Other[Music][Music][Music][Music] thank you so much uh M for being here Ithank you so much uh M for being here Ithank you so much uh M for being here I before we start I want to thankbefore we start I want to thankbefore we start I want to thank Professor Styer at Mund College ofProfessor Styer at Mund College ofProfessor Styer at Mund College of Business and Mark D Mitch at Notre DameBusiness and Mark D Mitch at Notre DameBusiness and Mark D Mitch at Notre Dame Institute for Global investing and alsoInstitute for Global investing and alsoInstitute for Global investing and also I I want to thank onada and all yourI I want to thank onada and all yourI I want to thank onada and all your staff members monish for thestaff members monish for thestaff members monish for the communication it was very smooth and hadcommunication it was very smooth and hadcommunication it was very smooth and had no problem setting everything up thatno problem setting everything up thatno problem setting everything up that being said with monish there was abeing said with monish there was abeing said with monish there was a recent eBay auction I saw and I think itrecent eBay auction I saw and I think itrecent eBay auction I saw and I think it was a 30 minute Zoom call that sold forwas a 30 minute Zoom call that sold forwas a 30 minute Zoom call that sold for about $26,000 if that's right monish andabout $26,000 if that's right monish andabout $26,000 if that's right monish and that means this hourlong Zoom call wethat means this hourlong Zoom call wethat means this hourlong Zoom call we have with you is worth at least $52,000have with you is worth at least $52,000have with you is worth at least $52,000 and if not probably even that is a grossand if not probably even that is a grossand if not probably even that is a gross underestimate if we can gather moreunderestimate if we can gather moreunderestimate if we can gather more insights from you today the guy who woninsights from you today the guy who woninsights from you today the guy who won that auction thought he got so muchthat auction thought he got so muchthat auction thought he got so much value that he sent 30,000 overvalue that he sent 30,000 overvalue that he sent 30,000 over just he increased the amount because hejust he increased the amount because hejust he increased the amount because he felt bad he thought it was toofelt bad he thought it was too
Otherfelt bad he thought it was too low well okay folks everyone in thelow well okay folks everyone in thelow well okay folks everyone in the classroom then if that's the case justclassroom then if that's the case justclassroom then if that's the case just be mindful you know when you raise yourbe mindful you know when you raise yourbe mindful you know when you raise your questions this is we're getting Greatquestions this is we're getting Greatquestions this is we're getting Great Value here today so if that's okayValue here today so if that's okayValue here today so if that's okay monish we'll get right into the firstmonish we'll get right into the firstmonish we'll get right into the first question if that's all right yeah andquestion if that's all right yeah andquestion if that's all right yeah and dibs you forgot to send me the shirt sodibs you forgot to send me the shirt sodibs you forgot to send me the shirt so we could be dressed the same I we couldwe could be dressed the same I we couldwe could be dressed the same I we could have planned it out yeah just somehave planned it out yeah just somehave planned it out yeah just some exclusive Burkshire merch but I'm sureexclusive Burkshire merch but I'm sureexclusive Burkshire merch but I'm sure you have you haveyou have you haveyou have you have plenty you know what I do want monish ifplenty you know what I do want monish ifplenty you know what I do want monish if that's okay the one with the quarter zipthat's okay the one with the quarter zipthat's okay the one with the quarter zip that you have the thund I wouldthat you have the thund I wouldthat you have the thund I would definitely want that that's an exclusivedefinitely want that that's an exclusivedefinitely want that that's an exclusive merge all right sounds good so the firstmerge all right sounds good so the firstmerge all right sounds good so the first question monish for great businesses andquestion monish for great businesses andquestion monish for great businesses and Compounders with long runways you'veCompounders with long runways you'veCompounders with long runways you've said said that even when it'ssaid said that even when it'ssaid said that even when it's appropriately valued you shouldn't sellappropriately valued you shouldn't sellappropriately valued you shouldn't sell it and even when it's overvalued youit and even when it's overvalued youit and even when it's overvalued you
Questionerit and even when it's overvalued you shouldn't sell it that one is definitely
Othershouldn't sell it that one is definitely
Questionershouldn't sell it that one is definitely it's definitely interesting and for I
Otherit's definitely interesting and for I
Questionerit's definitely interesting and for I can we can think of two reasons one if
Othercan we can think of two reasons one if
Questionercan we can think of two reasons one if the investors have large amount of
Otherthe investors have large amount of
Questionerthe investors have large amount of capital like Buffett or even yourself
Othercapital like Buffett or even yourself
Questionercapital like Buffett or even yourself perhaps where there is not that many
Otherperhaps where there is not that many
Questionerperhaps where there is not that many stocks to invest in and that's why kind
Otherstocks to invest in and that's why kind
Questionerstocks to invest in and that's why kind of have to hold on to the Compounders
Otherof have to hold on to the Compounders
Questionerof have to hold on to the Compounders and then second we get an interest free
Otherand then second we get an interest free
Questionerand then second we get an interest free loan from government with no maturity so
Otherloan from government with no maturity so
Questionerloan from government with no maturity so those are the two benefits but apart
Otherthose are the two benefits but apart
Questionerthose are the two benefits but apart from those two benefits why would you
Otherfrom those two benefits why would you
Questionerfrom those two benefits why would you not sell a compounder with long Runway
Othernot sell a compounder with long Runway
Questionernot sell a compounder with long Runway even when it's clearly overvalued in in
Othereven when it's clearly overvalued in in
Questionereven when it's clearly overvalued in in by definition yeah that's a great
Otherby definition yeah that's a great
Questionerby definition yeah that's a great question and one of the reasons we don't
Otherquestion and one of the reasons we don't
Questionerquestion and one of the reasons we don't want to sell is because first of all
Otherwant to sell is because first of all
Questionerwant to sell is because first of all these great businesses and these great
Otherthese great businesses and these great
Questionerthese great businesses and these great Compounders with long runways are very
OtherCompounders with long runways are very
QuestionerCompounders with long runways are very rare we should be very grateful and
Otherrare we should be very grateful and
Questionerrare we should be very grateful and thankful that we get a couple of those
Otherthankful that we get a couple of those
Questionerthankful that we get a couple of those in our portfolio the second is that when
Todd Combsin our portfolio the second is that when you have these kinds of businesses is in your portfolio figuring out intrinsic value is a non-trivial exercise and you may actually make errors in figuring that out so for example I mean let's say you owned Amazon at some point in your portfolio and it looked optically overvalued Amazon's always looked optically overvalued because they're you know putting their earnings into so many other initiatives that their earnings look artificially low when you just look at the the basic number and we don't know which of the bets they're making which we don't have enough visibility on are going to work out or not work out and what the economics of those bets are going to be and so on we would not be able to for example have any kind of idea about AWS before they you know before the whale surfaced or what the you know
Questionerwhale surfaced or what the you know economics or long-term prospects of that business are or or even other businesses that Amazon may enter in the future so basically I I would say that the the idea should be that when it's very clear that a business is egregiously overvalued absolutely you should sell it but if you're just you know this is more kind of I think Art and Science when you're when you get past what you think is fair value and it's something looks like you know it's 20 30% over valued or something I think you have to give benefit of Doubt because there are so many unknowns that could work in your favor and and this is this is especially the case with gifted management teams I mean at what point in Microsoft's you know something like 48e history or maybe even 40e history or so as a public company at what point should
Questioneras a public company at what point should it have been sold right I mean we knowit have been sold right I mean we knowit have been sold right I mean we know that we hit that point around 2000 rightthat we hit that point around 2000 rightthat we hit that point around 2000 right and when it was like you know 600and when it was like you know 600and when it was like you know 600 billion second second most valuablebillion second second most valuablebillion second second most valuable business in the planet or something butbusiness in the planet or something butbusiness in the planet or something but through if you ex exclude that onethrough if you ex exclude that onethrough if you ex exclude that one bubble which everything became crazy abubble which everything became crazy abubble which everything became crazy a lot of things you know deserve to belot of things you know deserve to belot of things you know deserve to be sold issold issold is Microsoft overvalued today is itMicrosoft overvalued today is itMicrosoft overvalued today is it egregiously overvalued I mean I don'tegregiously overvalued I mean I don'tegregiously overvalued I mean I don't know whether Microsoft is fairly pricedknow whether Microsoft is fairly pricedknow whether Microsoft is fairly priced or overpriced is probably somewhere inor overpriced is probably somewhere inor overpriced is probably somewhere in that kind of rangethat kind of rangethat kind of range but I wouldn't venture to say it'sbut I wouldn't venture to say it'sbut I wouldn't venture to say it's egregiously overpriced so so I would sayegregiously overpriced so so I would sayegregiously overpriced so so I would say that the egregious overpricing becomesthat the egregious overpricing becomesthat the egregious overpricing becomes obvious when it's happening and one canobvious when it's happening and one canobvious when it's happening and one can act on that but I think you need to giveact on that but I think you need to giveact on that but I think you need to give it a lot of R just so that we the otherit a lot of R just so that we the otherit a lot of R just so that we the other thing to keep in mind is that it'sthing to keep in mind is that it'sthing to keep in mind is that it's always good to think of it as if you'realways good to think of it as if you'realways good to think of it as if you're the owner of the business the thethe owner of the business the the
