Other[Music][Music][Music][Music] Okay. So good morning everyone and welcome to the University of Nebraska Omaha College of Business. I'm Jinlu from the economics department. We are honored to host Monese Paparay an internationally respected investor and a thought leader. Please join me in welcoming our dean of the college of business Dr. Steve Shaw. Thank you Dr.
OtherAnd I want to thank everybody that is here today. So it's now my privilege to introduce our key speaker Monai. Many of you know him as a renowned value investor and the founder of Pabri Investment Funds. So please join me welcoming Mones Pabry.
OtherIt's a pleasure to be here and thank you to university for hosting us. I'm always very happy to be on the campus. I think it's a wonderful business school and campus. So, thank you so much for having all of us. And this time we'd set up a live stream and they ran out of licenses
Otherlive stream and they ran out of licenses for the live stream and then they were gracious enough to increase those. So, we have I think we have about a thousand people joining us online which is wonderful. So, to me, you know, I think the best way for me to learn is to teach. So I have an ulterior motive for doing this which is I'm just trying to teach myself you know and so you guys are along for the ride which is which is just fine. And so the talk I'm giving today is a new talk. You only need to get rich once. You don't need to get rich multiple times. You only need to get rich once. And I just wanted to remind myself of that. And so I'll go through a few slides and then I'm most interested in what you guys want to talk about. Whether it's part of what I talked about or something else that'd be fine. I'll get going. Some of you might
Questionerfine. I'll get going. Some of you might know that in the late 1960s and early '7s there was this concept of the Nifty50 which is different from the Nifty50 that exists in India right now. But the idea was that you bought 50 of these blue chip stocks in equal denominations, 2% each. And you really didn't care about valuations or anything. You just bought these dominant businesses. And then you kind of set it and forget it. And it was supposed to do extremely well. And it took off. It actually Nifty50 became extremely popular. And then we had the big downturn in 1973 and 74 which was kind of a big crash in slow motion. I think over a 2-year period markets were down more than 50%. And the Nifty50 basically got taken out back and shot. So by the time we got around to 1975, nobody was invested in the Nifty50. I mean that was kind of over. There is some controversy whether
OtherThere is some controversy whether Walmart was part of the Nifty50 or not. Walmart went public in 1970. In order to make my talk more interesting, I'm going to assume that Walmart was part of the Nifty50. So if you think about Walmart being part of the Nifty50 and being 2% of the Nifty50. So if you had invested $100, $2 would have been invested in Walmart. And you now the nifty50 had many stocks that went to zero. You know Xerox, Polaroid, Kodak, whole bunch of companies that were highf flyers that eventually went nowhere. But if you make an extreme assumption which is that 49 of the 50 stocks went to zero. So let's say everything except Walmart disappears basically to nothing. Even though there were companies like Coca-Cola, American Express, ADP, a lot of very strong businesses that are with us even today, but if you just assume
Questionerus even today, but if you just assume everything's gone, 2% left in the Nifty50 blew out the S&P 500 over the last 55 years. And so if you looked at just $2 invested in the Nifty50, 98 going to zero and $100 invested in the S&P 500, the S&P did very well. It's at like a 320x since then. It's up to 32,000. But Walmart alone at the at the $2 blows out the S&P becomes 126,000. It's like a 64,000x basically return if you will. And so there's a number of lessons here in the sense that we know that there are power laws in investing and we know that most stock market returns come from a sliver of small business, few businesses and it's important to be in those businesses for the long term. And so if we just switch gears a little bit and we look at Burkshire Hathaway which is why we're here this weekend and this is the 60th anniversary of Berkhire and
Questioner60th anniversary of Berkshire and Warren had made these comments two years back in the annual letter to shareholders and he said in 58 years of Berkshire management most of my capital allocation decisions have been no better than so so our satisfactory results have been the result of about a dozen truly good decisions that would be one every 5 years. So if we look at Berkshire in terms of the last 60 years and we try to examine how many decisions important decisions Warren has made in the last six decades, we know they bought more than 80 businesses. The common stock investments they made know I'm I put down 210. I think it might even be double that number. It might be three or 400 stocks that they've invested in over the last 60 years. And then key hires by Buffett would be probably more than 10, but you know, let's say he had at least 10 key hires.
