so they said look put a smile on your face they said look put a smile on your face they said look put a smile on your face go back to work for 6 months start a go back to work for 6 months start a go back to work for 6 months start a search for a CEO in 6 months or less search for a CEO in 6 months or less search for a CEO in 6 months or less you'll find the guy hand over the reins you'll find the guy hand over the reins you'll find the guy hand over the reins and then go to what whatever hell you and then go to what whatever hell you and then go to what whatever hell you want to do and so that that's what I did want to do and so that that's what I did want to do and so that that's what I did and I left the business new CEO came in and I left the business new CEO came in and I left the business new CEO came in and then about 4 five weeks after that and then about 4 five weeks after that and then about 4 five weeks after that he called me and said someone wants to he called me and said someone wants to he called me and said someone wants to buy the buy the buy the company and he had relocated from Dallas company and he had relocated from Dallas company and he had relocated from Dallas my business was in Chicago I don't want my business was in Chicago I don't want my business was in Chicago I don't want to pull the rug out from under him so I to pull the rug out from under him so I to pull the rug out from under him so I said I don't want to do anything here
Othersaid I don't want to do anything here that is disruptive to you what do you want to what what what what would you like me to do he said sell it so all his options everything was going to West on change of control instantaneously after 4 weeks of work so and the other beautiful thing was that the guy the buyers wanted to lock him up they wanted nothing to do with me so they were going to give him a new deal you know so he Rings the register after 4 weeks gets a new deal so of course he's saying sell it you know so we sold the business and the only thing they asked of me is they said we want to non-compete that you know you're not going to enter the it business for like four years I said look can we make it like 40 years and we can add a few more million to the purchase price they said no we just want four years you know so I tried
Questionerjust want four years you know so I tried to get some more money for them but Ito get some more money for them but Ito get some more money for them but I knew I wasn't going back to hurting catsknew I wasn't going back to hurting catsknew I wasn't going back to hurting cats you know so that's the story how did youyou know so that's the story how did youyou know so that's the story how did you th sorry but how did you 13x a millionth sorry but how did you 13x a millionth sorry but how did you 13x a million doll in 5 yearsthat's well I mean now that would getthat's well I mean now that would getthat's well I mean now that would get little involved all right but basicallylittle involved all right but basicallylittle involved all right but basically you know Buffett had a qut this year andyou know Buffett had a qut this year andyou know Buffett had a qut this year and I think you saw the video the circle theI think you saw the video the circle theI think you saw the video the circle the wagons video right so Buffett had awagons video right so Buffett had awagons video right so Buffett had a quote this year I mean he had a fewquote this year I mean he had a fewquote this year I mean he had a few sentences this year in his annual reportsentences this year in his annual reportsentences this year in his annual report he said that in 58 years of running bookhe said that in 58 years of running bookhe said that in 58 years of running book III haway most of my investing decisionshaway most of my investing decisionshaway most of my investing decisions have been no better than sohave been no better than sohave been no better than so so and he said there've only been 12so and he said there've only been 12so and he said there've only been 12 decisions that have beendecisions that have beendecisions that have been spectacular so if I look at the 58espectacular so if I look at the 58espectacular so if I look at the 58e history of BU hatway and Warren Buffetthistory of BU hatway and Warren Buffetthistory of BU hatway and Warren Buffett and Charlie Munger these guys are likeand Charlie Munger these guys are likeand Charlie Munger these guys are like the gods of investing I mean they'rethe gods of investing I mean they'rethe gods of investing I mean they're really good at what they do right thereally good at what they do right thereally good at what they do right the gods of investing are saying
Questionergods of investing are saying that they probably made about more than 300 different Investments over that almost 60-year period and out of those 300 only 12 mattered so it was like a 4% hit rate so now the other 296 were not losers they maybe flatlined or did a little bit but didn't really move the needle much and so investing has this has this trait of where you you can get and you know you see this in your businesses as well you can get outsize returns right and but the outside returns are not going to happen to every investment you make and if I look at Warren and Charlie I think they're like so good at what they do 4% is a shockingly low number to do well at but the ones that they did well on those 12 decisions that move the needle those were just so spectacular so in that in that period when I had that 13x there were 200