Questionerthe owner of the business the the founder of the business so would afounder of the business so would afounder of the business so would a Founder sell his company because theyFounder sell his company because theyFounder sell his company because they got an offer which was 20 30% more thangot an offer which was 20 30% more thangot an offer which was 20 30% more than what they thought the business was worthwhat they thought the business was worthwhat they thought the business was worth and you know if it's got a Runway andand you know if it's got a Runway andand you know if it's got a Runway and all those things that's probablyall those things that's probablyall those things that's probably unlikely you know if they got an offerunlikely you know if they got an offerunlikely you know if they got an offer of you know 500% of what they thoughtof you know 500% of what they thoughtof you know 500% of what they thought the business was worth they'd be verythe business was worth they'd be verythe business was worth they'd be very happy to sell and so I think having ahappy to sell and so I think having ahappy to sell and so I think having a Founder mindset is also veryFounder mindset is also veryFounder mindset is also very useful Mish to that point though when weuseful Mish to that point though when weuseful Mish to that point though when we say we have to give benefit of the doubtsay we have to give benefit of the doubtsay we have to give benefit of the doubt in a way we are also giving benefit ofin a way we are also giving benefit ofin a way we are also giving benefit of Doubt to the management team andDoubt to the management team andDoubt to the management team and believing that they will continue tobelieving that they will continue tobelieving that they will continue to throw things on the wall and you knowthrow things on the wall and you knowthrow things on the wall and you know hopefully produce that rate of returnhopefully produce that rate of returnhopefully produce that rate of return that they have been right we we arethat they have been right we we arethat they have been right we we are putting faith in that in a sense in theputting faith in that in a sense in theputting faith in that in a sense in the history of that okay okay just to behistory of that okay okay just to behistory of that okay okay just to be clear and and another thing to keep inclear and and another thing to keep in
Questionerclear and and another thing to keep in mind is so when you do that the riskmind is so when you do that the riskmind is so when you do that the risk that you run is that a business that youthat you run is that a business that youthat you run is that a business that you thought is great might go into declinethought is great might go into declinethought is great might go into decline right so let's say you've had a 30X or aright so let's say you've had a 30X or aright so let's say you've had a 30X or a 50x on some business held it for a long50x on some business held it for a long50x on some business held it for a long time it's been a great return and youtime it's been a great return and youtime it's been a great return and you don't spot the exact moment when thedon't spot the exact moment when thedon't spot the exact moment when the business goes into decline so you maybusiness goes into decline so you maybusiness goes into decline so you may sell it at a 20% or 30% discount fromsell it at a 20% or 30% discount fromsell it at a 20% or 30% discount from the peakthe peakthe peak valuation there are far worse tragediesvaluation there are far worse tragediesvaluation there are far worse tragedies than that inthan that inthan that in life you know we are okay if we don'tlife you know we are okay if we don'tlife you know we are okay if we don't capture the last dollar and we don'tcapture the last dollar and we don'tcapture the last dollar and we don't optimize but I think the down theoptimize but I think the down theoptimize but I think the down the downside of actually getting off a greatdownside of actually getting off a greatdownside of actually getting off a great Runway is much much worseRunway is much much worseRunway is much much worse actually so so to conclude even when weactually so so to conclude even when weactually so so to conclude even when we don't see a clear path to how thisdon't see a clear path to how thisdon't see a clear path to how this valuation could bevaluation could bevaluation could be justified because like with Amazon andjustified because like with Amazon andjustified because like with Amazon and AWS there's so much internally going onAWS there's so much internally going onAWS there's so much internally going on that we don't know we're we're going tothat we don't know we're we're going tothat we don't know we're we're going to trust it I mean I would I I mean I
Questionertrust it I mean I would I I mean I trust it I mean I would I I mean I haven't looked at Amazon's market cap haven't looked at Amazon's market cap haven't looked at Amazon's market cap lately but um let's say for example in lately but um let's say for example in lately but um let's say for example in fact let me just take a quick look at fact let me just take a quick look at fact let me just take a quick look at what Mr Market is putting for Amazon what Mr Market is putting for Amazon what Mr Market is putting for Amazon today and then we can maybe have a today and then we can maybe have a today and then we can maybe have a little bit of an intelligent little bit of an intelligent little bit of an intelligent conversation about this great business conversation about this great business conversation about this great business so Amazon's Market clap is about 1.3 so Amazon's Market clap is about 1.3 so Amazon's Market clap is about 1.3 trillion trillion trillion today I mean I would say that if I were today I mean I would say that if I were today I mean I would say that if I were a owner of a owner of a owner of Amazon it would not bother me if the Amazon it would not bother me if the Amazon it would not bother me if the market cap was two trillion or even two market cap was two trillion or even two market cap was two trillion or even two and a half trillion I would give it a and a half trillion I would give it a and a half trillion I would give it a lot of Ro because I think that they have lot of Ro because I think that they have lot of Ro because I think that they have such an ability to enter new businesses such an ability to enter new businesses such an ability to enter new businesses and such an ability to execute and any and such an ability to execute and any and such an ability to execute and any of those embryos that we can't even see of those embryos that we can't even see of those embryos that we can't even see could become big in the future but I could become big in the future but I could become big in the future but I would just give them a lot of room and would just give them a lot of room and would just give them a lot of room and take the risk that we may eventually end take the risk that we may eventually end take the risk that we may eventually end up selling at you know something less up selling at you know something less up selling at you know something less than those numbers but if you've had a
Otherthan those numbers but if you've had a good run for a long time it's still okay okay thank you very much and so turn it over to the classroom I think arnov you wouldd like to go and ask your question
Questionerhi um I I was just curious uh when you exited trte what pushed you to start your own investment fund uh versus like investing in any of the already existing value funds I didn't fully get the question you said when I left trte can you just repeat that again yeah like what pushed you to start your own value fund versus putting your money in like an already existing an already existing fund
Questioneryeah I that's a great question so actually when I was at that Crossroads in in in 99 what I really wanted to do was I I wanted to go work for Warren Buffett that was my goal in life and at that time you know my my liquid net worth was like north of 10 million maybe which I thought was you know a huge
Ted Weschlerwhich I thought was you know a huge amount of money i' never had any anything like that in in the stock market and so on maybe 10 12 million so I felt like okay I don't need to work anymore I think I and I don't need to get a paycheck anymore and what do I want to do do and I said what I want to do is continue to get better at investing and how do I get better at investing well you know go Apprentice with Warren Buffett and so I wrote Warren a letter in 99 probably January or February of 99 and I basically told him listen this is my background and I don't need a salary or anything and I can work in Omaha or Chicago where I was living at the time and you know you can pretty much tell me to do anything including sweet the floors it's okay uh and I don't need a title or anything and actually within a week I got a response from Warren which means that my letter
Questionerfrom Warren which means that my letter probably got responded to in Omaha maybe the same day or the next day after it got there and he basically said that I work alone and I like working alone and then he said now you might wonder why I'm saying that when there's Charlie Munger in the picture and he said Charlie's in LA and I'm in Omaha so we don't really on a day-to-day basis work together and so he says his exact words were good luck reorganizing your life I'm not the answer okay so I was very depressed and dejected when I got that letter because I could not think of anything else I really wanted to do I didn't could not think of any other place I wanted to go work and I had some friends I was part of a group called Young Presidents organization YPO and I had some friends in YPO and they you know I used to give some of these guys
