Otherthanks everyone for being here and manish thank you thank you for being here um you know i actually had the pleasure of seeing monesh speak a few years ago and uh i you know followed him onto the subway and we had a short conversation on the subway after he spoke at the columbia business school investor conference which is which is always a great conference um so i'm so glad that we were able to have him virtually here today um and manish founded funds about 21 years ago and he's since expanded the firm to about half a billion dollars in assets under management um you know he can tell us a lot more about his story but i think one of the most interesting things and this is something that charlie munger actually called out at the daily journal meeting a few years ago was that you know just like warren munich does not charge asset management fees he
Questionernot charge asset management fees he charges only performance fees so charges only performance fees so charges only performance fees so no he would be generating about 10 million in fees every year if he did the standard 2 and 20 model but standard 2 and 20 model but standard 2 and 20 model but he prefers to let the performance do the he prefers to let the performance do the he prefers to let the performance do the do the talking um do the talking um do the talking um and i'm really really looking forward to and i'm really really looking forward to and i'm really really looking forward to this conversation as as i'm sure all of this conversation as as i'm sure all of this conversation as as i'm sure all of you are as well you are as well you are as well um so monica if you could maybe just um so monica if you could maybe just um so monica if you could maybe just just uh at the beginning talk a little just uh at the beginning talk a little just uh at the beginning talk a little bit more about bit more about bit more about launching your fund i know um one of the launching your fund i know um one of the launching your fund i know um one of the student investment fund members is student investment fund members is student investment fund members is actually in the process of launching his actually in the process of launching his actually in the process of launching his own fund so i'm sure he would benefit a own fund so i'm sure he would benefit a own fund so i'm sure he would benefit a lot from lot from lot from from your learnings and maybe any advice from your learnings and maybe any advice from your learnings and maybe any advice you might have for someone wanting to you might have for someone wanting to you might have for someone wanting to launch a fund today launch a fund today launch a fund today
Otheroh sure well uh jamie pleasure to be oh sure well uh jamie pleasure to be oh sure well uh jamie pleasure to be here and uh here and uh here and uh uh good to be virtually on the ucla uh good to be virtually on the ucla uh good to be virtually on the ucla campus so that's campus so that's campus so that's uh that's great uh last time i was on uh that's great uh last time i was on uh that's great uh last time i was on the the on the ucla campus i think uh royce hall
Otheron the ucla campus i think uh royce hall i watched uh russell peters uh who uh maybe some discerning few of you from south asia might know off uh but he's a he's a south asian comedian who grew up in toronto and uh so if you haven't watched russell peters you can go on youtube and uh listen to some of his uh his stuff but uh anyway great uh great to be here and great to see you again uh we're not uh we're not as uh time-bound as our subway uh subway journey but that's that's okay yeah so i think uh in terms of starting starting a fund and such my my journey was a little bit different in the sense that i i had never worked uh in the industry uh you know i'm a computer engineer by training and i was running an i.t services firm in the late 90s and uh mid-90s i heard about warren buffett and charlie munger for the first time 94 i
Questionercharlie munger for the first time 94 i thinkthinkthink and that was transformational you know iand that was transformational you know iand that was transformational you know i really wasreally wasreally was blown away with you know reading andblown away with you know reading andblown away with you know reading and learning aboutlearning aboutlearning about them and uh andthem and uh andthem and uh and that got me started on the journey ofthat got me started on the journey ofthat got me started on the journey of investinginvestinginvesting uh my own uh my own money anduh my own uh my own money anduh my own uh my own money and in in 94 i had soldin in 94 i had soldin in 94 i had sold a small portion ofa small portion ofa small portion of the business and after taxes i had aboutthe business and after taxes i had aboutthe business and after taxes i had about a million dollarsa million dollarsa million dollars with me first time ever that i had anywith me first time ever that i had anywith me first time ever that i had any you knowyou knowyou know cash in the bank so to speak and uhcash in the bank so to speak and uhcash in the bank so to speak and uh and so i said you know i'll uh i'll takeand so i said you know i'll uh i'll takeand so i said you know i'll uh i'll take the million andthe million andthe million and invest it based on uh buffett mongerinvest it based on uh buffett mongerinvest it based on uh buffett monger principles and just see kind of what iprinciples and just see kind of what iprinciples and just see kind of what i can do with itcan do with itcan do with it and uh it did really well uh i mean ofand uh it did really well uh i mean ofand uh it did really well uh i mean of course at that timecourse at that timecourse at that time there was a raging bull market going onthere was a raging bull market going onthere was a raging bull market going on uh in the mid 90s which culminated in auh in the mid 90s which culminated in auh in the mid 90s which culminated in a mega bubble and the bubble burst inmega bubble and the bubble burst inmega bubble and the bubble burst in in march 2000 uh but so iin march 2000 uh but so iin march 2000 uh but so i i did really well in that period i thinki did really well in that period i thinki did really well in that period i think uh something likeuh something likeuh something like 70 percent a year more than 70 a year
Other70 percent a year more than 70 a year70 percent a year more than 70 a year uh from like 94 to 99 or souh from like 94 to 99 or souh from like 94 to 99 or so and uh and uhand uh and uhand uh and uh you know i thought to myself you knowyou know i thought to myself you knowyou know i thought to myself you know well done bonuswell done bonuswell done bonus uh uh i knew you could do thisuh uh i knew you could do thisuh uh i knew you could do this and uh and such and uh and at that timeand uh and such and uh and at that timeand uh and such and uh and at that time iii had a few friends and uh whenever i'dhad a few friends and uh whenever i'dhad a few friends and uh whenever i'd see them if i had you know alreadysee them if i had you know alreadysee them if i had you know already bought a position i wouldbought a position i wouldbought a position i would tell them about uh you know some stockstell them about uh you know some stockstell them about uh you know some stocks they could buy and so onthey could buy and so onthey could buy and so on and some of these guys would go andand some of these guys would go andand some of these guys would go and invest in things i'd tell them aboutinvest in things i'd tell them aboutinvest in things i'd tell them about and uh they also did really well umand uh they also did really well umand uh they also did really well um so uh they were uhso uh they were uhso uh they were uh they became even better friendsthey became even better friendsthey became even better friends and and a bunch of them actuallyand and a bunch of them actuallyand and a bunch of them actually approached meapproached meapproached me in early 99 and they said that theyin early 99 and they said that theyin early 99 and they said that they wanted me to manage money for themwanted me to manage money for themwanted me to manage money for them and uh and basically you know what whatand uh and basically you know what whatand uh and basically you know what what they were saying is thatthey were saying is thatthey were saying is that some guy would have like a you knowsome guy would have like a you knowsome guy would have like a you know couple of million dollar net worth andcouple of million dollar net worth andcouple of million dollar net worth and i'd tell him toi'd tell him toi'd tell him to uh buy something and he would put youuh buy something and he would put youuh buy something and he would put you know ten thousand dollars into it and it
Otherknow ten thousand dollars into it and it would triple uh but it wouldn't really move the needle in terms of his net worth and and also sometimes i wouldn't see them for a while and so they would buy stuff and then they wouldn't know what to do with it and so on and uh so they said look uh there's each of us wants to give you like a hundred thousand dollars to manage and then you manage that money for us and we don't need to get into these stock tips and all that and um i uh i thought about it and uh so what i did not want to you know my concern was i didn't want to lose their money uh you know because they were very close friends of mine so i didn't want to have any kind of like a negative impact on the friendship or anything and i didn't really think of it as a a business or anything i think i thought of it as a hobby so i said that if i'm going to manage
