Other[Music][Music][Music][Music] thank you everyone first of all a verythank you everyone first of all a verythank you everyone first of all a very very warm welcome my name is Akash Chrivery warm welcome my name is Akash Chrivery warm welcome my name is Akash Chri I'm the learning chair for Vio myI'm the learning chair for Vio myI'm the learning chair for Vio my partner anupam tja is the YPO uh goldpartner anupam tja is the YPO uh goldpartner anupam tja is the YPO uh gold learning chair for this year uh we arelearning chair for this year uh we arelearning chair for this year uh we are Ki starting our first event with MrKi starting our first event with MrKi starting our first event with Mr monish PAB today uh it's my distinctmonish PAB today uh it's my distinctmonish PAB today uh it's my distinct honor and privilege tohonor and privilege tohonor and privilege to introduce distinguished figure in theintroduce distinguished figure in theintroduce distinguished figure in the world of investing philanthropy andworld of investing philanthropy andworld of investing philanthropy and thought leadership Mr Mishthought leadership Mr Mishthought leadership Mr Mish pabra uh monish is the managing partnerpabra uh monish is the managing partnerpabra uh monish is the managing partner of pabra investment funds uh which heof pabra investment funds uh which heof pabra investment funds uh which he founded in 19 1999 his investmentfounded in 19 1999 his investmentfounded in 19 1999 his investment philosophy has been greatly inspired byphilosophy has been greatly inspired byphilosophy has been greatly inspired by two legends in the investment Worldtwo legends in the investment Worldtwo legends in the investment World Warren Buffet and CharlieWarren Buffet and CharlieWarren Buffet and Charlie Monger who have uh you know deliveredMonger who have uh you know deliveredMonger who have uh you know delivered outstanding returns and also garneredoutstanding returns and also garneredoutstanding returns and also garnered respect and admiration all over therespect and admiration all over therespect and admiration all over the world Beyond his remarkable work in theworld Beyond his remarkable work in theworld Beyond his remarkable work in the field offield offield of investment uh monish is also a dedicatedinvestment uh monish is also a dedicatedinvestment uh monish is also a dedicated philanthropy his book dando investor
Otherphilanthropy his book dando investorphilanthropy his book dando investor offers a unique perspective on low riskoffers a unique perspective on low riskoffers a unique perspective on low risk High return investing making complexHigh return investing making complexHigh return investing making complex Financial strategies accessible to aFinancial strategies accessible to aFinancial strategies accessible to a broader audience today we are fortunatebroader audience today we are fortunatebroader audience today we are fortunate to hear Mr P as he shares his invaluableto hear Mr P as he shares his invaluableto hear Mr P as he shares his invaluable insights on investing market trends andinsights on investing market trends andinsights on investing market trends and life lessons so please join me inlife lessons so please join me inlife lessons so please join me in welcoming Mr Mish B on the high stagewelcoming Mr Mish B on the high stagewelcoming Mr Mish B on the high stage along with gorov dalmia fellow Vier andalong with gorov dalmia fellow Vier andalong with gorov dalmia fellow Vier and the day chair for the day gorov thankthe day chair for the day gorov thankthe day chair for the day gorov thank you good evening everyone my pleasureyou good evening everyone my pleasureyou good evening everyone my pleasure again to invite Mish so Mish is aagain to invite Mish so Mish is aagain to invite Mish so Mish is a legendary investor I just finishedlegendary investor I just finishedlegendary investor I just finished reading his book which is called hundoreading his book which is called hundoreading his book which is called hundo investor and he gives some remarkableinvestor and he gives some remarkableinvestor and he gives some remarkable examples in that book why the pelexamples in that book why the pelexamples in that book why the pel community owns $40 billion worth ofcommunity owns $40 billion worth ofcommunity owns $40 billion worth of Hotel Assets in the US $40Hotel Assets in the US $40Hotel Assets in the US $40 billion how Richard Branson built virginbillion how Richard Branson built virginbillion how Richard Branson built virgin with very little capital and so on Iwith very little capital and so on Iwith very little capital and so on I will hand it over to Mish and thereawill hand it over to Mish and thereawill hand it over to Mish and therea I'll ask him a few questions and we'll
QuestionerI'll ask him a few questions and we'll go into generic Q&A so try this one all right well it's great to be here and I'm always excited to speak to wipers this is my 27th year in YPO and I'm in gold now so I used to have a headful of hair when I joined and it's actually been life altering experience like for all of you and uh one of the reasons I actually like to speak to vipers is that buffit has a quote he says that I'm a better businessman because I'm an investor and I'm a better investor because I'm a businessman and so actually if you're running a business or if you're an entrepreneur it's the exact same brain cells that get used when you're making investment decisions and so all of you have all the core tools already in place far more valuable than an MBA or you know going to Business School and all of that and you just have to make a couple of tweaks in
Otherjust have to make a couple of tweaks in terms of how you think about Investments and the moment you kind of think about Investments the way you think about allocating capital in your business then it gets to kind of complete alignment they're both the same and I just want to start with a story I like to tell stories so in 1626 the Dutch settlers in New York they were negotiating with the American Indians to buy the island of Manhattan from them and so there was a guy Peter minuit who was a negotiator for the Dutch and they reached an agreement for the Indians to sell the island for $24 and that deal closed and when people hear that story they say oh the Indians got taken you know like you know is Manhattan is so valuable and you know $24 is nothing you know all these natural Harbors great location but let's say the Indians had a trust
Questionersay the Indians had a trust officer and they had told this trustofficer and they had told this trustofficer and they had told this trust officer to invest thisofficer to invest thisofficer to invest this $24 for the benefit of the$24 for the benefit of the$24 for the benefit of the tribe and let's say that that trusttribe and let's say that that trusttribe and let's say that that trust officer was somewhatofficer was somewhatofficer was somewhat competent and could generate a 7% returncompetent and could generate a 7% returncompetent and could generate a 7% return on that money so there's something knownon that money so there's something knownon that money so there's something known as the rule of 72 how many of you haveas the rule of 72 how many of you haveas the rule of 72 how many of you have heard of the rule of 72 so we have a fewheard of the rule of 72 so we have a fewheard of the rule of 72 so we have a few hands which is great if you only takehands which is great if you only takehands which is great if you only take away from this evening the rule ofaway from this evening the rule ofaway from this evening the rule of 72 from my point of view it would be a72 from my point of view it would be a72 from my point of view it would be a home run so the rule of 72 is kind of ahome run so the rule of 72 is kind of ahome run so the rule of 72 is kind of a mathematical hack that happens to workmathematical hack that happens to workmathematical hack that happens to work where if I want to know how long it willwhere if I want to know how long it willwhere if I want to know how long it will take money to double and so if you telltake money to double and so if you telltake money to double and so if you tell me that I'm going to get 7% compoundedme that I'm going to get 7% compoundedme that I'm going to get 7% compounded for example and I want to know how longfor example and I want to know how longfor example and I want to know how long it's going to take to double I can justit's going to take to double I can justit's going to take to double I can just do 72 divide by 7 and that's 10 sodo 72 divide by 7 and that's 10 sodo 72 divide by 7 and that's 10 so approximately 10 Years it'll double ifapproximately 10 Years it'll double ifapproximately 10 Years it'll double if let's say I'm getting 5% a year I can dolet's say I'm getting 5% a year I can dolet's say I'm getting 5% a year I can do 72 divide by 5 it's
Other72 divide by 5 it's approximately 15 it'll take about 15 years to double if I'm getting 25% a year it'll take take about 3 years so if I want my money to double in 10 years or 5 years let's say I want it to double in 5 years I know I need a 15% interest rate it just happens to work because of some Quirk so the Indians you know with their competent trust officer getting 7% a year in 10 years that money will double which means in 1636 it'll be $48 and in 1646 it'll be $96 so so if we take a 100 period that's 10 doubles every 10 years we doubling 100 years 10 doubles is 2^ of 10 and 2 ^ of 10 is 12,24 so we want round numbers so we throw away the 24 so it's 1,000 so by 1726 it's 24,000 and by 1826 it's 24 million and and 1926 it's 24 billion and 2026 it's 24 trillion and for 2026 we're not at 2026 so you can take that 24 trillion and take out
Othercan take that 24 trillion and take out 15% like 21 trillion or something let's say that $24 would be about 21 22 trillion today now if you look at the entire wealth of the plan Planet the wealth of every man woman and child it is about $550 trillion out of that 550 trillion us wealth is close to about 200 trillion it's a little more than 1/3 so it is unlikely that one tenth of us wealth would be undeveloped land in Manhattan what I'm saying is that if you took the entire island of Manhattan with no buildings in it just land value it would not be 20 trillion it' be much less than that that so the Indians did not get taken the Indians got a great deal and it was a trust officer who screwed up because he didn't generate the 20% the 7% and 7 7% not a heroic heroic rate so if we go back let's say let's say the deal instead of 1626 was happening in