Otherlet's say he had at least 10 key hires. So he probably had in reality probablySo he probably had in reality probablySo he probably had in reality probably four or 500 important decisions that hefour or 500 important decisions that hefour or 500 important decisions that he made over the last six decades. And youmade over the last six decades. And youmade over the last six decades. And you know in the slide I put down 300 so toknow in the slide I put down 300 so toknow in the slide I put down 300 so to get to a 4% hit rate but basically theget to a 4% hit rate but basically theget to a 4% hit rate but basically the hit rate for someone like Warren wouldhit rate for someone like Warren wouldhit rate for someone like Warren would have been like 2 to 4%. So just 2 to 4%have been like 2 to 4%. So just 2 to 4%have been like 2 to 4%. So just 2 to 4% of the decisions that he made would haveof the decisions that he made would haveof the decisions that he made would have is what has led to all of our interestis what has led to all of our interestis what has led to all of our interest in Berkhire and the remaining 96 orin Berkhire and the remaining 96 orin Berkhire and the remaining 96 or 98% kind of didn't matter in very98% kind of didn't matter in very98% kind of didn't matter in very similar to the Nifty50 where the 98%similar to the Nifty50 where the 98%similar to the Nifty50 where the 98% didn't matter. It was just the 2% thatdidn't matter. It was just the 2% thatdidn't matter. It was just the 2% that really moved the needle. And I don'treally moved the needle. And I don'treally moved the needle. And I don't know whether these are the 12 decisionsknow whether these are the 12 decisionsknow whether these are the 12 decisions he's talking about. I took a stab at it.he's talking about. I took a stab at it.he's talking about. I took a stab at it. I know that Ajit Jane is 12. You know,I know that Ajit Jane is 12. You know,I know that Ajit Jane is 12. You know, Charlie used to talk about like the bestCharlie used to talk about like the bestCharlie used to talk about like the best return Berkhire ever gotten anyreturn Berkhire ever gotten anyreturn Berkhire ever gotten any investment was the search fee they paidinvestment was the search fee they paidinvestment was the search fee they paid on hiring Ajet Jane. I think Ajet aloneon hiring Ajet Jane. I think Ajet alone
Warrenon hiring Ajet Jane. I think Ajet alone has created like north of 100 billion inhas created like north of 100 billion inhas created like north of 100 billion in value for Berkshire from scratchvalue for Berkshire from scratchvalue for Berkshire from scratch basically. But you know Candy would bebasically. But you know Candy would bebasically. But you know Candy would be in there and Coke would be in there andin there and Coke would be in there andin there and Coke would be in there and Apple would be in there and nationalApple would be in there and nationalApple would be in there and national indemnity would be in there and and youindemnity would be in there and and youindemnity would be in there and and you know Mid American so on. So, it's beenknow Mid American so on. So, it's beenknow Mid American so on. So, it's been just a few decisions that have led tojust a few decisions that have led tojust a few decisions that have led to this outcome. And the important thingthis outcome. And the important thingthis outcome. And the important thing about these 12 decisions was it wasn'tabout these 12 decisions was it wasn'tabout these 12 decisions was it wasn't the decision to buy them that wasthe decision to buy them that wasthe decision to buy them that was important. The important thing about theimportant. The important thing about theimportant. The important thing about the 12 decisions was the decision was to12 decisions was the decision was to12 decisions was the decision was to hold them. The whole decision was morehold them. The whole decision was morehold them. The whole decision was more important than the buy decision. Andimportant than the buy decision. Andimportant than the buy decision. And it's the same thing with Walmart, right?it's the same thing with Walmart, right?it's the same thing with Walmart, right? I mean, Walmart being part of theI mean, Walmart being part of theI mean, Walmart being part of the Nifty50 wasn't that important. It wasNifty50 wasn't that important. It wasNifty50 wasn't that important. It was not doing anything with it for a longnot doing anything with it for a longnot doing anything with it for a long time. That was very critical. And mytime. That was very critical. And mytime. That was very critical. And my friend Nick Sleep in the UK used to runfriend Nick Sleep in the UK used to runfriend Nick Sleep in the UK used to run the Nomad Fund and with his partner in
Questionerthe Nomad Fund and with his partner in crime case Sakaria and they ran the Nomad Fund from 2001 to 2013. You know they compounded at 18 plus% a year over that period and they had about $3 billion in the management when they decided to return everyone's money and close the funds basically be move on. And the reason they did that was that Amazon was a bet they had made earlier and it had become a large portion of the fund because it had appreciated so much and the UK regulator was giving them a lot of grief about the lack of diversification and the high degree of risk with so much in one position etc which of course they didn't agree with and they looked at each other and said that you know and I'm estimating that they probably had a net worth at that time of about 400 million, about 200 million each. And they probably looked at each other and just said that we
