Other[Music][Music][Music][Music] so Mones poite is the managing partnerso Mones poite is the managing partnerso Mones poite is the managing partner of poite investment funds inspired byof poite investment funds inspired byof poite investment funds inspired by the original 1950s Buffet Partnershipsthe original 1950s Buffet Partnershipsthe original 1950s Buffet Partnerships and a close replica of the originaland a close replica of the originaland a close replica of the original Buffet partnership rules from inceptionBuffet partnership rules from inceptionBuffet partnership rules from inception in 1999 through Decemberin 1999 through Decemberin 1999 through December 2023 uh 100,000 investment in po funds2023 uh 100,000 investment in po funds2023 uh 100,000 investment in po funds had grown to 1.83 million this equals tohad grown to 1.83 million this equals tohad grown to 1.83 million this equals to an annualized a gain of more than 12%an annualized a gain of more than 12%an annualized a gain of more than 12% versus 7% for the FP 500 Mr P is theversus 7% for the FP 500 Mr P is theversus 7% for the FP 500 Mr P is the founder and chairman of the ductionfounder and chairman of the ductionfounder and chairman of the duction Foundation which is a public us 501cFoundation which is a public us 501cFoundation which is a public us 501c charity the duction focuses on povertycharity the duction focuses on povertycharity the duction focuses on poverty alleviation through education Monesalleviation through education Monesalleviation through education Mones loves playing duplicate bridge andloves playing duplicate bridge andloves playing duplicate bridge and received his first lifetime band in 2019received his first lifetime band in 2019received his first lifetime band in 2019 from playing Blackjack at Las Vegasfrom playing Blackjack at Las Vegasfrom playing Blackjack at Las Vegasfrom playing Blackjack at Las Vegas casino with all that let's give a bigcasino with all that let's give a bigcasino with all that let's give a big round ofla Applause to our dearest guestround ofla Applause to our dearest guestround ofla Applause to our dearest guest mes P
Questionerwell it's great to be here andwell it's great to be here andwell it's great to be here and wonderful to have Uno hosting us sowonderful to have Uno hosting us sowonderful to have Uno hosting us so thank you Professor Lou and the team at
Otherthank you Professor Lou and the team at UNO it's wonderful to be here it's kind of Hallowed Ground to be able to speak to all of you and I'll uh try to keep my monologue brief basically I'm more interested in learning what you guys want to talk about what I'm going to do is last year I had talked about this concept of circling the wagon which I think is a important concept for my vantage point on getting great results on investments the best way I know to learn is to teach and so actually I have an ulterior motive for being here but basically trying to teach myself and so what I'm going to talk about today are some thoughts and ideas that are not fully formed so you guys are the guinea pigs thank you so much I actually have never talked about these things before and I don't actually have them developed enough to be a framework I would think that maybe in the next few
OtherI would think that maybe in the next few months or maybe year or two we might put it together into a a tight framework but in the meanwhile I'm excited to at least help get some of these ideas kind of get my head around them so we know that the circle the wagons concept is that when we find ourselves in the for fortunate situation of a partial or complete ownership of a business that has you know great economics and wonderful prospects that basically we hang on to those businesses and we don't try to become too cute about you know is it overvalued or should we buy something else etc etc less is more less activity is is more profitable and so basically going down that path is is a great way to go but that concept kind of skims over the notion of intrinsic value you know because intrinsic value basically at the end is the Bedrock that we base
Questionerat the end is the Bedrock that we base everything on the definition of intrinsic value is painfully simple uh you know John B Williams came up with it probably close to 100 years ago it's just the sum of all the cash a business will produce and distribute between its start and end and that's basically the intrinsic value of a business discounted to presid value by some reasonable interest rate so the definition is really simple figuring it out is far from simple and trying to figure out what a business might produce 5 years or 10 years or 15 years from now becomes somewhat complicated and if you look at a business like bushire haway that most of us are familiar with both Warren and Charlie have commented that they both have an idea about the intrinsic valuable Burkshire and if they were both to write down that number or range of numbers they would not be identical they
Questionernumbers they would not be identical they would be somewhat different in that total Warren has also said and what busha has also done is they have engaged in BuyBacks of the stock at prices that they believe is well below intrinsic value so I think recently they were willing to buy back shares at 1.2x of Book value tangible Book value and both Buffett and Munger have commented that as Burkshire has become become more of a collection of wholly owned businesses tangible Book value becomes less of a uh valid metric to Value Burkshire so to give you an example you know when they bought Seas candy they paid more than three times Book value for seeds and so if you were valuing Burkshire at like 1.2 times book you would basically undervalue a business like if you look at business like Burlington Northern Railway and you looked at it from replacement cost point of view to
Questionerfrom replacement cost point of view to replace that railroad you know going transcontinental Etc probably couldn't be done but even if you even if You Were Somehow able to do it it would exceed in my opinion would exceed the market cap of Burkshire probably north of 700 800 billion might be over a trillion to replicate that Railroad and so how would would you value Burlington Northern you know if you valued it at those numbers that might be overstated because they don't have an earnings power that would correlate with that type of a book value so for many reasons Book value is a inadequate measure I also feel that when when Buffett and Munger say that they have a range of the intrinsic value of Burkshire in their mind I think what they are thinking about is very likely to be a number less than two times Book value and if you look at bursha haway
Questionervalue and if you look at bursha hawayvalue and if you look at bursha haway today for example it trades attoday for example it trades attoday for example it trades at approximately one and a half times Bookapproximately one and a half times Bookapproximately one and a half times Book value you know current currentvalue you know current currentvalue you know current current valuations were one and a half times andvaluations were one and a half times andvaluations were one and a half times and I would say they would both consider itI would say they would both consider itI would say they would both consider it probably optimistic to Value Burkshireprobably optimistic to Value Burkshireprobably optimistic to Value Burkshire two times Book value as I thought abouttwo times Book value as I thought abouttwo times Book value as I thought about this what I realized is that when youthis what I realized is that when youthis what I realized is that when you look at bushire Hathway's past what youlook at bushire Hathway's past what youlook at bushire Hathway's past what you find is that there have been times infind is that there have been times infind is that there have been times in the past when Burkshire has been verythe past when Burkshire has been verythe past when Burkshire has been very willing to issue stock they issued stockwilling to issue stock they issued stockwilling to issue stock they issued stock to buy Dexter shoes which war would liketo buy Dexter shoes which war would liketo buy Dexter shoes which war would like to forget about they issued stock to buyto forget about they issued stock to buyto forget about they issued stock to buy Genry they also issued stock to buyGenry they also issued stock to buyGenry they also issued stock to buy Burlington Northern so there were timesBurlington Northern so there were timesBurlington Northern so there were times when even though they are reluctant towhen even though they are reluctant towhen even though they are reluctant to issue stock they were very willing toissue stock they were very willing toissue stock they were very willing to issue stock to get these transactionsissue stock to get these transactionsissue stock to get these transactions done when you look at Buffett himselfdone when you look at Buffett himselfdone when you look at Buffett himself he's never bought or sold a share ofhe's never bought or sold a share of
Questionerhe's never bought or sold a share of Burkshire in the the entire almost 60 years of running Burkshire his ownership has stayed static so even when the price has gone down a lot he hasn't bought anything and when Burkshire has gotten into what some might consider youup for pricing he hasn't sold anything so even though bsha Hathaway has engaged in transactions periodically in terms of issuing shares and buying back shares Warren bu Buffett himself has never never done that so when I think about this notion of intrinsic value and you think about this notion that Warren and Charlie put forth that probably the value of burshire is less than two times Book value I don't think that fully captures things so if we for example if we go back let's say we go back to 1990 you know 34 years back stock was trading at that time at a proximately $4,000 a
Questioner$4,000 a share and if you multiplied by one and a half million shares which is approximately what they had outstanding then and even now it had a $6 billion market cap at the time and Book value was probably some fraction of that maybe might be 3 or 4 billion if you were to come up then and say okay we'll apply this kind of two times of Book value multiple as a shorthand for intrinsic value you would end up with some number less than $88,000 a share maybe $6,000 a share or something it would be it' be some number not that far off from $4,000 market price but we know clearly since we are in the future you know in 1990 we couldn't see it because we couldn't see the future cash flow stream right if we step into the future and we look at the future cash flow streams from 1990 to 2024 and then you discount all of that back back what you would end up with is
Questionerback back what you would end up with is a number that would be much higher than a number that would be much higher than a number that would be much higher than even $10 or $20,000 a share you would even $10 or $20,000 a share you would even $10 or $20,000 a share you would end up with a number of intrinsic value end up with a number of intrinsic value end up with a number of intrinsic value that would be significantly above that would be significantly above that would be significantly above numbers that Warren and Charlie put numbers that Warren and Charlie put numbers that Warren and Charlie put forth as the likely intrinsic value what forth as the likely intrinsic value what forth as the likely intrinsic value what is the intrinsic value of Burkshire is the intrinsic value of Burkshire is the intrinsic value of Burkshire right is it using a metric like Warren right is it using a metric like Warren right is it using a metric like Warren and Charlie tell us to use which is you and Charlie tell us to use which is you and Charlie tell us to use which is you know some premium to book or is it know some premium to book or is it know some premium to book or is it something which is more where you something which is more where you something which is more where you actually run some assumptions on future actually run some assumptions on future actually run some assumptions on future cash flows and then try to Discount back cash flows and then try to Discount back cash flows and then try to Discount back and in my simplistic way of thinking and in my simplistic way of thinking and in my simplistic way of thinking about it I think there might be two about it I think there might be two about it I think there might be two different intrinsic values two different different intrinsic values two different different intrinsic values two different ways to describe intrinsic value and ways to describe intrinsic value and ways to describe intrinsic value and those two different ways to describe those two different ways to describe those two different ways to describe intrinsic value might be correlating intrinsic value might be correlating intrinsic value might be correlating to the two different ways Warren Buffett to the two different ways Warren Buffett to the two different ways Warren Buffett deals with Burkshire stock he deals with deals with Burkshire stock he deals with deals with Burkshire stock he deals with B Burkshire stock one way when Burkshire
QuestionerB Burkshire stock one way when BurkshireB Burkshire stock one way when Burkshire is either buying businesses or buyingis either buying businesses or buyingis either buying businesses or buying back shares there is some activity withback shares there is some activity withback shares there is some activity with Burkshire shares that goes on in thatBurkshire shares that goes on in thatBurkshire shares that goes on in that realm and then we look at the secondrealm and then we look at the secondrealm and then we look at the second realm which is his own ownership ofrealm which is his own ownership ofrealm which is his own ownership of bursh hathway which never changes youbursh hathway which never changes youbursh hathway which never changes you know absolutely static other than givingknow absolutely static other than givingknow absolutely static other than giving money away to and so on he's basicallymoney away to and so on he's basicallymoney away to and so on he's basically never entertained the notion of sellingnever entertained the notion of sellingnever entertained the notion of selling a share and he said that basically hea share and he said that basically hea share and he said that basically he will in the future as well never sell awill in the future as well never sell awill in the future as well never sell a share in my opinion Warren theshare in my opinion Warren theshare in my opinion Warren the individual had a far better grasp on theindividual had a far better grasp on theindividual had a far better grasp on the intrinsic value of bsha haway than bshaintrinsic value of bsha haway than bshaintrinsic value of bsha haway than bsha haway the company did I think warenhaway the company did I think warenhaway the company did I think waren Buffett the individual understood betterBuffett the individual understood betterBuffett the individual understood better what the value of bursha was so in 199what the value of bursha was so in 199what the value of bursha was so in 199 at the 4,000 per share they may haveat the 4,000 per share they may haveat the 4,000 per share they may have been willing to issue shares to buybeen willing to issue shares to buybeen willing to issue shares to buy businesses but then or even now he's notbusinesses but then or even now he's notbusinesses but then or even now he's not willing to sell the stock at at thosewilling to sell the stock at at those