Questionerso i said that if i'm going to manage the money i want to do it in the format the money i want to do it in the format the money i want to do it in the format of the buffett partnerships uh which uh you know where buffett had these uh you know where buffett had these uh you know where buffett had these 1950s and 60s partnerships where he 1950s and 60s partnerships where he 1950s and 60s partnerships where he basically basically basically did not take management fees and did not take management fees and did not take management fees and eventually his deal was eventually his deal was eventually his deal was 0 6 25 which is a six percent 0 6 25 which is a six percent 0 6 25 which is a six percent annual hurdle and then above that he annual hurdle and then above that he annual hurdle and then above that he took one 25 percent and took one 25 percent and took one 25 percent and his investors got 75 and uh so i told his investors got 75 and uh so i told his investors got 75 and uh so i told them listen i'd like to set up them listen i'd like to set up them listen i'd like to set up a limited partnership a limited partnership a limited partnership with these rules and they really didn't with these rules and they really didn't with these rules and they really didn't care they said you do whatever you want care they said you do whatever you want care they said you do whatever you want man we'll give you the money man we'll give you the money man we'll give you the money and they didn't really understand what i and they didn't really understand what i and they didn't really understand what i was trying to do or any of that was trying to do or any of that was trying to do or any of that and i went to i went to and i went to i went to and i went to i went to a an attorney who knew nothing about a an attorney who knew nothing about a an attorney who knew nothing about investment funds investment funds investment funds and anto and i took him and anto and i took him and anto and i took him some pages of lowenstein's book i some pages of lowenstein's book i some pages of lowenstein's book i photocopied a few pages which talked photocopied a few pages which talked photocopied a few pages which talked about about about buffett's fee structure and i told him buffett's fee structure and i told him buffett's fee structure and i told him listen create a limited partnership for
Questionerlisten create a limited partnership for me with these rules and he wasn't really like a securities lawyer and uh later i had to spend uh a few thousand dollars fixing things that uh he didn't quite do right but we eventually straightened the boat out uh but but the other thing i had done at that time was time was time was because i did not want to lose money for my friends my friends my friends i guaranteed their principle uh you know i gave them a personal uh you know i gave them a personal uh you know i gave them a personal guarantee guarantee guarantee that there would be no loss of principle that there would be no loss of principle that there would be no loss of principle and not only that and not only that and not only that that they would make at least six that they would make at least six that they would make at least six percent a year percent a year percent a year uh so principal was guaranteed and six uh so principal was guaranteed and six uh so principal was guaranteed and six percent a year was guaranteed percent a year was guaranteed percent a year was guaranteed and then above that it was whatever the and then above that it was whatever the and then above that it was whatever the you know the fund generated and so on you know the fund generated and so on you know the fund generated and so on and um and so the and um and so the and um and so the the the fund got going and and the the the fund got going and and the the the fund got going and and the reason i did is guaranteed reason i did is guaranteed reason i did is guaranteed again like i said i just didn't want again like i said i just didn't want again like i said i just didn't want this group to have any kind of negative this group to have any kind of negative this group to have any kind of negative impact and at that time
Questionerimpact and at that time in 99 i personally was worth around 10 million because that you know 70 a year uh starts adding up and uh so i said okay you know i've got 10 million there's a one million dollar fund that i'm guaranteeing it's really uh no problem you know one thing is this even if things don't go well i think i could take care of it right and uh so so the fun got going and in the first year we were up uh 70 which to me sounded like the magic number uh and uh and uh yeah i was up like 70 i think after fees and that was it was up 70 including so the fund launched july 99 and the first year ended like june 30th 2000 and that included the nasdaq uh you know crashing and you know starting its decline so inclusive of all that we were still up because i had completely sidestepped the bubble i i mean i knew there was a bubble
Otherbubblebubble and uh there was nothing that i wasand uh there was nothing that i wasand uh there was nothing that i was doing in our fundsdoing in our fundsdoing in our funds that was going to uh i mean we had nothat was going to uh i mean we had nothat was going to uh i mean we had no investments in pets.cominvestments in pets.cominvestments in pets.com okay let's put it that way and uh and uhokay let's put it that way and uh and uhokay let's put it that way and uh and uh so as the market was tankingso as the market was tankingso as the market was tanking we were we had very strong performancewe were we had very strong performancewe were we had very strong performance and and more investorsand and more investorsand and more investors wanted to invest their friends they toldwanted to invest their friends they toldwanted to invest their friends they told their friends about this guytheir friends about this guytheir friends about this guy who's given them a principal guaranteewho's given them a principal guaranteewho's given them a principal guarantee andandand six percent a year guarantee and allsix percent a year guarantee and allsix percent a year guarantee and all these things and sothese things and sothese things and so uh other people were interested and iuh other people were interested and iuh other people were interested and i realized thatrealized thatrealized that i wanted to uhi wanted to uhi wanted to uh do this more formallydo this more formallydo this more formally rather than a hobby on the side and irather than a hobby on the side and irather than a hobby on the side and i had gotten rid of myhad gotten rid of myhad gotten rid of my i.t business which i was not veryi.t business which i was not veryi.t business which i was not very interested ininterested ininterested in and but i said uh if iand but i said uh if iand but i said uh if i if i were to scale this uh iif i were to scale this uh iif i were to scale this uh i i can't have the guarantees and stuffi can't have the guarantees and stuffi can't have the guarantees and stuff you know it doesn't scaleyou know it doesn't scaleyou know it doesn't scale and so i went to my partners and saidand so i went to my partners and saidand so i went to my partners and said hey listen i want tohey listen i want tohey listen i want to i want to keep adding more investors andi want to keep adding more investors and
Otheri want to keep adding more investors and scaling and all that and we need to remove the guarantees okay so they said uh we like the guarantees you know and uh we really don't uh uh we don't want to remove them we like the guarantees okay so i said i i can't bring in more people unless you know there will be two different classes of investors and all that so i said okay what i'm going to do is i'm going to close this fund and shut it down and i'm going to start another fund and the other fund is going to be the same as this one but there's going to be no principal guarantee so they all said uh okay and when i closed the fund they all came to the other fight okay it's like like they were not willing to you know get rid of the guarantee but then when they had no choice uh everyone was on board and so then i felt uh and i also felt good because they were
Questionerand i also felt good because they were already up they were already up quite aalready up they were already up quite aalready up they were already up quite a bitbitbit uh you know where uh you know they wereuh you know where uh you know they wereuh you know where uh you know they were sitting at significant gainssitting at significant gainssitting at significant gains so so that's how the funds got startedso so that's how the funds got startedso so that's how the funds got started and so itand so itand so it moved from uh basically justmoved from uh basically justmoved from uh basically just i mean i had eight investors when wei mean i had eight investors when wei mean i had eight investors when we started a year later i had 17 investorsstarted a year later i had 17 investorsstarted a year later i had 17 investors and then maybe two years after after iand then maybe two years after after iand then maybe two years after after i started about 25 investorsstarted about 25 investorsstarted about 25 investors and it just kept going from there and iand it just kept going from there and iand it just kept going from there and i looked very closelylooked very closelylooked very closely at buffett's journey because buffettat buffett's journey because buffettat buffett's journey because buffett alsoalsoalso really just went to his very closereally just went to his very closereally just went to his very close friends and familyfriends and familyfriends and family initially and then as he startedinitially and then as he startedinitially and then as he started deliveringdeliveringdelivering uh really spectacular numbers uhuh really spectacular numbers uhuh really spectacular numbers uh you know gradually the kind of base ofyou know gradually the kind of base ofyou know gradually the kind of base of investorsinvestorsinvestors expanded uh over that so umexpanded uh over that so umexpanded uh over that so um so the super bright fund started as aso the super bright fund started as aso the super bright fund started as a hobbyhobbyhobby uh and then it got going i i would sayuh and then it got going i i would sayuh and then it got going i i would say that ifthat ifthat if if someone was starting todayif someone was starting todayif someone was starting today so i would say that one is thatso i would say that one is thatso i would say that one is that if you're starting a fund and you're
