Other[Music][Music][Music] foreignforeignforeign [Music][Music]started off his career as anstarted off his career as anstarted off his career as an entrepreneur starting his company Highentrepreneur starting his company Highentrepreneur starting his company High company Trans Tech in the early 1990scompany Trans Tech in the early 1990scompany Trans Tech in the early 1990s later sold it and invested that money tolater sold it and invested that money tolater sold it and invested that money to and eventually created an investmentand eventually created an investmentand eventually created an investment partnership with some of his otherpartnership with some of his otherpartnership with some of his other friends he started off investing theirfriends he started off investing theirfriends he started off investing their money and then realized he wanted tomoney and then realized he wanted tomoney and then realized he wanted to change the model a little bit startedchange the model a little bit startedchange the model a little bit started his own hedge fund and now he's giving ahis own hedge fund and now he's giving ahis own hedge fund and now he's giving a lot of that back to his foundation Drlot of that back to his foundation Drlot of that back to his foundation Dr Toronto foundation and the fourthToronto foundation and the fourthToronto foundation and the fourth highlight of his career is I believehighlight of his career is I believehighlight of his career is I believe Manish tell me if I get this wrong but aManish tell me if I get this wrong but aManish tell me if I get this wrong but a couple years ago he was kicked out ofcouple years ago he was kicked out ofcouple years ago he was kicked out of several casinos in Vegas for blackjackseveral casinos in Vegas for blackjackseveral casinos in Vegas for blackjack is that right Manishis that right Manishis that right Manish
Questionerone we've been kicked out of one so farone we've been kicked out of one so farone we've been kicked out of one so far my my goal is to get kicked out of allmy my goal is to get kicked out of allmy my goal is to get kicked out of all of them but we'll do it a little byof them but we'll do it a little byof them but we'll do it a little by little okay I did get some questions forlittle okay I did get some questions forlittle okay I did get some questions for some people unfortunately couldn't makesome people unfortunately couldn't make
Othersome people unfortunately couldn't make it today we do have some people on zoom and obviously we have all of you here today so you know monish how do you want to do this do you have a monologue do you want to go right into q a how do you think we should go about this
OtherI think let's we don't have that much time I think let's go with the Q a format I think that's a good way to go see what you guys have on your mind
Otherperfect so let's hear it what do you guys have in your mind
Questionerspecifically right the Micron is not a 37 basically all the Holdings don't get reported like the 13f doesn't report our foreign Holdings and so on we don't I don't invest more than 10 of assets into anything so when we made the investment into Micron it was a 10 bet it had become maybe I think at the peak it was maybe 25 or so a bit and it's pulled back so it might be like around 20 or a
Questionerback so it might be like around 20 or a little less than that I'm just wondering because I pitched a stock I did a stock pitch on AMD I've just done a lot of research the summer conductor industry in general and actually I got a friend from high school he's a dram system engineer at microphone you see we're working there for just three months so it's not really familiar with everything but we all know like do you run Market is completely like cyclical and like reading through micron's latest earnings it seems like the margins and revenue are just going down so if you could walk us through some of the decision-making criteria that we had for assistant according Micron because you've got you have other options that are not as capital heavy not as capital intensive in AMD and the video for example done well they also are subject to some cyclical maker of the industry
Questionerto some cyclical maker of the industry at least so far as inside there are margins and that income are holding up better than money
Todd Combsyeah I mean I think that's a good question and one thing we should always keep in mind in investing is that there's a very high error rate at least 40 percent and could be even 50 or more and even with being wrong on half the bets one can do really well Micron is a case where we're not really going to know whether the BET worked or not until the dust settles so we've got to let the bed play out but I would just say this that the cyclicality of the memory business has gone down a lot dram used to be a terrible business there were more than a dozen players it's now down to three players three players have over 95 of the market and one of the things that I had a discussion a while back with Charlie Munger I didn't directly discuss
QuestionerCharlie Munger I didn't directly discuss Micron with him but I discussed Micron with him but I discussed Micron with him but I discussed oligopolies and and especially oligopolies and and especially oligopolies and and especially oligopolies where they can't so one of the things about oligopolies is that if the things about oligopolies is that if the things about oligopolies is that if you're let's say Coke and Pepsi you you're let's say Coke and Pepsi you you're let's say Coke and Pepsi you can't sit in a room and set prices can't sit in a room and set prices can't sit in a room and set prices that's kind of anti-trans violation and that's kind of anti-trans violation and that's kind of anti-trans violation and all kinds of other illegal Behavior but all kinds of other illegal Behavior but all kinds of other illegal Behavior but as long as you don't you don't engage in as long as you don't you don't engage in as long as you don't you don't engage in a whole bunch of irrational actions for a whole bunch of irrational actions for a whole bunch of irrational actions for police can do really well so I asked police can do really well so I asked police can do really well so I asked Charlie about kind of the nature of Charlie about kind of the nature of Charlie about kind of the nature of oligopolies and he said that Buffett had oligopolies and he said that Buffett had oligopolies and he said that Buffett had studied a long time ago Coke and Pepsi studied a long time ago Coke and Pepsi studied a long time ago Coke and Pepsi bottler in wide number of regions bottler in wide number of regions bottler in wide number of regions in the U.S and around the world and he in the U.S and around the world and he in the U.S and around the world and he found that in probably 95 or 97 of cases found that in probably 95 or 97 of cases found that in probably 95 or 97 of cases both the bottlers made good money both the bottlers made good money both the bottlers made good money basically it's these are strong Brands basically it's these are strong Brands basically it's these are strong Brands and people have preferences and such and people have preferences and such and people have preferences and such it's not French pricing power if Pepsi it's not French pricing power if Pepsi it's not French pricing power if Pepsi is on sale and Coke is really expensive
Warrenis on sale and Coke is really expensive you might switch but in some geographies you might switch but in some geographies maybe the three to five percent of geographies the one of the owners decided that they wanted a much larger market share and so they engaged in price Wars and a lot of other Behavior the try to say market share and of course the your competitor is going to react to that and so you end up in some markets where nobody made money neither the coke bottle and or the Pepsi bottler they were just bashing each other trying to get market share nothing really happened the consumer one basically but in 95 or more percent of the market there was rational behavior and there was no collusion or illegal behavior in these markets but both players made money and what I see with Micron and high next and Samsung is that I was really surprised originally when I was looking at the