Questioner13x there were 200 Baggers two stack two stocks that went up 100x okay in in one case I had put 100,000 and it became it was like 9 or 10 million and the other one was much smaller that was a overseas investment I had done it was only about 10,000 but that was about a 1 150x that became what a million and a half and so if you take out those two it's just H hum you know 1 million becomes like 2 three million or something but but if you um put those in it changes and and basically that has happened a few times
Questionerso yeah question so for a room of people who are running their own businesses and betting on themselves every day one of the things that I remember Buffet saying a long time ago this he he knows what he's but he does so much research and he and wherever he's putting his money he's more than any of us could ever spend that time or our
Questionerus could ever spend that time or our chosen to spend time doing that so what like and I'm going to hold you to this like if if we were you know your family members and we all had businesses that were doing well and giving us outside returns compared to the market what kind of a ratio would you say hey you should take this percentage of your network and just leave you put it inp and just don't even think about it and then the rest of this you know this best you know your business best keep pouring it back into your business
Warrenwell usually I think the issue you're going to run into and you know you would describing your business to me briefly but I think the issue most of you will run into is your business cannot absorb the cash it generates at high rates that it's already generating so what I'm saying is the invested Capital that you have and
Questionerthe invested Capital that you have and the cash flows that's generating isthe cash flows that's generating isthe cash flows that's generating is spectacular for many of you if you werespectacular for many of you if you werespectacular for many of you if you were to put another 10 million in you wouldto put another 10 million in you wouldto put another 10 million in you would not get a return on that because thenot get a return on that because thenot get a return on that because the business cannot absorb it right andbusiness cannot absorb it right andbusiness cannot absorb it right and because like in your case you're not inbecause like in your case you're not inbecause like in your case you're not in a capital intensive business so evena capital intensive business so evena capital intensive business so even putting a million in is hard what areputting a million in is hard what areputting a million in is hard what are you going to do like I mean you knowyou going to do like I mean you knowyou going to do like I mean you know it's just difficult to to spend them Mit's just difficult to to spend them Mit's just difficult to to spend them M so basically I think in your case caseso basically I think in your case caseso basically I think in your case case or in many cases in vipo businessesor in many cases in vipo businessesor in many cases in vipo businesses there really isn't a choice of puttingthere really isn't a choice of puttingthere really isn't a choice of putting it in the business because you're goingit in the business because you're goingit in the business because you're going to naturally see that so A simple rule Ito naturally see that so A simple rule Ito naturally see that so A simple rule I would use is if I'm not getting like awould use is if I'm not getting like awould use is if I'm not getting like a 20 30 40% annual return by putting it20 30 40% annual return by putting it20 30 40% annual return by putting it into my business with a very low riskinto my business with a very low riskinto my business with a very low risk I'm not interested right so if whateverI'm not interested right so if whateverI'm not interested right so if whatever the business can absorb at those typesthe business can absorb at those typesthe business can absorb at those types of returns it should absolutely takeof returns it should absolutely takeof returns it should absolutely take that the rest index the rest and you're
Questionerthat the rest index the rest and you're done uh what was the hardest shift from operator to investor like what was the did you find it as exciting as rewarding what was the hardest of skill or discipline to develop
Questionermy Forum uh in Chicago we had done there was a really amazing Retreat we had where we had these two industrial psychologists who had come in and they basically interviewed us all interviewed our spouses our employees our friends did full 360s on us and basically they gave us what I call our owner's manual they basically cracked a head open and said this is who you are and when they did that for me they basically said to me that we have no idea because that time I was still running the it business I was about to leave the business they said we don't even have any idea how you actually function every day with all those people and all of that they said