Ted Weschlerif you're starting a fund and you're starting with a modest amount of capital you really don't have any expenses in the sense that you don't need office space and you don't need a staff or any of those things i mean i i think till for the first year and a half i think i was running this out of my house uh the funds and after that i took one uh one room in my my wife's business i rented from her to one one of a small office uh from her and i i i hired a part-time assistant who was working maybe 10 hours a week or something so like you know i i had maybe four or five hundred dollars in rent uh maybe four hundred dollars in rent and maybe you know a fairly small payroll you know the expenses were pretty uh pretty low um and uh and and uh so uh i think if someone starting today uh you do have upfront costs to set up the fund which you would need
Otherto set up the fund which you would need to frontto frontto front because there are no investors initiallybecause there are no investors initiallybecause there are no investors initially to set up the documents andto set up the documents andto set up the documents and and all of that the legal fees but whatand all of that the legal fees but whatand all of that the legal fees but what you can do isyou can do isyou can do is you can amortize those expenses overyou can amortize those expenses overyou can amortize those expenses over let's say five yearslet's say five yearslet's say five years for the fund to prepay you so let's sayfor the fund to prepay you so let's sayfor the fund to prepay you so let's say for examplefor examplefor example if you spend twenty five thousandif you spend twenty five thousandif you spend twenty five thousand dollars or somethingdollars or somethingdollars or something setting up all the legal documents andsetting up all the legal documents andsetting up all the legal documents and so on uh you could have the fund pay youso on uh you could have the fund pay youso on uh you could have the fund pay you back like five thousand a year soback like five thousand a year soback like five thousand a year so it's it's spread out to the investorsit's it's spread out to the investorsit's it's spread out to the investors over a whileover a whileover a while um and and basicallyum and and basicallyum and and basically uh the the key is thatuh the the key is thatuh the the key is that um initially i think uh you have toum initially i think uh you have toum initially i think uh you have to focusfocusfocus on friends family and fools umon friends family and fools umon friends family and fools um especially the fools uh and uhespecially the fools uh and uhespecially the fools uh and uh and uh and then once you get going iand uh and then once you get going iand uh and then once you get going i think thenthink thenthink then if you uh perform wellif you uh perform wellif you uh perform well then that group of investors willthen that group of investors willthen that group of investors will probably want to give you more money toprobably want to give you more money toprobably want to give you more money to manage and probably also give you somemanage and probably also give you somemanage and probably also give you some introductionsintroductionsintroductions to people they know and so on so that's
Questionerthat makes a lot of sense um and can so kind of now as we look over the last 20 21 years you've obviously seen a a large change in in kind of the investing landscape and and maybe you know multiples kind of contracted a lot significantly in the first couple of years you were running the fund and now they've kind of expanded and you have the financial crisis so can you talk about how your investing philosophy has changed or or how maybe not the philosophy but but where you're looking has changed and investments now versus what you were investing in 10 and 20 years ago
Otheruh yeah that's a great question so actually uh i went through tremendous learning and growth in like 949494 95 when i first heard about buffett and munger it was like kind of like drinking munger it was like kind of like drinking
Questionermunger it was like kind of like drinking from a fire hydrant from a fire hydrant from a fire hydrant uh you know you had all the uh you know you had all the uh you know you had all the berkshire letters and the partnership berkshire letters and the partnership berkshire letters and the partnership letters letters letters and then some biographies that come out and then some biographies that come out and then some biographies that come out on on on buffett and so there was a lot of on buffett and so there was a lot of on buffett and so there was a lot of learning and growth for me then learning and growth for me then learning and growth for me then and and at that time i think and and at that time i think and and at that time i think 94 or so because i was running a 94 or so because i was running a 94 or so because i was running a tech company and my background was in tech company and my background was in tech company and my background was in technology technology technology the portfolio tended to be a significant amount of software and a significant amount of software and a significant amount of software and technology names technology names technology names and so on because that's what i knew i and so on because that's what i knew i and so on because that's what i knew i knew those well um knew those well um knew those well um and uh and and at that time and uh and and at that time and uh and and at that time uh my my modus operandi uh my my modus operandi uh my my modus operandi was in many of these cases to was in many of these cases to was in many of these cases to kind of set it and forget it you know kind of set it and forget it you know kind of set it and forget it you know sort of sort of sort of buy and hold and uh buy and hold and uh buy and hold and uh and in in in some cases and in in in some cases and in in in some cases uh because the um the growth engines uh because the um the growth engines uh because the um the growth engines were so robust were so robust were so robust so far out uh i pretty much felt like so far out uh i pretty much felt like so far out uh i pretty much felt like when i bought these companies that when i bought these companies that when i bought these companies that i should never sell them so i should never sell them so i should never sell them so there were two businesses at that time there were two businesses at that time there were two businesses at that time in the in the
Questionerin the in the mid 90s that i'd invested inin the mid 90s that i'd invested inin the mid 90s that i'd invested in which became hundred baggerswhich became hundred baggerswhich became hundred baggers 100 baggers are really good for your100 baggers are really good for your100 baggers are really good for your health and your wealthhealth and your wealthhealth and your wealth and one of them uh was aand one of them uh was aand one of them uh was a was a company in india i i had opened upwas a company in india i i had opened upwas a company in india i i had opened up a brokerage account in india and ia brokerage account in india and ia brokerage account in india and i had just made very little investments inhad just made very little investments inhad just made very little investments in indiaindiaindia i think out of the million dollars maybei think out of the million dollars maybei think out of the million dollars maybe like 20 000like 20 000like 20 000 uh when went into india but one of theuh when went into india but one of theuh when went into india but one of the bets i made which was aboutbets i made which was aboutbets i made which was about a ten thousand dollar bet uh was aa ten thousand dollar bet uh was aa ten thousand dollar bet uh was a company called uhcompany called uhcompany called uh satyam computer services and i knewsatyam computer services and i knewsatyam computer services and i knew those guys well becausethose guys well becausethose guys well because uh uh they used to visit the usuh uh they used to visit the usuh uh they used to visit the us i had some clients in common with themi had some clients in common with themi had some clients in common with them and so i had interacted with them and iand so i had interacted with them and iand so i had interacted with them and i was very impressed with the way theywas very impressed with the way theywas very impressed with the way they ran their affairs and when i looked atran their affairs and when i looked atran their affairs and when i looked at the business they were they were tradingthe business they were they were tradingthe business they were they were trading forforfor below the liquidation value of the realbelow the liquidation value of the realbelow the liquidation value of the real estate they owned in hyderabadestate they owned in hyderabadestate they owned in hyderabad so the market was not even valuing
Questionerso the market was not even valuing their business which was growing 50 a year i mean it was just on a rocket ship uh and it was a really great business because they have a lot of recurring revenue from fortune 500 u.s companies and so on so i said wow this is like so far so deep undervalued um you know i but i didn't i i didn't know how well these repatriation laws would work in india et cetera so anyway i made a 10 000 bet and that eventually became about 140x so it became like 1.4 million which is great and and actually i had no intentions of selling it but then in the year 2000 they had spun out uh a dot-com business in 99 and that business they spun out got some ridiculous valuation and then their own stock was being valued very highly because of that and so why my take was uh when i looked at it in 2000 i said this is just