Questioneroriginally when I was looking at the businesses about the frequency with which they speak to the markets they seem to like if they have the quarterly calls then they'll have some that's the conference and they'll do updated guidance so there's a lot of stuff going on it's just not four times a year that they're telling they invest in public what's going on and it took me a while to realize that they're not talking to me they're talking to each other so if they go on a rooftop if Samsung goes on a rooftop and screams and says my capex is going to be 20 billion this year and I'm I'm basically going to produce so many chips for example two days later Micron will make a similar announcement from a group of saying my capital is going to be 10 billion a year this year and this is the number I'm going to produce and then the third guy SK High next to say that too so they're really
Questionernext to say that too so they're really talking to each other and it's legal to talk to each other United and American Airlines American will reduce fares on some route and five minutes later United will reduce the fare as well so as long as it's not done in a room colluding and you're doing it through press releases or whatever else saying Hey listen basically the unsaid messages I'm rational I'm not trying to take market share I'm happy where am I where I'm at and I met with all three companies two of them are in Korea and when I met with Samsung and I told Samsung I said look it used to be that Samsung was the low-cost producer so they actually have a or used to have a cost advantage versus the other two so I told Samsung that basically if you wanted to you could reduce prices to the point that the other two couldn't match you
Questionerthat the other two couldn't match you because they would start losing money and you could take more market share and we hurt them so Samson's response was that bad things happen to us when we go over 50 market share so they said we really don't have much interest he said our customers like to have Second Source they like to have large second and Source options and and the regulators and everyone else will not look kindly upon some one of the three becoming 80 of the market or something so Samsung said we are at 50 and we want to stay at 50 and basically the other two pretty much said the same thing so now what's happened over the last few years is that Micron used to be always behind by a year or two and they've caught up now I don't know how long they can keep that they've actually run ahead of the other two they've got a little bit of a of an edge right now but
Questionerlittle bit of a of an edge right now but I don't know if that's sustainable or I don't know if that's sustainable or how the other two will what that looks like in three years or five years but the bottom line is that we have three Cooperative players like 95 of Coke and Pepsi bottlers the memory business there's really no you know alternative to it at least as far as I can see uh this is technology and they can be disruption but the way software is written and the way the chips work and the way logic chips talk to memory and all that that has not changed in more than 60 years when I was when I was going through my undergrad I'm a computer engineer and I studied the architecture of the IBM system 360. and later I was working on I actually worked on firmware and chips and Hardware and all of that and used a bunch of drams and so on later when I studied the architecture of the Intel 8386 which is
Otherarchitecture of the Intel 8386 which is a chip in the late 80s basically these two chips were almost these two architectures were 30 years apart and there was no difference they were identical the only difference was size and and now if you look at Computing today I haven't kept up with it the way I used to keep up you've got some changes that have taken place because of arm Holdings and people doing specialized processes and Apple's doing its own processes people are not taking off the shelf AMD and Intel products they're trying to get more specialized so there's been some change based on the nature of the Computing they're doing searches Google is doing and that sort of thing but for the most part these architectures have not changed and it's unlikely to change in the near term and such so I don't think there'll be a fourth player in this market and and I
Questionerfourth player in this market and and I think even the land market might think even the land market might think even the land market might consolidate at some point and that might consolidate at some point and that might consolidate at some point and that might become an even better business so these become an even better business so these become an even better business so these are all the theories behind why Micron are all the theories behind why Micron are all the theories behind why Micron makes sense and once you get all this makes sense and once you get all this makes sense and once you get all this growth that's going to be coming from AI growth that's going to be coming from AI growth that's going to be coming from AI and data centers and everything else and data centers and everything else and data centers and everything else going on self-driving cars or assisted going on self-driving cars or assisted going on self-driving cars or assisted driving cars when we have all these driving cars when we have all these driving cars when we have all these things take place it's a tremendous things take place it's a tremendous things take place it's a tremendous surge to the to the volume of memory surge to the to the volume of memory surge to the to the volume of memory needed and we're also hitting edges of needed and we're also hitting edges of needed and we're also hitting edges of Moore's Law so things don't double every Moore's Law so things don't double every Moore's Law so things don't double every 18 months anymore 18 months anymore 18 months anymore in fact they're lucky to get doubles in fact they're lucky to get doubles in fact they're lucky to get doubles every four years or five years now based every four years or five years now based every four years or five years now based on all that I think that even though on all that I think that even though on all that I think that even though these are high capex businesses all these are high capex businesses all these are high capex businesses all three should do well but we it remains three should do well but we it remains three should do well but we it remains to be seen whether paying a high to be seen whether paying a high to be seen whether paying a high multiple multiple multiple for an Nvidia or an AMD in the long run for an Nvidia or an AMD in the long run for an Nvidia or an AMD in the long run of the better bet it could be that's the
Otherof the better bet it could be that's the case but we'll see stay tuned all right
Questionerother questions uh hi my name is Shreya thanks for joining us today I think my question is a little bit geared towards the story of you starting your own company first and then your hedge fund what what is that process and how does it look like for you now having your own hedge funds