Questionerthose people and all of that they said so they told me you like to play games you like to play math games you games you like to play math games you games you like to play math games you like to play single player games so they like to play single player games so they like to play single player games so they said you're not the kind of guy who's said you're not the kind of guy who's said you're not the kind of guy who's happy being in a soccer team where happy being in a soccer team where happy being in a soccer team where you're one of the guys and the outcome you're one of the guys and the outcome you're one of the guys and the outcome depends on the team so I like to play depends on the team so I like to play depends on the team so I like to play games where outcome depends on me and so games where outcome depends on me and so games where outcome depends on me and so they said the the company you're running they said the the company you're running they said the the company you're running is just a ridiculous mismatch and then is just a ridiculous mismatch and then is just a ridiculous mismatch and then when I described to them what I was I when I described to them what I was I when I described to them what I was I was just about to start P Bri fund that was just about to start P Bri fund that was just about to start P Bri fund that described to them what I was going to be described to them what I was going to be described to them what I was going to be doing they said this is perfect right doing they said this is perfect right doing they said this is perfect right and this was 24 24 years ago and this was 24 24 years ago and this was 24 24 years ago and one of them became one of my and one of them became one of my and one of them became one of my original investors and I was telling him original investors and I was telling him original investors and I was telling him listen man I haven't done this before listen man I haven't done this before listen man I haven't done this before you know you don't want to do this he you know you don't want to do this he you know you don't want to do this he said no no no we'll do fine you know I said no no no we'll do fine you know I said no no no we'll do fine you know I looked in your head I know what's going looked in your head I know what's going looked in your head I know what's going on it's okay and
Questioneron it's okay and so when I when covid hit and we had to work from home I actually found that I was more productive working from home and I'm actually really happy when I have no human interaction I can deal with humans in very small doses like you know after something like this I need a long period with no humans you know to kind of get back back to square one and so actually for each of us the answer is different but for me so like I found work from home is is better so I we I have an office in Austin I stopped going to work and it's so much better I'm more productive everything is great and all the tools are there now that we can do everything remotely so from my point of view I don't miss it at all I think it's great I don't want to do anything else it's really good so one of the things like you mentioned was like you know
Questionerlike you mentioned was like you know this 4% success rate on bigthis 4% success rate on bigthis 4% success rate on big wins a lot of times we make investmentswins a lot of times we make investmentswins a lot of times we make investments in our businesses and we have to cut ourin our businesses and we have to cut ourin our businesses and we have to cut our losses how did you go about thinkinglosses how did you go about thinkinglosses how did you go about thinking about when you pick a stock or anabout when you pick a stock or anabout when you pick a stock or an investment strategy you say like 96%investment strategy you say like 96%investment strategy you say like 96% it's in the 96% not the four how muchit's in the 96% not the four how muchit's in the 96% not the four how much time did you give it how did you whattime did you give it how did you whattime did you give it how did you what was the thought process
Todd Combsyeah on those Imean I think that's a that's a greatmean I think that's a that's a greatmean I think that's a that's a great question and I think the best answer Iquestion and I think the best answer Iquestion and I think the best answer I can give is when it's obvious so you'recan give is when it's obvious so you'recan give is when it's obvious so you're going to know you know you don't want togoing to know you know you don't want togoing to know you know you don't want to be trigger happy but I would say in abe trigger happy but I would say in abe trigger happy but I would say in a few months I mean not a few months in afew months I mean not a few months in afew months I mean not a few months in a in a two or three years the ridingin a two or three years the ridingin a two or three years the riding should be on the wallshould be on the wallshould be on the wall so once once you own a stock that's whenso once once you own a stock that's whenso once once you own a stock that's when you really start learning about ayou really start learning about ayou really start learning about a business you don't really know muchbusiness you don't really know muchbusiness you don't really know much about a business before you buy it it'sabout a business before you buy it it'sabout a business before you buy it it's only after you buy and when it drops 50%only after you buy and when it drops 50%