Questionerat each other and just said that we never expected to be this wealthy, and why do we need to manage anyone else's money? If we've just managed our own money, no one can tell us what to allocate. So, they decided to basically return everyone's capital. And Nick wrote his investors a letter saying that I'm taking my money and I'm putting 1/3 into Berkshire, 1/3 into Costco and 1/3 into Amazon. And he said that you can do the same and you don't need to pay us any fees and at least for 10 years you don't need to do anything with it. You can just keep it that way. And I got a panicked call from endowment who got this letter large university endowment in the US and they said oh you know monish did you see that Nick is shutting down his fund and he's returning our money and all of that and it's terrible you know and I said yeah but he told you what to do and he told
Questionerbut he told you what to do and he told you what to do and now you can do that without paying any fees to anyone. So he says to me yeah but we are not allowed to buy stocks directly ourselves. So I said, "So do you want me to set up a fund and I'll buy those three stocks and I can set up a 2 and 20 structure and then everything will be okay?" He said, "Yeah, that would work, you know. So that's just the way the world works." I didn't do that. That would be that that would be so, you know, I don't know if I'd be able to sleep at night, you know, but yeah, you know, it's just the weirdness of the way the world world works. But Nick put one/ird of his money in these three three stocks and basically Amazon kept going up after that and it became I think like I don't know 70 80% of the portfolio and he was concerned and so he decided to cut the
Questionerconcerned and so he decided to cut the Amazon stake in half and he put that in what I considered a loser company ASOS. ASOS is a company in the UK which is run by I think it used to be run by a guy who was the former head of Amazon in the UK but you know fast fashion clothing like whatever. So ASOS did not go anywhere you know didn't do anything and we know that's going to happen because we know the hit rates are so small. So if Nick had done nothing at all he would his portfolio today would be about 1.7 billion. Even with the ASOS misstep, it's 1.4 billion. And if he had just put it in the S&P, it'd be about less than 800 million. So, worked out extremely well for Nick, even with the adventures with ASOS. And the other thing is that Nick pretty much trounced everyone after 2014 while doing no work, you know? I mean, he likes to do racing on
Questionermean, he likes to do racing on racetracks. He's got like a few cars andracetracks. He's got like a few cars andracetracks. He's got like a few cars and he likes to go bike riding across Chinahe likes to go bike riding across Chinahe likes to go bike riding across China and whatever. He has a lot of differentand whatever. He has a lot of differentand whatever. He has a lot of different activities and hobbies and he fullyactivities and hobbies and he fullyactivities and hobbies and he fully pursued those while the portfolio keptpursued those while the portfolio keptpursued those while the portfolio kept doing its thing and it worked out justdoing its thing and it worked out justdoing its thing and it worked out just just fine. I don't think he's had anyjust fine. I don't think he's had anyjust fine. I don't think he's had any regrets about any of it. Then you lookregrets about any of it. Then you lookregrets about any of it. Then you look at myself you know that's why I'm givingat myself you know that's why I'm givingat myself you know that's why I'm giving this talk is really to just educatethis talk is really to just educatethis talk is really to just educate myself is we used to in 2014 own aboutmyself is we used to in 2014 own aboutmyself is we used to in 2014 own about close to 14 million shares of fearclose to 14 million shares of fearclose to 14 million shares of fear Chrysler and within that 14 millionChrysler and within that 14 millionChrysler and within that 14 million shares was 90% of Ferrari and when fearshares was 90% of Ferrari and when fearshares was 90% of Ferrari and when fear Chrysler spun out Ferrari they gave allChrysler spun out Ferrari they gave allChrysler spun out Ferrari they gave all the shareholders for every 10 shares ofthe shareholders for every 10 shares ofthe shareholders for every 10 shares of fear Chrysler you got one share offear Chrysler you got one share offear Chrysler you got one share of Ferrari and basically at that time ofFerrari and basically at that time ofFerrari and basically at that time of iPhonesiPhonesiPhones owned.7% of Ferrari you know like 2/3 orowned.7% of Ferrari you know like 2/3 orowned.7% of Ferrari you know like 2/3 or 1% approximately and in my infinite1% approximately and in my infinite1% approximately and in my infinite wisdom I thought Ferrari was toowisdom I thought Ferrari was toowisdom I thought Ferrari was too expensive overvalued you know they were
Questionerexpensive overvalued you know they were IPOing it so I said they've timed this perfectly etc and so the whole adventure with Fiat Chrysler and Ferrari was was very profitable for PBR funds we had invested about 70 million and we collected about 260 million but and out of that 260 60 million 100 million came from Ferrari but if I just kept Ferrari that alone would be about 640 million now and it's not the only one there's a long list of these you know there's a shipping company Frontline I had put 10% of the portfolio on I lost count it went up like 350x you know we got a double and then it went up 350x and so we've had a few of these bloopers along the way so I try to kind of understand how do we avoid these things you know So obviously you know the first thing which is great investment ideas are very very rare. I mean if God also known as Mr.