Questionerknow I used to give some of these guys stock tips over the years and they done really well with those tips and so on so they said look why don't you just set up a partnership like Buffett had and we don't want stock tips from you we want to give you some money to manage and you manage that money and you know see what you can make of it and they were proposing to they were like eight or nine of them giving me $100,000 each so I would have like a million dollars under management which I didn't think was enough to you know pay the rent or anything and but I didn't need I didn't need income so I said okay I can set up a vehicle like the Buffett Partnerships to take care of my friends 1 million and if I'm buying a stock for my portfolio there's no additional work involved in buying it for this second portfolio it's like you know five minutes more of work
Ted Weschlerlike you know five minutes more of work or something so I started that not so much as a you know kind of plan B Because Buffett said no but because I said okay I can do this but this doesn't solve my problem but let me see what I else I can do and then about about 15 months after I started the fund which I really thought of as a hobby I didn't even think it was like a real business we had done really well the first year we were up like 70% the fund had some more money come in it had about 2 and a half million under management m agement in 2000 and I decided at that point that I was actually enjoying the fact that I had some investors and I had this pool of capital so I said why don't I stop treating it as a stepchild and start treating it like a real business and you know raise assets and run it more professionally you know if you will and so I did that and I
Questionerif you will and so I did that and I basically decided I'm going to try to grow and scale for investment funds and so that that's how I went down that path
Questionerthank you monish and for the next question it's regarding cigar butt investing specifically so you know Graham did it Buffett did it Walter slos did it even you did it at a point so you know was so you know I know you would say that compound finding Compounders is the best but sticking to Cigar butd investing if in a situation we have three stocks you know ABC ab and c and their net Nets are all trading at let's say one10 their value and we found these three stocks so we buy three 33% in each stock just keep it give it to three stocks and you know we go to sleep for two years and then wake up and find that one of the stocks has gone up as uh quadrupled essentially so it's now
Questionerquadrupled essentially so it's now trading at 40 50% of its net value nettrading at 40 50% of its net value nettrading at 40 50% of its net value net let's say and the other two are just uhlet's say and the other two are just uhlet's say and the other two are just uh Coast lining really nothing doingCoast lining really nothing doingCoast lining really nothing doing nothing in this scenario does thenothing in this scenario does thenothing in this scenario does the concept of portfolio rebalancing makesconcept of portfolio rebalancing makesconcept of portfolio rebalancing makes sense because there's more room to gosense because there's more room to gosense because there's more room to go more Puff left in the other two comparedmore Puff left in the other two comparedmore Puff left in the other two compared to this one stock would that make senseto this one stock would that make senseto this one stock would that make sense to trim that and pour it over the otherto trim that and pour it over the otherto trim that and pour it over the other two stocks
Otheryeah so I think to answertwo stocks yeah so I think to answertwo stocks yeah so I think to answer your first question about you knowyour first question about you knowyour first question about you know whether to do net net investing or towhether to do net net investing or towhether to do net net investing or to just focus on Compounders and so on injust focus on Compounders and so on injust focus on Compounders and so on in investing it's always good to have ainvesting it's always good to have ainvesting it's always good to have a Swiss army knife approach to investingSwiss army knife approach to investingSwiss army knife approach to investing where you can maintainwhere you can maintainwhere you can maintain flexibility so um finding greatflexibility so um finding greatflexibility so um finding great Compounders at compelling prices doesn'tCompounders at compelling prices doesn'tCompounders at compelling prices doesn't happen thathappen thathappen that often and and you know this year whenoften and and you know this year whenoften and and you know this year when Buffett's letter came out uh you know heBuffett's letter came out uh you know he talked about the fact that in 58 yearstalked about the fact that in 58 yearstalked about the fact that in 58 years of running bookof running book
Questionerof running book hatway there were 12 decisions that hehatway there were 12 decisions that hehatway there were 12 decisions that he made that really ended up probablymade that really ended up probablymade that really ended up probably creating 80 90% of the value forcreating 80 90% of the value forcreating 80 90% of the value for Burkshire and he took hundreds ofBurkshire and he took hundreds ofBurkshire and he took hundreds of decisions in the last 8 years probablydecisions in the last 8 years probablydecisions in the last 8 years probably more than three probably bought moremore than three probably bought moremore than three probably bought more than 300 stocks and there were reallythan 300 stocks and there were reallythan 300 stocks and there were really just a few stocks and a few businessesjust a few stocks and a few businessesjust a few stocks and a few businesses and the hiring of AIT Jane which wereand the hiring of AIT Jane which wereand the hiring of AIT Jane which were these 12 great decisions which led tothese 12 great decisions which led tothese 12 great decisions which led to this tremendous outcome so he said likethis tremendous outcome so he said likethis tremendous outcome so he said like it it was like one good decision everyit it was like one good decision everyit it was like one good decision every five years on average right so even forfive years on average right so even forfive years on average right so even for a person with the talents of Warrena person with the talents of Warrena person with the talents of Warren Buffett finding these great you knowBuffett finding these great you knowBuffett finding these great you know businesses like a Geico or a Coke or AMXbusinesses like a Geico or a Coke or AMXbusinesses like a Geico or a Coke or AMX or Burlington Northern or all of theseor Burlington Northern or all of theseor Burlington Northern or all of these things that have worked so well Nationalthings that have worked so well Nationalthings that have worked so well National Indemnity and so on were rare theyIndemnity and so on were rare theyIndemnity and so on were rare they happened relativelyhappened relativelyhappened relatively infrequently and so I think it's alwaysinfrequently and so I think it's alwaysinfrequently and so I think it's always nice tonice tonice to have more Tools in Your Arsenal that youhave more Tools in Your Arsenal that you
Questionerhave more Tools in Your Arsenal that you can deal with one of the things that didcan deal with one of the things that didcan deal with one of the things that did not get so much Clarity or publicitynot get so much Clarity or publicitynot get so much Clarity or publicity properly about what Buffett did recentlyproperly about what Buffett did recentlyproperly about what Buffett did recently was that on his birthday in 2020 Augustwas that on his birthday in 2020 Augustwas that on his birthday in 2020 August 30th Burkshire announced that they had30th Burkshire announced that they had30th Burkshire announced that they had taken more than a 5% stake in fivetaken more than a 5% stake in fivetaken more than a 5% stake in five Japanese trading companies mitsuiJapanese trading companies mitsuiJapanese trading companies mitsui Mitsubishi marui know Sumit Tomo and soMitsubishi marui know Sumit Tomo and soMitsubishi marui know Sumit Tomo and so on and he had invested I think north ofon and he had invested I think north ofon and he had invested I think north of about five billion in all these fiveabout five billion in all these fiveabout five billion in all these five companies and they were forced tocompanies and they were forced tocompanies and they were forced to disclose because they went overdisclose because they went overdisclose because they went over 5% and what he did interestingly when he5% and what he did interestingly when he5% and what he did interestingly when he made this bet is that he borrowed themade this bet is that he borrowed themade this bet is that he borrowed the entire amount so bsh sitting on largeentire amount so bsh sitting on largeentire amount so bsh sitting on large Mar cash but he borrowed the entireMar cash but he borrowed the entireMar cash but he borrowed the entire amount in Yen at a half a percent a yearamount in Yen at a half a percent a yearamount in Yen at a half a percent a year long term and these five companies hadlong term and these five companies hadlong term and these five companies had average dividend yields of aboutaverage dividend yields of aboutaverage dividend yields of about 8% so basically he made a $5 billion bet8% so basically he made a $5 billion bet8% so basically he made a $5 billion bet putting no money down the dividends wereputting no money down the dividends wereputting no money down the dividends were going to be about you know 400 million a