QuestionerI think I think there is a misnomer about entrepreneurs people people assume that entrepreneurs are Risk Takers that they are rolling the dice and if you look at kind of non-venture-backed startups which probably comprise more than 99 of startups probably 99.9 of startups are not running Japan your neighborhood Chinese restaurant or laundromat or the Consulting business I had started and that sort of thing so most businesses more than a million businesses that get started in the US
Questionerbusinesses that get started in the US every yearevery yearevery year are not Venture back businesses and theare not Venture back businesses and theare not Venture back businesses and the common theme amongst all most of thesecommon theme amongst all most of thesecommon theme amongst all most of these businesses is they do everything inbusinesses is they do everything inbusinesses is they do everything in their power to reduce risk so basicallytheir power to reduce risk so basicallytheir power to reduce risk so basically there's an asymmetry when you start athere's an asymmetry when you start athere's an asymmetry when you start a business where if it fails you may notbusiness where if it fails you may notbusiness where if it fails you may not really lose that much and if it worksreally lose that much and if it worksreally lose that much and if it works your moonshot works so that sort ofyour moonshot works so that sort ofyour moonshot works so that sort of asymmetry in bets is very attractive andasymmetry in bets is very attractive andasymmetry in bets is very attractive and one should make those bets when one getsone should make those bets when one getsone should make those bets when one gets a chance to soa chance to soa chance to so when I when I quit my job or actuallywhen I when I quit my job or actuallywhen I when I quit my job or actually even probably a nine months before Ieven probably a nine months before Ieven probably a nine months before I quit my job and I was thinking aboutquit my job and I was thinking aboutquit my job and I was thinking about quitting my job I basically analyzed thequitting my job I basically analyzed thequitting my job I basically analyzed the situation and I said okay look I'm 25situation and I said okay look I'm 25situation and I said okay look I'm 25 years old I'm gonna take on I took onyears old I'm gonna take on I took onyears old I'm gonna take on I took on eventually about 70 or 70 000 in crediteventually about 70 or 70 000 in crediteventually about 70 or 70 000 in credit card debt Visa Mastercard for my Venturecard debt Visa Mastercard for my Venturecard debt Visa Mastercard for my Venture capitalists they took no board seatscapitalists they took no board seatscapitalists they took no board seats which was great and and then I emptiedwhich was great and and then I emptiedwhich was great and and then I emptied out that 401k which is about 30 000 and
Questionerout that 401k which is about 30 000 and at 25 000 I wasn't too concerned about my retirement savings so I had a hundred thousand dollars and I could lose a hundred thousand and I was willing to lose now the seventy thousand in credit card debt at that time this is ninety one they've changed the laws now but at that time I researched bankruptcy law and basically my business went Kapoor and I declared personal bankruptcy that 70 000 would get wiped out and it wouldn't affect my credit I'd get a clean slate and Not only would I get clean slate but I actually become a really good credit for seven years because I can't at that time with the way the laws was you could not refile for personal bankruptcy for seven years so basically you become a very good credit risk because the credit card companies know that car loan companies know that if I make a five-year loan to
Questionerknow that if I make a five-year loan to him he really can't go back and file bankruptcy because that's not open to him so I knew that I could just lose my 30 000 and I said I'm qualified I'm an engineer I can get a job and I when this blows up and so when I quit my job my my boss and his boss they basically told me look when your business fails not if your business but when your business fails you can come back higher pay promotion Etc I said wow this is even better than I thought I don't have to apply for jobs I get a higher salary and I get a higher position if things don't work and basically things worked there's a huge asymmetry because then you're you're doing millions in revenue and profits and so on and like I said it's if you study there's a book by Amar bidet called the origin and evolution of new businesses which goes into what goes
Questionerbusinesses which goes into what goes into the minds of entrepreneurs when they're starting these businesses he interviewed a bunch of wing 500 CEOs over 10 years and what you see is a common theme that most of them thought like me I didn't know that I didn't know that there was this framework that people were using but most entrepreneurs implicitly use this framework without even though they haven't really talked to each other about it and starting a business for the most part for me was low risk not starting it was high risk because I felt like in a corporate path once I was married with kids and in my 30s or 40s now I would have a lot more to lose if I'm single and I go bankrupt and I declare bankruptcy it doesn't mean much I can bounce back and so I felt like I had one open clear shot and I should take that the hedge fund basically the thing is I'm just looking
Questionerbasically the thing is I'm just looking to do things that I'm passionate are excited about I enjoyed investing then I found when I had a few investors that I was going to have this group that I was helping and working with and they were a bunch of entrepreneurships sometimes they were analysts for me because of the some business that I was studying was in their area and so on unpaid analysts which is great and so then I just took it to the next step I said this can be actually a profitable business and a hedge fund has tremendous economics sense that one person could be running in my case hundreds of millions of dollars but you could even be the billions of dollars and the upside potential is tremendous and it can be a great great business so that's why I lost interest in my I.T business I got more interested in investing and I just
Questionermore interested in investing and I just kind of pursued
Otherall right thank you for the question
Otherjust a reminder for the people on Zoom if you do have questions just raise your hand that way I can know that you have a question because I'm not able to see if anybody has their cameras on but yeah
Otherother questions since we have two business questions I'm not really a business major but thank you for asking of answering those questions I learned from miles that you are a philanthropist as well
Questioneroutside after work I was just wondering I'm curious why specifically in Choice education and aiding or a helping children to go to your blood school and agency why education specifically as you're an Olympic best interests or is there any individual positive story you would like to share throughout the journey
Otheryeah so actually I found philanthropy really interesting