Questionerrare. I mean if God also known as Mr. Buffett finds like 12 of them in 60 years then you know what hope is there for the rest of us. And so one of the first things I realized was that it is really dumb to sell a business purely because it's overvalued. And the reason that's dumb is that we actually don't know usually whether a business is overvalued or not. We are trying to figure it out, but we may not understand the business well enough to know whether it's overvalued or not. And what I find interesting about Nick Sleep's example, and I'll go through a couple more examples, is that if you think about Nick's portfolio, because he was going to go on autopilot with the portfolio. If you think of his portfolio when he, you know, when you are rich and you want to stay rich and I'm sure that was a consideration Nick had when you look at
Questionerconsideration Nick had when you look at the three bets he made which was Amazon, the three bets he made which was Amazon, the three bets he made which was Amazon, Costco and Berkhire, I would say that Costco and Berkhire, I would say that Costco and Berkhire, I would say that the most resilient of the three in my the most resilient of the three in my the most resilient of the three in my way of thinking would be Berkhire just way of thinking would be Berkhire just way of thinking would be Berkhire just because it's so diversified and Warren because it's so diversified and Warren because it's so diversified and Warren and Charlie's focused on you know and Charlie's focused on you know and Charlie's focused on you know downside protection and all of that. The downside protection and all of that. The downside protection and all of that. The other two bets also are extremely good other two bets also are extremely good other two bets also are extremely good bets. I mean, they're very, very good bets. I mean, they're very, very good bets. I mean, they're very, very good businesses. We have not seen any decline businesses. We have not seen any decline businesses. We have not seen any decline in any of these three businesses in the in any of these three businesses in the in any of these three businesses in the last 10 years or and I would be last 10 years or and I would be last 10 years or and I would be surprised if we see declines in these surprised if we see declines in these surprised if we see declines in these businesses in the next 10 or 20 years. businesses in the next 10 or 20 years. businesses in the next 10 or 20 years. They all three bets are extremely good. They all three bets are extremely good. They all three bets are extremely good. But Burkshire especially is interesting But Burkshire especially is interesting But Burkshire especially is interesting because Burkshire almost is like an because Burkshire almost is like an because Burkshire almost is like an index in the sense that it's very index in the sense that it's very index in the sense that it's very diversified lots of different income diversified lots of different income diversified lots of different income streams and so one can take a lot of streams and so one can take a lot of streams and so one can take a lot of comfort in that situation. The other comfort in that situation. The other comfort in that situation. The other thing is that when you think about
Questionerthing is that when you think about Nick's situation let's say for example the one-third allocations become 80% Amazon and 10% Berkshire and 10% Costco which is approximately where he was I think at at that point. it still should not have mattered to him because the 10% of the pie that's in Berkshire would still be more money than he could possibly use in a lifetime. So once you're rich, the concept of I think the concept of optimizing after you're rich is likely to hurt more than help. So because there was the anchor of Berkhire, one could in effect let it ride. And and I'll give you another example which will maybe illustrate this point. There there are two or three examples that'll be interesting for you to look at. So we talked about Walmart and the Walton family. So Sam Walton had transferred ownership of Walmart to his kids when Walmart was a very small
Otherkids when Walmart was a very small private company. And so when he passed away, there basically was no estate tax because the the shares were already owned by the next generation. And the Walton family today, 55 years after the IPO and 33 years after Sam Walton's passing, still owns 46% of Walmart. And it hasn't changed that much from the time of the IPO. So in 46 years of I mean in 55 years of being a public company the Waltons would have been approached by a lot of helpers. you know, we have a lot of helpers around and the helpers would have come up with all kinds of, you know, diversification schemes and whatever else for them. And they, for whatever reason, decided that we don't need the helpers. We we're good, right? And they they kept it. And I actually would think that this approach that the Walton family took is somewhat risky compared to the approach
Questionersomewhat risky compared to the approach that Nick sleep took in the sense that Nick had the Burkshire Hathaway anchor. Walmart is a single company. It's a retailer, one of the most competitive of the different industry codes etc. But you know they understood some things about Walmart and they said okay we can put all eggs in one basket and go for it. And they are the richest family in America now. Now if we look at Microsoft one of these things which I mentioned which is you don't sell a business because it's overvalued in the year late 99 early 2000 Microsoft's valuation went crazy it was one of the three most valuable businesses on the planet 600 billion market cap against singledigit billion cash flows so it was really incredibly overvalued at that time and I used to think at that time around 2000 that it was dumb to own Microsoft
Questionerthat it was dumb to own Microsoft because it was so overvalued. And that was correct because for the next 15 years the returns were zero. In fact, it wasn't just zero. The was a violent ride. You know, it lost a lot of market cap and then came back. When Microsoft went public, Bill Gates owned 45% of Microsoft. And do you know how much he owns today? It's less than 1%. So, Bill's taken his ownership stake in Microsoft down from 45% to 1% over this period. No, no one probably knows Microsoft better than Bill Gates. You know, he knows it cold. And in many ways, I think my middle name is Forest Gum. And in 95, 1995, 30 years ago, I was running a IT system integrator that I had founded in Chicago. And we were a Microsoft solution provider. and Bill Gates was coming into town and they had invited some of us solution providers to have lunch with Bill and I said, "Okay,