Questionergoing to be about you know 400 million agoing to be about you know 400 million a year and the interest he was paying wasyear and the interest he was paying wasyear and the interest he was paying was 252525 million okay so 375 money of 75 millionmillion okay so 375 money of 75 millionmillion okay so 375 money of 75 million of easy money coming in you know andof easy money coming in you know andof easy money coming in you know and when we fast forward three years now youwhen we fast forward three years now youwhen we fast forward three years now you know he's increased that stake but theknow he's increased that stake but theknow he's increased that stake but the dividends have alldividends have alldividends have all doubled and the stocks have doubled todoubled and the stocks have doubled todoubled and the stocks have doubled to quadr okay so basically that fivequadr okay so basically that fivequadr okay so basically that five billion that he put in became about likebillion that he put in became about likebillion that he put in became about like 12 or 13 billion or something12 or 13 billion or something12 or 13 billion or something collectively and instead of making 400collectively and instead of making 400collectively and instead of making 400 million a year now he's making 800million a year now he's making 800million a year now he's making 800 million a year on those bets so it was amillion a year on those bets so it was amillion a year on those bets so it was a huge home run and he did it because Ihuge home run and he did it because Ihuge home run and he did it because I think and maybe it took him some time tothink and maybe it took him some time tothink and maybe it took him some time to understand the nature of these companiesunderstand the nature of these companiesunderstand the nature of these companies and so on I looked at the I looked atand so on I looked at the I looked atand so on I looked at the I looked at these companies Bufford intends to holdthese companies Bufford intends to holdthese companies Bufford intends to hold these businesses for a long time he saysthese businesses for a long time he saysthese businesses for a long time he says well passed after he's gone bsh willwell passed after he's gone bsh willwell passed after he's gone bsh will continue holding them right now theycontinue holding them right now theycontinue holding them right now they don't fit the perfect
Questionerdon't fit the perfect template of great Compounders you know they have some dividends they're buying back shares they have this huge smorgus Board of assets all over the world it's really not really you know clean story like you might have with Amazon or Salesforce or you know something like that book haway for that for that matter but this was classically what I would call part of the Swiss Army nap right this was was a bet that if you think about the way he made that bet the odds that he would actually lose money on that was very low there was no currency risk the yields were so much higher if you study the stock prices of all these companies basically they were hitting multi-year lows in 2020 when he bought them and Japan in general has still not hit the highs that it had in 1990s so we had 33 years after the bubble we haven't
Questionerhad 33 years after the bubble we haven't hit that same Mark yet it's still 30 40% discount so I think that when you look at net Nets or you look at the Japanese bets he made or you know you know merger Arbitrage or any number of things you could do convertible bonds whatever else you could do in the stock market it's good to maintain flexibility so in your example you know you make a basket bet with some net Nets and you know one works out and two have flat line well it's hard to answer the question that way you would really have to kind of peel the onion some more understand those businesses some more and say well do the other two continue to be undervalued or is there something structurally wrong with them or are they melting ice cubes what's going on right and so yeah if you uh get an opportunity and with small amounts of capital doing these other things can work out really
Questionerthese other things can work out really well but I would say that it's it's well but I would say that it's it's well but I would say that it's it's always good to have an eye out on the always good to have an eye out on the always good to have an eye out on the Compounders that's kind of plan a and if plan a doesn't work then you know we plan a doesn't work then you know we plan a doesn't work then you know we have plan B plan C Plan D and so on so have plan B plan C Plan D and so on so have plan B plan C Plan D and so on so we can play these Mickey Mouse games on we can play these Mickey Mouse games on we can play these Mickey Mouse games on the side while we're waiting for plan a the side while we're waiting for plan a the side while we're waiting for plan a and and that can work out just and and that can work out just and and that can work out just fine want to be fair for folks who are fine want to be fair for folks who are fine want to be fair for folks who are early in their careers and just maybe early in their careers and just maybe early in their careers and just maybe still in school uh finding a compounder still in school uh finding a compounder still in school uh finding a compounder is not you know would they even have the is not you know would they even have the is not you know would they even have the in would we even have the insight to in would we even have the insight to in would we even have the insight to find a compounder and truly understand a find a compounder and truly understand a find a compounder and truly understand a business that well would wouldn't it business that well would wouldn't it business that well would wouldn't it take maybe 10 15 20 years of studying take maybe 10 15 20 years of studying take maybe 10 15 20 years of studying and you know building knowledge and and you know building knowledge and and you know building knowledge and information before we can even try that information before we can even try that information before we can even try that actually you know it is not that hard to actually you know it is not that hard to actually you know it is not that hard to find great businesses and find great businesses and find great businesses and Compounders and there's a hack you can Compounders and there's a hack you can Compounders and there's a hack you can do to get there I'm going to give you
Questionerdo to get there I'm going to give youdo to get there I'm going to give you the hack so you can you know you can gothe hack so you can you know you can gothe hack so you can you know you can go straight to the promised land so thestraight to the promised land so thestraight to the promised land so the hack is make ahack is make ahack is make a list of all thelist of all thelist of all the brands that you are a customerbrands that you are a customerbrands that you are a customer of okay so if you eat at McDonald's onceof okay so if you eat at McDonald's onceof okay so if you eat at McDonald's once in a while add that to the list if youin a while add that to the list if youin a while add that to the list if you go to Chipotle once in a while add thatgo to Chipotle once in a while add thatgo to Chipotle once in a while add that to the list if you are buying a certainto the list if you are buying a certainto the list if you are buying a certain clothing line your headphones are aclothing line your headphones are aclothing line your headphones are a certain brand you know you're using uhcertain brand you know you're using uhcertain brand you know you're using uh certain types of perfume so look atcertain types of perfume so look atcertain types of perfume so look at everything you spend moneyeverything you spend moneyeverything you spend money on okay and just make a list because theon okay and just make a list because theon okay and just make a list because the thing is that for some company tothing is that for some company tothing is that for some company to succeed in getting even a tiny part ofsucceed in getting even a tiny part ofsucceed in getting even a tiny part of youryouryour spending is a hugespending is a hugespending is a huge accomplishment because all of us areaccomplishment because all of us areaccomplishment because all of us are very discerning about what we want wevery discerning about what we want wevery discerning about what we want we are very particular about you know Iare very particular about you know Iare very particular about you know I want to wear certain types of shoes Iwant to wear certain types of shoes Iwant to wear certain types of shoes I want to wear certain types of socks Iwant to wear certain types of socks Iwant to wear certain types of socks I want to you know buy certain kinds ofwant to you know buy certain kinds ofwant to you know buy certain kinds of furniture or buy certain
Questionerfurniture or buy certain appliances oh I'm buying a Samsung phone or iPhone or whatever so just make a list of everything you are consuming right and then start saying okay which of these are listed public companies right and and now let's understand why ask yourself why did I go to McDonald's okay why didn't I go to you know Carl's Jr or some other brand like waterburger or whatever and and then you know let's probe into McDonald's and seek what kind of business it is is is it undervalued what kind of because if you're a consumer of the business you already know a lot about and and you don't even need to get to the balance sheets and all that right now just basically in your head what you would ask is where is this business going you know is it really going to explode you know there's a new line of new brand of sneakers on you know I saw people
Questionersneakers on you know I saw people wearing on sneakers I'm not lucky enough to have on sneakers yet but I read an article that it was really exploding in kind of sales and whatever reason people have an interest in that so I would just be curious to understand what is going on there right and and what can a business business is it and why would it be sustainable or not sustainable and so on so I think that if you take that approach and this you know Peter Lynch was a big advocate of this approach it's going to get you relatively close because you're going to and especially what you'll find is sometimes you latch on to brands that are just emerging you know before theyve really you know like college students were the very first demographic to get rid of landlines okay so some of you don't know what I mean by landline that's okay you
Questionerwhat I mean by landline that's okay you can be forgiven for that but when people started disconnecting landlines the very first demographic that did that was college students so college students were able to see that land lines are going away they were probably also the first to disconnect from cable or from satellite team okay so both so when the Behavior parents are changing you know you sign on to some streaming platform for some content chant that you guys may be ahead of the curve versus the rest of the crew right when Facebook first started it was only for a few colleges right only it first started at Harvard and then expanded from there so basically those individuals who were early customers of Facebook or consumers of Facebook has a huge Advantage because the rest of the world didn't even know what Facebook is they never used it so so you're actually