Todd CombsI found philanthropy really interesting when I first stepped into it there arewhen I first stepped into it there arewhen I first stepped into it there are some similarities with investing butsome similarities with investing butsome similarities with investing but there are also plenty of differences onethere are also plenty of differences onethere are also plenty of differences one of the things you need to doof the things you need to doof the things you need to do well in terms of effectively channelingwell in terms of effectively channelingwell in terms of effectively channeling the resources that a charity has at itsthe resources that a charity has at itsthe resources that a charity has at its disposal is to have a combination ofdisposal is to have a combination ofdisposal is to have a combination of heart and headheart and headheart and head so you need a great heart but you alsoso you need a great heart but you alsoso you need a great heart but you also need a business headneed a business headneed a business head and what I found at most Charities wasand what I found at most Charities wasand what I found at most Charities was that most of them were run by peoplethat most of them were run by peoplethat most of them were run by people with great hearts but they didn't reallywith great hearts but they didn't reallywith great hearts but they didn't really understand Capital allocation and thingsunderstand Capital allocation and thingsunderstand Capital allocation and things like social return or invested capitallike social return or invested capitallike social return or invested capital or looking at two different initiativesor looking at two different initiativesor looking at two different initiatives and trying to Benchmark and compareand trying to Benchmark and compareand trying to Benchmark and compare which one is better and then you putwhich one is better and then you putwhich one is better and then you put more eggs in the basket that is bettermore eggs in the basket that is bettermore eggs in the basket that is better I found it puzzling that people just didI found it puzzling that people just didI found it puzzling that people just did things mostly to the pants and one ofthings mostly to the pants and one ofthings mostly to the pants and one of the things I always questioned was thatthe things I always questioned was thatthe things I always questioned was that when I saw a charity which had 10
Otherwhen I saw a charity which had 10 different initiatives I said okay if you measure all 10 you're going to find that there's initiative number one that does the most good per dollar you spend and number 10 that does the least good so why wouldn't you the next year cut it to eight initiatives the year after that six as long as the ones at the top can absorb more cash but they don't think like that I think that their perspective is we want to appeal to a wide range of donors or the annual report looks nice this way or whatever else and so there's a lot of inefficiency in the way Charities operate I my experience has been that education has such a massive multiplier effect give a man a fish you feed them per day teach a man to fish you feed them for a lifetime so clearly teaching phishing is more my up my alley than giving fish though
Otherup my alley than giving fish though there plenty good to be done by giving fish I just prefer teaching fishing so that we can get a multiplier effect and and I ran across this guy in 2006 in Bihar in India on the organization called super 30 which is what we cloned because he wasn't willing to take money from me and I said you mind if we clone your model he said no feel free so he was he was taking 30 really poor kids you know kids making families making less than two dollars a day type thing laborers Farmers illiterate parents and he was spending about a year coaching them and about somewhere between 90 and 100 of them were getting admitted to the iits that's the MIT of India and once you get admitted to the iits it's almost free to attend so heavily subsidized so the difficulty is getting in and the coaching to get ready for the IIT entrance exam which is the
Otherfor the IIT entrance exam which is the toughest exam in the world is expensive so it used to always be that the iits took kids who were middle class or higher and below that you just didn't have the resources because the tuition fees would exceed or the coaching fees would be multiple of what your parents are making so I just saw that he was spending at that time about 700 per kid and what would happen is that the incremental earnings might be something like 50x or 100x was huge because once you go to IIT then Microsoft wants to hire you and alphabet and apple and so on and so you have a lot of career options open to you which are not there if you don't go to IIT go to another school so to me that was a great input output ratio at dakshana we cannot do it for 700 his mom was cooking for them and all that he was and he was not scaled it
Otherall that he was and he was not scaled it costs us about three thousand dollars acosts us about three thousand dollars acosts us about three thousand dollars a person it's been about 15 years soperson it's been about 15 years soperson it's been about 15 years so there's tons of information in there butthere's tons of information in there butthere's tons of information in there but what the 3000 does actually is almost anwhat the 3000 does actually is almost anwhat the 3000 does actually is almost an infinite Paybackinfinite Paybackinfinite Payback because we've pretty much transformedbecause we've pretty much transformedbecause we've pretty much transformed every generation from then on for thatevery generation from then on for thatevery generation from then on for that family and they've pretty much gone fromfamily and they've pretty much gone fromfamily and they've pretty much gone from Zero to Hero so to me it was aZero to Hero so to me it was aZero to Hero so to me it was a no-brainer that we would have a veryno-brainer that we would have a veryno-brainer that we would have a very high return to society by doing this andhigh return to society by doing this andhigh return to society by doing this and I have not come across anything elseI have not come across anything elseI have not come across anything else which I can see is a higher thought Roiwhich I can see is a higher thought Roiwhich I can see is a higher thought Roi social return or invested Capital ifsocial return or invested Capital ifsocial return or invested Capital if there was and I could figure out how tothere was and I could figure out how tothere was and I could figure out how to do it then I would switch so that's whydo it then I would switch so that's whydo it then I would switch so that's why we're doing what we're doingwe're doing what we're doingwe're doing what we're doing
Questionerthanks for the question sure what is thethanks for the question sure what is thethanks for the question sure what is the biggest setback of your career and howbiggest setback of your career and howbiggest setback of your career and how did you overcome that setback yeahdid you overcome that setback yeahdid you overcome that setback yeah
OtherMarcus Aurelius was one of the lastMarcus Aurelius was one of the lastMarcus Aurelius was one of the last Roman emperors and he shows up in theRoman emperors and he shows up in theRoman emperors and he shows up in the movie The Gladiator at the beginning of
Othermovie The Gladiator at the beginning of the movie and the old King was dying and Russell Crowe his chosen Heir and then of course all hell breaks loose after that but he was he was a philosopher he spent most of his life on the battlefield he had a lot of injuries and a lot of illnesses and he had a very tough life and he came up with a stoic philosophy which is worth delving into but what Marx basically says is that to encounter Misfortune and overcome it is good for Fortune so basically whenever we and what I have noticed about what has happened to me in my life is every time I've been beaten down or something negative has happened something terrible has happened there's been so much learning and growth that's come out of that I couldn't see at that time I'm like down and out saying this is terrible and and what I've always noticed is that the