Warrenhave lunch with Bill and I said, "Okay, where do I sign?" You know, so we there were about 10 of us and we had a nice lunch with Bill Gates and I asked him a question then and I asked him about what he thought the durability of Microsoft was. I asked him where he thought the company might be in 10, 20, 30 years. And he was extremely bearish. So he said to me that the history of you study businesses, dominant businesses, all of them go into decline. Almost all of them go into decline. So the likely end result is that Microsoft will go into decline. And I think that when Bill became extremely wealthy, he started a program of automatic selling of Microsoft stock so that no matter whether he knew information or not, he could continue selling. and they they kept selling and buying a diversified set of other businesses and those have done
Questionerbusinesses and those have done reasonably well but they have not done as well as Microsoft has done and then we have Steve Balmer hired gun and when I bring up Steve Balmer to some of the professional fund managers they do not have pleasant things to say about Steve because they say you know in that tenure of Steve Balmer's tenure is that 15-year tenure okay that's when Steve is the CEO it's not his fault you know he gets a overvalued stock and then what's he going to do you know no matter what he does I mean Microsoft's cash flows went up a lot but you know he was facing a big headwind when Steve first joined Microsoft he dropped out of Stanford business school and Bill Gates convinced him to come on board at Microsoft and the deal he had was $50,000 base salary and 10% of all incremental profits generated from by the company after that. Okay. And in a few years the 10%
Questionerthat. Okay. And in a few years the 10% of profits was a massive number. Okay. So Bill sat down with Steve and said this is not sustainable. You know we can't do this. We have to cut a different deal. And the deal they cut was that he would no longer get a percentage of profits and he'd get 8% of Microsoft. And so that's what happened. He he was given 8% of Microsoft. And Balmer, even though he's sitting with Steve, with Bill, and even though I'm sure they had the same discussion about the durability of the Microsoft franchise, whatever else, never sells any shares, right? And Microsoft issued a lot of stock for stock options and all that. So Balmer's stake in Microsoft today is 4%. It's 4% of four more than four times what Bill has. And now he's wealthier than Bill. you know, hired gun, wealthier than the founder, right? And what I find interesting about Balmer is
Questionerwhat I find interesting about Balmer is he made the best decisions of all these guys. I think he made better decisions than Nick Sleep. He made better decisions than the Walton family. He made better decisions than Bill Gates. What he did was he collects about a billion plus in dividends every year, you know, just coming in and those have gone into the S&P 500 index. So Balmer now has about 25 billion or something sitting in the S&P and he's got what 120 130 billion sitting in Microsoft. So whatever you think happens to Microsoft, even if the S&P is overvalued, tens of billions are going to still be there. And so it takes away all the all the concern he might have about going to the poor house or becoming not wealthy again or any of that, he could let it ride because he's got the anchor of the S&P. And then you know obviously what happens
QuestionerAnd then you know obviously what happens after that was a total outlier where he brings in Satya and of course Satya hits it out of the park and it's been great but it's interesting to see Microsoft in the context of these different leaders and different owners and how they dealt with their stake. And if you look at Coca-Cola, which is a position that's a large position for Berkshire, it went through the same situation where it went through a 12-ear period of no returns. And if you go back and look at the transcripts of the discussions Warren and Charlie had, especially what Warren was saying about Coke in the late '9s as the PE was rising, he just felt was an impregnable moat, you know, was the ultimate. And a few years later he I was surprised he actually said that it might have been better to sell because you know again Coke was sitting at such a
Otherknow again Coke was sitting at such a know again Coke was sitting at such a euphoric valuation that as the business euphoric valuation that as the business euphoric valuation that as the business continued to do well just like Microsoft continued to do well just like Microsoft continued to do well just like Microsoft it went through a 12-year period but it went through a 12-year period but it went through a 12-year period but again going back to the maxim of not again going back to the maxim of not again going back to the maxim of not selling a business when it's overvalued selling a business when it's overvalued selling a business when it's overvalued in the longer fullness of time it still in the longer fullness of time it still in the longer fullness of time it still works out okay and in the longer works out okay and in the longer works out okay and in the longer fullness of time, Burkshire still done fullness of time, Burkshire still done fullness of time, Burkshire still done perfectly fine. I mean, even even though perfectly fine. I mean, even even though perfectly fine. I mean, even even though they suffered through that 12- year they suffered through that 12- year they suffered through that 12- year period with Coke and such. So, those period with Coke and such. So, those period with Coke and such. So, those were the some of the thoughts I wanted were the some of the thoughts I wanted were the some of the thoughts I wanted to share with you and I really wanted to to share with you and I really wanted to to share with you and I really wanted to share because I wanted to kind of hear share because I wanted to kind of hear share because I wanted to kind of hear them myself, you know, and try to them myself, you know, and try to them myself, you know, and try to understand a few things about the way understand a few things about the way understand a few things about the way the world works. So, thank you so much the world works. So, thank you so much the world works. So, thank you so much and we can take your questions. So, and we can take your questions. So, and we can take your questions. So, thank you Mones for such an insightful thank you Mones for such an insightful thank you Mones for such an insightful and thoughtprovoking presentation. So and thoughtprovoking presentation. So and thoughtprovoking presentation. So next I will do a interview with Mones next I will do a interview with Mones