Questionerwilling to sell the stock at at those prices when I look at my my own example prices when I look at my my own example prices when I look at my my own example I run pabra investment funds which has I run pabra investment funds which has I run pabra investment funds which has wonderful business economics it's a wonderful business economics it's a wonderful business economics it's a great business I haven't really talked great business I haven't really talked great business I haven't really talked very much about the economics of the very much about the economics of the very much about the economics of the general partner of PAB funds but I would general partner of PAB funds but I would general partner of PAB funds but I would just say this that in 25 years of just say this that in 25 years of just say this that in 25 years of running PAB running PAB running PAB funds funds funds our pre-tax our pre-tax our pre-tax margin is about margin is about margin is about 88% so the fees that P funds earns and 88% so the fees that P funds earns and 88% so the fees that P funds earns and has earned over the last 25 has earned over the last 25 has earned over the last 25 years 88% is operating income it's a years 88% is operating income it's a years 88% is operating income it's a great business better than Apple you great business better than Apple you great business better than Apple you know very nice no complaints about life know very nice no complaints about life know very nice no complaints about life okay people have approached me from time okay people have approached me from time okay people have approached me from time to time to buy a portion of the general to time to buy a portion of the general to time to buy a portion of the general partner even though I've never shared partner even though I've never shared partner even though I've never shared financials with financials with financials with them they were very eager to buy an them they were very eager to buy an them they were very eager to buy an interest in the general partner and it interest in the general partner and it interest in the general partner and it didn't even take me 5 Seconds to you didn't even take me 5 Seconds to you didn't even take me 5 Seconds to you know ignore all those offers and turn know ignore all those offers and turn know ignore all those offers and turn them down and and the the reason was them down and and the the reason was them down and and the the reason was pretty simple is that you know if I were
Questionerpretty simple is that you know if I were to try to calculate what is the intrinsic value of the general partner of PAB funds I don't know what that value is I just know that there's a range there's probably a pretty wide range on that and at the upper end of that wide range could be some spectacular numbers right I mean and I and I don't know which way it'll fall in the sense of at the top end or the bottom end so one is that if Warren has ownership of bushire haway and understands the business as well as he does clearly he seales all the all the Great Wide deep mod on Burkshire and you know wants to stay there and same with Charlie Monger more than 90% of net worth in bushire haway there are two there are I I would say there are two ways to think about intrinsic value there's a standard way to think of intrinsic value and then I would say
Otherintrinsic value and then I would say there's another way which is owner intrinsic value or the owner's definition of intrinsic value the owner's definition of intrinsic value is not just this maybe more broader look at the business over much longer periods it also has intangibles related to for example having control right I mean one of the things I realized is that the moment I sold some portion of the general partner there would be a clock on the business because whoever bought that stake at some point would want to monetize it and those types of Concepts were not of interest to me and so there's an aspect of intrinsic value which relates to Future cash flows in both definitions and there's an aspect of it that deals with the intangibles of of these intangible that come with the ownership so when you go back to the the notion of circling the
Questionerback to the the notion of circling the wagons right so circling the wagonswagons right so circling the wagonswagons right so circling the wagons basically like I said it skimmed overbasically like I said it skimmed overbasically like I said it skimmed over the notion of intrinsic value it justthe notion of intrinsic value it justthe notion of intrinsic value it just said that hey you have a great businesssaid that hey you have a great businesssaid that hey you have a great business you just hold on to it and don't ask tooyou just hold on to it and don't ask tooyou just hold on to it and don't ask too many questions but if we were to askmany questions but if we were to askmany questions but if we were to ask some questions you know we would say nosome questions you know we would say nosome questions you know we would say no but you know every business has a finitebut you know every business has a finitebut you know every business has a finite value Etc the reality is that we need tovalue Etc the reality is that we need tovalue Etc the reality is that we need to only get rich once we don't need to getonly get rich once we don't need to getonly get rich once we don't need to get rich multiple times uh in fact you don'trich multiple times uh in fact you don'trich multiple times uh in fact you don't want to go back to go as Charlie sayswant to go back to go as Charlie sayswant to go back to go as Charlie says you know once you get there you don'tyou know once you get there you don'tyou know once you get there you don't want to go back to go and and the secondwant to go back to go and and the secondwant to go back to go and and the second is that you really for the most partis that you really for the most partis that you really for the most part only need to be right once so you mightonly need to be right once so you mightonly need to be right once so you might make 100 investments inmake 100 investments inmake 100 investments in stocks and it's possible that even youstocks and it's possible that even youstocks and it's possible that even you know 90 plus% of them don't work butknow 90 plus% of them don't work butknow 90 plus% of them don't work but some could work so spectacularly thatsome could work so spectacularly thatsome could work so spectacularly that they could make your overall portfoliothey could make your overall portfoliothey could make your overall portfolio look great just I think last couple of
Questionerlook great just I think last couple of days the financial times noted that Warren Buffett in the Burkshire portfolio has bought and sold like 65 stocks which is a lot we don't think of Warren as a Trader you know and and they said the average holding period of the stocks that he owned was like a little over four years Todd and Ted under him uh the FD reported that the they also had pretty large number of Trades and their average holding period was less than 3 years and so you know a large error rate is pretty normal in this business finding the Holy Grail of the great Compounders is few and far between but basically this particular notion of intrinsic value I think is worth paying attention to especially the notion of owner intrinsic value and I think the notion of owner intrinsic value can give us more
Questionermore conviction to hold conviction to hold conviction to hold on rather than just basic it on oh it's on rather than just basic it on oh it's on rather than just basic it on oh it's a great business because when you look a great business because when you look a great business because when you look at a great business so if I take the at a great business so if I take the at a great business so if I take the example of Starbucks more recently example of Starbucks more recently example of Starbucks more recently Starbucks was taken out back and shot in Starbucks was taken out back and shot in Starbucks was taken out back and shot in the last few days you know chopped liver the last few days you know chopped liver the last few days you know chopped liver and and and so is it a business that has secular so is it a business that has secular so is it a business that has secular negative issues in the future or is it a negative issues in the future or is it a negative issues in the future or is it a business that had a speed bump right and business that had a speed bump right and business that had a speed bump right and these things become hard to answer they these things become hard to answer they these things become hard to answer they become hard to answer these in real time become hard to answer these in real time become hard to answer these in real time in the fullness of time we will in the fullness of time we will in the fullness of time we will understand whether it was a speed bump understand whether it was a speed bump understand whether it was a speed bump or something more than a speed bump so or something more than a speed bump so or something more than a speed bump so if we were to look at a business like if we were to look at a business like if we were to look at a business like Starbucks and analyze every speed bump Starbucks and analyze every speed bump Starbucks and analyze every speed bump it would become really hard to be able it would become really hard to be able it would become really hard to be able to hold that business for a long time I to hold that business for a long time I to hold that business for a long time I was listening to a podcast just before was listening to a podcast just before was listening to a podcast just before coming to Omaha with Ken langon you know coming to Omaha with Ken langon you know coming to Omaha with Ken langon you know Ken langon was the founder of Home Depot
QuestionerKen langon was the founder of Home DepotKen langon was the founder of Home Depot and he's got he had multiple great hitsand he's got he had multiple great hitsand he's got he had multiple great hits and the interviewer asked him so likeand the interviewer asked him so likeand the interviewer asked him so like Ken like when you held Home Depot forKen like when you held Home Depot forKen like when you held Home Depot for like more than four decades what type oflike more than four decades what type oflike more than four decades what type of financial analysis did you do on Homefinancial analysis did you do on Homefinancial analysis did you do on Home Depot and what was the continuingDepot and what was the continuingDepot and what was the continuing Financial analysis as it went along andFinancial analysis as it went along andFinancial analysis as it went along and
OtherKen just laughed he said I bet on peopleKen just laughed he said I bet on peopleKen just laughed he said I bet on people and he said I bet on these guys and thatand he said I bet on these guys and thatand he said I bet on these guys and that was the end of the analysis you knowwas the end of the analysis you knowwas the end of the analysis you know there was nothing else I did beyond thatthere was nothing else I did beyond thatthere was nothing else I did beyond that you know he said I'm he said he saidyou know he said I'm he said he saidyou know he said I'm he said he said he's been um married to the same womanhe's been um married to the same womanhe's been um married to the same woman for 68 years she still puts up to himfor 68 years she still puts up to himfor 68 years she still puts up to him with with him and he says that thewith with him and he says that thewith with him and he says that the mental framework he uses to stay marriedmental framework he uses to stay marriedmental framework he uses to stay married to the same woman and the framework heto the same woman and the framework heto the same woman and the framework he uses to hold on to the Home Depot stockuses to hold on to the Home Depot stockuses to hold on to the Home Depot stock are both the same you know basicallyare both the same you know basicallyare both the same you know basically saying that he's all about loyalty so hesaying that he's all about loyalty so hesaying that he's all about loyalty so he said if you want my framework it's
Questionersaid if you want my framework it's loyalty and that's it and the guy had loyalty and that's it and the guy had loyalty and that's it and the guy had multiple 100 Baggers in his lifetime multiple companies that did extremely well for him all because of inactivity and you know he talked about some businesses that we've never heard Ken businesses that we've never heard Ken businesses that we've never heard Ken langon having a stake in he had a take langon having a stake in he had a take langon having a stake in he had a take in Eli Lily that came about when they in Eli Lily that came about when they in Eli Lily that came about when they bought a a business that he had bought a a business that he had bought a a business that he had ownership of and just you know ownership of and just you know ownership of and just you know inactivity never did anything I think inactivity never did anything I think inactivity never did anything I think that was like a 40 bagger for him just that was like a 40 bagger for him just that was like a 40 bagger for him just on the side but while home Deco was on the side but while home Deco was on the side but while home Deco was going these are like other vs on the going these are like other vs on the going these are like other vs on the side that are happening side that are happening side that are happening so so this I think that when we when we so so this I think that when we when we so so this I think that when we when we try to think about intrinsic try to think about intrinsic try to think about intrinsic value from the perspective of an owner value from the perspective of an owner value from the perspective of an owner even if we are not an owner you know if even if we are not an owner you know if even if we are not an owner you know if you think about it so if you had an you think about it so if you had an you think about it so if you had an ownership a small ownership stake in in ownership a small ownership stake in in ownership a small ownership stake in in Starbucks but you thought about it the Starbucks but you thought about it the Starbucks but you thought about it the way how it schults would think about it