Questionerwhat I've always noticed is that the paybacks are exponential so you can't see it at the time but now I just submit to August Aurelia saying okay when we encounter bad times they're not really bad times we just don't know they're actually good for us and we'll figure that out later so when I look back at my life there were a few points which were low points my my parents went bankrupt several times when when I was growing up and my dad was a kind of Serial entrepreneur and every three or four years his business would blow up and my parents are very poor financial planners so pretty much if the business was doing well they lived really well and just blew up we didn't have money for rent or groceries or anything so it was really pretty dire and trying to go to friends and family and trying to just have money to get by and so there
Otherjust have money to get by and so there was a lot of kind of feast and famine going on and when I was a a junior in college I would come to the US my father was doing well even bankrupt and at that time I was on a student visa and I couldn't work and didn't really have any job prospects still at a like a year and a half of school left and I felt very helpless and I just thought my everything's over I'm not going to be able to finish my degree and I don't know what's going to happen here and I was doing well in school but that was a very traumatic time and then a few days later one of my uncles stepped in and said he would support us which was amazing my favorite uncle still and but I remember the feelings I had at that time it was very it was very sad and solemn and there's been they've been other times in business or running the fund in the financial crisis we were
Todd Combsfund in the financial crisis we were down like 65 to 70 percent but there were a lot of lessons that came out of that there were mistakes I had made and those mistakes got seared in and it really helped the performance after that so I couldn't see it then but we don't really learn from success we learned when we stumbled thank you for the question other questions from the southern describe right here all right I
Questionerwas emailed some questions beforehand so I'll ask some of those and if anybody in Zoom has a question just raise your hand so I sent out your Ten Commandments punish the other day I attend the investment Commandments one of the ones that someone pointed out was I don't remember I think it was maybe five or six where it was Thou shalt not use Excel I believe in Mary that's a bit of heresy please explain what is your philosophy behind
explain what is your philosophy behindexplain what is your philosophy behind that I think or in investing you shouldthat I think or in investing you shouldthat I think or in investing you should be able to do the math in your head andbe able to do the math in your head andbe able to do the math in your head and if you need to have a complex Excel DCFif you need to have a complex Excel DCFif you need to have a complex Excel DCF model to tell you that something is amodel to tell you that something is amodel to tell you that something is a good investment it is not a goodgood investment it is not a goodgood investment it is not a good investment so I'll give you some maybeinvestment so I'll give you some maybeinvestment so I'll give you some maybe some extreme examples but this in uh insome extreme examples but this in uh insome extreme examples but this in uh in in 2019 I made an investment in thisin 2019 I made an investment in thisin 2019 I made an investment in this company in Turkey resource Logistics andcompany in Turkey resource Logistics andcompany in Turkey resource Logistics and this was a 20 million dollar market capthis was a 20 million dollar market capthis was a 20 million dollar market cap at the time and the liquidation valueat the time and the liquidation valueat the time and the liquidation value was like 800 million or so and I waswas like 800 million or so and I waswas like 800 million or so and I was visiting them because a good friend ofvisiting them because a good friend ofvisiting them because a good friend of mine in Turkey who's a very strong kindmine in Turkey who's a very strong kindmine in Turkey who's a very strong kind of gram type investor I just told them Iof gram type investor I just told them Iof gram type investor I just told them I want to visit all the businesses thatwant to visit all the businesses thatwant to visit all the businesses that you already invested in kind of oneyou already invested in kind of oneyou already invested in kind of one layer of diligence already done becauselayer of diligence already done becauselayer of diligence already done because someone really smart is filtered throughsomeone really smart is filtered throughsomeone really smart is filtered through so I asked him is it a fraud what'sso I asked him is it a fraud what'sso I asked him is it a fraud what's going on here and he said no I have angoing on here and he said no I have an
Questionergoing on here and he said no I have an investment and the company just doesn't have great IR or anything and they had a bunch of warehouses it was very easy to Value those warehouses they were in very Prime areas 99 least 10-year inflation index leases to like Amazon Ikea car for uh Dupont Mercedes and so on and so there's very strong recurring Revenue business and then you could just look at in six months liquidate the whole portfolio and have about 800 million or 500 million or 900 million something like that and you were paying 20 million for it and there's no Excel needed and now the business in the last three years the Turkish leader has been decimated and I invested at that 20 million dollar market cap it was a five Lira to the dollar it is now 18 and a half later to the dollar so very strong appreciation of the lira in dollar terms we are up about I think about 9x in the
Questionerwe are up about I think about 9x in the last three years and so the company now has a value of 180 million or so and the liquidation value they've actually improved they've done a bunch of things which have improved the business probably it's over a billion it actually depressed it could be in normal times a billion and a half or two billion so we're still sitting at something like 10 or 20 of liquidation value so you don't need Excel for that and and one time I was in 2006 I was looking at a steel manufacturer ipsco and ipsco was a situation where they made tubular steel what goes into pipelines and they used to get these long-term contracts because some pipeline will take you in two or three years to get built so they want to have assurances of the steel supply and so on and so ifsco had about 15 a share in cash on their balance sheet they had
Questionerin cash on their balance sheet they had no debt and they had publicly stated that the next two years their earnings were going to be 15 a share each year so the stock was at around 45 and between the cash and the next two years that the company is saying they would make and this wasn't like normal guidance they have contracts with these pipeline guys to build these pipelines so it's not like Apple's making some forecast or something this is actually hard coded and after two years because it's a cyclical business earnings could go to zero it could even go negative so my take was if we just hold the stock for two years we'll have 45 dollars of cash in the business and plus all the plant and inventory and everything else I just want to see what the market values it at that point I just want to see how Mr Market is going to price that business and about a year
Questionerto price that business and about a year later maybe eight or nine months later they announced that you're gonna have one more year of earnings or 15 a share they got some more contracts so now we were in the money we were going to be at sixty dollars guaranteed and the stock had now moved up to mid to high 16. Mr Market was guys in some of that and I was I was looking at it and I was thinking what should we do and it had gradually then over the next few months moved up to close to 90 a share So within about 18 months we had a double and I was thinking this is a good deal the technical business I think we should exit and as I was running through that math in my head I woke up one morning and some Swedish company had made an offer to buy them out at 160 a share and the stock had immediately gone to 152 or something and I didn't even wait for