Todd Combsis justis just too ridiculous in terms of valuationtoo ridiculous in terms of valuationtoo ridiculous in terms of valuation even though i wanted to hold it for aeven though i wanted to hold it for aeven though i wanted to hold it for a whilewhilewhile i said this is just very extreme so ii said this is just very extreme so ii said this is just very extreme so i sold it and i pretty much must have soldsold it and i pretty much must have soldsold it and i pretty much must have sold it withinit withinit within two weeks of the peak and then ittwo weeks of the peak and then ittwo weeks of the peak and then it proceeded toproceeded toproceeded to lose about it was still would have beenlose about it was still would have beenlose about it was still would have been a great investment but it lost abouta great investment but it lost abouta great investment but it lost about 60 70 of its value after that uh so you60 70 of its value after that uh so you60 70 of its value after that uh so you still had astill had astill had a huge multibagger but nothing like whathuge multibagger but nothing like whathuge multibagger but nothing like what we capturedwe capturedwe captured then there was another business uh atthen there was another business uh atthen there was another business uh at that time cmgithat time cmgithat time cmgi which was based in boston which waswhich was based in boston which waswhich was based in boston which was spawning.comspawning.comspawning.com so they were like an incubatorso they were like an incubatorso they were like an incubator creating.coms and thencreating.coms and thencreating.coms and then all of those some of those are goingall of those some of those are goingall of those some of those are going public so it was apublic so it was apublic so it was a i i knew the internet would be big and ii i knew the internet would be big and ii i knew the internet would be big and i knew thatknew thatknew that some of these business would make it butsome of these business would make it butsome of these business would make it but i didn't know which ones and i didn'ti didn't know which ones and i didn'ti didn't know which ones and i didn't want to pay for any of these businesseswant to pay for any of these businesseswant to pay for any of these businesses so i felt like if i bought cmgi and theyso i felt like if i bought cmgi and theyso i felt like if i bought cmgi and they keep you know
Questionerkeep you know creating these dot coms it's kind of like the way it would be with investing in tencent or alibaba today you know these businesses are creating many many businesses and of course the difference is uh well i think in both cases even in the case of amazon all these businesses throw a lot of stuff against the wall and most things don't stick but some things do stick and when they stick they stick and do really well um so so my take with cmgi was i was buying it at a pretty modest valuation in the mid 90s and then it just went crazy over the next few years so that actually was a hundred thousand uh ten percent bet that became over a million and uh i went over 10 million sorry and uh so so so those were good times but then uh when the fund started in 99 2000 i could see the the bubble and i could see these valuations uh
Questionerand i could see these valuations uh being quite crazybeing quite crazybeing quite crazy so at that time the market has splitso at that time the market has splitso at that time the market has split into kind of twointo kind of twointo kind of two halves uh one half was this frenziedhalves uh one half was this frenziedhalves uh one half was this frenzied crazy multiplescrazy multiplescrazy multiples and the others were these boringand the others were these boringand the others were these boring companies like berkshire and so on thatcompanies like berkshire and so on thatcompanies like berkshire and so on that no one was interested inno one was interested inno one was interested in and so the day the nasdaq peaked i thinkand so the day the nasdaq peaked i thinkand so the day the nasdaq peaked i think march 6 the march 9thmarch 6 the march 9thmarch 6 the march 9th 2000 was the day that berkshire hit a2000 was the day that berkshire hit a2000 was the day that berkshire hit a multi-year lowmulti-year lowmulti-year low so as the nasdaq was hitting 5 000so as the nasdaq was hitting 5 000so as the nasdaq was hitting 5 000 i think uh berkshire was sitting at likei think uh berkshire was sitting at likei think uh berkshire was sitting at like 40 00040 00040 000 down from 70 000 so it had dropped quitedown from 70 000 so it had dropped quitedown from 70 000 so it had dropped quite a bita bita bit and so if you were willing to look atand so if you were willing to look atand so if you were willing to look at non-sexy businesses at that timenon-sexy businesses at that timenon-sexy businesses at that time you could get them at modest multiplesyou could get them at modest multiplesyou could get them at modest multiples even though there was a lot of frenzyeven though there was a lot of frenzyeven though there was a lot of frenzy and somethingand somethingand something i think somewhat similar now wherei think somewhat similar now wherei think somewhat similar now where there's athere's athere's a sliver of the market that is exuberantsliver of the market that is exuberantsliver of the market that is exuberant uhuhuh but a large portion of the market i seebut a large portion of the market i seebut a large portion of the market i see today is probablytoday is probablytoday is probably uh overvalued but maybe not egregiouslyuh overvalued but maybe not egregiouslyuh overvalued but maybe not egregiously overvalued
Questionerovervaluedovervalued there's a small sliver which i think isthere's a small sliver which i think isthere's a small sliver which i think is egregiously overvaluedegregiously overvaluedegregiously overvalued and then you've got a lot of businessesand then you've got a lot of businessesand then you've got a lot of businesses i think thati think thati think that people are not very interested in rightpeople are not very interested in rightpeople are not very interested in right now sonow sonow so in the 2000s early 2000s i changed myin the 2000s early 2000s i changed myin the 2000s early 2000s i changed my stylestylestyle because i could see that you knowbecause i could see that you knowbecause i could see that you know markets are quite overheated so imarkets are quite overheated so imarkets are quite overheated so i wanted to buy value because i could notwanted to buy value because i could notwanted to buy value because i could not findfindfind anything in technology or anything thatanything in technology or anything thatanything in technology or anything that made sense in terms of valuationsmade sense in terms of valuationsmade sense in terms of valuations so my my style ofso my my style ofso my my style of investing changedinvesting changedinvesting changed from what you might call garp tofrom what you might call garp tofrom what you might call garp to you know buy a 50 cent dollar and sellyou know buy a 50 cent dollar and sellyou know buy a 50 cent dollar and sell at 90 centsat 90 centsat 90 cents and hopefully that dollar maybe increaseand hopefully that dollar maybe increaseand hopefully that dollar maybe increase a little bita little bita little bit in size over time so i practiced thatin size over time so i practiced thatin size over time so i practiced that until actually this year and this year iuntil actually this year and this year iuntil actually this year and this year i uh year 2000 most people would like touh year 2000 most people would like touh year 2000 most people would like to forget but year 2000 wasforget but year 2000 wasforget but year 2000 was a terrific year for me from a learninga terrific year for me from a learninga terrific year for me from a learning point of viewpoint of viewpoint of view it it's probably the next biggest yearit it's probably the next biggest yearit it's probably the next biggest year for learning for me versus the mid
Questionerfor learning for me versus the mid mid 90s and uh and so the the big epiphany for me this year was that uh if you if you are lucky enough to have bought into a great compounder at a reasonable valuation um with a long runway then you should not you should not let it go just because it gets to 100 cents on the dollar or 120 cents on the dollar so i was never in the past willing to hold a business above intrinsic value or above let's call it optical intrinsic value um so the and and charlie munger has talked about it right he says that there's no rational way to justify it but he's not willing to sell great businesses he owns just because they are somewhat uh or they appear to be somewhat overvalued like you know i just i just met charlie a week ago for a socially distant dinner at his patio in in la and at all times i was uh at least eight or ten feet away
Warreni was uh at least eight or ten feet away from him with the mask on so and only time i didn't have a mask on it was when i was eating but when i was eating i was actually at a different table so i was um always made sure i'm sufficient distance from from charlie so i just speak a little louder which is okay uh but like for example you know he says that he owns costco at 40 times earnings right and he won't sell costco at 40 times earnings he wouldn't buy it he wouldn't buy a costco at 40 times earnings but he won't sell it and he says that there's no intellectual way to justify it you know everything should either be a buy or a sell right i mean at a particular price but he says costco is definitely not a sell for him at 40 times trailing earnings right so so the big uh lessons i learned in 2000 was don't sell a compounder just because it appears optically
Todd Combsjust because it appears optically overvalued and keep the compounder until it gets egregiously overvalued like it's really like you you can't justify it um i mean i would say that i didn't i didn't exactly get this for monger but i would say that if costco got to 100 times earnings uh i'm not sure charlie would be holding i mean he has very deep love for costco but maybe at 50 times earnings he would hold and maybe even at 60 times earnings he would hold but maybe not at 200 times earnings or 100 times earnings so so give it some room basically give it some room uh because if you've got these great businesses with great runways uh with great dna i mean if you look at a business like costco they have one store in china okay and what does costco's business look like in china 20 years from now right maybe it looks like what happened in the first 20 years in