Other1626 was happening in 1526 so you had 2400 cents that this1526 so you had 2400 cents that this1526 so you had 2400 cents that this deal took place and if you go back 100deal took place and if you go back 100deal took place and if you go back 100 years you could have made the deal foryears you could have made the deal foryears you could have made the deal for 2.42.42.4 cents and you would still end up withcents and you would still end up withcents and you would still end up with the 21 trillion so every scent mattersthe 21 trillion so every scent mattersthe 21 trillion so every scent matters right and Einstein called compoundingright and Einstein called compoundingright and Einstein called compounding the E wonder of the world and we humansthe E wonder of the world and we humansthe E wonder of the world and we humans have difficulty with the concept ofhave difficulty with the concept ofhave difficulty with the concept of compounding because it's not linear it'scompounding because it's not linear it'scompounding because it's not linear it's basically on a log scale we don'tbasically on a log scale we don'tbasically on a log scale we don't normally think in a log scale but it'snormally think in a log scale but it'snormally think in a log scale but it's really important important to think inreally important important to think inreally important important to think in those terms my daughter my youngerthose terms my daughter my youngerthose terms my daughter my younger daughter she went to NYU and we weredaughter she went to NYU and we weredaughter she went to NYU and we were living in California at the time I usedliving in California at the time I usedliving in California at the time I used to pick her up at like 1 or 2:00 in theto pick her up at like 1 or 2:00 in theto pick her up at like 1 or 2:00 in the morning from LAX and we were about 50 Mimorning from LAX and we were about 50 Mimorning from LAX and we were about 50 Mi away so we had a long hour plus driveaway so we had a long hour plus driveaway so we had a long hour plus drive back home and you know she's kind ofback home and you know she's kind ofback home and you know she's kind of falling asleep Etc so one time I decidedfalling asleep Etc so one time I decidedfalling asleep Etc so one time I decided this is a good time to give a lesson onthis is a good time to give a lesson onthis is a good time to give a lesson on compounding so I told her hey you know
Questionercompounding so I told her hey you know maachi I said you know you're going to have this internship in the summer and you don't really need the money you're going to save about5 $6,000 $5,000 over the summer and you're 18 right and I said that let's say we put that money in an IRA you know a retirement account which is not taxed and uh let's say you gave me power of attorney on that account and let's say I was able to generate a 15% return on that $5,000 so I told her look basically 68 is 50 years from 18 to 68 and we are doubling every 5 years the important thing is however long things take to double life is all about how long things take to double so I said you'll get 10 doubles 10 dou you know is a magical number 1,000 so I said at 68 you'll have 5 million but you'll do another internship when you're 19 Maybe you'll make 6 7,000 and that'll be
Questioneryou'll make 6 7,000 and that'll be another 5 6 million and then at some point you'll graduate and you'll get a job and you'll actually be able to save a little bit more so by now she's wide awake you know so I said how much money will you have when you're 68 she said it's too big a number my head will explode so I was happy she got it you know and I said the important thing is that you have to start early you know so there are three variables when we look at the Indian story there are three variables that go into the end result with compounding right so the first variable is starting amount right what do you start with second variable is what is the rate of return and the third variable is the length of the runway and these three have an interplay so we saw that you can start with 2.4 cents with a really long run way and end up with a really big number at a
Otherup with a really big number at a relatively low rate of compounding or you can have a you know kind of above index rate of compounding like I was giving my daughter about 15% smaller Runway not that much starting Capital but still end up with a large number so I think it's really important when you're young you know I was telling them and they were putting this event together especially YPO gold you know it's like it's too late guys you know we needed to have this conversation 50 years ago you know but we have a few yng people here can the yng folks raise their hands so I'm only directing my comments to you guys the rest of them are just here for you know filling the seats but you guys can actually do something about it right because you have a Runway and so so it's really important to start as early as possible you know Warren Warren Buffett says that
Questioneryou know Warren Warren Buffett says that I bought my first St when I was 11 I wasI bought my first St when I was 11 I wasI bought my first St when I was 11 I was wasting my time before then you know sowasting my time before then you know sowasting my time before then you know so anyway I mean I just wanted to just kindanyway I mean I just wanted to just kindanyway I mean I just wanted to just kind of just set the stage where basically Iof just set the stage where basically Iof just set the stage where basically I just say that these are these are reallyjust say that these are these are reallyjust say that these are these are really simple Concepts but Charlie manger usedsimple Concepts but Charlie manger usedsimple Concepts but Charlie manger used to say you got to you have to take ato say you got to you have to take ato say you got to you have to take a simple idea and take it very seriouslysimple idea and take it very seriouslysimple idea and take it very seriously and compounding is a very simple ideaand compounding is a very simple ideaand compounding is a very simple idea but it has a a lot of power if you fullybut it has a a lot of power if you fullybut it has a a lot of power if you fully unleash it so anyway with that gorovunleash it so anyway with that gorovunleash it so anyway with that gorov let's see what you have in mind thanklet's see what you have in mind thanklet's see what you have in mind thank you Manish so we all aware of Warrenyou Manish so we all aware of Warrenyou Manish so we all aware of Warren Buffett and he takes complex investmentBuffett and he takes complex investmentBuffett and he takes complex investment ideas dissects them into simple stepsideas dissects them into simple stepsideas dissects them into simple steps and the trouble for most people that Iand the trouble for most people that Iand the trouble for most people that I talk to and I'm a Aid follower of uhtalk to and I'm a Aid follower of uhtalk to and I'm a Aid follower of uh Buffett myself in my ownBuffett myself in my ownBuffett myself in my own Investments and our time Horizon forInvestments and our time Horizon forInvestments and our time Horizon for Investments is 15 20 years but for aInvestments is 15 20 years but for aInvestments is 15 20 years but for a normal investor how does he maintain anormal investor how does he maintain anormal investor how does he maintain a buffet like discipline when there's so
Questionerbuffet like discipline when there's so much noise all around yeah so last year 2023 Buffett wrote in his annual letter that in 58 years of running Burkshire haway and even more than that probably close to 70 years of more than 70 years of compounding 12 investment ideas that he came up with move the needle now if I go back to the just the period when he ran bsh haway the 58 years and he said that there was approximately one great idea every 5 years they were 12 over 58 years over 58 years he acquired about 85 companies and I'm estimating he would have invested in something like 3 or 400 stocks over that period so even if you take a total Universe of 400 400 bets made over 58 years it's a 3% hit rate by the god of investing why did it take Warren Buffett 58 years to come up with just 12 great ideas and these ideas the 12 great ideas
Questionerideas and these ideas the 12 great ideas you know he didn't name them but we can guess them they are things like American Express Coca-Cola C is candy ABC it's a Network television network Washington Post Geico hiring Ajit Jane and and so on right hiring a Jin probably was number one in terms of return because he says that if you calculate the Head Hunter fees they paid he created more than 100 billion of value for Burell so that's like a you know infinite annualized return so why did it take so many years for this guy who's the best we know of ever to come up with just 12 ideas that move the Needle and to get to your question basically in 1972 Buffett and Charlie Monger bought a company called Seas candy and it's a small California company they paid three times Book value they were choking at the price he had never Warren at that time was a deep
Questionerhad never Warren at that time was a deep value guy always wanted to buy things atvalue guy always wanted to buy things atvalue guy always wanted to buy things at a discount year he was buying a businessa discount year he was buying a businessa discount year he was buying a business where 2/3 of of money evaporatedwhere 2/3 of of money evaporatedwhere 2/3 of of money evaporated basically it was intangibles and theybasically it was intangibles and theybasically it was intangibles and they paid aboutpaid aboutpaid about I think 13 14 times trailing earningsI think 13 14 times trailing earningsI think 13 14 times trailing earnings for that business and they were reallyfor that business and they were reallyfor that business and they were really choking on the price where they finallychoking on the price where they finallychoking on the price where they finally said that if the family wanted evensaid that if the family wanted evensaid that if the family wanted even $10,000 more they would have walked and$10,000 more they would have walked and$10,000 more they would have walked and they paid about 25 million for thatthey paid about 25 million for thatthey paid about 25 million for that business and he always left his managerbusiness and he always left his managerbusiness and he always left his manager alone to run the business but he toldalone to run the business but he toldalone to run the business but he told his manager Chuck Huggins that onhis manager Chuck Huggins that onhis manager Chuck Huggins that on December 26th every year I will set theDecember 26th every year I will set theDecember 26th every year I will set the prices for the following year so he toprices for the following year so he toprices for the following year so he to go he used to go to the C candy pricego he used to go to the C candy pricego he used to go to the C candy price list and he raised the prices every yearlist and he raised the prices every yearlist and he raised the prices every year by 10% and what blew him away was thatby 10% and what blew him away was thatby 10% and what blew him away was that they raise prices by 10% and sales wentthey raise prices by 10% and sales wentthey raise prices by 10% and sales went up and then the next year they raised itup and then the next year they raised itup and then the next year they raised it another 10% and this is you know in aanother 10% and this is you know in a