Questionersomething and I didn't even wait for understanding the odds or whether that would happen or not or what I sold all the stock because I was almost ready to sell at 90 and I'm getting 150 and I don't know what these Swedish people are doing two years back when you could have bought it for 45 or maybe paid 65 or 70 or something that's the way the world works so I think the best way to invest is to first of all you make very few bets you look for extremely asymmetric or where you just know that statistically it might work for you now even when you do all that you may still have a 30 40 error rate but that's okay it doesn't matter because the winners are so heavily doing so well that the losers don't matter so I think that basically the using Excel is actually a red flag it should give you a red flag when you are reaching for Excel because you shouldn't need it you
Todd CombsExcel because you shouldn't need it you shouldn't need it to figure out if I'm looking at something like Micron I don't need Excel I can look at their sales I can look at the capex second look at that cash flows and I can look at where the industry might be in a few years in terms of sales and cash flows and margins and so on and you can run them ads in your head it's not that hard
Questionerany questions from the crowd or if you have a couple ones on Zoom Alex serial hello sir sorry for coming in late at Big JB soccer game getting to where you were requires a lot of risks and I'm just curious to know what was your biggest risk along the way and how did you convince yourself to push forward rather than just stay in your Comforts
Todd Combswe'll have to have you watch the replay because we went through our discussion on risk I don't know if your peers want
Otheron risk I don't know if your peers want me to regurgitate but I would just say this that actually it's a misnomer we do everything in our power to minimize risk so what I'm trying to do is I'm trying to pick up I'm basically looking for Beth's weather risk is low and the reward is high and in auction driven markets from time to time you can get those sorts of odds not all the time many times it goes the other way where the risk is high and the reward is low but if you stay disciplined and do your thing and are patient it can work now you asked did you want another no I've got those okay questions so should I tiger I'll go tiger then Tommy
Questionerum you said you basically have the numbers of mine so I went through there 1.2 those margins down point six percent then I'll basically break into that so honestly that's pricing it's sacrifice right now but how do you see um my problems
Questionerum my problems here because obviously like this is uh next quarter we've sold is probably um we don't care in any business I own we don't care about the next quarter or even the next year with Micron basically I think it's just destination analysis basically the what they think will happen in the industry is that the memory guys are making about 150 billion a year offline all three of them together and that 150 billion they think goes to about 300 billion in seven or eight years and we don't know whether that will happen whether it's 50 billion or 350 billion or where that number is but it's likely to be around 300 million maybe higher and Micron might be 75 85 billion or something they're about maybe 100 billion of that number and so then you just say would they be banging out something like 20 30 billion a year cash flow and yeah I think they could
Othercash flow and yeah I think they could and and by then the market might and and by then the market might and and by then the market might recognize that it's not the old dram recognize that it's not the old dram recognize that it's not the old dram business anymore but these guys business anymore but these guys business anymore but these guys basically even in downturns they don't basically even in downturns they don't basically even in downturns they don't lose money lose money lose money and they still came through the cycles and they still came through the cycles and they still came through the cycles used to be very high and low we've used to be very high and low we've used to be very high and low we've already seen the cycle the review so already seen the cycle the review so already seen the cycle the review so basically my take is okay at some point basically my take is okay at some point basically my take is okay at some point if the market believes if the market believes if the market believes that icon can produce 20 30 billion in that icon can produce 20 30 billion in that icon can produce 20 30 billion in cash flow they will value it accordingly cash flow they will value it accordingly cash flow they will value it accordingly so who cares about the rest the rest so so who cares about the rest the rest so so who cares about the rest the rest so I'll give you another example the I'll give you another example the I'll give you another example the company I invested in it's in India and company I invested in it's in India and company I invested in it's in India and it's our oldest position I bought this it's our oldest position I bought this it's our oldest position I bought this talk in 2015. it's a company called rain talk in 2015. it's a company called rain talk in 2015. it's a company called rain rain Industries and at that time when we rain Industries and at that time when we rain Industries and at that time when we bought the company bought the company bought the company the market cap was 200 million and it's the market cap was 200 million and it's the market cap was 200 million and it's a very cyclical business they provide a very cyclical business they provide a very cyclical business they provide parts to the aluminum industry and so on parts to the aluminum industry and so on parts to the aluminum industry and so on but the thing is that I thought they all
Questionerbut the thing is that I thought they all so this was the company doing 2 billion in Revenue uh with a market cap of 200 million one tenth of sales and I thought the odds were very good that they would come a single year when their cash flows in one year would exceed 200 million and just like with ifsco I said when that happens I just want to see what the market does what is the market going to do when they produce 200 billion million in cash flow and what happened is in 2018 exactly that happened they had a year that they produced 200 million and the market took the market cap to 2 billion from 200 million it was a 10x in less than three years and of course by then what happened is I fell madly in love with the company and the manager and all of that and I thought they would keep going because he was doing so many good things and then