Othernext I will do a interview with Mones and then we will start a Q&A. So we willand then we will start a Q&A. So we willand then we will start a Q&A. So we will do a 30 minutes interview and then 30do a 30 minutes interview and then 30do a 30 minutes interview and then 30 minutes Q&A. So Mon is your third timeminutes Q&A. So Mon is your third timeminutes Q&A. So Mon is your third time at UNO. So yeah. So we've been startingat UNO. So yeah. So we've been startingat UNO. So yeah. So we've been starting this since 2022 and over the years wethis since 2022 and over the years wethis since 2022 and over the years we got a bigger and bigger audience. Sogot a bigger and bigger audience. Sogot a bigger and bigger audience. So this year we have all you guys here andthis year we have all you guys here andthis year we have all you guys here and also a thousand people online. Um so Ialso a thousand people online. Um so Ialso a thousand people online. Um so I guess most of uh you here are investorsguess most of uh you here are investorsguess most of uh you here are investors right and are value investors. So howright and are value investors. So howright and are value investors. So how many of you following Mon on Twitter?many of you following Mon on Twitter?many of you following Mon on Twitter? Raise your hands. Oh awesome. So howRaise your hands. Oh awesome. So howRaise your hands. Oh awesome. So how many of you would identify yourself as amany of you would identify yourself as amany of you would identify yourself as a value investor? Cool. So we will startvalue investor? Cool. So we will startvalue investor? Cool. So we will start questions with value investing andquestions with value investing andquestions with value investing and investment philosophy. So in your bookinvestment philosophy. So in your bookinvestment philosophy. So in your book Mones you emphasized the power of aMones you emphasized the power of aMones you emphasized the power of a lowrisk high return strategy.lowrisk high return strategy.lowrisk high return strategy. So how has that approach evolved overSo how has that approach evolved overSo how has that approach evolved over time especially in today's fastm movingtime especially in today's fastm movingtime especially in today's fastm moving and tech saturated markets? I thinkand tech saturated markets? I thinkand tech saturated markets? I think that's a good question. And so because
Questionerthat's a good question.
WarrenAnd so because there are 50,000 stocks or so around the world, there are large numbers of them that are mispriced at any given time and they can be mispriced as being too cheap or too expensive. And if we focus on the ones that are mispriced on the right side of the scale, then that's what makes this interesting because we get a free lunch, you know, where we can we can once in a while get a chance to make investments where we are basically be able to buy assets well below what they're worth. And usually we are not able to do this if markets are not auction driven. So we are looking at negotiated transactions and things like that then you don't have as much of an opportunity but auction-driven markets tend to overshoot and undershoot a lot so we can actually take advantage. You've championed the idea of a rigor rigorous
Questionerchampioned the idea of a rigorous investment checklist. So what are a few items that remain critical for you today? Can you share how this framework has helped you avoid major mistakes?
CharlieYeah, the checklist actually is a very useful tool and it's helped us in aviation a lot where air travel is become extremely safe mainly because of the use of checklists by pilots you know and before they take off before they land and so on and I had applied the same concept. So the aviation checklist came about from examining failures. So they when a plane crashed, the FAA would always go in and try to figure out why did the crash happen. And then the FAA actually takes a pragmatic view of reality. They have a definition of what a human life is worth. And I haven't kept up, but it used to be around $10 million a few years back. So when they see a lane crash and they see
Otherwhen they see a lane crash and they see that, you know, so many lives were lost, they try to figure out that if nothing was done, how many lives would be lost over the next 5, 10, 20 years? And then they multiply it by that 10 million number. And then they now know, okay, we would have a $4 billion loss, for example, in dollar terms if we did nothing. And then they look at if we ask industry to make changes to aircraft design or whatever else what is the cost of that and they will only make those changes if the cost is less than the 4 billion. So it's a very pragmatic approach because you you don't want air travel to be so expensive that we cannot get on an airplane and you don't want it to be planes crashing all the time because that also doesn't work. So they've kind of chosen this middle path which has worked really well and I did
Questionerwhich has worked really well and I did the same thing when I had developed a checklist for pre-investment checklist is I looked at great minds of investing who had had investments they made that didn't work but where the reason why the investment would not work may have been obvious before the investment was made. So like for example, Berkshire buying Dexter shoes, right? I mean the concept that lowcost foreign manufacturing may impact the moat should have been visible to Warren and Charlie. It was not that hard to think about that. And so then I would add that as a as a question to the checklist that if this product were manufactured in another country, could that affect the mode? could that affect the profitability etc. So like this I looked at many many investments that had failed by great minds and then I recategorized them into different
Questionerrecategorized them into different buckets and it was really interesting because the number one reason for business failure when I finished all the work on recategorizing them was the number one reason why investments did not work was leverage. The single greatest reason why investments failed was because the businesses were levered. And the second reason why the investments didn't work was some misunderstanding of the nature of the moat. And then you know there were other issues you know trade unions and different things but these were the two big ones like either the moat was not properly understood or the leverage is really what did the company in. So the next one is about staying within the circle. So the circle of competence is a core principle in your investing style. So how do you define that circle today and what practices helped you stay
Questionertoday and what practices helped you stay within it especially as new industries and the trends emerge?