Questioneranother 10% and this is you know in a country with an inflation rate of 2 3 4% and for 50 years they've been raising the prices 10% and C's delivered an avalanche of cash I would say in the last 50 years they think they mentioned a few years back not of three three million in dividends to Burkshire and Warren and Charlie said that they could have paid 100 million even 150 million for the business six times five times what they paid and it would have been a bargain but at that time when they bought the business they didn't know that or understand that but it took them about 5 or 10 years probably more maybe like 15 years to truly understand the power of and the power of Brands and in 1988 they made an investment in Coca-Cola and at that time he put one quarter of the total book value of bursha haway into a single stock Coke huge bet some insurance
Questionerstock Coke huge bet some insurance company buying a you know company theycompany buying a you know company theycompany buying a you know company they don't they don't control and Coke was adon't they don't control and Coke was adon't they don't control and Coke was a huge home run and Warren said that ifhuge home run and Warren said that ifhuge home run and Warren said that if they had not made the se's investmentthey had not made the se's investmentthey had not made the se's investment they would not be able to make the cokethey would not be able to make the cokethey would not be able to make the coke investment because they would neverinvestment because they would neverinvestment because they would never understand Coke and the Apple investmentunderstand Coke and the Apple investmentunderstand Coke and the Apple investment which was more recent would not havewhich was more recent would not havewhich was more recent would not have happened without C's or Coke so it washappened without C's or Coke so it washappened without C's or Coke so it was not actually a tech investment it was anot actually a tech investment it was anot actually a tech investment it was a investment in a brand and consumerinvestment in a brand and consumerinvestment in a brand and consumer Behavior he understood consumer BehaviorBehavior he understood consumer BehaviorBehavior he understood consumer Behavior so when we look at investing it has toso when we look at investing it has toso when we look at investing it has to be a complete no-brainer at the timebe a complete no-brainer at the timebe a complete no-brainer at the time you're making the investment so whateveryou're making the investment so whateveryou're making the investment so whatever opportunity is in front of you if youopportunity is in front of you if youopportunity is in front of you if you need aneed aneed a spreadsheet it's a pass if you needspreadsheet it's a pass if you needspreadsheet it's a pass if you need Excel it's a passExcel it's a passExcel it's a pass if you cannot do the math in your headif you cannot do the math in your headif you cannot do the math in your head that I'll put this money out today andthat I'll put this money out today andthat I'll put this money out today and in 3 years I'll get it all back or inin 3 years I'll get it all back or inin 3 years I'll get it all back or in four years I'll get it all back it's a
Questionerfour years I'll get it all back it's a pass and there will be Investments that will show up at unpredictable times and at times sometimes when you don't expect our job as an investor is to be like a salmon fisherman standing by a stream with a spear doesn't know when a juicy salmon would go by but he has to be very patient waiting for a long time the juicy salmon will come but we don't know when it'll come we don't know how big it'll be and that's the nature of investing is it's very opportunistic it's also an extremely forgiving business in the case of Buffett as long as he didn't lose a lot of money 95% Mis rate still made him the wealthiest human you know so it's an extremely forgiving business the best of us will be wrong half the time most of us will be wrong 2/3 of the time but that's okay the errors don't don't matter what matters is the focus that
Othermatter what matters is the focus that when you do find something great that you keep it for a long time so we have rakes junal most of you are familiar with him I think Rakesh was probably the greatest investor India has ever produced and he was a split brain I I don't know how he did it but he had a one side where he's trading frantically every day in and out three four screens in front of him all this stuff on the other side he has these few stocks that never touches so like for example very very early he bought Titan but what was remarkable about raakesh is he then loaded up more on Titan paying 16 times what we paid for the first St so most of us will never be willing to pay 10 times 15 times what we paid for Something 2 years before we're not going to pay at another zero to that he did that in fact he kept buying Titan repeatedly at
Questionerhe kept buying Titan repeatedly at higher and higher prices and it ended up that I think when he passed away he never managed money for any other one anyone else just his own money 5.6 billion dollar and I think about 2 billion of that was Titan right so how many times did he need to be right but he knew in this case he was right and at the same time he's trading in and out of hundreds of stocks right but he doesn't touch Titan so that's that's a remarkable guy I just want to reiterate um so I was talking to sanjiv bandani who's also at a legendary Venture investor and asked him you know what's your secret and all of that and one point he made was in his Venture Investments he feeds the winners if a company is doing well he'll invest in every single round and in fact in his mind he reserves almost 2/3 to 3/4 of the capital for future investing in case the capital for future investing in case
Questionerthe capital for future investing in case there is a winner and that's how he big makes big stakes in policy Bazar or in uh zato and so on and so forth and I just found a statistic today if Warren Buffett had not given away 55 billion worth of shares in bursha hatway which he's given away since 2006 his net worth today would have been 293 billion which would be $41 billion more than the current richest man which is Elon Musk so his net worth is after giving away 55 uh billion someone asked Buffet you know for Genie comes to you and gives you one wish what will you wish for he says when they look look at my corpse I want them to say man he was old and he wants to die really really old not because he likes to hang out with us he just wants a long run way he understands like he said first 11 years he was wasting his life so he's been compounding now for 83
Questionerso he's been compounding now for 83 yearsyearsyears and that's what he wants to do just keepand that's what he wants to do just keepand that's what he wants to do just keep it running for as much as you can asit running for as much as you can asit running for as much as you can as long as you can so let me ask you aboutlong as you can so let me ask you aboutlong as you can so let me ask you about the technology sector so I'm definingthe technology sector so I'm definingthe technology sector so I'm defining Tech in more classical way high grossTech in more classical way high grossTech in more classical way high gross margin not e-commerce which is a lowmargin not e-commerce which is a lowmargin not e-commerce which is a low gross margin business high gross margingross margin business high gross margingross margin business high gross margin high growth yet outlin dis valuation howhigh growth yet outlin dis valuation howhigh growth yet outlin dis valuation how would you make a tradeoff of investingwould you make a tradeoff of investingwould you make a tradeoff of investing in Tech the American definition of techin Tech the American definition of techin Tech the American definition of tech
Otheryeah so all businesses it doesn't reallyyeah so all businesses it doesn't reallyyeah so all businesses it doesn't really matter whether they arematter whether they arematter whether they are growing whether they're Flatline cashgrowing whether they're Flatline cashgrowing whether they're Flatline cash flows or whether they're declining cashflows or whether they're declining cashflows or whether they're declining cash flows allflows allflows all businesses have a value and the value isbusinesses have a value and the value isbusinesses have a value and the value is the sum of all the future cash that willthe sum of all the future cash that willthe sum of all the future cash that will produce till that business doesn't existproduce till that business doesn't existproduce till that business doesn't exist anymore that'll come out toanymore that'll come out toanymore that'll come out to investors and discounting that back backinvestors and discounting that back backinvestors and discounting that back back at some reasonable interest rate now theat some reasonable interest rate now theat some reasonable interest rate now the problem we have is that we don't knowproblem we have is that we don't know
Questionerproblem we have is that we don't know what those future cash flows are in most companies we don't know that so if I take a business like Nvidia for example and if I had a crystal ball that told me for the next 10 years these are the cash flows NV video will produce and let's say that crystal ball told me that in in the next 10 years Nvidia will produce 2 trillion in cash flow the market cap is 3 trillion so a Patel would say Easy Pass and even someone like me looking at it I would say that if I'm going to buy Nvidia stock one of the first questions I ask is how much would it cost me to buy the whole business I'm not I don't care about the stock price I care about the price to buy the entire business so let's say the price to buy the entire my business is $3 trillion so then the business is $3 trillion so then the second question I would ask is 3 trillion how long is it going to take me to get that 3 trillion back because I