Questionerwhat happened in the first 20 years in what happened in the first 20 years in the u.s maybe it might be even the u.s maybe it might be even the u.s maybe it might be even twice that we don't know or maybe it's twice that we don't know or maybe it's twice that we don't know or maybe it's it's a doubt it doesn't go anywhere it's a doubt it doesn't go anywhere it's a doubt it doesn't go anywhere right they get to 20 stores and then right they get to 20 stores and then right they get to 20 stores and then they say this is they say this is they say this is for whatever reason not working so for whatever reason not working so for whatever reason not working so there's a wide range of outcomes there's a wide range of outcomes there's a wide range of outcomes right and but there are certainly some right and but there are certainly some right and but there are certainly some outcomes outcomes outcomes in that mix where they could have a in that mix where they could have a in that mix where they could have a massive home ramen massive home ramen massive home ramen home run in china with you know thousand home run in china with you know thousand home run in china with you know thousand plus stores plus stores plus stores and they could have a massive home run and they could have a massive home run and they could have a massive home run in 20 other countries in 20 other countries in 20 other countries you know so the number of countries you know so the number of countries you know so the number of countries costco is in today is a really small costco is in today is a really small costco is in today is a really small number so in the range of things a lot of so in the range of things a lot of so in the range of things a lot of things are possible for costco things are possible for costco things are possible for costco and so you know and so you know and so you know give it that room to run as long as the give it that room to run as long as the give it that room to run as long as the dna is intact dna is intact dna is intact the culture is intact uh and the culture is intact uh and the culture is intact uh and the business is a lovable business still the business is a lovable business still the business is a lovable business still so don't uh so two two two lessons i don't uh so two two two lessons i don't uh so two two two lessons i learned one is that learned one is that learned one is that i was always looking for the last 20
Warreni was always looking for the last 20 years for discounted pies and i didn't really care whether the pie grew or not my take was that if i bought a business for 40 cents or 50 cents on the dollar and i i've always implicitly assumed that uh market efficiency would kick in in two or three years so if i'm correct that a business is worth a dollar and i'm buying it for 50 cents and i sell it for 90 cents and that convergence takes place in two or three years uh it's a very nice rate of return in the 20s and so you don't really need a compounder to do that the negative with that is then you've got to keep finding the next one and the next one and so on and the second is you've got this irritating thing called taxes you know and uh and so so the the better model is to uh be able to run for a while now uh the way monish is wired
Questionerhe is unable to pay up for a great business a lot of other investors are wired where they are far more willing and able to pay up but i know monish and monish is just not wired that way so that is perfectly okay so i am limited to a universe where a compounder is maybe not recognized of the compounder or it has hit a temporary hiccup or something where the valuation is really cheap but there is a genuinely long runway and growth ahead and instead of just getting off that train when it looks fully priced which is what i did many times in the past this time the idea is stay on the train stay on the train for a while and only get off the train when it gets egregious so i think this this is a transition uh and i looked at looked looked at my own portfolio in the last few years and i really kicked myself you know the thing is i used to own this
Questionerthing is i used to own this chinese liquor company called mao tai chinese liquor company called mao tai chinese liquor company called mao tai and uh you know maota is the most uh you know maota is the most and uh you know maota is the most valuable valuable valuable liquor company on the planet it's a liquor company on the planet it's a liquor company on the planet it's a north of 200 billion north of 200 billion north of 200 billion market cap and and market cap and and market cap and and their product i think the cost of a their product i think the cost of a their product i think the cost of a bottle maybe is bottle maybe is bottle maybe is not more than five dollars tops not more than five dollars tops not more than five dollars tops and uh and i think the selling price and uh and i think the selling price and uh and i think the selling price is not a 150. uh you know is not a 150. uh you know is not a 150. uh you know that's a really good business to be in that's a really good business to be in that's a really good business to be in when your cost of goods sold is five when your cost of goods sold is five when your cost of goods sold is five dollars and your selling price dollars and your selling price dollars and your selling price is 150 and in five years you can take is 150 and in five years you can take is 150 and in five years you can take that selling price of 300 that selling price of 300 that selling price of 300 and in 10 years you can take it to maybe and in 10 years you can take it to maybe and in 10 years you can take it to maybe 500 or whatever and 500 or whatever and 500 or whatever and um eighty percent of the multi sold in um eighty percent of the multi sold in um eighty percent of the multi sold in china china china is counterfeit it's fake is counterfeit it's fake is counterfeit it's fake because the demand is so high and because the demand is so high and because the demand is so high and so the company has in in their case they so the company has in in their case they so the company has in in their case they cannot grow cannot grow cannot grow volumes very easily because uh volumes very easily because uh volumes very easily because uh the sorghum that it is based on the sorghum that it is based on the sorghum that it is based on that the soil in which it grows is only that the soil in which it grows is only that the soil in which it grows is only in a certain part of china in a certain part of china
Questionerin a certain part of china and there's only certain amount of acreage uh from where you can get that sorghum and then they they really actually draw the water only on one particular day when the moon is there's a full moon in the autumn and on that day they draw the water for the whole year so there's basically one batch uh made in the year if you will so they've got but then they're blending it with like 100 years of previous blends and all that anyway it's very unusual company and uh i got it relatively cheap and uh i like the business and then in in the next four or five years it went up six seven times and it started looking optically expensive you know not even like costco just like you know high 20s low 30s type of multiple and i got off the train and then it went on to more than double you know in the next couple of years and it'll keep
Todd Combsthe next couple of years and it'll keep going andgoing andgoing and uh and then the same thing also happeneduh and then the same thing also happeneduh and then the same thing also happened to me in ferrari you know ito me in ferrari you know ito me in ferrari you know i invested in a company called fiatinvested in a company called fiatinvested in a company called fiat chrysler and they spun outchrysler and they spun outchrysler and they spun out uh ferrari shares and uh when they spunuh ferrari shares and uh when they spunuh ferrari shares and uh when they spun out ferrari sharesout ferrari sharesout ferrari shares my thinking was the company has withmy thinking was the company has withmy thinking was the company has with their bankers priced it appropriatelytheir bankers priced it appropriatelytheir bankers priced it appropriately because they're obviously trying tobecause they're obviously trying tobecause they're obviously trying to capture value and ferrari came public incapture value and ferrari came public incapture value and ferrari came public in thethethe 40-hour dollar range in40-hour dollar range in40-hour dollar range in i think 2016 or soi think 2016 or soi think 2016 or so and and i said okay you know this looksand and i said okay you know this looksand and i said okay you know this looks like a very good businesslike a very good businesslike a very good business and uh as it started to approach 70and uh as it started to approach 70and uh as it started to approach 70 80 100 a share and on a trailing80 100 a share and on a trailing80 100 a share and on a trailing earnings basis it started lookingearnings basis it started lookingearnings basis it started looking expensive uh i saidexpensive uh i saidexpensive uh i said we've had a very nice ride and it was awe've had a very nice ride and it was awe've had a very nice ride and it was a very significant portion of thevery significant portion of thevery significant portion of the portfolio becauseportfolio becauseportfolio because just the ferrari portion of my portfoliojust the ferrari portion of my portfoliojust the ferrari portion of my portfolio was likewas likewas like over 100 million and umover 100 million and umover 100 million and um so i sold and then it kept going and theso i sold and then it kept going and theso i sold and then it kept going and the earnings kept going up andearnings kept going up and