Questionerthey never used it so so you're actually at Notre Dame at a huge advantage to Warren in Omaha you know massive Advantage because he's not changing anything about what he's doing whereas you guys are actually driving change and so very easy to find a compounder I gave you the formula that that works more thank you so much all right H turning it back over to the classroom we have another student that wants to ask their question yeah so part of Charlie's thinking and subsequently yours has to do with like multi-disciplinary thinking and using a number of different mental models so I was wondering if you need advice for like us students without Decades of experience like how we go about developing that skill set and then subsequently applying it as well yeah I think that's a great that's a great question and you know Charlie is a great
Questionerquestion and you know Charlie is a great collector of models and and he's really good actually the amazing thing about the his brain works is how he can immediately like recall or bring to bear you know four or five different models almost instantly so he's practiced that a lot but if you if you go through the book poor Charlie Almanac you know the back of the book they have the 10 great speeches he's given and one of the speeches is the psychology of human misjudgment and he modified that talk the original Talk talk was given at Harvard and the original Talk is on the internet Etc so you don't even need to spend $2 you just ask God Google and God Google will give you all of that content for free and so I try to read that essay every year and that essay contains a good 30 plus marks and they give you that essay gives you a lot of insights into how
Questioneryou a lot of insights into how our brains function and that gives you a lot of big leg up in how you can you know figure things out Etc right so for example in that essay he talks about Association tendency Association tendency is used by companies like Coca-Cola where Coca-Cola wants to be any place where humans are happy so if there's the Olympics or the World Cup or the NFL or NFL game or a movie theater any place where humans are happy C wants to be there and Coke is willing to do whatever it takes loss lead or whatever to be there for for that purpose and the association tend Tendencies are very strong so when we see Coke in a happy setting it carries on to other areas of life if we want Coke with us because we think if we have a Coke we're going to be happy right so coke uses that in their advertising they also use celebrities in their
Questioneralso use celebrities in their advertising right for the same reason you know if you know if some you know Brad Pit is you know drinking a certain band brand of beer that's the brand of beer I need to be drinking you know and that sort of thing and
Warrenso he goes through a number of models so I think it took Charlie probably 30 or 40 years of stumbling around in the darkness to come up with those particular models he basically distilled it down in that talk so what took him 30 or 40 years you could absorb in a day or two which is tremendous leg up on Charlie and you know so there are quirks in the wiring of the human brain and it's very important to understand those quirks because once you start understanding those quirks you can get a huge leg up on other humans so for example humans have built in to our brains this reciprocation
Otherbrains this reciprocation tendency that if someone does us a favortendency that if someone does us a favortendency that if someone does us a favor we feel that we need to do them a favorwe feel that we need to do them a favorwe feel that we need to do them a favor so the reciprocation tendency is builtso the reciprocation tendency is builtso the reciprocation tendency is built into most humans and Charlie thinks itinto most humans and Charlie thinks itinto most humans and Charlie thinks it comes from going very way back in ourcomes from going very way back in ourcomes from going very way back in our evolutionary history so when we wereevolutionary history so when we wereevolutionary history so when we were when we lived in Hunter gather societieswhen we lived in Hunter gather societieswhen we lived in Hunter gather societies and there was a hunter who brought downand there was a hunter who brought downand there was a hunter who brought down a big beast right brings it to his smalla big beast right brings it to his smalla big beast right brings it to his small Groove now he cannot consume the wholeGroove now he cannot consume the wholeGroove now he cannot consume the whole Beast himself and there's noBeast himself and there's noBeast himself and there's no Refrigeration so what he does is heRefrigeration so what he does is heRefrigeration so what he does is he stores that meat in the bellies of hisstores that meat in the bellies of hisstores that meat in the bellies of his neighbors and he invites them all toneighbors and he invites them all toneighbors and he invites them all to share in his feastshare in his feastshare in his feast so later when one of them brings down aso later when one of them brings down aso later when one of them brings down a beast they know they're going to invitebeast they know they're going to invitebeast they know they're going to invite him you know he knows he's going to gethim you know he knows he's going to gethim you know he knows he's going to get invited right and so it works win forinvited right and so it works win forinvited right and so it works win for everyone but there's a quirk in theeveryone but there's a quirk in theeveryone but there's a quirk in the reciprocation tendency is that becausereciprocation tendency is that becausereciprocation tendency is that because of the way our evolutionary brainsof the way our evolutionary brains
Otherof the way our evolutionary brains evolved the reciprocation tendency evolved the reciprocation tendency evolved the reciprocation tendency etched into our brain does not have a etched into our brain does not have a etched into our brain does not have a calibration engine so I can remember calibration engine so I can remember calibration engine so I can remember that John did a favor for me that John did a favor for me that John did a favor for me but I'm really not good at calibrating but I'm really not good at calibrating but I'm really not good at calibrating the size of the the size of the the size of the fa and cini talks about it you know the fa and cini talks about it you know the fa and cini talks about it you know the psychology of persuasion that salese use psychology of persuasion that salese use psychology of persuasion that salese use this all the time in a way to take this all the time in a way to take this all the time in a way to take advantage of people or you know get more advantage of people or you know get more advantage of people or you know get more sales Etc and I've used this tendency to sales Etc and I've used this tendency to sales Etc and I've used this tendency to increase Assets in PAB funds for example increase Assets in PAB funds for example increase Assets in PAB funds for example so when when a potential investor so when when a potential investor so when when a potential investor approaches me and says hey I'm approaches me and says hey I'm approaches me and says hey I'm interested in investing in PAB funds for interested in investing in PAB funds for interested in investing in PAB funds for example everything they need to make example everything they need to make example everything they need to make their investment could be sent to them their investment could be sent to them their investment could be sent to them by email various documents and by email various documents and by email various documents and prospectus and disclosures and whatever prospectus and disclosures and whatever prospectus and disclosures and whatever right and they can look at that right and they can look at that right and they can look at that Etc and we do that we send them all the Etc and we do that we send them all the Etc and we do that we send them all the information digitally but but what we information digitally but but what we information digitally but but what we also do is we send them a physical
Otheralso do is we send them a physical package okay and the the physical package okay and the the physical package okay and the the physical package has all the same documents in package has all the same documents in package has all the same documents in hard copy but it also has some giveaways hard copy but it also has some giveaways hard copy but it also has some giveaways right so it has a book usually and it right so it has a book usually and it right so it has a book usually and it has a very nice cross pen okay and now has a very nice cross pen okay and now has a very nice cross pen okay and now when the person receives the package he when the person receives the package he when the person receives the package he gets this very nice cross pen which he gets this very nice cross pen which he gets this very nice cross pen which he never asks for doesn't even want it but never asks for doesn't even want it but never asks for doesn't even want it but it's there now and the book is there it's there now and the book is there it's there now and the book is there now maybe one out of one two out of 100 now maybe one out of one two out of 100 now maybe one out of one two out of 100 people I would send these packages to people I would send these packages to people I would send these packages to return the whole package to me with a return the whole package to me with a return the whole package to me with a note saying thank you Mr PAB for sending note saying thank you Mr PAB for sending note saying thank you Mr PAB for sending these documents and you know all these these documents and you know all these these documents and you know all these things I decided it's not for me and things I decided it's not for me and things I decided it's not for me and warm regards right because what they're warm regards right because what they're warm regards right because what they're trying to do is they're trying to get trying to do is they're trying to get trying to do is they're trying to get rid of the rid of the rid of the reciprocation reciprocation reciprocation obligation and but for 98% of humans obligation and but for 98% of humans obligation and but for 98% of humans there's too high a frictional cost to there's too high a frictional cost to there's too high a frictional cost to try to return that pack you know you got try to return that pack you know you got try to return that pack you know you got to go to UPS and all of that it's a
Otherto go to UPS and all of that it's a complicated thing it's not so easy and so if they don't return the package now it's like they ate my meat okay they ate the Beast I gave them and so they feel obliged and if you feel obliged then the minimum investment is a few million dollars you know so you can send a few million dollars and now we're even you know and so the pen is equal to a few million dollars because the brain cannot calibrate right and so that's a mental model that is useful now there are used car sales scumback salesman who take advantage of this in nefarious ways right and but you can take advantage of it in very above board ways and so being aware of these quirks in the way human brains are wired is going to give you an advantage in life so as you go through life and as you learn about different things and as you say oh like for