Todd Combsonly after you buy and when it drops 50% you really become an expert at it you know it really well and so I think it kind of is obvious because you would know I I don't think you want to use the stock price to guide your decisions it would over time become clear what the real economics and realities of the business are and then you can just take it from there so it's it's really important one of the things I try to do before I buy anything is I want to be able to explain it to a 9-year-old in four sentences you know what's the thesis here right it can't be a spreadsheet it needs to be four or five sentences that a nine-year-old is going to understand and so I have a very simple thesis if as time goes on those sentences are no longer applicable there's something flawed in the analysis I had done then we need to move on but it needs to be clear before you
Questioneron but it needs to be clear before you go ingo ingo in I mean I think you have Clarity when youI mean I think you have Clarity when youI mean I think you have Clarity when you are running your business you're makingare running your business you're makingare running your business you're making an investment some capex you have a lotan investment some capex you have a lotan investment some capex you have a lot of clarity about what you're expectingof clarity about what you're expectingof clarity about what you're expecting that to do and you need to have the samethat to do and you need to have the samethat to do and you need to have the same Clarity on the investing side I loveClarity on the investing side I loveClarity on the investing side I love everything you're saying and it's soeverything you're saying and it's soeverything you're saying and it's so true one of the things that you've beentrue one of the things that you've beentrue one of the things that you've been touching on whether it's sort of in yourtouching on whether it's sort of in yourtouching on whether it's sort of in your stories about your daughters or youstories about your daughters or youstories about your daughters or you personally has been sort of the goldenpersonally has been sort of the goldenpersonally has been sort of the golden cff you're able to put around yourcff you're able to put around yourcff you're able to put around your compounding strategy or sort of takingcompounding strategy or sort of takingcompounding strategy or sort of taking the emotion out of like I've got to walkthe emotion out of like I've got to walkthe emotion out of like I've got to walk away from this loser I'm okay doublingaway from this loser I'm okay doublingaway from this loser I'm okay doubling down and concentrating and taking thisdown and concentrating and taking thisdown and concentrating and taking this much risk I think that's one of the themuch risk I think that's one of the themuch risk I think that's one of the the nuances that just like cannot get lostnuances that just like cannot get lostnuances that just like cannot get lost in the points that you're making rightin the points that you're making rightin the points that you're making right because like the janitor I love thatbecause like the janitor I love thatbecause like the janitor I love that story one of the things that I mean he
Questionerstory one of the things that I mean he could have had more you're right but it could have had more you're right but it could have had more you're right but it was because he was able to put that was because he was able to put that was because he was able to put that money away and not go to Hawaii what you money away and not go to Hawaii what you money away and not go to Hawaii what you articulated what do you think about kind articulated what do you think about kind articulated what do you think about kind of the behavioral you know Finance of the behavioral you know Finance of the behavioral you know Finance aspects you clearly are able to cut your aspects you clearly are able to cut your aspects you clearly are able to cut your emotion away from the palpitations that emotion away from the palpitations that emotion away from the palpitations that sometimes I'm sure happens well I think sometimes I'm sure happens well I think sometimes I'm sure happens well I think
Otherthink about that I mean I think I think think about that I mean I think I think think about that I mean I think I think for most of us the answer is to just for most of us the answer is to just for most of us the answer is to just index index index so I think that when you make the so I think that when you make the so I think that when you make the transition from index to picking stocks transition from index to picking stocks transition from index to picking stocks that is a huge leap and that comes with that is a huge leap and that comes with that is a huge leap and that comes with a with a lot a with a lot a with a lot of bells and whistles and caveats and of bells and whistles and caveats and of bells and whistles and caveats and you know thinking and whatnot so I I you know thinking and whatnot so I I you know thinking and whatnot so I I would say that the amazing thing about would say that the amazing thing about would say that the amazing thing about investing is that a no nothing investing is that a no nothing investing is that a no nothing investor who just index spends less than investor who just index spends less than investor who just index spends less than they earn Etc will end up winning the they earn Etc will end up winning the they earn Etc will end up winning the race and there's a reason why the index race and there's a reason why the index race and there's a reason why the index works so if you look at the S&P right so