Todd Combsearnings kept going up and it's more than double since then and it's more than double since then and it's more than double since then and both maota and ferrari both maota and ferrari both maota and ferrari were not egregiously overvalued were not egregiously overvalued were not egregiously overvalued they were at best optically overvalued they were at best optically overvalued they were at best optically overvalued for a cheapskate like me and in for a cheapskate like me and in for a cheapskate like me and in both cases i should have just held on both cases i should have just held on both cases i should have just held on because these are because these are because these are remarkable unusual businesses i mean remarkable unusual businesses i mean remarkable unusual businesses i mean ferrari ferrari ferrari is one of the most recognized brand in is one of the most recognized brand in is one of the most recognized brand in the world the world the world and in their 70 plus his 70 plus year and in their 70 plus his 70 plus year and in their 70 plus his 70 plus year history history history they've never spent a dollar on they've never spent a dollar on they've never spent a dollar on advertising advertising advertising you know like gm you know how much does you know like gm you know how much does you know like gm you know how much does gm spend on advertising or how much does gm spend on advertising or how much does gm spend on advertising or how much does mercedes or bmw spend on advertising mercedes or bmw spend on advertising mercedes or bmw spend on advertising or porsche ferrari has spent zero or porsche ferrari has spent zero or porsche ferrari has spent zero and they have the most dominant brand and they have the most dominant brand and they have the most dominant brand even amongst autos or non-orders you even amongst autos or non-orders you even amongst autos or non-orders you know know know most recognized dominant brands in the most recognized dominant brands in the most recognized dominant brands in the world so world so world so anyway incredible franchises and i was anyway incredible franchises and i was anyway incredible franchises and i was very dumb and stupid very dumb and stupid very dumb and stupid um and like bunger says we are old too um and like bunger says we are old too um and like bunger says we are old too soon and why is too late but i still soon and why is too late but i still soon and why is too late but i still feel i
Questionerfeel i hopefully have maybe 25 30 35 years runway left and uh if i can apply the lessons of 2020 and not so one of the changes i made is i'm not interested in buying discounted dollar bills i want to look at dollar bills that are going to grow in size the pie has to be a growing pie and of course i'm a cheapskate so i want to buy the pie cheap but i'll run it for a while and so that's the change this year and uh that what also what that means is that in a given year if i can find one or two uh there's plenty so that's the that's the modus operandi now
Questionerfor speaking with us um so so i had a question from from what i understand you look a lot at international companies especially in you know locations where a lot of investors don't typically look at what is what is your approach when it comes to kind of you know finding businesses that you
Questioneryou know finding businesses that you know don't have you know active sell side research and you know other types of forms that other investors are used to looking at
Questioneryeah well the the sell side research is mostly garbage i mean you know i think that you know the the thing is that uh i remember that when i was making this investment in india the satyam computers the broker said to me you know we we cover the name and i was in mumbai and he said do you want to see our report on satyam i said sure so he gave me the report and uh stock was at like 40 rupees a share and the report was saying it's worth like 60 rupees a share and i knew that the real estate loan was worth more than two times the stock price and i'm not even getting to the business and the growth of the business the business has fifty percent a year growth going on for many years and the real estate is not where the value
Otherthe real estate is not where the value of the business is the value of the business is in their operations okay so none of that is in the report right so then the broker says by the way you want to meet the analyst who wrote the report okay and i said sure so i met this uh nice lady who was the analyst who wrote the report and i i told her listen um i don't want to kind of you know you know go against what you're saying but i just happen to work in this industry i have a company in this industry i understand this industry quite well and i think your report kind of misses it by a mile i think that you need to put in here a target price which is like 600 rupees and it's sitting at 40 and she said no we can't do that i said i said why can't you do that she said i said i can show you why it's worth that she said no no the way it works in our
Questionershe said no no the way it works in our business is we put like price target no more than 30 40 percent above where it is and then when the stock goes up we again bump it another 20 30 above that and we keep going and something so then the report is complete garbage okay it's not really going into reality and the thing is a lot of the analysts reports they're really near term one or two quarters ahead they're really focused very near-term and they really don't go into what happens 10 years from now or 15 years from now and looking at it like you own the business you know we don't need precision on what's going to happen next quarter i don't need to know to the penny what's going to happen next quarter that is complete garbage data the nature of business is it doesn't go in a straight line it's going to go up and down and what you're really looking at you
Questionerand what you're really looking at you want to like kind of look at the long term trajectories and probabilities of different things and uh so so so first of all the sell side stuff is only for entertainment and i think what i find useful is i find useful to look at things like value investors club i think that's a good place to look because there people are you know putting somewhat thoughtful write-ups and such uh you could look at something like sum zero which is has a subscription but again uh these are these are people who are basically actually on on the buy side and you know they're interested in buying these things and so on on so i think those can be good or actually a lot of people send me ideas uh and things by email and those also i i like to look at if if they're you know well thought through and so on so i think i'm not trying to invest outside
Todd Combsi think i'm not trying to invest outside the u.s the u.s the u.s uh other things being equal i would uh other things being equal i would uh other things being equal i would prefer to invest prefer to invest prefer to invest in the us uh governance is a lot better in the us uh governance is a lot better in the us uh governance is a lot better uh usually things are in the english uh usually things are in the english uh usually things are in the english language uh language uh language uh all those things kind of make it easier all those things kind of make it easier all those things kind of make it easier uh but uh but uh but i think what if my portfolio ends up i think what if my portfolio ends up i think what if my portfolio ends up with a lot of foreign names with a lot of foreign names with a lot of foreign names in general that is because i'm not in general that is because i'm not in general that is because i'm not finding much value here finding much value here finding much value here uh and i'm finding value somewhere else uh and i'm finding value somewhere else uh and i'm finding value somewhere else so i'm somewhat agnostic so i'm somewhat agnostic so i'm somewhat agnostic about where i find value in fact the about where i find value in fact the about where i find value in fact the hurdle is higher hurdle is higher hurdle is higher to invest overseas because i mean you to invest overseas because i mean you to invest overseas because i mean you know i got to go meet the company and know i got to go meet the company and know i got to go meet the company and and uh and and i got to get past all the and uh and and i got to get past all the and uh and and i got to get past all the language and culture and other issues language and culture and other issues language and culture and other issues make sure really understanding the make sure really understanding the make sure really understanding the nuances nuances nuances and i think in this environment uh what and i think in this environment uh what and i think in this environment uh what i've been finding i've been finding i've been finding is that i did find is that i did find is that i did find one business to invest in in 2020 in the one business to invest in in 2020 in the one business to invest in in 2020 in the us us us uh because of covet i think things sting uh because of covet i think things sting uh because of covet i think things sting stanked and stanked and
Questionerstanked and so i could do something in april umso i could do something in april umso i could do something in april um actually a little later maybe may or soactually a little later maybe may or soactually a little later maybe may or so and uh but for the most partand uh but for the most partand uh but for the most part most recently it's been outside the u.smost recently it's been outside the u.smost recently it's been outside the u.s but it's okay i mean i think the key isbut it's okay i mean i think the key isbut it's okay i mean i think the key is you know that you've got to make sureyou know that you've got to make sureyou know that you've got to make sure the business is in your circle ofthe business is in your circle ofthe business is in your circle of competence andcompetence andcompetence and all the other pieces are fitting well soall the other pieces are fitting well soall the other pieces are fitting well so then it can work out fine anyone elsethen it can work out fine anyone elsethen it can work out fine anyone else yeah i'd be curious um to know i watchedyeah i'd be curious um to know i watchedyeah i'd be curious um to know i watched the podcast you did with edelweissthe podcast you did with edelweissthe podcast you did with edelweiss capitalcapitalcapital where you sort of discussed how peoplewhere you sort of discussed how peoplewhere you sort of discussed how people have an external map and an internal maphave an external map and an internal maphave an external map and an internal map and how that doesn't really get alignedand how that doesn't really get alignedand how that doesn't really get aligned but how that puts you on the path tobut how that puts you on the path tobut how that puts you on the path to capital could you talk a bit more aboutcapital could you talk a bit more aboutcapital could you talk a bit more about thatthatthat