Questionerthings and as you say oh like for example one of the things that has helped me a lot is you know I'm the Shameless cloner you know and I have still not figured out so I know that humans for whatever reason have an averion to cloning they consider it beneath them they think it's like cheating or whatever right I really don't know why there is a human aversion to cloning what I do know is it definitely exists because a lot of people will look at something that somebody else is doing and they'll decide oh that's a good idea but it's already been done so there's no point me trying to copy it or it won't work whatever they don't copy it a really good example of that is you know when I first ran into Chipotle you know the restaurant we all love so when I first ran into Chipotle I loved it it was great you know I'm I'm talking like about 20 years
Questionerknow I'm I'm talking like about 20 years ago and I used to go every day and haveago and I used to go every day and haveago and I used to go every day and have my lunch at Chipotle because I justmy lunch at Chipotle because I justmy lunch at Chipotle because I just creature of habits you know keep itcreature of habits you know keep itcreature of habits you know keep it simple and chipotle had a particularsimple and chipotle had a particularsimple and chipotle had a particular innovation in the way Mexican food wasinnovation in the way Mexican food wasinnovation in the way Mexican food was being served which is that they allowedbeing served which is that they allowedbeing served which is that they allowed extremeextremeextreme customization and no two people in linecustomization and no two people in linecustomization and no two people in line ordered the same thing right and becauseordered the same thing right and becauseordered the same thing right and because of the way their whole assembly line wasof the way their whole assembly line wasof the way their whole assembly line was set up it was very easy to customizeset up it was very easy to customizeset up it was very easy to customize right because they just go down the lineright because they just go down the lineright because they just go down the line and ask you what you want and you justand ask you what you want and you justand ask you what you want and you just keep telling them and you go and I saidkeep telling them and you go and I saidkeep telling them and you go and I said this is a great Innovation i l thoughtthis is a great Innovation i l thoughtthis is a great Innovation i l thought about I thought about 20 years ago 22about I thought about 20 years ago 22about I thought about 20 years ago 22 years ago I said this is a fantasticyears ago I said this is a fantasticyears ago I said this is a fantastic Innovation then I would go to Baja FreshInnovation then I would go to Baja FreshInnovation then I would go to Baja Fresh okayokayokay and they just give you some standardand they just give you some standardand they just give you some standard burrito or standard T you know youburrito or standard T you know youburrito or standard T you know you cannot you can tell them or you knowcannot you can tell them or you knowcannot you can tell them or you know change this that that but it's not achange this that that but it's not a
Otherchange this that that but it's not a seamlessseamlessseamless experience and Baja Fresh has not scaledexperience and Baja Fresh has not scaledexperience and Baja Fresh has not scaled and what I couldn't figure out is I saidand what I couldn't figure out is I saidand what I couldn't figure out is I said I saw when there was Baja Fresh and II saw when there was Baja Fresh and II saw when there was Baja Fresh and I saw when there was chipot and if I wassaw when there was chipot and if I wassaw when there was chipot and if I was the CEO Baja Fresh what I would havethe CEO Baja Fresh what I would havethe CEO Baja Fresh what I would have done is I would have just completelydone is I would have just completelydone is I would have just completely clone Chipotle i' make everything theclone Chipotle i' make everything theclone Chipotle i' make everything the same exactly the way Chipotlesame exactly the way Chipotlesame exactly the way Chipotle and there's room for more than one okayand there's room for more than one okayand there's room for more than one okay there's not room for just one and nowthere's not room for just one and nowthere's not room for just one and now you know we have some other restaurantsyou know we have some other restaurantsyou know we have some other restaurants like Cava Etc that have come up with thelike Cava Etc that have come up with thelike Cava Etc that have come up with the same concept with different kinds ofsame concept with different kinds ofsame concept with different kinds of food right but there could have beenfood right but there could have beenfood right but there could have been more of the same nobody really clonedmore of the same nobody really clonedmore of the same nobody really cloned McDonald's fries like why are you notMcDonald's fries like why are you notMcDonald's fries like why are you not cloning those fries those fries arecloning those fries those fries arecloning those fries those fries are great okay it's not not rocket sciencegreat okay it's not not rocket sciencegreat okay it's not not rocket science let's clone it nobody cloned the egg MClet's clone it nobody cloned the egg MClet's clone it nobody cloned the egg MC McMuffin why are you not cloning the EggMcMuffin why are you not cloning the EggMcMuffin why are you not cloning the Egg McMuffin it's great okay just becauseMcMuffin it's great okay just becauseMcMuffin it's great okay just because you didn't invent it doesn't mean you
Otheryou didn't invent it doesn't mean you can't clone it okay and so I find continuously around the world when I look around that there are so many opportunities but for doing what has already been done there's no need to make any changes to what has already been done because there's room for two or three players or four players easily in what was already been done but nobody does that and that's that's the way we the world works so embracing a mental model like cloning so what I when I realize that humans have some weird aversion to cloning what I said is okay monish if you become the Shameless clone right off the bat you will have an advantage okay and that Advantage because other people are not willing to do that is going to give you a huge leg up and I remember in 2012 I noticed that Burkshire Hathaway in their 13f filing had bought General Motors you
Warren13f filing had bought General Motors you know General Motor stock and I also know General Motor stock and I also know General Motor stock and I also noticed that I think it was David Einhorn who had bought GM stock okay I Einhorn who had bought GM stock okay I Einhorn who had bought GM stock okay I always hated the car business I think always hated the car business I think always hated the car business I think the car business is a horrible business the car business is a horrible business the car business is a horrible business you know High capex unions we see what you know High capex unions we see what you know High capex unions we see what the unions are doing right now and the unions are doing right now and the unions are doing right now and you're subject to Consumer taste and if you're subject to Consumer taste and if you're subject to Consumer taste and if something even slightly off they won't something even slightly off they won't something even slightly off they won't buy your car and you know all of these buy your car and you know all of these buy your car and you know all of these things it's very competitive and all of things it's very competitive and all of things it's very competitive and all of that right it's a horrible business to that right it's a horrible business to that right it's a horrible business to be in so I said why would these smart be in so I said why would these smart be in so I said why would these smart people want to go into a business which people want to go into a business which people want to go into a business which is worse than having a root canal you is worse than having a root canal you is worse than having a root canal you know like why would you want to invest know like why would you want to invest know like why would you want to invest in a stupid business like General Motors in a stupid business like General Motors in a stupid business like General Motors and what I decided to do was I said I'm and what I decided to do was I said I'm and what I decided to do was I said I'm just going to dig into this to just going to dig into this to just going to dig into this to understand what drugs these people were understand what drugs these people were understand what drugs these people were smoking so I decided I was going to smoking so I decided I was going to
Questionersmoking so I decided I was going to study GM to try to come up with an answer of why these smart people bought GM right and when I started to study it I realized that the auto business had changed and it had changed in a very major way and I was not aware that it had changed so what happened in in the auto business is in the financial crisis in 2008 and 09 GM and Chrysler went through bankruptcy and when they went through bankruptcy they got rid of their legacy liabilities they got rid of their debt they got cleansed out of all all the sins of the past and I read a book called overhaul it was written by Steve Ratner who was the auto Zar appointed by President Obama to basically fix the Auto industry and he was basically responsible for the US government bailout of GM and Chrysler and managing those companies to come back to health and when I read his book overhaul which
Questionerand when I read his book overhaul which is a great book to read I realized that so every five years like like we're seeing right now the UAW renegotiates the union contracts and they have a lot of Leverage because they'll go on strike and if they go on strike you know obviously the company are in a lot of pain right like they've just struck so many of their plants and distribution centers if you take your car in now they can't get the parts because the distribution centers are all on strike the people are all on strike so in in 2009 I think that the auto task force in DC Steve Ratner and his colleagues were going to Detroit to meet with some of the leaders of GM and Ford and ZM and Chrysler and so on and they had a meeting with the UAW at about 4M and their flight was going to be leaving at 5:00 P p.m so when they met the UAW they