Questionerworks so if you look at the S&P right soworks so if you look at the S&P right so S&P has 500 stocks 500 companies whenS&P has 500 stocks 500 companies whenS&P has 500 stocks 500 companies when you look at the individual names ofyou look at the individual names ofyou look at the individual names of these companies they're very successfulthese companies they're very successfulthese companies they're very successful I mean that's how they got on thatI mean that's how they got on thatI mean that's how they got on that list they make some changes to the indexlist they make some changes to the indexlist they make some changes to the index like couple of companies might go in alike couple of companies might go in alike couple of companies might go in a year and a couple come in but for theyear and a couple come in but for theyear and a couple come in but for the most part it stays static right so whatmost part it stays static right so whatmost part it stays static right so what happens is the the index is too dumb tohappens is the the index is too dumb tohappens is the the index is too dumb to know that it ownsknow that it ownsknow that it owns Apple it's too dumb to sell Apple it'sApple it's too dumb to sell Apple it'sApple it's too dumb to sell Apple it's too dumb to sell Microsofttoo dumb to sell Microsofttoo dumb to sell Microsoft it's too dumb to do anything and so whatit's too dumb to do anything and so whatit's too dumb to do anything and so what ends up happening if you think about theends up happening if you think about theends up happening if you think about the 4% situation is there's a lot of4% situation is there's a lot of4% situation is there's a lot of companies in the S&P that will not docompanies in the S&P that will not docompanies in the S&P that will not do well but that those don't matter becausewell but that those don't matter becausewell but that those don't matter because the thing is it's got some that will dothe thing is it's got some that will dothe thing is it's got some that will do exceptionally well it has Nvidia inexceptionally well it has Nvidia inexceptionally well it has Nvidia in there right it's going to have the fullthere right it's going to have the fullthere right it's going to have the full run of Nvidia which nobody else is goingrun of Nvidia which nobody else is goingrun of Nvidia which nobody else is going to have everyone else will join that
Questionerto have everyone else will join that bandwagon after it's a trillion dollar market cap but it was in there in the S&P at 20 billion or 10 billion right and so it just had that entire run in the index so the index is very powerful because basically you have ownership of some of the best businesses in the planet and they're running and they're doing their thing and you don't to think about it and it's tax efficient and everything
Questionerso like I said there's three variables right so one variable that you you just put that that away the the other variable is you know spending less than you earn you have more control over that and the Runway start as early as you can you know so that's it yeah so when you talk about the 100 200x Investments can you describe the asset class that those were in and I say that because I'm typically the person that people invest in to try
Questionerthe person that people invest in to try to get 100 200x so I'm just thinking with those startups with those Venture what what type of investors have that profile I don't take risk I'm not a risk guy so the the things I invest in if I were in real time to tell my investors what I was doing they would throw up all over the place since you're not my investors and I don't think you're going to throw up but I can tell you so for example 5 years ago I started going to Turkey Istanbul and I had a good friend there who basically is a hardcore deep value investor running a small fund there and turkey had had a lot of dislocation it still has a lot of dislocation with currency that's very unstable and mass Exodus of foreign investors so I told my friend that listen I want to come to Istanbul and I just want to visit the companies that
Questionerjust want to visit the companies that you actually have in your fund don't take me to any companies that you think are great and this and that if you don't actually have your money in the in those companies I don't want to see them right and so I went to Istanbul and I think and I've been going every year since other than the co years but in the second trip I made in 2019 he took me to see this company where the market cap was $6 million us as we were driving over he tells me Mish the liquidation value of the business is somewhere between 600 to 800 million so I said is it a fraud like you know what's going on here what kind of people are running the place he said no he said I have money in it and he said it's really simple it's actually a a Reit basically they they rent warehouse space out and they are the largest Warehouse operator in Turkey
Questionerlargest Warehouse operator in Turkey they had 12 million square F feet of of Class A warehouses I mean their clients were Amazon Ikea car 4 Mercedes Toyota Etc 99% lease inflation index leases all of that so I met with these guys the father and son who run it they look perfectly fine honorable people to me I went and visited the warehouses they looked exceptional great locations and I thought that it would be hard to get the stock because it's like such such a nanoc cap but turkey is a interesting place because the local investors in Turkey have a complete Gambler approach to investing so their approach to investing is buy a stock at 10:00 sell it at 3:00 and make 10% that's their model good luck with that okay and Buffett has a quote he says that the stock market is a mechanism to transfer wealth from the active to the inactive so I said if I'm or like he say