Otherway how it schults would think about itway how it schults would think about it for example then I think your lens willfor example then I think your lens willfor example then I think your lens will go out further it'll look out furthergo out further it'll look out furthergo out further it'll look out further into the future and you might be able tointo the future and you might be able tointo the future and you might be able to see things that a quantitative analysissee things that a quantitative analysissee things that a quantitative analysis is not going to show you and so againis not going to show you and so againis not going to show you and so again just to take a step backjust to take a step backjust to take a step back basically this is the limit of what Ibasically this is the limit of what Ibasically this is the limit of what I have to talk about to you today on thishave to talk about to you today on thishave to talk about to you today on this subject given that I've talked to yousubject given that I've talked to yousubject given that I've talked to you I'll reflect back and try to improve onI'll reflect back and try to improve onI'll reflect back and try to improve on the next time I talk about the subjectthe next time I talk about the subjectthe next time I talk about the subject but I like to switch to another subjectbut I like to switch to another subjectbut I like to switch to another subject very quickly and then I'll pass it on sovery quickly and then I'll pass it on sovery quickly and then I'll pass it on so the second subject uh is that againthe second subject uh is that againthe second subject uh is that again going back to the circle the wagonsgoing back to the circle the wagonsgoing back to the circle the wagons concept I had mentioned that you knowconcept I had mentioned that you knowconcept I had mentioned that you know Warren had 12 great super hits in 58Warren had 12 great super hits in 58Warren had 12 great super hits in 58 years that led to the creation ofyears that led to the creation ofyears that led to the creation of burshire hathway and I had speculatedburshire hathway and I had speculatedburshire hathway and I had speculated that he might have made you know 300that he might have made you know 300that he might have made you know 300 decisions but 12 really mattered givendecisions but 12 really mattered givendecisions but 12 really mattered given that you know he's been this hyperactive
Questionerthat you know he's been this hyperactive Trader in the last couple of decades maybe he had five or 600 decisions so it might be even a smaller number like 2 or 3% that really hit the ball out of the park for for all of us the second question that comes up is why is the ability to find hits so spread out right he said he was able to find on average one great idea every five years why would it take and this is Warren Buffett saying this you this is Warren Buffett saying this you know the rest of us humans you know I don't know what that means but maybe one every 25 years then so the question is why does it take so long to be able to identify and invest in a great business and hold on and I think the answer there is that Circle of competence grows very slowly and both War and Charlie circle of competence has expanded dramatically over the last several decades and both of them have said repeatedly that many
Questionerof them have said repeatedly that many of the deals they did in the later decades last few last 10 20 30 years would not have been possible for them in the first 30 years because they were too dumb they wouldn't have understood them the coke investment for example would not have happened without the se's investment so if there's no investment in se's candy there's no investment in the Coca-Cola company and there also no investment in probably Apple because both of those businesses were about Brands it was a an investment related to the power of Brands and where those Brands could go and uh if you look at a business like Koke that Buffett invested in around the 19 late 80s early 90s at that time they put 1/4 of Book value into Coke was a huge bet one of probably the largest bet that Burkshire had made until that point it might be the largest
Questioneruntil that point it might be the largest bit they've ever made so it's very atypical for an insurance company to take a quarter of their entire book value and put it into a a business they don't control and such but they were very confident on that bet and that confidence about the size of the BET and the duration ability to hold on till today and Beyond is because because of the very deep learning that came to them after the Seas candy purchase so Seas candy was bought in 1972 and the very first Coke stock was bought in 1988 16 years I don't think that they would have even fully figured out the framework for Coke until it was into the 80s so for example only area of op operations that B that Warren Buffett got involved in with C candy was changing the price on December 26th every year so he told Chuck Huggins who was running the business please run the
Warrenwas running the business please run the business as if you own it you're not going to hear from us just do what you think makes sense except I Warren Buffett will control pricing and on December 26 he'd sit down with the entire C's Priceless scratch out all the old prices Jack the prices up by more than two or three times the rate of inflation 10 12% a year when inflation might have been running 3 4% a year and he would himself be really surprised that a year later the volumes had gone up 2% not much 2% and that price was accepted by the consumers of seed and then the following year he'd bump it another 10% and he would again be amazingly surprised that it went up another two another 2% in volume now Seas is a California phenomena for the most part California GDP in the 70s 80s was probably growing at 5 or 6% a year it was pretty rapid period of growth for
Questionerit was pretty rapid period of growth for California these heavy price increases in my opinion may have crimped some volume where it did not keep up with California GDP growth it actually was maybe 40% of GDP growth but it didn't matter it was actually a brilliant decision because the you know River of cash coming out of seas when you're bumping up prices at three times the rate of inflation I mean they had paid 25 million for C's I think even going back 10 or 15 years they had collected dividends of more than 2 billion from seas and so again but they saw limitations in Seas the biggest limitation was they repeatedly tried to expand the geography Warren wanted Seas to be in all states he wanted it to be in all countries and he couldn't even make it become dominant in a second state so they repeatedly would open a store in Chicago and they would lose
Questionerstore in Chicago and they would lose money and lose money and lose money they shut it down they'd open one in New York same thing so the number of experiments C did over the years and both Warren and Charlie all the brain power everything they could going at it could never expand the brand Beyond California when they encountered Koch and they read the history of coch they saw Koch had no difficulty in Geographic expansion we have two countries in the world today uh Cub Cuba and North Korea that have no Coke right if tomorrow either of these countries opened up to Coke without a dollar of advertising sales would take off in both those countries I mean the the pop culture embeddedness of the brand and all of that is very powerful so when they compared Coke to C's C's was already home run but they saw this was home run to the power of home run right
Questionerhome run to the power of home run righthome run to the power of home run right and it became a no-brainer so like everyand it became a no-brainer so like everyand it became a no-brainer so like every share that they could buy they wereshare that they could buy they wereshare that they could buy they were buying every share they could andbuying every share they could andbuying every share they could and so that's the reason these hits show upso that's the reason these hits show upso that's the reason these hits show up every 5 years for for Berkshireevery 5 years for for Berkshireevery 5 years for for Berkshire because coming up and figuring out thesebecause coming up and figuring out thesebecause coming up and figuring out these types of insights into brandstypes of insights into brandstypes of insights into brands intangibles does it travel theintangibles does it travel theintangibles does it travel the aftertaste all these different thingsaftertaste all these different thingsaftertaste all these different things that come up with Coke and seas or withthat come up with Coke and seas or withthat come up with Coke and seas or with apple these just take a long time itapple these just take a long time itapple these just take a long time it just takes a long time to actually getjust takes a long time to actually getjust takes a long time to actually get your head around them and so with thatyour head around them and so with thatyour head around them and so with that those are my comments so I appreciatethose are my comments so I appreciatethose are my comments so I appreciate bearing with me thank you very much so Ibearing with me thank you very much so Ibearing with me thank you very much so I would like to follow up your talk so youwould like to follow up your talk so youwould like to follow up your talk so you talked about two intrinsic values andtalked about two intrinsic values andtalked about two intrinsic values and you talked about Val people likeyou talked about Val people likeyou talked about Val people like ownership so like for for big investorsownership so like for for big investorsownership so like for for big investors like you you have access like to thelike you you have access like to thelike you you have access like to the management team but for a lot ofmanagement team but for a lot ofmanagement team but for a lot of ordinary investors they don't have that
Questionerordinary investors they don't have that access you know to the management PE uh Team to get to know you know the people you know in the companies so how would you advise uh like those investors like uh do
Questioneryeah yeah I think that's a that's a great question access to management team and insiders or owners can be a positive but it can also be a negative and if we look at the Burkshire example of the coke purchase they had no contact with management they never reached out to the Coca-Cola Company all they did was read the publicly available information on coke and one of the things that both of them did is they read every annual report of Coke from the time Coke was public which should have been about something like 70 years of coke annual reports and Warren and Charlie went through every one of those 70 years of annual reports and they just noticed
Warrenof annual reports and they just noticed that unit unit volumes never went down that unit unit volumes never went down that unit unit volumes never went down they never went down during the Great they never went down during the Great they never went down during the Great Depression they never went down during Depression they never went down during Depression they never went down during World War I World War II Korean War you World War I World War II Korean War you World War I World War II Korean War you know the stagflation of the' 70s all of know the stagflation of the' 70s all of know the stagflation of the' 70s all of that volumes just kept going up every that volumes just kept going up every that volumes just kept going up every single year and so I think with there is single year and so I think with there is single year and so I think with there is a large amount of information available a large amount of information available a large amount of information available on every public business public company on every public business public company on every public business public company and I think some of the things that may and I think some of the things that may and I think some of the things that may really matter in terms of what will really matter in terms of what will really matter in terms of what will drive longterm results insiders may not drive longterm results insiders may not drive longterm results insiders may not be able to help you plus insiders are be able to help you plus insiders are be able to help you plus insiders are sales people they are going to actually sales people they are going to actually sales people they are going to actually Lead You astray I have been LED astray Lead You astray I have been LED astray Lead You astray I have been LED astray by many man managers better not to talk by many man managers better not to talk by many man managers better not to talk to them if you are an indiv idual to them if you are an indiv idual to them if you are an indiv idual investor you have an advantage if you investor you have an advantage if you investor you have an advantage if you don't have access so like uh reading don't have access so like uh reading don't have access so like uh reading news like from just public information news like from just public information news like from just public information it can be more objective and uh yeah it
Questionerit can be more objective and uh yeah it
Questionerit can be more objective and uh yeah it yeah I was speaking at one of the
Questioneryeah I was speaking at one of the
Questionercolleges recently and one of the
Questionercolleges recently and one of the
Questionercolleges recently and one of the students asked that you know my circle
Questionerstudents asked that you know my circle
Questionerstudents asked that you know my circle of competence is so small I just