Questionerto get that 3 trillion back because I want it back as soon as possible right and if I come up with math that starts getting into more than 7 8 10 years you've lost me I have an investment in uh in turkey and I'll give you some if you have time we we'll go a little bit into it but there's a fatherson team that run that company very gifted capital allocators and they actually don't understand how gifted they are I tried to explain it to them but I don't think they understand and neither of them went to business school and they tell me that we have really simple math that we run anytime we're going to make any Capital allocation decision in the business in dollars we want the money back in 2 years and maximum if we are getting really euphoric is 3 years so he says any thing we look at any project we look at that is the lens that I want it back in 3
Questioneris the lens that I want it back in 3 is the lens that I want it back in 3 years or 2 years if you get your money years or 2 years if you get your money years or 2 years if you get your money back in 2 years rule of 72 it's a 36% back in 2 years rule of 72 it's a 36% back in 2 years rule of 72 it's a 36% annual rate of return 3 years is a 24% annual rate of return 3 years is a 24% annual rate of return 3 years is a 24% annual rate of return both are very annual rate of return both are very annual rate of return both are very acceptable and they need to obviously acceptable and they need to obviously acceptable and they need to obviously see that and I keep observing all the see that and I keep observing all the see that and I keep observing all the different Investments and things that different Investments and things that different Investments and things that they make very few mistakes they make very few mistakes they make very few mistakes and very high returns because they just and very high returns because they just and very high returns because they just just never put cash out if they don't just never put cash out if they don't just never put cash out if they don't have that and and so I think that it have that and and so I think that it have that and and so I think that it doesn't matter if we investing in a tech doesn't matter if we investing in a tech doesn't matter if we investing in a tech business a motel business real estate business a motel business real estate business a motel business real estate whatever it all boils down to what am I whatever it all boils down to what am I whatever it all boils down to what am I putting out and how long is it take me putting out and how long is it take me putting out and how long is it take me to get that money back and generally to get that money back and generally to get that money back and generally speaking when we get to some some tech speaking when we get to some some tech speaking when we get to some some tech businesses in this environment that businesses in this environment that businesses in this environment that we're in there is a lot of we're in there is a lot of we're in there is a lot of euphoria and so generally when you get euphoria and so generally when you get euphoria and so generally when you get to Euphoria you're not going to get to Euphoria you're not going to get to Euphoria you're not going to get these 2 three 4 year returns and the
Questionerthese 2 three 4 year returns and the good news with investing is that we can keep saying no we can keep saying no to everything and we can say yes once a year once in 5 years we can say yes whenever we want to say yes so that's the great thing about investing is we've got a lot of freedom of when to say yes and so on so let me come to Quant so I was in Columbia in 1988 and David Shaw has just left Colombia he was teaching at Columbia to start the which is one of the world's great hedge funds today and I'd met him at that point and it was a very nichy idea at that point and today Quant investing is a mainstream idea we all know of renesa which has delivered gross returns of what 65 67% for the last 20 years what do you think about Quant investing
Warrenit's beyond my pay grade so I would say that almost nobody has been able to do what Renaissance did
Questionerhas been able to do what Renaissance did and what Jim Simons was able to do that's very much an outlier and the best way to approach investing is that if you don't fully understand something that's okay that's the case with 99% of things in the world we just take a pass so Quant I don't have to waste brain cells we move on you know somebody else can make a lot of money and that's perfectly fine let me come to India so the S&P over the last several decades has returned about 9 and 1 half% the Nifty has returned about 14% after factoring in rupee versus dollar risk premium for India Etc what would you pick today I would pick neither the SNP is at a trailing multiple of about 28 or 29 and in the year 2000 in September 20 ,000 it had a trailing multiple of 26 and then the returns for the next 11 years for investors including all dividends reinvested was
Questionerincluding all dividends reinvested was Zero 0% return after 11 years and it wasn't just a straight zero you had a very volatile ride so there was periods in there where 30 40% of the money had gone and so it was it would have been difficult for most investors to hold on in that environment what I find interesting about India is that India has far more Tailwinds than the S&P has or the US has growing population emerging and you know um massive amount of per capita and GDP growth I mean you can just see it everywhere there's a big difference between investing in a great business and making a great investment so we we know for example that Hindustan uni Li is a great business if I were to ask us to make a list of the truly exceptional businesses in in India most of us would not have difficulty coming up with such a list warun beverages is an exceptional
Questionerwarun beverages is an exceptional business is he a YP over no I don't think so okay I don't want to offend people you know pardon sister is daugh okay but exceptional business you know terrific promoter great management I gave a talk last December at flame University where I compared vun beverages to a Coke bottler based in Istanbul and the coke bottler based in Istanbul has roughly about two times the volume that V vun does they they bottle in about 14 countries Koch just gave them half of Bangladesh they do all of Pakistan and they do all of turkey and a bunch of other countries and we can compare Coke and Pepsi bottlers around the world the Coke and Pepsi Bottling business around the world is very similar the economics are very similar and you can make some adjustments for growth rates and such the turkey business trades at about
Questionerthe turkey business trades at about close to 1 18th or oneth of theclose to 1 18th or oneth of theclose to 1 18th or oneth of the effective valuation of warun And waruneffective valuation of warun And waruneffective valuation of warun And warun Trades at something like five times theTrades at something like five times theTrades at something like five times the effective valuation ofeffective valuation ofeffective valuation of all other Coke and Pepsi bottlers aroundall other Coke and Pepsi bottlers aroundall other Coke and Pepsi bottlers around the world so if I look at Coca-Cola FEMAthe world so if I look at Coca-Cola FEMAthe world so if I look at Coca-Cola FEMA ininin Mexico phenomenal business 1Mexico phenomenal business 1Mexico phenomenal business 1 the multiple or less than 1if thethe multiple or less than 1if thethe multiple or less than 1if the multiple of warun and I see that playmultiple of warun and I see that playmultiple of warun and I see that play out in a number of different businessesout in a number of different businessesout in a number of different businesses in India where the business is arein India where the business is arein India where the business is are exceptional there's a huge amount ofexceptional there's a huge amount ofexceptional there's a huge amount of growth ahead truly exceptional promotersgrowth ahead truly exceptional promotersgrowth ahead truly exceptional promoters and managementand managementand management but you're paying a lot to have a seatbut you're paying a lot to have a seatbut you're paying a lot to have a seat at the table in the end in you know theat the table in the end in you know theat the table in the end in you know the stock market like Buffett says a is astock market like Buffett says a is astock market like Buffett says a is a voting machine in the short term it's avoting machine in the short term it's avoting machine in the short term it's a weighing machine in the long term so inweighing machine in the long term so inweighing machine in the long term so in the end everything gets weighedthe end everything gets weighedthe end everything gets weighed appropriately and so I had justappropriately and so I had justappropriately and so I had just suggested that if we were to go 5 10 15suggested that if we were to go 5 10 15suggested that if we were to go 5 10 15 years in the future and we looked atyears in the future and we looked at
Questioneryears in the future and we looked at these two businesses Coca-Cola ISC and turkey and won beverages in India and we just looked at kind of where they end up 15 years from now in terms of investor returns Von's trailing p is more than 100 in terms of current be and so I think that's the difficulty I think that India has is that there are tremendous Tailwinds but it's also a place where there are lots of great investors and not that many businesses with exceptional corporate governance so if you take the entire listed b space and let's get to the ones that have great governance and great Moes you might end up with 100 businesses and all the money goes into those 100 businesses the sips every month so you the result is predictable and one of the things about Investors is that investors love to have lemming Behavior so they believe that whatever
QuestionerBehavior so they believe that whatever has gone up recently will keep going uphas gone up recently will keep going uphas gone up recently will keep going up and so it just kind of perpetuates youand so it just kind of perpetuates youand so it just kind of perpetuates you know but eventually things do get toknow but eventually things do get toknow but eventually things do get to ahead and then a new cycle begins soahead and then a new cycle begins soahead and then a new cycle begins so that's how I how I look at it I thinkthat's how I how I look at it I thinkthat's how I how I look at it I think that the S&P what I would do if I werethat the S&P what I would do if I werethat the S&P what I would do if I were in the US if I was forced to be an indexin the US if I was forced to be an indexin the US if I was forced to be an index investor I would take the equal weightedinvestor I would take the equal weightedinvestor I would take the equal weighted S&P rather than the normal S&P whereS&P rather than the normal S&P whereS&P rather than the normal S&P where each business in the S&P has a 2% weighteach business in the S&P has a 2% weighteach business in the S&P has a 2% weight it's equal weighted that way you get itit's equal weighted that way you get itit's equal weighted that way you get it all the techall the techall the tech Euphoria and the Nifty in the U in inEuphoria and the Nifty in the U in inEuphoria and the Nifty in the U in in India I mean I think it's been a greatIndia I mean I think it's been a greatIndia I mean I think it's been a great place to be but I don't know whether Iplace to be but I don't know whether Iplace to be but I don't know whether I could be very bullish about where it iscould be very bullish about where it iscould be very bullish about where it is 10 years from now so let me ask you a10 years from now so let me ask you a10 years from now so let me ask you a businessman's dilemma that we debate inbusinessman's dilemma that we debate inbusinessman's dilemma that we debate in our office all the time so let's say Iour office all the time so let's say Iour office all the time so let's say I have two options in my in in anyhave two options in my in in anyhave two options in my in in any business one is I can do lower rocebusiness one is I can do lower rocebusiness one is I can do lower roce business which is high growth in mybusiness which is high growth in my