Questionerinactive so I said if I'm or like he sayinactive so I said if I'm or like he say it's like playing bridge with someoneit's like playing bridge with someoneit's like playing bridge with someone who doesn't look at the cards so I saidwho doesn't look at the cards so I saidwho doesn't look at the cards so I said if I'm going to be buying companies fromif I'm going to be buying companies fromif I'm going to be buying companies from these types of people this will be athese types of people this will be athese types of people this will be a very fun experience and I was veryvery fun experience and I was veryvery fun experience and I was very surprised I for $8surprised I for $8surprised I for $8 million I was able to get one3 of themillion I was able to get one3 of themillion I was able to get one3 of the company and basically the tradingcompany and basically the tradingcompany and basically the trading volumes are really high in Turkeyvolumes are really high in Turkeyvolumes are really high in Turkey because of this so if you take out whatbecause of this so if you take out whatbecause of this so if you take out what The Insider Z and what the Foreigner ownThe Insider Z and what the Foreigner ownThe Insider Z and what the Foreigner own the floating sock Cycles every 9 daysthe floating sock Cycles every 9 daysthe floating sock Cycles every 9 days the entire company's market cap Cyclesthe entire company's market cap Cyclesthe entire company's market cap Cycles every 9 days in the US it might be likeevery 9 days in the US it might be likeevery 9 days in the US it might be like one and a half times a year or somethingone and a half times a year or somethingone and a half times a year or something for most companies or two times a yearfor most companies or two times a yearfor most companies or two times a year at the most every 9 days is veryat the most every 9 days is veryat the most every 9 days is very hyperactive right so anyway we we boughthyperactive right so anyway we we boughthyperactive right so anyway we we bought one/ third of the companyone/ third of the companyone/ third of the company and I obviously in last few years youand I obviously in last few years youand I obviously in last few years you know been visiting them and know themknow been visiting them and know themknow been visiting them and know them well and so on and really great operatorwell and so on and really great operator
Otherwell and so on and really great operator so that 600 8800 million liquidation value is now approaching about 2 billion it's been about 4 years since we bought and the currency's collapsed so when I bought I was 5 ler to the dollar it's 28 L to the dollar in dollars the market cap now is 600 million still sitting at 1/3 of where I think it needs to be but in L it's an infinite return but but nobody who cares about that so from my point of view the father and son who run this are really smart they very astute Capital allocators we have no plans to sell that and and of course the issue I run into is that it's become such a large portion of some of my funds that I have to keep giving disclaimers to all my investors that you know like in One Fund this is not the only investment we have in Turkey but all the turkey Investments are so we we had this type
WarrenInvestments are so we we had this type of a situation in Turkey because thereof a situation in Turkey because thereof a situation in Turkey because there was just a mass Exodus going on likewas just a mass Exodus going on likewas just a mass Exodus going on like people leaving and then the local marketpeople leaving and then the local marketpeople leaving and then the local market and all that I own the Coke bottler inand all that I own the Coke bottler inand all that I own the Coke bottler in Turkey which bottles in about 12Turkey which bottles in about 12Turkey which bottles in about 12 countries and they also own the they owncountries and they also own the they owncountries and they also own the they own the number one beer businesses in Turkeythe number one beer businesses in Turkeythe number one beer businesses in Turkey 55% market share and they have number55% market share and they have number55% market share and they have number one or number two Market sh in about 12one or number two Market sh in about 12one or number two Market sh in about 12 countries on beer including Ukraine andcountries on beer including Ukraine andcountries on beer including Ukraine and RussiaRussiaRussia and I paid nothing for those businessesand I paid nothing for those businessesand I paid nothing for those businesses what I'm saying is I'm looking for I'mwhat I'm saying is I'm looking for I'mwhat I'm saying is I'm looking for I'm looking for no-brainers I'm looking forlooking for no-brainers I'm looking forlooking for no-brainers I'm looking for places where there is a lot ofplaces where there is a lot ofplaces where there is a lot of irrational hatred and irrationalirrational hatred and irrationalirrational hatred and irrational behavior and then when all of that thenbehavior and then when all of that thenbehavior and then when all of that then we hone in on things that basically Iwe hone in on things that basically Iwe hone in on things that basically I can explain in threecan explain in threecan explain in three sentences so that's what wesentences so that's what wesentences so that's what we do