Questionerof competence is so small I just
Questionerof competence is so small I just understand very few things how can I get
Questionerunderstand very few things how can I get
Questionerunderstand very few things how can I get an advantage and I I said that she had
Questioneran advantage and I I said that she had
Questioneran advantage and I I said that she had a significant advantage over over me
Questionera significant advantage over over me
Questionera significant advantage over over me because college campuses are usually the
Questionerbecause college campuses are usually the
Questionerbecause college campuses are usually the places where change comes first so for
Questionerplaces where change comes first so for
Questionerplaces where change comes first so for example college students were the first
Questionerexample college students were the first
Questionerexample college students were the first demographic to get rid of
Questionerdemographic to get rid of
Questionerdemographic to get rid of landlines everybody else got rid of
Questionerlandlines everybody else got rid of
Questionerlandlines everybody else got rid of landlines later some of you may not know
Questionerlandlines later some of you may not know
Questionerlandlines later some of you may not know what land line landline is that's okay
Questionerwhat land line landline is that's okay
Questionerwhat land line landline is that's okay you know but landlines went away very
Questioneryou know but landlines went away very
Questioneryou know but landlines went away very the first demographic that got rid of
Questionerthe first demographic that got rid of
Questionerthe first demographic that got rid of land lines was college students the
Questionerland lines was college students the
Questionerland lines was college students the first demographic that started cutting
Questionerfirst demographic that started cutting
Questionerfirst demographic that started cutting the cord on cable was college students
Questionerthe cord on cable was college students
Questionerthe cord on cable was college students the first people who got to experience
Questionerthe first people who got to experience
Questionerthe first people who got to experience Facebook was kids in a few colleges in
QuestionerFacebook was kids in a few colleges in
QuestionerFacebook was kids in a few colleges in fact Facebook was only open to initially
Questionerfact Facebook was only open to initially Harvard and some IV leagues and then other colleges so a lot of restaurants get their start in college towns and so you will be able to see some Brands and stuff that will take off so in many ways a young person has a huge advantage over someone like me unlikely to change many things about the way I live my life right it's a static but a young person is willing to kind of experiment and do different things so I what I said to that that lady is that look at your expenses every month look at where every dollar that you're spending is going what are you spending on cloud storage who are you sending that money to what are you spending on you know which apps do you spend time on which restaurants do you eat at what clothes do you wear what brands do you use and just make a list of all of those even if
Warrenjust make a list of all of those even if you spend 50 cents a month on something write it down and then next column whether it's publicly listed or not right many of them are going to be publicly listed because I want to actually get your money and all that they've got to have some presence and then after that you begin your research because now these are things that you're already a consumer of so you've got like a lot of nonquantitative data on the business which will give you a big Edge so that's the way to go
Questioneryeah it's all happening at UNO yeah that's a great advice for college students who wants to do investment so that comes to my next question so you mentioned like a it it can take five years to find a good investment like a for five years like you see some return but what about for young investors like young hge fund managers like for people like you you
Questionermanagers like for people like you you well established so even the first four years it didn't perform like people are patient but like for young hge fund managers like a young investors like a five years you know like that that's a long time so what's your advice like you know for young people investors like to start you know their career like in this field in this industry
Questionerwell I would say the first the very first thing that should have happened is you should have done well with your own Investments right so you've got been doing this for some time and you've got some track record with hopefully that can be audited with your own money maybe there have been a few hits so if you've been doing it for 5 10 15 years then you've got a few things that have worked really well then the next step after that is to talk to friends family and
Questionertalk to friends family and fools especially thefools especially thefools especially the fools the fools are really importantfools the fools are really importantfools the fools are really important okay and so then you convince peopleokay and so then you convince peopleokay and so then you convince people that you are the person that they oughtthat you are the person that they oughtthat you are the person that they ought to give some money to manage and thento give some money to manage and thento give some money to manage and then you go from there that's my questionsyou go from there that's my questionsyou go from there that's my questions from your talk and uh I also yeah wantfrom your talk and uh I also yeah wantfrom your talk and uh I also yeah want to ask this question is about yourto ask this question is about yourto ask this question is about your background so you were majoring inbackground so you were majoring inbackground so you were majoring in engineer in college and after many yearsengineer in college and after many yearsengineer in college and after many years you switched uh to investment so in youryou switched uh to investment so in youryou switched uh to investment so in your previous talk you mentioned oh when youprevious talk you mentioned oh when youprevious talk you mentioned oh when you were yeah engineering school you need towere yeah engineering school you need towere yeah engineering school you need to work really hard and uh when you tookwork really hard and uh when you tookwork really hard and uh when you took some business classes you it's so easysome business classes you it's so easysome business classes you it's so easy natural come to you and you you think ohnatural come to you and you you think ohnatural come to you and you you think oh yeah I don't want to be pierced withyeah I don't want to be pierced withyeah I don't want to be pierced with these Foods in business school like yeahthese Foods in business school like yeahthese Foods in business school like yeah I want to do engineer and then manyI want to do engineer and then manyI want to do engineer and then many years later and then you you you come toyears later and then you you you come toyears later and then you you you come to investment and in business so can youinvestment and in business so can youinvestment and in business so can you tell us like a pivotal moment or story
Questionertell us like a pivotal moment or story like uh how did how did you make that change and uh do you think Engineers are smarter or business people are smarter
Otherso the 20-year-old Mish which I'm glad you guys didn't meet that 20-year monish had a very jaundice view of the world he thought about things in a in a very limited way if you will so I was an engineering student but I really enjoyed taking business classes you know accounting and economics and investing and so on and so I did my undergrad at Clemson University South Carolina and so as many classes as they would allow me to take at the business school I used to go take those classes what I noticed is that the usually I was topping the class I would be like number one in most of these classes I was taking and I remember that in one investing class I had 106% average going into to the final so the
Questioneraverage going into to the final so the professor called me to his office and he said that I looked I looked up your background and he said I was surprised to see that you're not a business major and he said that I don't know what kind of engineer you're going to make but I think you're in the wrong major you know I think you need to switch and the very limited world view monish at the time had a view that when I took my engineering classes they were really hard and I was never the number one person in the class or even the number three person in the class you know so I had to work hard really work hard on those and on the on this stuff it was it just came so easy that I just felt that these students I were taking the classes with were a little different demographically Etc from my engineering classmates and I remember I didn't understand this at the
Questionerremember I didn't understand this at the time but this was happening in 1984 1985 and the US Stock Market had bottomed in 82 and I remember in one of the uh investment classes we were doing they had given us all subscriptions to the Wall Street Journal for the semester student rate and we were the professor had done a case study on Disney and I remember you know at that time you know companies like Disney were trading at like you know six times seven times earning things were very cheap and remember he went through some of the parts on Disney where just the real estate of Disney exceeded the market cap you valued just the real estate and of course Disney had a lot of intellectual property and all of that which has grown over the years and I remember looking at all of that I said wow this is really remarkable you can get these things so
Otherremarkable you can get these things so easily you look at these things you justeasily you look at these things you justeasily you look at these things you just look at portion of the business and alllook at portion of the business and alllook at portion of the business and all of that so I was just really excitedof that so I was just really excitedof that so I was just really excited about my investment classes then uhabout my investment classes then uhabout my investment classes then uh probably was very engaged with all ofprobably was very engaged with all ofprobably was very engaged with all of that and the professor was right that Ithat and the professor was right that Ithat and the professor was right that I should have switched but Mish was tooshould have switched but Mish was tooshould have switched but Mish was too dumb to make that switch at at that timedumb to make that switch at at that timedumb to make that switch at at that time and I think about nine eight or nineand I think about nine eight or nineand I think about nine eight or nine years after that I heard about Warrenyears after that I heard about Warrenyears after that I heard about Warren Buffett for the first time andBuffett for the first time andBuffett for the first time and eventually I did make the switch I Ieventually I did make the switch I Ieventually I did make the switch I I made the switch maybe 15 years after Imade the switch maybe 15 years after Imade the switch maybe 15 years after I should have so I caught the year kind ofshould have so I caught the year kind ofshould have so I caught the year kind of this way instead of just catching itthis way instead of just catching itthis way instead of just catching it this way but you know we stumble alongthis way but you know we stumble alongthis way but you know we stumble along we still get there we still get to somewe still get there we still get to somewe still get there we still get to some decent end point and it worked so heredecent end point and it worked so heredecent end point and it worked so here we are so we are on the eve of thewe are so we are on the eve of thewe are so we are on the eve of the Bookshare halfway meeting so I believeBookshare halfway meeting so I believeBookshare halfway meeting so I believe many of the audience here for the bookmany of the audience here for the bookmany of the audience here for the book Shire halfway meeting so why don't we do
QuestionerShire halfway meeting so why don't we do a poll so how many of you will go to a poll so how many of you will go to a poll so how many of you will go to tomorrow's Bookshare halfway meeting so tomorrow's Bookshare halfway meeting so tomorrow's Bookshare halfway meeting so almost all of you so this is on the eve almost all of you so this is on the eve almost all of you so this is on the eve and uh last year Charlie manger passed and uh last year Charlie manger passed and uh last year Charlie manger passed away and we know that you you had a away and we know that you you had a away and we know that you you had a profound friendship with both Warren and profound friendship with both Warren and profound friendship with both Warren and Charlie so you like to sh share like a Charlie so you like to sh share like a Charlie so you like to sh share like a memory with Charlie like a well I mean I
Warrenthink it's very sad and I I think we will see probably the movie tomorrow I think they said they're going to stream think it's very sad and I I think we will see probably the movie tomorrow I think they said they're going to stream think it's very sad and I I think we will see probably the movie tomorrow I think they said they're going to stream it they've never streamed that movie it they've never streamed that movie it they've never streamed that movie before it might be all Charlie zingers before it might be all Charlie zingers before it might be all Charlie zingers so bring a lot of Kleenex you know to so bring a lot of Kleenex you know to so bring a lot of Kleenex you know to the to the meeting well I mean Charlie the to the meeting well I mean Charlie the to the meeting well I mean Charlie was one of a kind you know I think you was one of a kind you know I think you was one of a kind you know I think you never see someone like like him again never see someone like like him again never see someone like like him again the way I felt after Charlie passed away the way I felt after Charlie passed away the way I felt after Charlie passed away was was similar to the way I felt after was was similar to the way I felt after was was similar to the way I felt after my my mom passed away and lesser extent my my mom passed away and lesser extent my my mom passed away and lesser extent my dad but even even that I felt that my