Questionerwas doing so many good things and then kovid happened and in 2020 it was downkovid happened and in 2020 it was downkovid happened and in 2020 it was down to I think aboutto I think aboutto I think about 300 million or less in market value and300 million or less in market value and300 million or less in market value and now it's seven or eight hundred millionnow it's seven or eight hundred millionnow it's seven or eight hundred million but we think that I think that it'llbut we think that I think that it'llbut we think that I think that it'll again go past that two billion they'llagain go past that two billion they'llagain go past that two billion they'll again have a year where they'll makeagain have a year where they'll makeagain have a year where they'll make over 200 million and this time I saidover 200 million and this time I saidover 200 million and this time I said maybe I'll pay more attention and we'llmaybe I'll pay more attention and we'llmaybe I'll pay more attention and we'll see if we need to get off the bus atsee if we need to get off the bus atsee if we need to get off the bus at that point but basically let's say thatthat point but basically let's say thatthat point but basically let's say that happens by 2025 three years from nowhappens by 2025 three years from nowhappens by 2025 three years from now probably high probability that wouldprobably high probability that wouldprobably high probability that would happen and if we exited at that point ithappen and if we exited at that point ithappen and if we exited at that point it would be a 10x in 10 years nothing wrongwould be a 10x in 10 years nothing wrongwould be a 10x in 10 years nothing wrong with the 10x in 10 years perfectly finewith the 10x in 10 years perfectly finewith the 10x in 10 years perfectly fine good for you would you say in generalgood for you would you say in generalgood for you would you say in general you don't reallyyou don't reallyyou don't really care about next quarter or next yearcare about next quarter or next yearcare about next quarter or next year completely irrelevant I think the nextcompletely irrelevant I think the nextcompletely irrelevant I think the next quarter is when I run a business I don'tquarter is when I run a business I don'tquarter is when I run a business I don't care about the next quarter I'm whencare about the next quarter I'm whencare about the next quarter I'm when Jeff Bezos runs a business his Arbitrage
QuestionerJeff Bezos runs a business his Arbitrage is that he's looking out seven years is that he's looking out seven years is that he's looking out seven years that people are not willing to look out that people are not willing to look out that people are not willing to look out seven years he's making bets which may seven years he's making bets which may seven years he's making bets which may not pay off for 10 years and so whenever not pay off for 10 years and so whenever not pay off for 10 years and so whenever you're making an investment your you're making an investment your you're making an investment your framework has to be the same as the guy framework has to be the same as the guy framework has to be the same as the guy running the business running the business running the business so the way Jeff thinks about the so the way Jeff thinks about the so the way Jeff thinks about the business business business is the way the Amazon investors need to is the way the Amazon investors need to is the way the Amazon investors need to think about the business think about the business think about the business and if they don't think the way Jeff and if they don't think the way Jeff and if they don't think the way Jeff does does does then they're not going to really then they're not going to really then they're not going to really understand the business not going to be understand the business not going to be understand the business not going to be able to hold it long enough are going to able to hold it long enough are going to able to hold it long enough are going to for the longest time Amazon had no cash for the longest time Amazon had no cash for the longest time Amazon had no cash flow they're pumping everything into flow they're pumping everything into flow they're pumping everything into growth growth growth and so if you didn't understand that and and so if you didn't understand that and and so if you didn't understand that and you didn't understand what aim he was you didn't understand what aim he was you didn't understand what aim he was playing and the long game he was playing playing and the long game he was playing playing and the long game he was playing you wouldn't get it so it is completely you wouldn't get it so it is completely you wouldn't get it so it is completely irrelevant to me what happens next irrelevant to me what happens next irrelevant to me what happens next quarter to micron's earnings there's not
Otherquarter to micron's earnings there's not even a something I bothered to look at it's still relevant so really for you like as an ambassador you don't really care if you're getting Micron for 120 bucks a share or 50 bucks a share if you believe this go in your python Plus or a thousand bucks a year right after this let's go to Tommy tiger I don't know whether we'll get to 500 a share from your mouth to God's ears but I think we could get to a couple hundred bucks a share sure no problem and we bought in the 30s and if we get to 200 or 250 he's buying back stock and so on and it's a decent return it's the thing about Micron is not it's not my I would say highest conviction idea you made a 10 bad there's nothing wrong with the business it's a good business they've got good management they understand Capital allocation all these things so
OtherCapital allocation all these things so my take is let us run we've got nine other bets and we want them non-correlated and yeah probably at the end of the day what will happen is five of them or six of them will work and maybe one or two might even have a loss and one or two might Flatline or something like that and if that actually transpires we would have a massive home run no problem in the interest of time I think we only have time for maybe a couple more questions Tommy I got an email from Germany and then we can have one more and wrap up so that's not good monish
Questionerabsolutely we can go as long as you want no problem uh unfortunately we have a club meeting after this and the camera's already giving me the death stare so I do have to move over eventually but Tommy yeah so I just want to ask you've experienced a number of cycles and market like crashes I guess in their
Questionermarket like crashes I guess in their career is there anything that you think is like unique about the one that we're in now or facing next year with obviously in the recession
Warrenyou know people always think that whatever is kind of happening at the present time like this is the worst time they always think that the present time is the worst trust me the present time is not okay and also trust me this too shall pass there's always Doom and Gloom at any point in time there's always things you can point to uh the financial crisis was a pretty terrible the great depressional pretty terrible Vietnam War there's all kinds of things always going on I think the bottom line is that if you invested in Walmart and stayed invested throughout the period you did really well through a very tumultuous period overall and so it's the micro Factor around a
Otherand so it's the micro Factor around a businessbusinessbusiness Will trump the macro factors so turkeyWill trump the macro factors so turkeyWill trump the macro factors so turkey is a crazy place to invest with crazyis a crazy place to invest with crazyis a crazy place to invest with crazy monetary policy our best gains in 2022monetary policy our best gains in 2022monetary policy our best gains in 2022 are in Turkey we're up on ourare in Turkey we're up on ourare in Turkey we're up on our investments solidly up which you can sayinvestments solidly up which you can sayinvestments solidly up which you can say about our U.S Investments and so on butabout our U.S Investments and so on butabout our U.S Investments and so on but and there's so much to hate about turkeyand there's so much to hate about turkeyand there's so much to hate about turkey micro trumps macro and this true Shallmicro trumps macro and this true Shallmicro trumps macro and this true Shall Pass uh okay any other questions orPass uh okay any other questions orPass uh okay any other questions or should I just go into the one with fromshould I just go into the one with fromshould I just go into the one with from Germany Summit looks like you have oneGermany Summit looks like you have oneGermany Summit looks like you have one