Questionerhow much weight do you put on thedo how much weight do you put on thedo how much weight do you put on the macro like so for examp zero but like tomacro like so for examp zero but like tomacro like so for examp zero but like to does the outside influence of like thedoes the outside influence of like the
Questionerdoes the outside influence of like the vanguards and black rocks on the S&P vanguards and black rocks on the S&P vanguards and black rocks on the S&P does that concern you at all
Warrenno because the the amount that's indexed uh the the amount that's indexed uh the the amount that's indexed uh relative to the side of the market is relative to the side of the market is relative to the side of the market is still still still small there are concerns with them about small there are concerns with them about small there are concerns with them about how they vote and things like that and how they vote and things like that and how they vote and things like that and all of that they have some influence but all of that they have some influence but all of that they have some influence but I don't think it matters in terms of how I don't think it matters in terms of how I don't think it matters in terms of how the investor is going to do so just if the investor is going to do so just if the investor is going to do so just if you look at the total amount in the SNP you look at the total amount in the SNP you look at the total amount in the SNP versus the total Market market cap I versus the total Market market cap I versus the total Market market cap I mean the S&P index versus the market cap mean the S&P index versus the market cap mean the S&P index versus the market cap of the 500 companies is a huge Delta so of the 500 companies is a huge Delta so of the 500 companies is a huge Delta so it's okay if if that number start to it's okay if if that number start to it's okay if if that number start to converge which I don't think can happen converge which I don't think can happen converge which I don't think can happen I think it would take several decades I think it would take several decades I think it would take several decades for that to happen but if that were to for that to happen but if that were to for that to happen but if that were to happen then it becomes some issue but happen then it becomes some issue but happen then it becomes some issue but not an issue right now
Questionerhow much of your investing at any has been private investing at any has been private investing at any has been private companies versus it's all public so it's
Questionercompanies versus it's all public so it's it's all public because the thing is Iit's all public because the thing is Iit's all public because the thing is I cannot get these deals in negotiatedcannot get these deals in negotiatedcannot get these deals in negotiated transactionstransactionstransactions so I think private Equity is a very bigso I think private Equity is a very bigso I think private Equity is a very big industry in the US and it's it has a lotindustry in the US and it's it has a lotindustry in the US and it's it has a lot of headwinds mainly because there's tooof headwinds mainly because there's tooof headwinds mainly because there's too much money chasing and and any time Imuch money chasing and and any time Imuch money chasing and and any time I mean all of you will seemean all of you will seemean all of you will see that anytime you are looking to put yourthat anytime you are looking to put yourthat anytime you are looking to put your company forcompany forcompany for sale it goes into ansale it goes into ansale it goes into an auction and then it gets bought at Iauction and then it gets bought at Iauction and then it gets bought at I mean who's in the title business you'remean who's in the title business you'remean who's in the title business you're in the the title business right you werein the the title business right you werein the the title business right you were talking about the at the peak all thesetalking about the at the peak all thesetalking about the at the peak all these guys sold right at Peak valuationsguys sold right at Peak valuationsguys sold right at Peak valuations that's when the sellers are going tothat's when the sellers are going tothat's when the sellers are going to sell they can see the peak the idiot PEsell they can see the peak the idiot PEsell they can see the peak the idiot PE guys can't and it's other people's moneyguys can't and it's other people's moneyguys can't and it's other people's money that they're playing with collectingthat they're playing with collectingthat they're playing with collecting fees so what do they care you knowfees so what do they care you knowfees so what do they care you know so so I I actually don't I don't like toso so I I actually don't I don't like toso so I I actually don't I don't like to deal with private anythingdeal with private anythingdeal with private anything because usually I'm not dealing with because usually I'm not dealing withbecause usually I'm not dealing with with someone stupid on the otherwith someone stupid on the otherwith someone stupid on the other side you know I like to deal with stupidside you know I like to deal with stupidside you know I like to deal with stupid people on the other side you knowso all right thank you very much thankso all right thank you very much thankso all right thank you very much thank you all