Otheryeah so umyeah so umyeah so um you know one of the unfortunate partyou know one of the unfortunate partyou know one of the unfortunate part about humans is that when weabout humans is that when weabout humans is that when we are created um we don't come with theare created um we don't come with theare created um we don't come with the owner's manualowner's manualowner's manual i think there was a screw-up where whati think there was a screw-up where whati think there was a screw-up where what should have happened is
Othershould have happened isshould have happened is after the delivery and before theafter the delivery and before theafter the delivery and before the placenta comes out there should be anplacenta comes out there should be anplacenta comes out there should be an owner's manual coming outowner's manual coming outowner's manual coming out and uh which says here's who you areand uh which says here's who you areand uh which says here's who you are and uh and so what happens is thatand uh and so what happens is thatand uh and so what happens is that um i had i'd gone to thisum i had i'd gone to thisum i had i'd gone to this through this with a couple of uhthrough this with a couple of uhthrough this with a couple of uh industrial psychologistsindustrial psychologistsindustrial psychologists about it's been about 21 22 years agoabout it's been about 21 22 years agoabout it's been about 21 22 years ago so their theory was thatso their theory was thatso their theory was that between our genetic makeupbetween our genetic makeupbetween our genetic makeup and our experiences in the first fiveand our experiences in the first fiveand our experiences in the first five years of our lifeyears of our lifeyears of our life who we are as humans is hard-codedwho we are as humans is hard-codedwho we are as humans is hard-coded so who you were at the age of sixso who you were at the age of sixso who you were at the age of six for example and who you will be at thefor example and who you will be at thefor example and who you will be at the age of 96age of 96age of 96 is going to be the exact same person sois going to be the exact same person sois going to be the exact same person so no change from 6 to 60 to 96and their perspective was thatand their perspective was thatand their perspective was that most humans have no idea who they aremost humans have no idea who they aremost humans have no idea who they are because that owner's manual never camebecause that owner's manual never camebecause that owner's manual never came it was not given to you and what we whatit was not given to you and what we whatit was not given to you and what we what we tend to dowe tend to dowe tend to do is when as we grow up and go into thisis when as we grow up and go into thisis when as we grow up and go into this worldwe try to conformwe try to conformwe try to conform to the world around us so that things
Otherto the world around us so that things go in a kind of reasonable socially acceptable way so we look at the way other humans are and the way the other humans interact and we base our own kind of approach to life based on that model right and so generally speaking that type of approach is going to lead to a distortion so for example let's say this is your inner map right this is who you are hard coded at the age of five and it might be that you're acting something like this as your outer map like this you're misaligned and until you are like this so they said if you miss a line this is not going to change this has to move right so your outer map has to change to align to the inner map and if you can align the outer your outer persona to who you actually are then you can go very far this was their theory so these two guys they named their
Questionerso these two guys they named their company conquest and they named it conquest after genghis khan so they said that look people think of genghis khan as a tyrant okay you know he's going to a village with his followers raping pillaging plundering then going to the next village raping pillaring plundering and that was the lifestyle right and but they said that genghis khan was very highly effective at what he did so he was a tyrant on the inside and he acted like a tyrant on the ice outside complete alignment so they said that it is not our goal to judge you or to change you because we don't think you can be changed even if we try to so if you are a villain on the inside you need to act like a villain on the outside and be an effective villain don't try to be gandhian on the outside when you are a villain on the inside because then you're going to have a
Otherbecause then you're going to have a miserable life and you will not be effective at trying to be gandhi you'll fail very miserably at that so what they did is they did a bunch of you know i took a bunch of tests with them and then they did 360 interviews with my wife my employees my friends and if your kids are old enough to talk to your kids and so on and through all of that they built what they said was my personality template and they gave it to me actually it's a nice 20 page document and i try to read it reread it every year because it really describes who i am and uh i know the first time ever that i could actually read and most people who have asked and who have gone ahead and taken this you know gone and done this um they've had a very hard time with the report uh like like the last guy i was talking to he said i hated the guy i was reading
Questionerhe said i hated the guy i was reading about okay and and it was really hard i said yeah but you know it's you he said yeah but i don't want to be that guy i said well you have no choice that is the guy you are okay and and and to his credit he was willing to embrace that and and and if he embraces it and then changes external behavior to align with the internal um then then you can go really far so so like for example in my case in 1999 when i was uh doing this uh went through this i i had a business that had uh i think more than 160 employees um i had founded that company about eight or nine years ago it had grown very fast and um i loved that business in the first four or five years and in the last four or five years uh gradually uh my my love for that business started to decline and to the point that in 99 when i actually did the testing with
Questioner99 when i actually did the testing with them i did not want to go to work and the problem was in the past anytime i felt like i didn't like my job or something i just resigned you know move on there was nobody to resign to you know and it's me who had created this so when i went through this testing they said to me we have no idea how you actually even get ready in the morning and get to work okay we have no idea how you actually are able to do that because it's so far off from who you are so the first thing they told me is get rid of the company okay so i said what do you mean by get rid of the company it's my company right they said you can sell it you can find somebody else to run it whatever else but you need to be out of there right and i did follow the advice and i started a ceo search and i was done in six months i was out it was
Questioneri was out it wasi was out it was phenomenal then the second thing theyphenomenal then the second thing theyphenomenal then the second thing they told me istold me istold me is so they said first of all you don't doso they said first of all you don't doso they said first of all you don't do well in team sportswell in team sportswell in team sports okay so there are people whookay so there are people whookay so there are people who would be really good in terms of innerwould be really good in terms of innerwould be really good in terms of inner map in terms of being on a soccer teammap in terms of being on a soccer teammap in terms of being on a soccer team right where in a soccer team you have toright where in a soccer team you have toright where in a soccer team you have to function as a team andfunction as a team andfunction as a team and you know and now if you're theyou know and now if you're theyou know and now if you're the goalkeeper you don't need togoalkeeper you don't need togoalkeeper you don't need to you know goalkeeper you're like off onyou know goalkeeper you're like off onyou know goalkeeper you're like off on your own tangent doing your thing butyour own tangent doing your thing butyour own tangent doing your thing but the rest of the team needs to be kind ofthe rest of the team needs to be kind ofthe rest of the team needs to be kind of functioning as a team to be effectivefunctioning as a team to be effectivefunctioning as a team to be effective so they said monish that is not you yourso they said monish that is not you yourso they said monish that is not you your mapmapmap is really simple they said number oneis really simple they said number oneis really simple they said number one you like to play mathematical games okayyou like to play mathematical games okayyou like to play mathematical games okay that's your number one thingthat's your number one thingthat's your number one thing mathematical games but they're verymathematical games but they're verymathematical games but they're very specific kind of math gamesspecific kind of math gamesspecific kind of math games they said it has to be a gamethey said it has to be a gamethey said it has to be a game that you think you can win okay so youthat you think you can win okay so youthat you think you can win okay so you you've looked at the game rules andyou've looked at the game rules andyou've looked at the game rules and whatever and you seem to
Otherwhatever and you seem to seem seem to think that you can win this game that will interest you the third is it cannot be a multiplayer game it has to be where you are the only guy on your team cannot be three people or a soccer team so a single player math game blah blah and uh and i i was about three months away from starting for python i was just starting to kind of sow the seeds on it and all that i asked them uh you know i'm going to be starting this fund with these friends of mine as investors what do you think of this so they looked and they said this is perfect for you this is exactly your calling and then one of the two of them gave me a hundred thousand it became one of the original investors okay one of these two psychologists right and i'm telling them you don't know me maybe this is a lot of money for you you know maybe you don't want to