Questionerbusiness which is high growth in my industry I can Veer towards that or onindustry I can Veer towards that or onindustry I can Veer towards that or on the other hand I can Veer towards athe other hand I can Veer towards athe other hand I can Veer towards a higher Roc business which is more nichyhigher Roc business which is more nichyhigher Roc business which is more nichy and therefore has lower growth as aand therefore has lower growth as aand therefore has lower growth as a businessman my tendency would be let'sbusinessman my tendency would be let'sbusinessman my tendency would be let's go with the highgo with the highgo with the high rocce growth matters less but therocce growth matters less but therocce growth matters less but the markets reward exactly the opposite theymarkets reward exactly the opposite theymarkets reward exactly the opposite they won't care whether I'm in the low roccewon't care whether I'm in the low roccewon't care whether I'm in the low rocce business or not but they'll rewardbusiness or not but they'll rewardbusiness or not but they'll reward growth how do you balance this it's notgrowth how do you balance this it's notgrowth how do you balance this it's not either all how do you balance this rosieither all how do you balance this rosieither all how do you balance this rosi versus gr
Otheryeah so I think that this isversus gr yeah so I think that this isversus gr yeah so I think that this is actually the Dilemma burshire Hathawayactually the Dilemma burshire Hathawayactually the Dilemma burshire Hathaway faces so if you look at something likefaces so if you look at something likefaces so if you look at something like burshire Hathaway today it's 8 00burshire Hathaway today it's 8 00burshire Hathaway today it's 8 00 billion market value they have to put 50billion market value they have to put 50billion market value they have to put 50 60 billion out at a time to move the60 billion out at a time to move the60 billion out at a time to move the needle and there are very few placesneedle and there are very few placesneedle and there are very few places that you can put 50 60 billion one shotthat you can put 50 60 billion one shotthat you can put 50 60 billion one shot how many businesses in India have ahow many businesses in India have ahow many businesses in India have a market value more than that so themarket value more than that so themarket value more than that so the conclusion Buffett and Munger came
Questionerconclusion Buffett and Munger came to was that we have to keep running the runway at a lower rate and so I would say between the two it's important to keep compounding and it's important not to be the flash in the pan if you will so if you've got some consistent growth but it's low Roe and at the end of the day it boils down to opportunity cost so you have limited dollars to invest if in the near-term one is giving you a high Roe you can put money there but you may not be able to put much money there the other one may be able to absorb the L and that's how we do it so everything boils down to opportunity cost my questions are over what I'm going to do is I have audience questions and then we'll Al also open it to the audience so first question can you generate serious wealth by investing into passive index funds or into mutual funds
Warrenyeah I think
Questionerfunds or into mutual funds yeah I think you can definitely generate uh great wealth we've seen that the important thing is length of Runway you know you start early the second is the good thing about this group is God has been kind to all of us we also have significant annual earnings and we can push that in as well and yeah so I think if we get a long enough time Horizon and we don't need to have heroic rates you can you can compromise between the rate of return with the length of Runway and starting capital and so on so absolutely you can you can do well with the passive in fact I think you're more likely to do better with a said it and forget it approach than and with some adviser who's telling you you know we're going to buy this and sell this and all of that I think you're going to do far better just having a very basic vanilla
Questionerbetter just having a very basic vanilla approach how to overcome greed and fear
Otherapproach how to overcome greed and fear don't read the newspaper well we don't
Otherdon't read the newspaper well we don't we don't need to overcome greed and fear
Otherwe don't need to overcome greed and fear all we need to do is we need to be
Otherall we need to do is we need to be fearful when the world is greedy and we
Otherfearful when the world is greedy and we need to be greedy when the world is
Otherneed to be greedy when the world is fearful so I'll just give you an example
Otherfearful so I'll just give you an example you know which I was going to go into
Otheryou know which I was going to go into with my I manage about 1.1
Otherwith my I manage about 1.1 billion and I have the most weird asset
Otherbillion and I have the most weird asset allocation I have had in 35 years as an
Otherallocation I have had in 35 years as an investor I've never had this weird
Otherinvestor I've never had this weird allocation 75% of the money is in three
Otherallocation 75% of the money is in three stocks in turkey and another 20% is
Otherstocks in turkey and another 20% is in three coal stocks you know
Otherin three coal stocks you know four-lettered word coal in the US and
Otherfour-lettered word coal in the US and the other 5% doesn't matter but I think
Otherthe other 5% doesn't matter but I think about this quite often and I think that
Otherabout this quite often and I think that what I really need to do is the next 10
Otherwhat I really need to do is the next 10 years 15 years just do talks like this
Otheryears 15 years just do talks like this and do no work and life will be great so
Otherand do no work and life will be great so I started going to Turkey in 2018
Ted WeschlerI started going to Turkey in 2018 because it was screening as an extremely cheap Market it was just I had a friend in Turkey a Die Hard Ben Graham investor wonderful guy and I said uh hither I'd like to visit you in Istanbul and i' like to visit the companies in your portfolio and uh is that okay with you he said oh no come we'll have a great time so I said here's the rules I only want to visit companies that you actually have money in don't take me to any companies you have no investment in that you think is good or whatever and I said we want I want to start with the one that you have the highest conviction most money and then we go down the list and I went the first year in 2018 I visited about many businesses really was amazed at a few things that I came across then I went the next year in 2019 and hather would send me the list of businesses that we
Othersend me the list of businesses that we were going to visit but I never did any work on any of them because I said that I want to do the work after meeting the managements and all that some base level I have some base level knowledge then I'll spend time drilling down I was just too lazy to do the work up front so we were driving to this company as said hither this company I haven't looked at it can you tell me about it he said yeah it's market cap is 16 million 16 and liquidation value is 800 million so I said fraud like 2% of I said what do they do he said they rent warehouses so I said why is it so cheap he said everything is cheap in Turkey the first business I visited with him was a bank trading at a p of 0.1 Bank was trading at a p of 0.1 0.1 means that 1 month earnings is the entire value of the business and but that's a separate story
Otherbusiness and but that's a separate story I couldn't invest in some things have too much hair for me also so anyway this is the father son team that I met they look like very smart people honest people to me I went after that and visited the warehouses and then I told my guys that buy every share just take out the ask so turkey has a rule the individual stocks cannot go up more than 10% in a day maximum any stock can go up is 10% I told him you tell the broker up to the 10% limit above the market price buy every share available of this company that was the 16 million market cap for $8 million I got 1/3 of the company the father son who run it they have 42% the Indian guy with a great mustache is at 33% % and I meet them every year I tell them listen I'm your cheerleader on the sidelines I don't want to do any work I don't want to be on the board I just want to be your
Otheron the board I just want to be your silent partner and they are happy with it I'm happy with it everyone's happy with it that company has a value now in the stock market of a billion dollars the L which is why everyone was exiting turkey at the time when I made the investment it was five L for one1 now it is 33 L to $1 so the L has collapsed but the collapse of the L meant nothing which I knew even then because I own warehouses they are made of steel and iron and concrete and land which is all inflation indexed we have the cement guys right here completely inflation indexed so I said there's no currency issues here you know it's all okay the liquidation value of the business which used to be 800 million is now somewhere between 2 or 3 billion so I cannot sell still cheap and I it took me a few years to figure out that I had not bought a cheap asset