Warrenmy dad but even even that I felt that my mother was a incredible person just I mean I was just really gifted blessed to have person like that as my mom and there's so many things that were great for me because she was my mother but I realized after she passed that I had a lot of regrets that there there were many things that I wish I had spent more time asked more things you know done more things with her and all that and I just even though we had a whole life together you know and many of the same thoughts came to me when when Charlie passed away is that uh oh there was so many things that uh I wanted to explore and talk and never got there last time I met Charlie was uh exactly a month before he passed away and I didn't know I didn't know at the time that it would be the last time I'd see him and it was just it was a dinner at
Warrenhim and it was just it was a dinner at his place and it was just me and him ithis place and it was just me and him ithis place and it was just me and him it was just the two of us you know Charliewas just the two of us you know Charliewas just the two of us you know Charlie never complained he always had so muchnever complained he always had so muchnever complained he always had so much different pain and things going on hedifferent pain and things going on hedifferent pain and things going on he would he would just he would joke hewould he would just he would joke hewould he would just he would joke he said any morning I wake up without somesaid any morning I wake up without somesaid any morning I wake up without some new pain is a great day you know like ifnew pain is a great day you know like ifnew pain is a great day you know like if everything is the way it was yesterdayeverything is the way it was yesterdayeverything is the way it was yesterday things are great and he was telling methings are great and he was telling methings are great and he was telling me that day that oh Mish there's a lotthat day that oh Mish there's a lotthat day that oh Mish there's a lot wrong with me you know you know and hewrong with me you know you know and hewrong with me you know you know and he was almost blind at that point I thinkwas almost blind at that point I thinkwas almost blind at that point I think really difficult for him to read butreally difficult for him to read butreally difficult for him to read but still never complaining you know hestill never complaining you know hestill never complaining you know he talked about soldiering on I think onetalked about soldiering on I think onetalked about soldiering on I think one of the most of the things I learned fromof the most of the things I learned fromof the most of the things I learned from Charlie were just observing him not whatCharlie were just observing him not whatCharlie were just observing him not what he said not what he wrote even thoughhe said not what he wrote even thoughhe said not what he wrote even though those are you know look at puar Almanacthose are you know look at puar Almanacthose are you know look at puar Almanac there's a lot of incredible wisdom butthere's a lot of incredible wisdom butthere's a lot of incredible wisdom but just observing him the way he you couldjust observing him the way he you could
Questionerjust observing him the way he you could put any food in front of Charlie and he put any food in front of Charlie and he put any food in front of Charlie and he would just eat it he never complain would just eat it he never complain would just eat it he never complain about anything you cannot do that with about anything you cannot do that with about anything you cannot do that with warrant okay you know Warren told me warrant okay you know Warren told me warrant okay you know Warren told me that he eats exactly what he ate when he that he eats exactly what he ate when he that he eats exactly what he ate when he was 6 years old no change in the diet was 6 years old no change in the diet was 6 years old no change in the diet from age of six to age of 93 is the same from age of six to age of 93 is the same from age of six to age of 93 is the same right when I had lunch with him someone right when I had lunch with him someone right when I had lunch with him someone put a shrimp on his plate and he was put a shrimp on his plate and he was put a shrimp on his plate and he was horrified you know like he couldn't he horrified you know like he couldn't he horrified you know like he couldn't he was just couldn't believe there was like was just couldn't believe there was like was just couldn't believe there was like a shrimp on his play you know couldn't a shrimp on his play you know couldn't a shrimp on his play you know couldn't wait to get rid of it but Charlie would wait to get rid of it but Charlie would wait to get rid of it but Charlie would eat anything you put in front of him eat anything you put in front of him eat anything you put in front of him right now Charlie loved SE candy you right now Charlie loved SE candy you right now Charlie loved SE candy you know just besides the business he was know just besides the business he was know just besides the business he was just a you know you see I remember this just a you know you see I remember this just a you know you see I remember this one young lady I I met at the airport one young lady I I met at the airport one young lady I I met at the airport and you know she was talking about the and you know she was talking about the and you know she was talking about the meeting first time she had come she said meeting first time she had come she said meeting first time she had come she said I wish Charles Munger spent less time I wish Charles Munger spent less time
WarrenI wish Charles Munger spent less time eating peanut brittle and more time eating peanut brittle and more time eating peanut brittle and more time answering answering answering questions you know he was just focused questions you know he was just focused questions you know he was just focused on eating the peanut brittle right soon eating the peanut brittle right soon eating the peanut brittle right so when I'd go to Charlie's house the when I'd go to Charlie's house the when I'd go to Charlie's house the peanut brittle was peanut brittle was peanut brittle was rationed okay so I was told that the rationed okay so I was told that the rationed okay so I was told that the peanut brittle is only brought out for peanut brittle is only brought out for peanut brittle is only brought out for dinner twice a dinner twice a dinner twice a month okay and I could say see so month okay and I could say see so month okay and I could say see so sometimes it would happen when I would sometimes it would happen when I would sometimes it would happen when I would be there that would be the day and I be there that would be the day and I be there that would be the day and I would tell them listen try to keep the would tell them listen try to keep the would tell them listen try to keep the penum rle for when I come because then penum rle for when I come because then penum rle for when I come because then there's an association tendency that there's an association tendency that there's an association tendency that when monish shows up life is great you when monish shows up life is great you when monish shows up life is great you know and I'd see that you know after know and I'd see that you know after know and I'd see that you know after dinner the peanut would come out it'd be dinner the peanut would come out it'd be dinner the peanut would come out it'd be gone like No 2 seconds it all be gone gone like No 2 seconds it all be gone gone like No 2 seconds it all be gone but he would never ask for more he would but he would never ask for more he would but he would never ask for more he would never like say on a non peanut brittle never like say on a non peanut brittle never like say on a non peanut brittle day I want to have peanut brittle you day I want to have peanut brittle you day I want to have peanut brittle you know he basically just accepted which is know he basically just accepted which is know he basically just accepted which is remarkable most of us can't do that most
Warrenremarkable most of us can't do that most of us would you know throw our weight around and B what we want Etc so a lot of things I learned from Charlie was just observing it with his grandkids with his daughter-in-laws and with all his different kids and friends that's really there were just incredible lessons from observing the way he was and I really miss him and it's nice to be in Omaha and I think tomorrow will be a wonderful day so thank you
Questioneryeah thank you for sharing that with us I think that's uh that's new for for all of us yeah so can you share like a so so you observe Charlie Monger like not just the investment but you know his personality how he interacts with his family and just lifestyle so how do you think that uh impact you um either on your investment like person personal growth and uh yeah even personal life way to approach life I would say being
Warrenway to approach life I would say being like Charlie is not easy I mean he's so evolved you know but whatever we can do to emulate him is is going to make us a lot better so I think there's he's he's the gold standard you know sitting up there but whatever we can absorb and learn from him and bring into our lives you know like I think uh one of his last interviews someone asked him you know what would you like on your grav Stone right and I think his his answer was I tried to be useful that's a very very very accurate way of describing how Charlie was whoever he interacted with whoever he came into contact with he tried to be useful if you just look at poor Charlie Almanac you look at bsha haway you know Warren wrote he started helping bshar hatway when he had no economic interest in the company his willingness to work on improving Costco including improving
Questioneron improving Costco including improving Berkshire or improving Mish had nothing to do with economic interest right it was all driven by he was trying to be useful I think it's a really great great ethos to live by yeah I can see that impact the youth through all the charity work you have done both in the US and uh in India yeah that's remarkable yeah and even the thing you are doing for us like right now so we met in bushire heway meeting 2021 like uh yeah and then I walk up to mes papai like would you like to give us a talk at Uno and he just said yeah he didn't even hesitate and he gave me his card he didn't even give me his assistance card and uh yeah and we just it's just so smooth and his dedication to education to the young people to the investors Community yeah it's really admirable yeah thank you for all the work you have done it's made my
Questionerall the work you have done it's made my Omaha trips more fun so thank you it's awesome so you mentioned uh like to Cay awesome so you mentioned uh like to Cay awesome so you mentioned uh like to Cay like Charlie monger's investment like Charlie monger's investment like Charlie monger's investment strategy and uh and you also mention in strategy and uh and you also mention in strategy and uh and you also mention in your book like a colony successful your book like a colony successful your book like a colony successful investors so could you walk us through a investors so could you walk us through a investors so could you walk us through a specific instance where you've applied specific instance where you've applied specific instance where you've applied this strategy and the license learned this strategy and the license learned this strategy and the license learned from it from cloning
Todd Combsyes well you know Jim Sagal who was the founder CEO of Jim Sagal who was the founder CEO of Jim Sagal who was the founder CEO of Costco for a long time he used to work Costco for a long time he used to work Costco for a long time he used to work at Price Club before at Price Club before at Price Club before Costco and uh he worked under Soul price Costco and uh he worked under Soul price Costco and uh he worked under Soul price so he was asked one time you know what so he was asked one time you know what so he was asked one time you know what have you learned from Soul have you learned from Soul have you learned from Soul price and he said it's the wrong price and he said it's the wrong price and he said it's the wrong question he said there's nothing I know question he said there's nothing I know question he said there's nothing I know that didn't come from Soul price and of that didn't come from Soul price and of that didn't come from Soul price and of course what happened is in in the case course what happened is in in the case course what happened is in in the case of Costco later Costco brought bought of Costco later Costco brought bought of Costco later Costco brought bought Price Club and actually became far more Price Club and actually became far more Price Club and actually became far more successful than Price Club so the successful than Price Club so the successful than Price Club so the student became better than the teacher
Otherstudent became better than the teacher
OtherI actually think that uh cloning is extremely powerful nothing I can think of that I know or you know came up with myself I mean everything is cloned you know so basically that's the great thing about this world is you can just pick up things that are already known and someone has already done it and you you know people will say say that oh you know Starbucks is a great business model but somebody already did did it or McDonald's is great but somebody already did it and actually there's room for three or four or five so if you know that Starbucks is a great model you can clone it and it would work and just to give you an example in my book the dando investor which I was writing in 2006 and 2007 I wrote about what an amazing business Chipotle was I love Chipotle at that time I was eating Chipotle for
Todd Combsthat time I was eating Chipotle for lunch every day and I just marveled at the business and Amman is the one who made all the money on Chipotle not Mish it's Bill Amman you know and so I love the business I never invested in the business and it's been one of the most spectacular home runs and I actually saw Chipotle when it was embryonic it was really really small at that time there were very few stores and the amazing thing about cloning is and I thought about it then in 2006 and even today no one has cloned Chipotle this is the most surprising thing for me is that chipotle has no clones so I remember there was another Mexican fast food taco place Baja Fresh which Wendy's used to own then and I went to Baja Fresh and of course that experience was terrible compared to Chipotle never went back again I thought to myself why don't these guys just go and do what Chipotle