Charlieknow maybe you don't want to invest they said no no i cracked your brain open i know exactly what's in there i'm going to kick ass for this money here's the money no problem and he did really well with it he had no problems uh so uh so the thing was that i've enjoyed playing bridge a lot i mean i discovered bridge when i was 23 years old i still play probably you know more than i wish i could play more i play probably four or five hours a week but i'd be even happier if i could take it to ten hours a week like buffett is i think that about 10 12 hours a week of bridge bridge is great okay mathematical game now it's with a partner but for the most part it's it's a two-player game pretty close to one player it's fine um and uh investing it goes beyond math you know it's not just pure math but uh it's a lot of you know analysis and whatever it's it's a
Otheranalysis and whatever it's it's aanalysis and whatever it's it's a rational kind ofrational kind ofrational kind of you know way of looking at things soyou know way of looking at things soyou know way of looking at things so that works greatthat works greatthat works great and and so uhand and so uhand and so uh so the thing is that if you go throughso the thing is that if you go throughso the thing is that if you go through that type of testing then of coursethat type of testing then of coursethat type of testing then of course in my opinion everyone should go throughin my opinion everyone should go throughin my opinion everyone should go through that test and get their manual because ithat test and get their manual because ithat test and get their manual because i think it's a huge advantagethink it's a huge advantagethink it's a huge advantage but if you didn't go through the testingbut if you didn't go through the testingbut if you didn't go through the testing you stillyou stillyou still you still can kind of figure it out andyou still can kind of figure it out andyou still can kind of figure it out and the way you can figure it out would be athe way you can figure it out would be athe way you can figure it out would be a little slowerlittle slowerlittle slower is your body actually in your mindis your body actually in your mindis your body actually in your mind actually tells youactually tells youactually tells you when you really like something and whenwhen you really like something and whenwhen you really like something and when you don't like somethingyou don't like somethingyou don't like something so like for example i wasn't interestedso like for example i wasn't interestedso like for example i wasn't interested in going to workin going to workin going to work right in the big company i had and uhright in the big company i had and uhright in the big company i had and uh i didn't know why but it was it was offi didn't know why but it was it was offi didn't know why but it was it was off my mapmy mapmy map uh i what happened is when i started theuh i what happened is when i started theuh i what happened is when i started the businessbusinessbusiness it was a complete mathematical game youit was a complete mathematical game youit was a complete mathematical game you know i wanted toknow i wanted toknow i wanted to increase sales grow revenues to you know
Otherincrease sales grow revenues to you know increase sales grow revenues to you know make it run make it run make it run make sure the profits were enough to make sure the profits were enough to make sure the profits were enough to keep growing it was all keep growing it was all keep growing it was all very even though it was not a very even though it was not a very even though it was not a mathematical company it was very mathematical company it was very mathematical company it was very mathematical in the way i thought about mathematical in the way i thought about mathematical in the way i thought about the business the business the business and as the company started to grow and as the company started to grow and as the company started to grow my role changed from being a doer my role changed from being a doer my role changed from being a doer to basically managing politics to basically managing politics to basically managing politics you know you know few vice presidents you know you know few vice presidents you know you know few vice presidents and then managing them and and then managing them and and then managing them and there's no mathematics in managing them there's no mathematics in managing them there's no mathematics in managing them okay it's a bunch of nonsense managing okay it's a bunch of nonsense managing okay it's a bunch of nonsense managing for my point of view a bunch of nonsense for my point of view a bunch of nonsense for my point of view a bunch of nonsense managing a bunch of people managing a bunch of people managing a bunch of people uh so i'm not you know like for example uh so i'm not you know like for example uh so i'm not you know like for example if i'm if i'm if i'm if i'm the sales guy i can make it all if i'm the sales guy i can make it all if i'm the sales guy i can make it all mathematical mathematical mathematical suspect prospect qualified lead close suspect prospect qualified lead close suspect prospect qualified lead close okay okay okay like every week i'd send 200 letters i'd like every week i'd send 200 letters i'd like every week i'd send 200 letters i'd make two or 300 calls make two or 300 calls make two or 300 calls i'd have so many meetings and then i i'd have so many meetings and then i i'd have so many meetings and then i knew based on those statistics how many knew based on those statistics how many knew based on those statistics how many deals would close right and that's all
Otherdeals would close right and that's all very buttoned down and i like that if i'm managing a sales force now it's a whole bunch of you know human mumbo jumbo going on and whatever else going on and politics going on it was just terrible uh so that was not me and there are other people who would love that would be really good at that you know they'd be uh really good at all those sorts of things so uh so i think the alignment issues are really and what has happened now is that pablo funds has been going on for 21 years i am probably as excited about it as the first day the numbers have become larger but the team size hasn't changed and in fact i learned from them don't get bazillion people so that because i get a lot of uh questions on this and people keep asking me you know who these guys are who can uh who can open everything up for them and so the two of them split up uh so
Questionerand so the two of them split up uh soand so the two of them split up uh so they're notthey're notthey're not they're not together anymorethey're not together anymorethey're not together anymore but but but one of thembut but but one of thembut but but one of them i'm going to give his name here and theni'm going to give his name here and theni'm going to give his name here and then let him be overwhelmed such as lifelet him be overwhelmed such as lifelet him be overwhelmed such as life his name is jack skein dr jack skeenhis name is jack skein dr jack skeenhis name is jack skein dr jack skeen s-k-e-e-n and hiss-k-e-e-n and hiss-k-e-e-n and his email address is j skein that'semail address is j skein that'semail address is j skein that's j-s-k-e-e-nj-s-k-e-e-nj-s-k-e-e-n at skin leadershipat skin leadershipat skin leadership group dot com charge a hundred thousandgroup dot com charge a hundred thousandgroup dot com charge a hundred thousand dollars does he because my net debt todollars does he because my net debt todollars does he because my net debt to ebitda right now is prettyebitda right now is prettyebitda right now is pretty you have to be limited all you have toyou have to be limited all you have toyou have to be limited all you have to do is give up your first male borndo is give up your first male borndo is give up your first male born anduh actually when i went through this iuh actually when i went through this iuh actually when i went through this i went through this with 12 guys togetherwent through this with 12 guys togetherwent through this with 12 guys together and uh it was a package deal at thatand uh it was a package deal at thatand uh it was a package deal at that time it was liketime it was liketime it was like 25 000 for all of us together the best25 000 for all of us together the best25 000 for all of us together the best 2000 i ever spent2000 i ever spent2000 i ever spent and i think now it's maybe around 10 000and i think now it's maybe around 10 000and i think now it's maybe around 10 000 a persona persona person so a small fraction of what ucla chargesso a small fraction of what ucla chargesso a small fraction of what ucla charges youyouyou and maybe uh the payoff is a lot largerand maybe uh the payoff is a lot largerand maybe uh the payoff is a lot larger so definitely worth doing but it's not iso definitely worth doing but it's not i
Otherso definitely worth doing but it's not i would say that uh you also have to have some fortitude uh because you know i'll tell you like the language will be like it'll start like this this narcissistic self-centered man okay he's not talking about trump okay he's talking about okay so that's how it starts this narcissistic self-centered man blah blah blah you read it and say i can't handle this okay learn to handle it okay so like remember that movie the few good men you can't handle the truth jack nicholson make sure you can handle the truth okay make sure there's intestinal fortitude i just want to say i've been told that by my family friends and uh people i've been in relationships with so it won't be a surprise they're all wrong though
Questionerthank monish thank you so much for your time i know everyone here really appreciates it and we really value value this so thanks again thank you so much
Otheramy a lot of fun and some great questions and look forward to it and hopefully i'll get a chance to another session sometime with you guys