Ajit Jainthat I had not bought a cheap asset where something was really cheap what actually what I had actually bought was an asset with two gifted Capital allocators who are going to compound this thing just last month I was in Turkey went to dinner with with the son the father doesn't come to too many dinners with us so he asked me a question he said what is my business going to look like in 20 years he's asking me the Indian guy okay who's not even in Turkey all the time so I told him listen man it's really simple the wealthiest families in Turkey are all second third fourth generation they are professional managers running those businesses the families are no longer running them you are pounding day in and day out and and you are wheeling and dealing day in day out and you have these very clear metrics on how you invest so I said you're
Otherinvest so I said you're 39 I hope you're excited about this business when you're 70 and if you're excited about this this business when you're 70 you will be the wealthiest family in Turkey because it's just math you know you just keep compounding it's just math and my my job is to just cheer you on and do nothing you know so basically the thing is that that business is I think like 350 million or something out of the pie it's a family business it's the P family business you know we are not the founders but that's okay we don't need to be the founders and we don't do any work you know and that's also okay so it's all okay and the other two businesses are I mean turkey was just so cheap it's just ridiculous so the coal business in the US just to tell you kind of how things work is let's say there's a company that will produce a billion
Questionera company that will produce a billion dollars a year for 50 years and then it goes out of business so it's going to exist for 50 years it's going to pump out 1 billion a year what would you pay for that business what would you pay
Questionerbillion the market was asking me to pay less than 2 billion US listed Company New York Stock Exchange no one's interested the Indian guy with the mustache is interested so we loaded up on these coal companies and not only were we buying 2 billion for 1 billion I mean buying billion of cash flow for 2 billion they're buying back shares and there's no restrictions on buying back shares so they'll in a few years you know they're no they they're no long-term holders of that stock I think we are one of the only guys who own the stock lot of Traders and we'll just sit there and India the funny thing is those companies in the US their Major Market is India so
Otherin the US their Major Market is India soin the US their Major Market is India so we cannot produce Iron and Steel withoutwe cannot produce Iron and Steel withoutwe cannot produce Iron and Steel without metallurgical coal India has massivemetallurgical coal India has massivemetallurgical coal India has massive needs for metallurgical coal but itneeds for metallurgical coal but itneeds for metallurgical coal but it doesn't have anything much metallurgicaldoesn't have anything much metallurgicaldoesn't have anything much metallurgical coal in the country so it has to importcoal in the country so it has to importcoal in the country so it has to import and there are only like six seven placesand there are only like six seven placesand there are only like six seven places in the world where you get have thatin the world where you get have thatin the world where you get have that quality of coal and no one is investingquality of coal and no one is investingquality of coal and no one is investing no one will invest in a coal mine no oneno one will invest in a coal mine no oneno one will invest in a coal mine no one will finance a coal mine so that's allwill finance a coal mine so that's allwill finance a coal mine so that's all fine it's all locked we just sit here sofine it's all locked we just sit here sofine it's all locked we just sit here so we don't needwe don't needwe don't need Nvidia you know so my take is you knowNvidia you know so my take is you knowNvidia you know so my take is you know and I don't need all these bets to workand I don't need all these bets to workand I don't need all these bets to work you know if they all work then you knowyou know if they all work then you knowyou know if they all work then you know Hallelujah you know we don't know whatHallelujah you know we don't know whatHallelujah you know we don't know what we'll do then you know but even half ofwe'll do then you know but even half ofwe'll do then you know but even half of them work it's okay 40% work it's okaythem work it's okay 40% work it's okaythem work it's okay 40% work it's okay no problem and all of you actually haveno problem and all of you actually haveno problem and all of you actually have the skills because your hard businessmanthe skills because your hard businessmanthe skills because your hard businessman you're hardcore dando guys you know youyou're hardcore dando guys you know you
Otheryou're hardcore dando guys you know you know how to allocate capital in yourknow how to allocate capital in yourknow how to allocate capital in your businesses if you know how to allocatebusinesses if you know how to allocatebusinesses if you know how to allocate capital in your businesses allocatingcapital in your businesses allocatingcapital in your businesses allocating Capital outside your business is theCapital outside your business is theCapital outside your business is the same right it's it's exactly the same sosame right it's it's exactly the same sosame right it's it's exactly the same so whenever someone says to you okay youwhenever someone says to you okay youwhenever someone says to you okay you know we should invest in this IPO weknow we should invest in this IPO weknow we should invest in this IPO we should invest in this and that this isshould invest in this and that this isshould invest in this and that this is the only question I have what is thethe only question I have what is thethe only question I have what is the market cap and when am I getting thatmarket cap and when am I getting thatmarket cap and when am I getting that money back and if I'm not getting thatmoney back and if I'm not getting thatmoney back and if I'm not getting that money back in 3 or 4 yearsmoney back in 3 or 4 yearsmoney back in 3 or 4 years I'm not interested so the interestingI'm not interested so the interestingI'm not interested so the interesting thing about the stock market is that ifthing about the stock market is that ifthing about the stock market is that if you say that I only want to invest inyou say that I only want to invest inyou say that I only want to invest in companies that are PE of one they existcompanies that are PE of one they existcompanies that are PE of one they exist PE of two they exist too and PE of 100PE of two they exist too and PE of 100PE of two they exist too and PE of 100 they also exist so the market willthey also exist so the market willthey also exist so the market will deliver whatever you want you can setdeliver whatever you want you can setdeliver whatever you want you can set whatever threshold you want and thenwhatever threshold you want and thenwhatever threshold you want and then you're done next question I think you'veyou're done next question I think you'veyou're done next question I think you've already answered but just for the sake
Questioneralready answered but just for the sake of it if there's one big takeaway from today's session what would it be I suppose well they should answer it what is the takeaway please raise your hand
Questionerpardon turkey go I'm telling you man turkey is the place to go don't put it in the/50 pardon yeah yeah exactly yeah yeah yeah exactly yeah but the thing the thing is you know I was talking to the CFO of a company that's like Tata and turkey there like one of the biggest group groups very blue chip group and he was telling me he said every country has a national sport he said like he said that in the US it's poker and he said poker is a game which is a mix of skill and luck in China it's bakara only luck in Russia it's chess only skill he said do you know what the national game of turkey is I said why don't you educate me so he said it's back gamon and the Turks are mad about back gamon they have
OtherTurks are mad about back gamon they have all these places they they go and play all these places they they go and play all these places they they go and play back gam total luck game there's no not back gam total luck game there's no not back gam total luck game there's no not much skill involved and he said that the much skill involved and he said that the much skill involved and he said that the average Turkish investor wants to buy a average Turkish investor wants to buy a average Turkish investor wants to buy a stock at 10:00 and sell it at 3:00 and stock at 10:00 and sell it at 3:00 and stock at 10:00 and sell it at 3:00 and make 10% and then do the same thing the make 10% and then do the same thing the make 10% and then do the same thing the next day and Buffett has a quote he says next day and Buffett has a quote he says next day and Buffett has a quote he says the stock market is a the stock market is a the stock market is a mechanism to transfer we wealth from the mechanism to transfer we wealth from the mechanism to transfer we wealth from the active to the inactive so when I was active to the inactive so when I was active to the inactive so when I was looking at this 16 million market cap looking at this 16 million market cap looking at this 16 million market cap company my concern was they'll be no company my concern was they'll be no company my concern was they'll be no liquidity there'll be no shares liquidity there'll be no shares liquidity there'll be no shares available who will sell this company available who will sell this company available who will sell this company right massive amounts of liquidity I right massive amounts of liquidity I right massive amounts of liquidity I mean I was shocked at the amount of mean I was shocked at the amount of mean I was shocked at the amount of trading volume the average Turkish trading volume the average Turkish trading volume the average Turkish Company If You exclude the founders Company If You exclude the founders Company If You exclude the founders stake and the foreign investors Cycles stake and the foreign investors Cycles stake and the foreign investors Cycles through the whole M market cap in 11 through the whole M market cap in 11 through the whole M market cap in 11 days every 11 days it's cycling it is days every 11 days it's cycling it is days every 11 days it's cycling it is what I would call an orgasmic Market to
Questionerwhat I would call an orgasmic Market to invest in you know you know for people like us who want to buy something and never sell it there could be no better place than that because you're dealing with people who are trying to get a value of a business for the next 6 hours right they're trying to understand what is this going to give me in 6 hours and if I'm willing to go to six years and he's at 6 hours I have a huge Advantage