QuestionerYeah, I mean I think circle of competence is a wonderful tool that Graham and Buffett and Munger have emphasized and stressed for a long time and there are few interesting things about circle of competence. First is if you ask the question, you know, if something is within your circle of competence or not, you've already answered it. To ask the question is to answer it, which is it's not. The fact that you're questioning that is this something in my circle of competence means it's not in your circle of competence. The second issue with the circle of competence is that we don't really pay much of a penalty if we have a very narrow circle of competence, very small circle. So people always trying to broaden their circle of competence, but quite frankly you could always have a
Questionerquite frankly you could always have a narrow circle of competence and do extremely well. And the most important part of the circle of competence is not the size of the circle. It's staying in the epicenter. That's the most important is staying in the epicenter of the circle. So if we look at most entrepreneurs, most entrepreneurs have a very narrow circle of competence. They are an inch wide and a mile deep. And if they were not that way, they would not be able to build successful companies. So most entrepreneurs don't know a lot about many things, but they are able to do extremely well because they know a lot about what they are focused on. So that works out well. So staying within the circle being in the center it's a natural process in investing that over a lifetime the circle will expand. It's just if you're reading and thinking and
Questionerjust if you're reading and thinking and you know experiencing different thingsyou know experiencing different thingsyou know experiencing different things over time you'll understand more thingsover time you'll understand more thingsover time you'll understand more things about how the world works and so theabout how the world works and so theabout how the world works and so the circle will expand. So we don't need tocircle will expand. So we don't need tocircle will expand. So we don't need to have some deliberate endeavor to expandhave some deliberate endeavor to expandhave some deliberate endeavor to expand the circle. it'll expand naturally. Andthe circle. it'll expand naturally. Andthe circle. it'll expand naturally. And we also need to be very clear on sayingwe also need to be very clear on sayingwe also need to be very clear on saying no very quickly when something isno very quickly when something isno very quickly when something is outside our circle. It's a big exerciseoutside our circle. It's a big exerciseoutside our circle. It's a big exercise in humility. Buffett has this too hardin humility. Buffett has this too hardin humility. Buffett has this too hard pile box on his desk. It's a physicalpile box on his desk. It's a physicalpile box on his desk. It's a physical box that says too hard and he says thatbox that says too hard and he says thatbox that says too hard and he says that 99% of stuff should go into it. So most99% of stuff should go into it. So most99% of stuff should go into it. So most things that we encounter from anthings that we encounter from anthings that we encounter from an investing perspective should go into theinvesting perspective should go into theinvesting perspective should go into the two hard pile. They should be outsidetwo hard pile. They should be outsidetwo hard pile. They should be outside circle of competence and we should notcircle of competence and we should notcircle of competence and we should not be trying to figure everything out. Uhbe trying to figure everything out. Uhbe trying to figure everything out. Uh next set of questions around globalnext set of questions around globalnext set of questions around global markets and macroeconomic forces. Somarkets and macroeconomic forces. Somarkets and macroeconomic forces. So you've invested in countries like Indiayou've invested in countries like Indiayou've invested in countries like India and South Korea.
Questionerand South Korea. uh what makes emerging markets attractive to you and what unique challenges or risks do you watch out for
Li Lunow? Yeah, actually we made several investments in South Korea. None of them worked. I mean thankfully in most cases we got most of our money back and I think the similar situation in India most of the things I did in India did not work. A few things worked but most didn't. And it goes back to the same issue of the you know 4% hit rate Warren Buffett has the nifty50 and so on is that in investing we are doing really well if our error rate is 50%. John Templeton should say say that the best investor investment analyst is going to be wrong one out of three times. Most of us are going to be long more than one hour three time, maybe even half the time or more. So it's not to say that you can't do really well in South
Warrenthat you can't do really well in South Korea or you can't do really well inKorea or you can't do really well inKorea or you can't do really well in India. I couldn't do well there andIndia. I couldn't do well there andIndia. I couldn't do well there and found other places that we could dofound other places that we could dofound other places that we could do well. So So next question is aboutwell. So So next question is aboutwell. So So next question is about volatility as a long-term advantage. Sovolatility as a long-term advantage. Sovolatility as a long-term advantage. So you said volatility is the friend of ayou said volatility is the friend of ayou said volatility is the friend of a long-term investor. Could you expand onlong-term investor. Could you expand onlong-term investor. Could you expand on how you've used the volatility as anhow you've used the volatility as anhow you've used the volatility as an opportunity especially during the timesopportunity especially during the timesopportunity especially during the times of panic or uncertainty and maybe theof panic or uncertainty and maybe theof panic or uncertainty and maybe the the past few weeks? Yeah, I mean I thinkthe past few weeks? Yeah, I mean I thinkthe past few weeks? Yeah, I mean I think that if we look at stocks