Questioner5:00 P p.m so when they met the UAW they said look we're going to redo thesaid look we're going to redo thesaid look we're going to redo the contracts because what is there in placecontracts because what is there in placecontracts because what is there in place right now is not SU aable and they saidright now is not SU aable and they saidright now is not SU aable and they said that we've actually come up with a newthat we've actually come up with a newthat we've actually come up with a new contract with how things are going tocontract with how things are going tocontract with how things are going to work and here is a new contract and onwork and here is a new contract and onwork and here is a new contract and on the last page you can sign and then wethe last page you can sign and then wethe last page you can sign and then we can move on so the UW basically thecan move on so the UW basically thecan move on so the UW basically the leadership told them that listen I don'tleadership told them that listen I don'tleadership told them that listen I don't think you understand how things work inthink you understand how things work inthink you understand how things work in Detroit we appreciate that you've comeDetroit we appreciate that you've comeDetroit we appreciate that you've come up with a new contract we will take thisup with a new contract we will take thisup with a new contract we will take this and study it and just for me seeing theand study it and just for me seeing theand study it and just for me seeing the first few paragraphs of what you writtenfirst few paragraphs of what you writtenfirst few paragraphs of what you written I can assure you none of it is going toI can assure you none of it is going toI can assure you none of it is going to be acceptable to us and we will comebe acceptable to us and we will comebe acceptable to us and we will come back to you in a few weeks with aback to you in a few weeks with aback to you in a few weeks with a counter proposal and then we'll go fromcounter proposal and then we'll go fromcounter proposal and then we'll go from there okay so Steve Ratner says to thethere okay so Steve Ratner says to thethere okay so Steve Ratner says to the UAW leadership at that point heUAW leadership at that point heUAW leadership at that point he says my plane leaves in 40says my plane leaves in 40says my plane leaves in 40 minutes and if in 35 minutes you have
Warrenminutes and if in 35 minutes you have not signed this contract without so much as changing a comma I will shut this city down tomorrow so he said I don't particularly care if you go on strike or not and I don't particularly care whether you come to work or not the companies need US government money to stay alive and the US government is not going to be putting up putting in a penny unless this contract is done exactly the way it's written and the UAW for the first time in its history signed that contract on the spot without changing a comma and I went to God Google and I pulled up that contract and it was the most orgasmic piece of reading that I had done in a very long time and they are now fighting to take out those conditions that were put in 2009 that are still there in the contracts now but what I realized when I read that contract is that
Otherread that contract is that
OtherDetroit used to be the best place on the planet to make cars and the reason was that all the factors of production were right there and the Great Lakes were right there to transport everything really cheaply so you had huge iron ore deposits around the Great Lakes you had huge coal deposits you had huge steel mills you had a huge Auto Parts industry all in that Great Lakes ecosystem very efficient transportation and Detroit was one of the only places on the planet that has all of that all that stuff in one place and then the labor became so extreme that it became the worst place to make a car and the Koreans and the Japanese and all of them took over that industry became a lot more efficient and what had happened with that revised contract is that Detroit had again become the best place to build a car and
Questionerbecome the best place to build a car and I realized that there was a major change so I went from hating the Auto industry to loving the Auto industry just because I had no aversion to cloning and I just decided that even though I have to hold my nose and read up on GM I'll hold my own nose and read up okay just to understand and and then what actually ended up happening is that which is another thing great model is sometimes you will see a company and you don't understand understand why some investor made that investment you study it but then you find another company in the same industry that's even better so I studied GM I studied Ford and I studied Chrysler and then I realized when I studied Chrysler that Fiat Chrysler had been there had been an acquisition by Fiat was an incredible business because they had a rockstar man manager Sergio Maron and if you know I
Questionermanager Sergio Maron and if you know I in hindsight I sold too soon that's why I say that you know these compounder so the entire market cap of Fiat Chrysler in 2012 was five or6 billion doar it was a company with 135 billion in Revenue with five billion of market cap and it had been cleansed a lot of the debt was gone and within that five or six billion was 80% of Ferrari and Ferrari if you look at it today has a 50 60 billion market cap so the they went public a few years later so the stock was at like you know5 or $6 basically Ferrari is about $300 a share right now at that time the effective value of Ferrari was about $15 a share that was embedded in there so I never paid much attention to Ferrari because I was interested in the ram franchise and the Jeep franchise which was so strong and the RAM and G franchise were both capable of producing
Todd Combsfranchise were both capable of producing more than 5 billion a year in cash flow so I had a business which was at 5 billion market cap you had two franchises you could eliminate the rest of the business and you would be making 10 billion a year but they also had the minivan franchise which was also really good and they owned Maserati and they owned Alfa Romeo the whole bunch of other things that they owned it was and they own Ferrari and they own these parts companies and all of that so in the end in the end this five billion market cap when you ran it through became more than 100 billion between Fiat and between Ferrari and the rest of the pieces and it all came out of basically because I I took a position I took a 10% position I held it and so on it all came out of wanting to understand why someone did something and I realized that nobody else would do that nobody
Questionerthat nobody else would do that nobody else would actually look at GM that Ted rexler bought and ask the question why right and so it's really important so if you look at the bsha hathway portfolio today very recently they have bought a bunch of home builders lenar and py and a few others they probably bought a bunch because the amount of money they wanted to put in they needed a basket and I know that if you study it you will come to aha moment because what the Lenard of the world have started doing is they've copied finally after more than 20 years they've copied the NVR model so aversion to cloning NVR the home builder which had a great model they bought back like 85% of their stock they stopped issuing dividends and all that it took these other home builders NVR in the last 25 years has been a 800 bagger okay it's gone up 800x it's a stupid home
Questionerit's gone up 800x it's a stupid home builder okay it's not chat GPT or something okay so it's gone up 800x and the others in the industry for more more than 20 years they watched them do so much better than them and none of them adopted that model till finally after 25 years they said I can't take it anymore and they finally succumbed after 25 years and now they've started cloning the NVR model and I think Burkshire saw that and they said let's go party so that's another model that can be helpful and I'm sorry for the long-winded answers I think I think the French fry thing is absolutely true mon every everything is absolutely true mon every every company should follow McDonald's french fries yeah why what what's so hard about it you know what you can do you know what you can do you can Incognito become a McDonald's employee and you can make those french fries you can extract every
Questionerthose french fries you can extract every bit of the intellectual property and just clone it right not happening because humans have these screwed up brains what can I say well Notre Dame will be the first to do it there's a student run organization all right that's great all right and so if we have one student waiting to ask a question and she would like to go and ask a question hi can you talk about the parallels between bridge and investing and if you have any Bridge hacks or strategy
Warrenare you a bridge player I am but I keep on losing to like now 90 year olds and 95 year olds are you are you do you play duplicate bridge I'm like okay I'm like pretty I'm like an intermediate player I would say but but you play duplicate and you play online or live live live okay like the local bridge clubs and so on yeah yeah so well that's actually excellent I think it's you know
Warrenactually excellent I think it's you know the sad part about bridge is that we have more people dying who play bridge than new people young people who are starting to play bridge which is really sad but yeah I mean I think that I remember uh you know I I first started playing bridge when I was I was about 23 years old I think about it was like about 25 26 years ago and I just loved the game and at that time there was no online bridge and I used to go to the local clubs and play and remember the first time I went and you know I had always been a Topper in math and understood probabilities and all of that and I'd never been in a math class that I was not the best student this had never happened in life and so I said okay this is you know we're going to have so much fun with this so I went to the bridge club and I remember I I was playing with this couple like you were