Questionerchanging topics a little bit what does the next US Presidency look like you know the I don't know have any of you read Robert Caro's books are there any Robert Caro fans so anyway every 6 months I go to Kerala I really come to India only to go to Kerala you know it's more interesting than Delhi with due respect and I have these two massas who work on Me 3 hours a day so all I do in Kerala is that I have my 1 and a half hour massage in the
Otherhave my 1 and a half hour massage in the morning 1 and a half hour massage in the morning 1 and a half hour massage in the morning 1 and a half hour massage in the evening I have a do not disturb sign on my door and I read Rob Robert Carol and my door and I read Rob Robert Carol and my door and I read Rob Robert Carol and Robert Carol if you don't know there's a I'll just digress for a second there's a I'll just digress for a second there's a documentary on Netflix probably available in India called Turn every page and I don't think there is any writer on the planet or researcher on the planet as good as Robert Carrol so this guy is now like 93 or something he spent about 10 years writing each of his books he wrote five books and he's working on his sixth one I hope he finishes the sixth month before he dies it'll be very sad so every time I come to Kerala I bring a Carol book with me like this time I bought Master of the Senate it's 1,000 Pages four out of his five books are on Lyndon Johnson and the thing about the United States is because of the
QuestionerUnited States is because of the Brilliance of the founding fathers and all this separation and distribution of power between the presidency and the Senate and Congress and the states is the US does well no matter who is the president really quite frankly irrelevant like right now we don't have a president you know everything is jamming and the reason everything is jamming is because on the status quo basis the country works so yeah we won't get some new rules we don't get some new laws we won't get new things I mean we've had Log Jam we've had parties not agree government shut Downs these parties not agreeing we have all these things going on in a parliamentary democracy like we have in India Modi cannot be in power if he doesn't have a majority of the lower house in the US the president is elected separately from both the houses he may
Otherseparately from both the houses he may or may not control both of them and manyor may not control both of them and manyor may not control both of them and many many times in the history of the US themany times in the history of the US themany times in the history of the US the president has been from one party andpresident has been from one party andpresident has been from one party and the houses are controlled by the otherthe houses are controlled by the otherthe houses are controlled by the other party so it's complete Log Jam andparty so it's complete Log Jam andparty so it's complete Log Jam and through all of that out of the 550through all of that out of the 550through all of that out of the 550 trillion 200 trillion is in the US youtrillion 200 trillion is in the US youtrillion 200 trillion is in the US you know at the end of theknow at the end of theknow at the end of the day that country had 4% of the globalday that country had 4% of the globalday that country had 4% of the global wealth when it was formed and now it iswealth when it was formed and now it iswealth when it was formed and now it is 30% of the global wealth right it just30% of the global wealth right it just30% of the global wealth right it just moved without having 30% of themoved without having 30% of themoved without having 30% of the population so I don't know who's goingpopulation so I don't know who's goingpopulation so I don't know who's going to be the president but it don't matterto be the president but it don't matterto be the president but it don't matter it'sit'sit's okay and readed Robert Carol start withokay and readed Robert Carol start withokay and readed Robert Carol start with the first one so every time I come tothe first one so every time I come tothe first one so every time I come to Kerala I bring one book right the kolKerala I bring one book right the kolKerala I bring one book right the kol book and what I feel really sad about isbook and what I feel really sad about isbook and what I feel really sad about is after two more trips I'll have no moreafter two more trips I'll have no moreafter two more trips I'll have no more carot books then I don't know what I'llcarot books then I don't know what I'llcarot books then I don't know what I'll do with my life you know so I have todo with my life you know so I have todo with my life you know so I have to I'm trying to find Carol number two but
OtherI'm trying to find Carol number two but there's no Carol number two but you should watch the documentary turn every page if you watch that which is about Robert Carol and his editor and then you go to his first book The Power broker it's a page Turner you won't be able to stop reading it we have three more questions here which I can't really ask because they're running out of time so I want to open it to the floor but you can ask these during dinner yeah so may I open it to the floor we can start from here and then we can go around you know you talked about of the criteria to use when to buy right when do you recover that you know whatever the market cap is so I mean that's that's good knowledge to have but what I usually struggle with is when to sell so I would love to get your thoughts on that
Questionerso if the job is done right it never needs to be sold and what
Otherright it never needs to be sold and what we should really be thinking about is we should really be thinking about is we should really be thinking about is when we invest we should think of it when we invest we should think of it when we invest we should think of it like a family like a family like a family business that can never be business that can never be business that can never be sold so if you know Buffett uses the sold so if you know Buffett uses the sold so if you know Buffett uses the analogy of a punch card he say that you analogy of a punch card he say that you analogy of a punch card he say that you have a card which has 20 punches and have a card which has 20 punches and have a card which has 20 punches and then you can't punch it anymore he said then you can't punch it anymore he said then you can't punch it anymore he said each time you buy a stock in your whole each time you buy a stock in your whole each time you buy a stock in your whole life you punch it once and when you've life you punch it once and when you've life you punch it once and when you've bought your 20th stock you cannot buy bought your 20th stock you cannot buy bought your 20th stock you cannot buy any more any more any more stocks so if that was a rule that was stocks so if that was a rule that was stocks so if that was a rule that was imposed on you you would think WR long imposed on you you would think WR long imposed on you you would think WR long and hard about each stock and one of the and hard about each stock and one of the and hard about each stock and one of the things you look you think about is can I things you look you think about is can I things you look you think about is can I live with this forever so we are always live with this forever so we are always live with this forever so we are always trying to buy things at a discount and trying to buy things at a discount and trying to buy things at a discount and that's one of the biggest mistakes I that's one of the biggest mistakes I that's one of the biggest mistakes I made through most of my career most of made through most of my career most of made through most of my career most of my career my model was buy something at my career my model was buy something at my career my model was buy something at 40 or 50 cents sell it 80 or 90 cents go 40 or 50 cents sell it 80 or 90 cents go 40 or 50 cents sell it 80 or 90 cents go back and buy another one for 40 50 cents back and buy another one for 40 50 cents back and buy another one for 40 50 cents
Charlieback and buy another one for 4050 cents and it took me like 25 years to figure out that is so stupid that these compounding machines that come along are so rare and if you find yourself in the happy position of having one of those then you should even keep it when it is overvalued you shouldn't keep it when it agre iously overvalued but you should keep it when it's overvalued so give a lot of benefit of Doubt to the Holdings that you have in terms of whether or not they're overvalued give them a lot of benefit and try to keep them for a longer period so if you have a family business you do not do a calculus every year saying what can I sell this for should I sell this you just don't do those types of things if you have a house that you really like you really don't care what somebody will pay you for it you know I bought a home I moved to Austin Texas recently I
QuestionerI moved to Austin Texas recently I bought a home I don't like to move and I bought a home I don't like to move and I bought a home I don't like to move and I said ABI I'm never moving this is the said ABI I'm never moving this is the said ABI I'm never moving this is the home this is it you know we're going to home this is it you know we're going to home this is it you know we're going to die in this home then the realtor who die in this home then the realtor who die in this home then the realtor who sold me the home he calls me and says sold me the home he calls me and says sold me the home he calls me and says that some couple from Connecticut The that some couple from Connecticut The that some couple from Connecticut The Wall Street Journal did a feature of Wall Street Journal did a feature of Wall Street Journal did a feature of library of my home so after that there library of my home so after that there library of my home so after that there was some interest so this couple in was some interest so this couple in was some interest so this couple in Connecticut said Connecticut said Connecticut said they want to buy your home so I said he they want to buy your home so I said he they want to buy your home so I said he said yeah no I already told them it's said yeah no I already told them it's said yeah no I already told them it's not on the market and that you will not on the market and that you will not on the market and that you will never sell the home Etc so they said to never sell the home Etc so they said to never sell the home Etc so they said to him everything is for sale everything on him everything is for sale everything on him everything is for sale everything on Earth is on sale for a Earth is on sale for a Earth is on sale for a price so I told him they are absolutely price so I told him they are absolutely price so I told him they are absolutely right everything is on sale for a price right everything is on sale for a price right everything is on sale for a price so I told them tell them this is the so I told them tell them this is the so I told them tell them this is the price you know which was about three price you know which was about three price you know which was about three times value of the of the house instead times value of the of the house instead times value of the of the house instead of going they came back and said can you of going they came back and said can you