Questionerthese guys just go and do what Chipotle does you know just reconfigure your line where you're producing the the tacos and burritos to be exactly that make it the same ingredients hire those chefs make the taste the same nobody's done it so if you look at the world over and over and over again you will find great things around with no clones and those are all wide open opportunities so long live cloning your hands I win Tails I don't lose much philosophy resonates with many investors can you share a memorable investment where this principal was put to the test and the outcome T you valuable license yeah so heads I win Tails I don't lose much I think that's just the Cornerstone of investing I think you have to it's like breathing you know they they said that when Warren was like six or seven years old he would walk with his knees slightly bent
Otherwalk with his knees slightly bent forward and the reason he did that is that he didn't want to fall and he found that if you walk with your knees slightly bent forward You' never fall and so Warren has a very extreme aversion to negative outcomes negative outcomes hurt him a lot like falling down for example so like you know he was saying the I think I heard a quote by him so you know they gave away 2% of Burkshire hathway shares to buy Dexter shoes right and Dexter shoes basically went to zero right I mean basically whatever they paid in those shares went to zero and Warren will every few years bring up Dexter shoes and say oh it's like $10 billion mistake it's a 12 billion doll mistake and and now I think uh it's like more than a $15 billion mistake and then he'd say you know when the stock goes down I actually feel good because I
Questionerdown I actually feel good because I think about Dexter shoes that makes me feel good that the stock went down so for someone like Warren I think the experience of falling down and the experience of like the loss from Dexter shoes are very similar feelings right with both Warren and Charlie I think their approach has always been a focus on the downside right so as investors we really want to be heavily focused on the downside and if we can do whatever we can to reduce or eliminate the downside even though even then we'll make a lot of mistakes but if the focuses on the downside many times the upside will take care of itself so it's really the downside so many of the Investments I made were Investments where the the downside was almost non-existent you know last year I had made an investment in a company called Console Energy it's a thermal coal
QuestionerConsole Energy it's a thermal coal producer and of course right now they the Baltimore Bridge has down which has dramatically affected them in terms of ability to ship anything for the last couple of months but Console Energy was a company that came on my radar I never heard of the company actually because someone put a tweet out and they put my handle on the Tweet saying oh David einhorn's Console Energy bet looks like mish's ipco bet and ipco was a company I had invested in almost 20 years ago 2004 and I have very fond memories of ipsco so whenever someone brings up ipsco I get very excited and ipco was this classic head I win Tails I don't lose much where this was a Canadian steel company where the stock price was $45 a share they had $15 a share in cash they had no debt and they had contracts which were going to give them at least $15 a
Questionerwere going to give them at least $15 awere going to give them at least $15 a share in earnings for each of the nextshare in earnings for each of the nextshare in earnings for each of the next two years so if you and they hadtwo years so if you and they hadtwo years so if you and they had publicly you know given this guidancepublicly you know given this guidancepublicly you know given this guidance and it wasn't just guidance these wereand it wasn't just guidance these wereand it wasn't just guidance these were contracts on their book so basically ifcontracts on their book so basically ifcontracts on their book so basically if you just bought the stock and you heldyou just bought the stock and you heldyou just bought the stock and you held for 2 years it would have $45 on thefor 2 years it would have $45 on thefor 2 years it would have $45 on the balance sheet and all the plant andbalance sheet and all the plant andbalance sheet and all the plant and equipment and inventory everything wouldequipment and inventory everything wouldequipment and inventory everything would be free so I had nobe free so I had nobe free so I had no idea what consol's long-term intrinsicidea what consol's long-term intrinsicidea what consol's long-term intrinsic value or cash flows or any of thosevalue or cash flows or any of thosevalue or cash flows or any of those things are I have no idea about it inthings are I have no idea about it inthings are I have no idea about it in fact it was such a cyclical businessfact it was such a cyclical businessfact it was such a cyclical business that in year three earnings could bethat in year three earnings could bethat in year three earnings could be zero earnings could even be negativezero earnings could even be negativezero earnings could even be negative because it could go up and down but Ibecause it could go up and down but Ibecause it could go up and down but I said okay all I want to do is I want tosaid okay all I want to do is I want tosaid okay all I want to do is I want to buy console I want to own it for twobuy console I want to own it for twobuy console I want to own it for two years I want to see what Mr Market doesyears I want to see what Mr Market doesyears I want to see what Mr Market does to the stock price that was the extentto the stock price that was the extentto the stock price that was the extent of my analysis on cons console nothing
Questionerof my analysis on cons console nothing more than that what happened is a year later they announced we're going to have one more year of $15 a share so I said Hallelujah we are now in the black cannot lose money right and by that time the stock had drifted North to about $80 or $90 a share so it was almost a double in like 14 15 months and I was thinking it's time to move on you know who knows what happens after that because this is very cyclical you know Mr Market's giving you a double in 15 months life is good and then as I was thinking through all that one day I wake up and the Stock's at 155 some Swedish company offered to buy them for 160 and about 5 seconds after that I sold all the shares I had so obviously in 2023 when someone tweets this is like mish's ipsco bet I thought I'd never ever see another ipsco in my life I said
Otherever see another ipsco in my life I said there is a God and the God loves me and
Otherthere is a God and the God loves me and
Otherthere is a God and the God loves me and so I said let's look into console and
Otherso I said let's look into console and
Otherso I said let's look into console and console was very similar in the sense
Otherconsole was very similar in the sense
Otherconsole was very similar in the sense that they forward sell a year in advance
Otherthat they forward sell a year in advance
Otherthat they forward sell a year in advance all the coal they they're going to
Otherall the coal they they're going to
Otherall the coal they they're going to produce with price bands that are fixed
Otherproduce with price bands that are fixed
Otherproduce with price bands that are fixed so it cannot go above or Beyond a
Otherso it cannot go above or Beyond a
Otherso it cannot go above or Beyond a certain range so basically in 2023
Othercertain range so basically in 2023
Othercertain range so basically in 2023 they've already done all these deals
Otherthey've already done all these deals
Otherthey've already done all these deals where that money is going to show up in
Otherwhere that money is going to show up in
Otherwhere that money is going to show up in 24 now it wasn't as good as ipsco in the
Other24 now it wasn't as good as ipsco in the
Other24 now it wasn't as good as ipsco in the sense that it wasn't 2 years fully
Othersense that it wasn't 2 years fully
Othersense that it wasn't 2 years fully locked in and all of that but the market
Otherlocked in and all of that but the market
Otherlocked in and all of that but the market cap was like under 2 billion and these
Othercap was like under 2 billion and these
Othercap was like under 2 billion and these cash flows in a single year which they
Othercash flows in a single year which they
Othercash flows in a single year which they locked in was about 600 million so
Otherlocked in was about 600 million so
Otherlocked in was about 600 million so almost like a third and unlike ipsco
Otheralmost like a third and unlike ipsco
Otheralmost like a third and unlike ipsco there were two advantages they had over
Otherthere were two advantages they had over
Otherthere were two advantages they had over ipsco unlike ipsco it was unlikely that
Otheripsco unlike ipsco it was unlikely that
Otheripsco unlike ipsco it was unlikely that they would have a year where they would
Otherthey would have a year where they would
Otherthey would have a year where they would lose money console is 150y Old Company
Otherlose money console is 150y Old Company
Otherlose money console is 150y Old Company they've never gone bankrupt in 150 years
Questionerthey've never gone bankrupt in 150 years they've always made money because they are the lowest cost producer of some of the highest quality thermal coal reserves in the world so they're sitting at a very low end on the cost curve they always make money and so I said okay this is actually better than ipsco because you know a year in advance and you don't can't really lose money the second thing that they had going with ipsco didn't have they they were going to spend all their money buying back shares so if you're trading at like you know three times four times five times cash flows and someone's going to buy back all the shares so long live Twitter that's all I got to say long live Twitter you know and here we are heavy heavily loaded on coal because of that tweet so life is good thank you yeah thank you for sharing that and you give us uh uh
Questionersharing that and you give us uh uhsharing that and you give us uh uh several examples of uh evaluate theseveral examples of uh evaluate theseveral examples of uh evaluate the ining value of a business so that's howining value of a business so that's howining value of a business so that's how the that's one of the most importantthe that's one of the most importantthe that's one of the most important thing for Value investors so I want tothing for Value investors so I want tothing for Value investors so I want to ask you how many of you are valueask you how many of you are valueask you how many of you are value investors how many of you would considerinvestors how many of you would considerinvestors how many of you would consider you guys are value investors great weyou guys are value investors great weyou guys are value investors great we have a large audience of value investorshave a large audience of value investorshave a large audience of value investors but there's also a trend that morebut there's also a trend that morebut there's also a trend that more people are doing passive investmentpeople are doing passive investmentpeople are doing passive investment invested in Index Fund so there's thisinvested in Index Fund so there's thisinvested in Index Fund so there's this concern that the population of valueconcern that the population of valueconcern that the population of value investors are shrinking like index fondinvestors are shrinking like index fondinvestors are shrinking like index fond don't pick up those undervalued stocksdon't pick up those undervalued stocksdon't pick up those undervalued stocks like if you are under a building like uhlike if you are under a building like uhlike if you are under a building like uh it's hardly to get noticed so in theit's hardly to get noticed so in theit's hardly to get noticed so in the past the mechanism is that yeah like apast the mechanism is that yeah like apast the mechanism is that yeah like a value investors like you guys Youvalue investors like you guys Youvalue investors like you guys You observe oh there there is an undervaluedobserve oh there there is an undervaluedobserve oh there there is an undervalued stock and people started investing in itstock and people started investing in itstock and people started investing in it and bring up the price of the stock uhand bring up the price of the stock uh
Questionerand bring up the price of the stock uh but the population of value investors but the population of value investors but the population of value investors are shrinking and seems it impact that are shrinking and seems it impact that are shrinking and seems it impact that mechanism so what's your thoughts on that
WarrenI think it's really good when that I think it's really good when that I think it's really good when people ignore stocks that's really people ignore stocks that's really people ignore stocks that's really awesome I mean I would love for the awesome I mean I would love for the awesome I mean I would love for the console price to stay extremely low for console price to stay extremely low for console price to stay extremely low for a very long period of time in fact it's a very long period of time in fact it's a very long period of time in fact it's not good if it goes up they would buy not good if it goes up they would buy not good if it goes up they would buy shares back at high prices in general if shares back at high prices in general if shares back at high prices in general if you have identified a business which is you have identified a business which is you have identified a business which is undervalued and no one agrees with you undervalued and no one agrees with you undervalued and no one agrees with you and it remains undervalued at the end of and it remains undervalued at the end of and it remains undervalued at the end of the day that business is producing cash the day that business is producing cash the day that business is producing cash flows and you have a claim on those cash flows and you have a claim on those cash flows and you have a claim on those cash flows and if the business is prudent flows and if the business is prudent flows and if the business is prudent about how it's you know either using or about how it's you know either using or about how it's you know either using or Distributing those cash Distributing those cash Distributing those cash flows at the end of the day the market flows at the end of the day the market flows at the end of the day the market is a weighing is a weighing is a weighing machine those cash flows have to show up machine those cash flows have to show up machine those cash flows have to show up as dividends or value to the investor so as dividends or value to the investor so