Otherplaying with this couple like you were describing the 90y old couple I was describing the 90y old couple I was describing the 90y old couple I was playing with this couple and this guy playing with this couple and this guy playing with this couple and this guy had an oxygen tank okay so you know he had an oxygen tank okay so you know he had an oxygen tank okay so you know he oxygen tank you know and he's really old oxygen tank you know and he's really old oxygen tank you know and he's really old and frail on a wheelchair and so on and and frail on a wheelchair and so on and and frail on a wheelchair and so on and I said you know I really hate to beat I said you know I really hate to beat I said you know I really hate to beat these people but you know somebody's got these people but you know somebody's got these people but you know somebody's got to do it what can I say and then they to do it what can I say and then they to do it what can I say and then they proceeded to make mince meat out of me proceeded to make mince meat out of me proceeded to make mince meat out of me you know like I was just shattered you you know like I was just shattered you you know like I was just shattered you know and like the the scores they got know and like the the scores they got know and like the the scores they got and all of that and that made me do a and all of that and that made me do a and all of that and that made me do a double take I say okay you know go back double take I say okay you know go back double take I say okay you know go back to square one and and find another gear to square one and and find another gear to square one and and find another gear you know learn some more so definitely you know learn some more so definitely you know learn some more so definitely with bridge I think experience and you with bridge I think experience and you with bridge I think experience and you know duration of time that you play it know duration of time that you play it know duration of time that you play it because you start seeing more and more because you start seeing more and more because you start seeing more and more patterns is going to be very helpful to patterns is going to be very helpful to patterns is going to be very helpful to you but it's a great game because it you but it's a great game because it you but it's a great game because it takes 15 minutes to learn and a lifetime
Othertakes 15 minutes to learn and a lifetime is not enough to master it and now that we have Bridge base which is online platform as well as you know the the live bridge and the local clubs and all of that so I think the way to get better at Bridge is first of all you know so there's some great books you keep you know reading those books and the ACBL bulletins with all the different tips and puzzles and all of that and the other thing that can really be helpful is to play with someone so you know I have two kinds of folks that I play with I play with some teachers who are really exceptional and I play with some peers who are at my level also and it's really when I'm playing with someone who's far better than me that the learning is really on a good accelerated pace so it's really important to have a great teacher or coach and to absorb from them
Warrenteacher or coach and to absorb from them and learn from them and I enjoyed a lot I mean I probably spend maybe five or six hours a week playing bridge and uh I'd be happier if it was more and and uh I now after more than 20 years I started going to the live tournaments so we have three National tournaments in the US every year every four months and I decided I'm going to basically try to attend all three of them at least for three four days or five days or something the next one's in Atlanta so I'm looking forward to that but yeah what a wonderful hobby to have not expensive Bridge base like $99 a year plus maybe1 or2 dollars per game so it's very relatively cheap entertainment and it is really helpful I think for a investor to play bridge both investing and Bridge are games centered on probability so we don't really have absolutes in investing everything you
Questionerabsolutes in investing everything you will look at will have some hair on it you know some there's some probabilities you know what happens at Amazon if Andy jasse is not there you know or what happens if the FTC succeeds in you know putting some handcuffs on them you know whatever so we always have things that can come from left field and so we always it's really investing is a probabilistic exercise and Bridge is very much a probabilistic exercise because we're continuously evaluating odds and odds are continuously changing as the cards are played and so to the extent that your brain becomes better and better at probability calculations and thinking istically it can be very helpful so I don't think it's a coincidence that Buffett and Munger and many other great investors are bridge players but now I run into a lot of investors who don't play bridge because
Otherinvestors who don't play bridge because it's kind of not regarded as so cool anymore but I would encourage all of you actually to take up the game I think you will get an incredible amount of joy and satisfaction and entertainment out of it and you'll become a better investor so it tastes great and it's less fing okay great thank you monish and before we end would we have to mention D Foundation feel like it's customary now and in your recent talk with M favor you mentioned that there will be a point ideally when 12% of the admitted students in IIT would be from Dua so about 1 18 and after you reach that point what would be I mean because you know you know you're going to reach there so and we all hope you reach there so what would be the vision afterwards and how would you want to funnel your Capital towards other social causes it's
QuestionerCapital towards other social causes it's a very good question I don't know thea very good question I don't know thea very good question I don't know the answer right now and one of the problemsanswer right now and one of the problemsanswer right now and one of the problems in so I think dakna we lucked out wein so I think dakna we lucked out wein so I think dakna we lucked out we lucked out that there was the iits andlucked out that there was the iits andlucked out that there was the iits and this whole ecosystem and we couldthis whole ecosystem and we couldthis whole ecosystem and we could leverage that nobody was doing it Etcleverage that nobody was doing it Etcleverage that nobody was doing it Etc but it's going to cap out right so oncebut it's going to cap out right so oncebut it's going to cap out right so once we are spending about we we currentlywe are spending about we we currentlywe are spending about we we currently spend about $3 million a year once wespend about $3 million a year once wespend about $3 million a year once we are spending about 7 or $8 million aare spending about 7 or $8 million aare spending about 7 or $8 million a year we will have maxed out I don'tyear we will have maxed out I don'tyear we will have maxed out I don't think we can spend more than that sothink we can spend more than that sothink we can spend more than that so first our spending needs to get to thefirst our spending needs to get to thefirst our spending needs to get to the 78 million which is the high class78 million which is the high class78 million which is the high class problem that's great we I think we'llproblem that's great we I think we'llproblem that's great we I think we'll get there in a few years if if I hadget there in a few years if if I hadget there in a few years if if I had let's say 20 or 30 million a year tolet's say 20 or 30 million a year tolet's say 20 or 30 million a year to give away for example one of thegive away for example one of thegive away for example one of the problems in philanthropy and charity isproblems in philanthropy and charity isproblems in philanthropy and charity is that finding great causes and generatingthat finding great causes and generatingthat finding great causes and generating great social returns is much harder thangreat social returns is much harder thangreat social returns is much harder than findingfindingfinding Compounders okay so the Compounders are
OtherCompounders okay so the Compounders are a cakewalk compared to once you enter the realm of Charities and you know all of that because the the the problem I mean let's take the problem of homelessness in La for example okay huge problem or homelessness in San Francisco if you know I was given that problem to solve I can assure you I will fail okay a lot of smart people have put a lot of money against that problem and they failed it's a very difficult problem to solve okay and these other problems you know environment Health Care you know education poverty illiteracy all these things each one of them is really difficult to crack so I'm experimenting with a few things always just to see that you know can this scale up or can that scale up and so far these experiments have not led to something that I can say oh here's the second model so once we hit 8 million we can do
Questionermodel so once we hit 8 million we can do this model and this can carry us I have not hit that point yet but I think what I will be forced to do is I will have to reduce my expectations it's just like bookshaway right basically when Warren was managing 1 million he says he would do 50% a year and when he's managing you know 600 billion he's barely able to beat the S&P you know it's a big it's a big difference so as we grow at daksh I think we will have to lower the bar of of what we would consider acceptable so we may have to find some cause which definitely does good for society but it doesn't do it at the level that what we're doing today what we're doing today really is magical and I don't think I I think we would be extremely lucky if we ever find another thing that is so magical it's just difficult and we we'll still try we'll
Questionerdifficult and we we'll still try we'll see what we can do yeah and and that's not just you saying it it's also warn not just you saying it it's also warn not just you saying it it's also warn saying it's one of the best well-written saying it's one of the best well-written saying it's one of the best well-written reports ever he's read for nonprofit so reports ever he's read for nonprofit so reports ever he's read for nonprofit so yeah that's great well monish I think yeah that's great well monish I think yeah that's great well monish I think we're essentially out of time but we're essentially out of time but we're essentially out of time but obviously we would you know stick around obviously we would you know stick around obviously we would you know stick around forever if you would like to continue forever if you would like to continue forever if you would like to continue but we would like to respect your time but we would like to respect your time but we would like to respect your time and the time with the students and folks and the time with the students and folks and the time with the students and folks in the classroom So yeah thank you very in the classroom So yeah thank you very in the classroom So yeah thank you very much