Questionerhi thank you for coming and meeting withhi thank you for coming and meeting withhi thank you for coming and meeting with us today I just had a quick questionus today I just had a quick questionus today I just had a quick question who's the best I'm sorry you dropped itwho's the best I'm sorry you dropped itwho's the best I'm sorry you dropped it off who is the what sorry sorry who isoff who is the what sorry sorry who isoff who is the what sorry sorry who is the best investor and why I think thethe best investor and why I think thethe best investor and why I think the
Otherthe best investor I would say wouldthe best investor I would say wouldthe best investor I would say would probably be Warren Buffett is look atprobably be Warren Buffett is look atprobably be Warren Buffett is look at the length of timethe length of timethe length of time and the way he's compounded and theand the way he's compounded and theand the way he's compounded and the kinds of the things he's done and he's akinds of the things he's done and he's akinds of the things he's done and he's a learning machine and so on so I think
Questionerlearning machine and so on so I think Warren would be up there do you mind answering the white part too I don't know if you're I think Warren if you look at him in his 20s early 20s and kinds of things he was doing he's been a learning machine and he's evolved and grown and changed significantly as an investor and gotten better he's continuously improved his game and he moved from buying fractions of businesses to buying whole businesses to becoming a great leader to managing this huge Empire he used to have more than 80 direct reports of CEOs according directly to him and anywhere you slice it I think if you if you read some of the biographies on Buffett uh like lovenstein's biography or snowball and so on I think you those are wonderful books to read to get a good sense of who he is and why it's worth studying him right uh thanks Sami for the
Questionerhim right uh thanks Sami for the question um let's see the last one was from Jeremy who uh sent me this actually as soon as you saw the um the announcement that I sent out aside a different Germany actually um but he said uh you know one of the investors that um so I'm going to avoid this a little bit so one of the investors that you know very well is uh guy Speer who I know you're good friends with um Jeremy said that guy posts a lot of his letters and returns and just you know passes them all over the internet but um Jeremy couldn't find yours and he was wondering um yeah why don't you follow the same sort of I don't know I'm trying to reward this little how do you why don't you do the same thing as guy and post your annual letters returns Etc
Otherwell actually he's not supposed to do that so we have sec rules that when we're running a hedge fund
Otherthat when we're running a hedge fund they gave us a lot of kind of light regulation but against the right regulation you cannot basically expose things like your returns and so on to non-accredited investors and I think even if you contact Aqua Marine funds they will ask you a bunch of questions related to whether you're accredited and qualified and so on before they will give you the keys to the kingdom it may be that their third parties posting his stuff but I know that guy doesn't send out his stuff willy-nilly to anyone and everyone because that would be actually a violation of the rules so if we were running mutual funds then everything is out in the open because it's platforms designed for the general public and the daily liquidity and daily navs and all of that but hedge funds are supposed to have a curtain between them and the general public that's what the
Questionerand the general public that's what the SEC wants thanks Jeremy for the question
Otherby the way so any other last or any questions Camp yeah one question thank you for coming by the way when you so transcend how do you decide what to do next
QuestionerI think it's it's really simple I have a simple rule that I've followed through my career which is that if on Monday morning I'm not fired up to work fired up to go to work I do two things number one I don't go to work and number two I hit the reset button so this happened two or three times my career when I was working for someone a couple of times and I just moved to a different part of the company but when I was starting my business I was getting disillusioned with the kind of work I was doing the company was becoming very corporate group I had joined used to be eight people when I joined them and
Questionereight people when I joined them and three years later there were 800 peoplethree years later there were 800 peoplethree years later there were 800 people so they had done some Acquisitions andso they had done some Acquisitions andso they had done some Acquisitions and they've also had a lot of organic growththey've also had a lot of organic growththey've also had a lot of organic growth so my job description which wasso my job description which wasso my job description which was basically no job description became abasically no job description became abasically no job description became a very narrow job I preferred the good oldvery narrow job I preferred the good oldvery narrow job I preferred the good old days when you were running wild and so Idays when you were running wild and so Idays when you were running wild and so I said I liked it better when it wassaid I liked it better when it wassaid I liked it better when it was smaller and I could see somesmaller and I could see somesmaller and I could see some opportunities where it was possible thatopportunities where it was possible thatopportunities where it was possible that a business around those opportunitiesa business around those opportunitiesa business around those opportunities could do well and so I said I'll pursuecould do well and so I said I'll pursuecould do well and so I said I'll pursue it because the risk was low so that'sit because the risk was low so that'sit because the risk was low so that's why I went for it
Othernice Captain any lastwhy I went for it nice Captain any lastwhy I went for it nice Captain any last ones on Zoom all right perfect thank youones on Zoom all right perfect thank youones on Zoom all right perfect thank you monish for coming again two years in amonish for coming again two years in amonish for coming again two years in a row now I we all appreciate the time isrow now I we all appreciate the time isrow now I we all appreciate the time is there any last parting words before wethere any last parting words before wethere any last parting words before we all say goodbye to each other miles Iall say goodbye to each other miles Iall say goodbye to each other miles I enjoy our sessions I enjoyed the lastenjoy our sessions I enjoyed the lastenjoy our sessions I enjoyed the last one so I was happy to be invited backone so I was happy to be invited backone so I was happy to be invited back and I enjoy our exchange and I would
Charlieand I enjoy our exchange and I would just kind of echo what Warren says for many of you students who will be going into looking at different jobs and careers and so on is I love profit's advice which is to go to work for people you like admire and trust and basically in that definition is not the highest pay and is not the most well recognized brand I think it's important to look at who you will be working for and who you'll be working with because you spend such a large portion of your life with those people and you should be excited about that and the money and the brands and all of that is secondary with that thank you Manish
Otherthank you everybody for coming those in person on Zoom especially those who are technically affiliated with women married Matt and Alex thank you I hope everybody got something out of it and thank you monish thank you all right bye