Otheras dividends or value to the investor so I would say it is a blessing for investors that all the money goes into the Fab for that's awesome put it all there it's great go go go
Other[Laughter]
QuestionerNvidia so you talked about the like a investment um like a look at a company so I'm a professor of economics in macroeconomics I also study Financial economics like financial markets so I want to put like investment in this big environment microeconomic environment like we see lots of changes in the past few years uh like uh yeah the pandemic changed the way of business doing and uh you also see the US China the tension political risk increasing and you see the supply chain and Ukraine war conflicts in Middle East like arise of nationalism around the world like a impact on globalization so in this Dynamic microeconomic environment how does that uh affect your investment
Questionerdoes that uh affect your investment particularly yeah I actually
Todd CombsFocus much more on the micro I always start with the business I don't start with okay there's a pandemic let me find out how I can make money from the pandemic or whatever I always try to go back to a business because I think understanding economies or big macro things is beyond my little brain I cannot get my arms around that understanding just a business itself is complicated so I don't want to go make it more complicated so keep it as simple as possible okay yeah let's uh open the questions to the audience
Questionerso my question is I'm asking this on behalf of my kids um how can they be uh rich and successful like you but faster thank you
Todd Combsyeah so many people like so Alan please make sure you repeat this to your kids to ask the question is to answer it okay the answer is in the question next
Otherthe answer is in the question next question I still a question when youquestion I still a question when youquestion I still a question when you figure it out let me know next year okayfigure it out let me know next year okayfigure it out let me know next year okay when you figure it out hi Manish thankswhen you figure it out hi Manish thankswhen you figure it out hi Manish thanks for giving this talk um I remember youfor giving this talk um I remember youfor giving this talk um I remember you said once um that your dad gave you asaid once um that your dad gave you asaid once um that your dad gave you a credit card and he said I trust you withcredit card and he said I trust you withcredit card and he said I trust you with this you don't have to tell me how muchthis you don't have to tell me how muchthis you don't have to tell me how much you don't have to tell me what for andyou don't have to tell me what for andyou don't have to tell me what for and we just had um our first son two monthswe just had um our first son two monthswe just had um our first son two months ago and um my question is um you knowago and um my question is um you knowago and um my question is um you know for Dad for Mom and Dad tips raising afor Dad for Mom and Dad tips raising afor Dad for Mom and Dad tips raising a young son what came first for your dadyoung son what came first for your dadyoung son what came first for your dad was it the trust or did he um in in howwas it the trust or did he um in in howwas it the trust or did he um in in how he raised you knew that you would do thehe raised you knew that you would do thehe raised you knew that you would do the right thing what was the story andright thing what was the story andright thing what was the story and impetus behind all that that's a greatimpetus behind all that that's a greatimpetus behind all that that's a great question you know my my dad my dad was aquestion you know my my dad my dad was aquestion you know my my dad my dad was a very strict father and it was like youvery strict father and it was like youvery strict father and it was like you know you had to be you know in your bestknow you had to be you know in your bestknow you had to be you know in your best behavior around him and all that rightbehavior around him and all that rightbehavior around him and all that right suddenly there was a switch that changedsuddenly there was a switch that changed
Othersuddenly there was a switch that changed with him when I turned 16 and when Iwith him when I turned 16 and when Iwith him when I turned 16 and when I turned 16 you know he told us you knowturned 16 you know he told us you knowturned 16 you know he told us you know you can go go to my wallet take as muchyou can go go to my wallet take as muchyou can go go to my wallet take as much money as you want spend it whatever youmoney as you want spend it whatever youmoney as you want spend it whatever you want never need to tell me what you'rewant never need to tell me what you'rewant never need to tell me what you're doing Etc and his demeanor changed fromdoing Etc and his demeanor changed fromdoing Etc and his demeanor changed from a father to a friend I really couldn'ta father to a friend I really couldn'ta father to a friend I really couldn't believe that this I always thought therebelieve that this I always thought therebelieve that this I always thought there was an ulterior motive something's goingwas an ulterior motive something's goingwas an ulterior motive something's going to change someday you know and it wasto change someday you know and it wasto change someday you know and it was really I think that what I realizedreally I think that what I realizedreally I think that what I realized later was that there was a transfer oflater was that there was a transfer oflater was that there was a transfer of valuevaluevalue that took place in the first maybe 15 16that took place in the first maybe 15 16that took place in the first maybe 15 16 years and he probably felt that thingsyears and he probably felt that thingsyears and he probably felt that things were okay so what I had done with my ownwere okay so what I had done with my ownwere okay so what I had done with my own daughters I pushed the envelope littledaughters I pushed the envelope littledaughters I pushed the envelope little bit little bit I didn't wait till 16 Ibit little bit I didn't wait till 16 Ibit little bit I didn't wait till 16 I think we gave them both credit cardsthink we gave them both credit cardsthink we gave them both credit cards when they were 12 and these were AMXwhen they were 12 and these were AMXwhen they were 12 and these were AMX Platinum cards right so they both had noPlatinum cards right so they both had noPlatinum cards right so they both had no limit they they had AMX Platinum cars at
Warrenlimit they they had AMX Platinum cars at 12 not even $10 got spent and of course I had more more tools than my dad because he was giving cash which he couldn't track but the credit card the bills are coming to me I can see what happened right so it's actually a leash you know even though they don't realize it's a leash I never saw we never saw anything happen with those cards at all which gave me cause for concern so I think that the important thing as a parent is a transfer of values and you cannot transfer values by talking to them so don't try to give them values by lecturing them they will pick up values by observing you especially when you don't think they are observing you okay so just recognize that they're going to be watching things and seeing things and all kinds of things even interaction between both of you Etc that will get
Otherbetween both of you Etc that will get deeply embedded in their psyches I think good parent is about good behavior and I think that's what so there's nothing I tell my kids that they listen to me about that never happens you know it's just all about they just look at Behavior so all the best congratulations I recently learned that your grandfather is a famous magician in India what what what's that how does that impact you the mustache is from him oh really but he also had a goatee you know he had a mustache he he was more happening than me you know he was far greater stage presence so we can only aspire to be like him but yeah so my grandfather or my my mother's dad probably the most incredible grand grandfather anyone could have I mean I think Summers we used to go to his place in the foothills of the Himalayas and you know the day would start in the morning he used do
Questionerwould start in the morning he used do magic tricks with us and then he would magic tricks with us and then he would magic tricks with us and then he would start the day with dessert he'd take us start the day with dessert he'd take us start the day with dessert he'd take us for dessert first you know break all the for dessert first you know break all the for dessert first you know break all the rules and yeah he became he was like rules and yeah he became he was like rules and yeah he became he was like number one in the world the best in the number one in the world the best in the number one in the world the best in the world in the art that he practiced so it world in the art that he practiced so it world in the art that he practiced so it was really good um thank you for a great was really good um thank you for a great was really good um thank you for a great talk here um I did um I was thinking talk here um I did um I was thinking talk here um I did um I was thinking about what you were saying about how about what you were saying about how about what you were saying about how investors have or at least Warren investors have or at least Warren investors have or at least Warren Buffett had Warren Buffett and Charlie Buffett had Warren Buffett and Charlie Buffett had Warren Buffett and Charlie had a high loss aversion in terms of had a high loss aversion in terms of had a high loss aversion in terms of Investments and as you know obviously Investments and as you know obviously Investments and as you know obviously there are many ways to invest but when I there are many ways to invest but when I there are many ways to invest but when I think of that aspect and then being think of that aspect and then being think of that aspect and then being heavily concentrated uh in a portfolio heavily concentrated uh in a portfolio heavily concentrated uh in a portfolio how do you marry that because obviously how do you marry that because obviously how do you marry that because obviously there are things that can happen to a there are things that can happen to a there are things that can happen to a company that are beyond our control um company that are beyond our control um company that are beyond our control um and then and then how do you uh make and then and then how do you uh make and then and then how do you uh make sure that you know you are not having sure that you know you are not having
Questionersure that you know you are not having too much of a loss if something goes wrong that is beyond your control but you're also heavily invested in in one or you know in a concentrated portfolio way
Questionerwell I mean I I would still say that uh the loss aversion aspect there's no downside to overdosing on that obviously at some point you need to make some bets right you you to do something but uh if you look at almost all entrepreneurs Who start different businesses people think that entrepreneurs take risk and actually the reality is entrepreneurs preneurs do everything possible to minimize risk so when you actually analyze what risk they're taking typically they don't have much money if you don't have much money you can't lose much money you know so it's like a downside already limited I mean when I started my first business I had taken out about 25,000 for my 401k
Ted WeschlerI had taken out about 25,000 for my 401k I was 24 so I didn't care so much about the retirement at that time you know signed up for every credit card that would they would send to me I had 70,000 in unused credit card lines and eventually all of that got drawn as I was you know growing the business but I had researched bankruptcy law at that time they've changed them now but basically if I had if the business had not worked that debt would have been wiped out and the 401K going away at 24 is not a extreme tragedy so I had actually looked at the downside of doing this versus the upside the upside was very asymmetric so I think that loss AV verion is a very good it's a very good principle a very good mental model to have and you do need to have some creativity and you need to have some interest in at least making bets Etc trying to exercise what
Othermaking bets Etc trying to exercise what you think might work work but you can do it in the context of minimizing or eliminating risk and then that can work well
Questionerhi Pro uh I'm Khloe from Singapore and uh thanks so much for all the YouTube videos that you shared it has taught me so much about investing and today is it okay that I be shameful to ask you two questions all right thank you um question number one is since you talk about the importance of downside and recently China has been dropping so much uh what's your view towards investing in China despite of all this political uncertainty uh particular in terms of index investing in China uh number two question is what's your view on companies like Starbucks and McDonald's who actually borrow a lot of money buying back their shares and which result in negative equity are you concerned about that thank you all right
Questionerconcerned about that thank you all right
Otherwell that's great questions thank you
Warrenwell that's great questions thank you regarding China more most of it would be outside my circle of competence I can't do much about that so to the extent that things are within Circle competence I can look at them I used to have an investment few years back in maai which I should never have sold and but you know that's the way it is and I also had investments in Alibaba and 10cent which we don't have but they didn't work for us at the time we invested so most of China I think it's outside of what I can do because just because of the range of understanding that I have on that the best businesses are ones that have no debt and I actually think there's a lot to be said for businesses that operate with zero debt so actually I'm not a proponent of a company borrowing money and doing BuyBacks there