Otherof going they came back and said can you show us some more pictures then I toldshow us some more pictures then I toldshow us some more pictures then I told them to I don't want to waste time Ithem to I don't want to waste time Ithem to I don't want to waste time I told them write me a three paragraphtold them write me a three paragraphtold them write me a three paragraph essay of why you want to buy a home foressay of why you want to buy a home foressay of why you want to buy a home for three times what it's worth they wentthree times what it's worth they wentthree times what it's worth they went away nobody likes to write anything andaway nobody likes to write anything andaway nobody likes to write anything and thankfully I get to keep living in thethankfully I get to keep living in thethankfully I get to keep living in the same house that I have really didn'tsame house that I have really didn'tsame house that I have really didn't want to that would have been a sad daywant to that would have been a sad daywant to that would have been a sad day if they said okay we'll pay 3x you knowif they said okay we'll pay 3x you knowif they said okay we'll pay 3x you know then I would have been you knowthen I would have been you knowthen I would have been you know regretting that but that's okay soregretting that but that's okay soregretting that but that's okay so basically if the job is done right webasically if the job is done right webasically if the job is done right we never have to sell you know I was reallynever have to sell you know I was reallynever have to sell you know I was really amused at least a couple of times youamused at least a couple of times youamused at least a couple of times you said you know the man the Indian mansaid you know the man the Indian mansaid you know the man the Indian man with the mustache so but I can't helpwith the mustache so but I can't helpwith the mustache so but I can't help but ask where do you get your mustachebut ask where do you get your mustachebut ask where do you get your mustache done from my my follow-up questiondone from my my follow-up questiondone from my my follow-up question actually you know when you talking aboutactually you know when you talking aboutactually you know when you talking about the candy company and all of that rightthe candy company and all of that rightthe candy company and all of that right and like every time the prices increase
Questionerand like every time the prices increase so basically you were describing the weblin goods uh and then another uh of the other stock price or whenever you the price kept increasing of the stock and then he would buy some more yeah yeah Titan yeah the Titan one yeah raakesh jun Vala so this all seems like a whole weblin concept happening over there that the demands kind of going up when the price is going up but so is that what you mean when you say consumer behavior and brand that you buy into or how does a product even achieve webin status like what have you seen like businesses do so that their ordinary product achieves like a weblin status
Questioneryeah that's uh those are two great questions so first of all on the mustache you know I have these Chinese men come up to me okay and they say to me how can I have a mustache like yours and I say to them some things are just
Questionerimpossible genetically impossible so butimpossible genetically impossible so butimpossible genetically impossible so but it did take me about like 5 six years toit did take me about like 5 six years toit did take me about like 5 six years to figure it out and then uh then we got afigure it out and then uh then we got afigure it out and then uh then we got a hang of it so it it took some time Ihang of it so it it took some time Ihang of it so it it took some time I think the question about Brands andthink the question about Brands andthink the question about Brands and consumer behavior is a really complexconsumer behavior is a really complexconsumer behavior is a really complex question and I'll give you an examplequestion and I'll give you an examplequestion and I'll give you an example Buffett and manga they brought theyBuffett and manga they brought theyBuffett and manga they brought they bought company called craftbought company called craftbought company called craft hindes and hindes used to be by itselfhindes and hindes used to be by itselfhindes and hindes used to be by itself it bought craft cheese and it became oneit bought craft cheese and it became oneit bought craft cheese and it became one company on the hind side of the housecompany on the hind side of the housecompany on the hind side of the house they have ketchup and they have thethey have ketchup and they have thethey have ketchup and they have the ability to raise prices much more thanability to raise prices much more thanability to raise prices much more than on the cheese side so on the cheese sideon the cheese side so on the cheese sideon the cheese side so on the cheese side even a tiny amount of price increase andeven a tiny amount of price increase andeven a tiny amount of price increase and consumer switch to another brand soconsumer switch to another brand soconsumer switch to another brand so people don't seem to care which cheesepeople don't seem to care which cheesepeople don't seem to care which cheese they're buying but they seem to care athey're buying but they seem to care athey're buying but they seem to care a lot about which sauce they're buying solot about which sauce they're buying solot about which sauce they're buying so the ketchup ketchup the humans have somethe ketchup ketchup the humans have somethe ketchup ketchup the humans have some kind of taste memory or taste history
Questionerkind of taste memory or taste history where they are particular about the kind of ketchup and they're not so particular about the kind of cheese right and so in the same company they're facing this issue and so this this notion of this consumer behavior and Brands is really really complicated and the devil is in the details and so when Buffett and Munger bought C's candy they saw this 10% price increase was going on and they loved that that was just awesome right and C's is very much a California phenomena it's very popular in California they would open a store in Arizona it would fail they'd open a store in Chicago it would fail they tried 100 things all over the world world uh there's even a store now in Dubai for example and they've had a lot of difficulty with the growth of seas outside of California and it's box box chocolate
QuestionerCalifornia and it's box box chocolate box chocolate is not a growth categorybox chocolate is not a growth categorybox chocolate is not a growth category so it was actually it's not only the Boxso it was actually it's not only the Boxso it was actually it's not only the Box chocolate it's box chocolate withchocolate it's box chocolate withchocolate it's box chocolate with dedicated retail they have their owndedicated retail they have their owndedicated retail they have their own Seas candy stores right which again is aSeas candy stores right which again is aSeas candy stores right which again is a another weird thing you know so foranother weird thing you know so foranother weird thing you know so for whatever reason that equation worked inwhatever reason that equation worked inwhatever reason that equation worked in California and it's worked over 50 60California and it's worked over 50 60California and it's worked over 50 60 years that they've owned it with peopleyears that they've owned it with peopleyears that they've owned it with people have changed everything has changedhave changed everything has changedhave changed everything has changed technology has changed but the candy istechnology has changed but the candy istechnology has changed but the candy is still going when they encountered Cokestill going when they encountered Cokestill going when they encountered Coke it blew them away the one of the bigit blew them away the one of the bigit blew them away the one of the big reasons it blew them away is becausereasons it blew them away is becausereasons it blew them away is because Coke travels so well Coke travels easilyCoke travels so well Coke travels easilyCoke travels so well Coke travels easily to any part of the world you know youto any part of the world you know youto any part of the world you know you can you can put up a Coke factorycan you can put up a Coke factorycan you can put up a Coke factory anywhere in the world start producing itanywhere in the world start producing itanywhere in the world start producing it and instantly there's Demand right Iand instantly there's Demand right Iand instantly there's Demand right I mean that brand has magical power somean that brand has magical power somean that brand has magical power so they looked at Seas they looked at howthey looked at Seas they looked at howthey looked at Seas they looked at how powerful it was but they couldn't grow
Warrenpowerful it was but they couldn't grow it then they looked at Coke and they said this is Seas on steroids right and so then they when they looked at Coke and they saw how powerful it was they went all in right and so these insights about you know brand and traveling not traveling Coke one of the things about difference between Coke and candy is there's no aftertaste with Coke what that means is that you can consume a huge amount of Coke but candy has an aftertaste you know we will start hitting kind of upper limits relatively soon with candy that we won't hit with Coke and person can easily have five Cokes a day or five Diet Cokes a day they wouldn't wouldn't see anything unusual about that but I what I've what I've been able to GLE lean is I don't consider Brands and consumer behavior my forte I think it's a very complicated area that seeing is believing I don't
Warrenarea that seeing is believing I don't know whether There are rules that go across like you see that Seas doesn't travel and Coke travels and you cannot raise the price of craft cheese and you can raise the price of ketchup I mean those are things I would never be able to forecast right so basically if you are able to forecast those things you can have some major home runs but it's not that easy but I think that there are a lot of rewards if you can figure it out
Questionerwell thank you garv it was a pleasure and thanks to all of you for being such a great audience and it's always fun for me thank you
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