Questionerborrowing money and doing BuyBacks there many companies that do that but I wouldmany companies that do that but I wouldmany companies that do that but I would say that probably the the gold standardsay that probably the the gold standardsay that probably the the gold standard is Burkshire hathway I mean Warren andis Burkshire hathway I mean Warren andis Burkshire hathway I mean Warren and Charlie have said many times that theyCharlie have said many times that theyCharlie have said many times that they could have introduced modest leveragecould have introduced modest leveragecould have introduced modest leverage and it would have increased theirand it would have increased theirand it would have increased their results even more than they've been butresults even more than they've been butresults even more than they've been but they never went there in fact if youthey never went there in fact if youthey never went there in fact if you look at Burkshire it's overloaded withlook at Burkshire it's overloaded withlook at Burkshire it's overloaded with cash and uh so I think that businessescash and uh so I think that businessescash and uh so I think that businesses are very fragile very few businessesare very fragile very few businessesare very fragile very few businesses that are around today even largethat are around today even largethat are around today even large dominant businesses that are arounddominant businesses that are arounddominant businesses that are around today will be around 50 years from nowtoday will be around 50 years from nowtoday will be around 50 years from now or 30 years from now and one of theor 30 years from now and one of theor 30 years from now and one of the reasons that businesses don't last isreasons that businesses don't last isreasons that businesses don't last is they don't have the ability to withstandthey don't have the ability to withstandthey don't have the ability to withstand heavy storms so all businesses are goingheavy storms so all businesses are goingheavy storms so all businesses are going to run into head wins the more you canto run into head wins the more you canto run into head wins the more you can do to build resilience so mostdo to build resilience so mostdo to build resilience so most management teams don't fully think thatmanagement teams don't fully think thatmanagement teams don't fully think that way and I think if they study bursh hat
Warrenway and I think if they study bursh hatway and I think if they study bursh hat away they study uh some truly greataway they study uh some truly greataway they study uh some truly great businesses I mean one of the Hallmarksbusinesses I mean one of the Hallmarksbusinesses I mean one of the Hallmarks to me of a great business is highto me of a great business is highto me of a great business is high Returns on Equity with no use ofReturns on Equity with no use ofReturns on Equity with no use of Leverage uh That's a classic definitionLeverage uh That's a classic definitionLeverage uh That's a classic definition of a great business so yeah I I'm not aof a great business so yeah I I'm not aof a great business so yeah I I'm not a proponent of borrowing money to buy backproponent of borrowing money to buy backproponent of borrowing money to buy back shares that's not good so for everyoneshares that's not good so for everyoneshares that's not good so for everyone Mish there are about 20 in theMish there are about 20 in theMish there are about 20 in the graveyards and my goal is to be agraveyards and my goal is to be agraveyards and my goal is to be a slightly lesser fool so if I getslightly lesser fool so if I getslightly lesser fool so if I get approached by somebody like you in thisapproached by somebody like you in thisapproached by somebody like you in this meeting how do I know it's not just luckmeeting how do I know it's not just luckmeeting how do I know it's not just luck what are the five good questions Iwhat are the five good questions Iwhat are the five good questions I should ask that person to see it's ashould ask that person to see it's ashould ask that person to see it's a repeatablerepeatablerepeatable framework uh which will help me can Iframework uh which will help me can Iframework uh which will help me can I retire well I I would say that theretire well I I would say that theretire well I I would say that the identification of a good investment manidentification of a good investment manidentification of a good investment man manager is much harder than themanager is much harder than themanager is much harder than the identification of a good investment soidentification of a good investment soidentification of a good investment so default should be index fund and then ifdefault should be index fund and then ifdefault should be index fund and then if something shows up on the radar where
Warrensomething shows up on the radar where you know seven moons are aligning then you can you can look into that you know
WarrenPeter Kaufman talks about the five Aces I don't know if I can rattle off the five Aces here but God Google can rattle them off for you but basically you know you're looking for things like an alignment of Interest you're looking for a track record you're looking for how the track record was developed you're looking for ethos and you know kind of character and you're also looking for someone who's fishing where the fish are so these are some of the things you would want to look for but I would say that even looking for all of those you know it's would not be a tragedy to be all index all the time so that'd be fine
Questionerbut this the question is about uh crypto car y what's your take on cryptocurrency is it uh a conspiracy what's the in
Questioneris it uh a conspiracy what's the in value in the cryptocurrency what's your value in the cryptocurrency what's your value in the cryptocurrency what's your take
WarrenI would say first of all outside circle of competence the second is I would say I would Echo Charlie rat poison not my words Charlie's words what can I say you know you know yeah I mean I I would say to me it doesn't matter what's happening with crypto because it's not something I understand or would invest in or anything and and if it ends up being a bubble that blows up that wouldn't surprise me at all the blockchain technology has a lot of positives but I think the crypto World attracts just certain types of characters in The Realm and so yeah for my point of view it's a easy PA hi my
Questionername is Tony I'm from Seattle okay so um so you gave the answer about Console Energy and it sort of seems obvious but obviously not everybody did it like obviously not every investor
Questionerit like obviously not every investor bought console so can you describe like bought console so can you describe like bought console so can you describe like obviously somehow you had an edge to see obviously somehow you had an edge to see obviously somehow you had an edge to see that and everybody else that stood on that and everybody else that stood on that and everybody else that stood on the line on on the sidelines didn't the line on on the sidelines didn't the line on on the sidelines didn't actually buy console why didn't they buy actually buy console why didn't they buy actually buy console why didn't they buy console the math is the same yeah
Todd Combsactually that's a that's a great question and I think one of the things question and I think one of the things question and I think one of the things about investing is that all knowledge is about investing is that all knowledge is about investing is that all knowledge is cumulative and uh when we go through cumulative and uh when we go through cumulative and uh when we go through different Investments and different Investments and different Investments and experiences it helps us so for me the experiences it helps us so for me the experiences it helps us so for me the reason I bought console is very reason I bought console is very reason I bought console is very different from the reason David Einhorn different from the reason David Einhorn different from the reason David Einhorn bought it even though I took the idea bought it even though I took the idea bought it even though I took the idea from David David complains of exactly from David David complains of exactly from David David complains of exactly what we talked about he complains about what we talked about he complains about what we talked about he complains about over indexing of the market it leading over indexing of the market it leading over indexing of the market it leading to undervaluations for very extended to undervaluations for very extended to undervaluations for very extended period of time of these companies where period of time of these companies where period of time of these companies where he believes and he believes it's a he believes and he believes it's a he believes and he believes it's a negative so he believes that these
Questionernegative so he believes that these companies that never get to intrinsic value are a negative I believe that if a company never gets to intrinsic value that's a huge positive for you because it means that you could be collecting dividends you could be buying back shares the company gets to do many other things that would would not be possible if it was appropriately priced so you actually end up in a situation where you can have higher returns when the market Mis prices things for extended periods so for me the reason why most investors would not be able to go into something like console is first of all coal is a four-lettered word so right there a lot of people will be halted in their tracks and then the second is that they may not understand the framework of anpo right so for me the console investment would not have happened if
Ted Weschlerinvestment would not have happened if the ipco investment had not happened sothe ipco investment had not happened sothe ipco investment had not happened so that framework was very importantthat framework was very importantthat framework was very important and console actually is interestingand console actually is interestingand console actually is interesting because it's a good investment but itbecause it's a good investment but itbecause it's a good investment but it led me to look at things that I thinkled me to look at things that I thinkled me to look at things that I think are even better which was moving fromare even better which was moving fromare even better which was moving from thermal coal to metallurgical coal andthermal coal to metallurgical coal andthermal coal to metallurgical coal and many of the same Dynamics apply on bothmany of the same Dynamics apply on bothmany of the same Dynamics apply on both sides and that's you know classicallysides and that's you know classicallysides and that's you know classicallywhat Charlie talks about which iswhat Charlie talks about which iswhat Charlie talks about which is opportunity cost is everything needs toopportunity cost is everything needs toopportunity cost is everything needs to be looked at from the lens ofbe looked at from the lens ofbe looked at from the lens of opportunity cost so beauty is in the eyeopportunity cost so beauty is in the eyeopportunity cost so beauty is in the eye of theof theof the beholder sobeholder sobeholder so most things that most people will getmost things that most people will getmost things that most people will get excited about may not appeal to a lot ofexcited about may not appeal to a lot ofexcited about may not appeal to a lot of other people because their lifeother people because their lifeother people because their life experience is so different just becauseexperience is so different just becauseexperience is so different just because I invested in console on or I liked itI invested in console on or I liked itI invested in console on or I liked it doesn't mean that it's going to resonatedoesn't mean that it's going to resonatedoesn't mean that it's going to resonate with a lot of people that's just thewith a lot of people that's just thewith a lot of people that's just the nature of humans
Questionerhi I'm Crystal Jane I'm from Stanford Business School and I I'm
Questionerfrom Stanford Business School and I I'm from Stanford Business School and I I'm a computer scientist so engineering a computer scientist so engineering a computer scientist so engineering Roots like you um you talk a lot about cloning my question is if you were if you could build a digital twin of you could build a digital twin of yourself or clone yourself what aspect yourself or clone yourself what aspect of yourself would would you clone and of yourself would would you clone and would you do it to preserve value for would you do it to preserve value for future Generations it might be above my future Generations it might be above my pay grade to be able to answer the pay grade to be able to answer the question so I don't know if I can even question so I don't know if I can even answer it
WarrenI mean I think one of the things about investing is that which is what makes it so much fun is that it's it's it's a mix of Art and Science and it's it's a mix of Art and Science and one of the things I find myself one of the things I find myself wondering is that almost every week we wondering is that almost every week we are seeing breakthroughs with AI which are seeing breakthroughs with AI which we didn't think was possible I mean we didn't think was possible I mean there almost every week I get surprised there almost every week I get surprised I see a lot of creativity coming out of I see a lot of creativity coming out of AI that I wouldn't have thought would be AI that I wouldn't have thought would be easy to get to I mean I think there's a
Questionereasy to get to I mean I think there's a site I ran into recently sun. a which creates any song you want with like a prompt of like seven words or something and the music is really exceptional actually I was really blown away so yeah so when you and you know I've thought about the issue of you know can you you know create AI models with things like Warren Buffett's template you know or Charlie monger's template and I'm still a skeptic on that I I don't know whether we can get to AI on that to that extent but certainly I think it can a great tool to cut down the the universe to few companies that are worth drilling down on possibly and and it may well work that creating an index a Burkshire index or a buffet index could do better than the S&P so that's those are possibilities but again like I said I think the thing is changing so fast that we don't know yet so thank you it was great to be with all of you