as businessesthat if we look at stocks as businessesthat if we look at stocks as businesses which have an intrinsic value, whateverwhich have an intrinsic value, whateverwhich have an intrinsic value, whatever causes that value to gocauses that value to gocauses that value to go down is an advantage for us long term ifdown is an advantage for us long term ifdown is an advantage for us long term if we if it's within circle of competencewe if it's within circle of competencewe if it's within circle of competence and such. And so volatility is alwaysand such. And so volatility is alwaysand such. And so volatility is always our friend. I mean it's I think it's theour friend. I mean it's I think it's theour friend. I mean it's I think it's the reason why we are all interested inreason why we are all interested inreason why we are all interested in auction driven markets is that they willauction driven markets is that they willauction driven markets is that they will undershoot overshoot. You know some newsundershoot overshoot. You know some newsundershoot overshoot. You know some news comes out and coke will go down in
Questionercomes out and coke will go down in price. Did their long-term cash flows go down from some particular news. So when you try to overlay news events that are moving markets and then you overlay them on a particular business, you may find that the correlation is very weak. And when you find those weak correlations, that usually is a sign that there could be opportunity there in the sense that something is being mispriced then. Okay. So the next one is about macro and the micro striking the balance. So how do you balance microeconomic forces like inflation, trade wars and global instability with deep company level research? Have you recent global uh have recent global events changed your waiting of a macro in your decision making?
OtherSo for most investments that we would make the micro would trump the macro and for most companies it is
Questionermacro and for most companies it is internal decisions that they are making and their competitors are making that are going to drive most of the outcome. And usually it is hard enough to try to figure out what a business is going to look like 5 or 10 years from now just looking at those factors just the internal and you know market forces around that business. If we start to try to overlay macro things on top of that I think we're going to get lost for the most part because I don't think it's becomes very hard to handicap. So we want to try to look at things where the thesis is very simple and the thesis is well understood from a internal perspective. So if you look at a company like let's say Saudi Aramco which is now publicly traded I don't know three trillion market cap or something it used to be that when Saudi Aramco produced oil their cost used to be like $2 a barrel
Questionertheir cost used to be like $2 a barrel to bring the oil up and now I don't know it might be like 10 bucks a barrel. So it's an insanely profitable company in almost any environment right. So does it matter if you are a Saudi Aramco investor? Now investing in Saudi Aramco has issues because the state takes a lot of the upside. But if it was just a normal business where you've got a $10 an hour and a barrel cost of bringing oil up, how does it matter whether oil price is 30, 50, 70, 100, 150 or 300? In all those price environments, you would make money, right? I mean you it's just whether you would make a lot of money or little money but you'd make money and if you were buying salamco stock where the thesis would work for you in terms of returns and cash flows if the oil price was more than 30 for example I think you could ignore the macro you could ignore
Questionercould ignore the macro you could ignore everything because the likelihood of oil going below 30 I mean 80% of production would shut down globally if if that happened is just unlikely to we're unlikely to get there. So we want to look at bets like that where we can focus on the micro situation within the company and we just find that there are these economics and if I look at a business like Ferrari for example you know a car they sell for 2 million. So Ferrari will announce some car for $2 or $3 million and they have a list of owners of Ferrari around the world ordered by the number of Ferraris they own. You know, some have 50, some have 30, whatever. They go down the list from their most preferred customer to the least preferred and they'll just make calls to the top 500 customers saying, "We've coming out with this car in 18 months. It's 3 million. Do you want it?
Questionermonths. It's 3 million. Do you want it? And the first 500 calls they make, they'll all say yes. And because they all know that one day after they get the car, they could flip it for 6 million. But they also know that they flip it for 6 million, Ferrari won't call them the next time. So those cars are gone before they're produced. Ferrari's cost on that 2 or3 million car is like 85% margins, maybe 90% margins. And so how do tariffs affect Ferrari? Irrelevant. Not really relevant to the whole scheme of things because rich men mostly Ferrari buyers are rich men have very few ways to express their wealth. That's all you need to understand. So you understand Saudi Ramco, you understand Ferrari. Who cares about the tariffs? Okay. So yeah, moving to the next part is a wisdom from Buffet Munger and cloning mindset. So you've often credited Warren Buffett and
Questioneryou've often credited Warren Buffett and Charlie Munger as guiding lives. What are some of the most enduring lessons you've applied from them in your own investing journey?
Ted WeschlerSo Charlie left us. So after a few years like you looking back well like I said you know my middle name is Forest Gump and we're not supposed to be able to touch these guys and they both became friends because I'm Forest Gump. So I got to see them up close. I got to see Charlie more up close than Warren. And but I don't think it was even that necessary to see them up close. I think that the the body of work they have produced is um so awesome. So I think that the best things about both of them have nothing to do with investing. You know they everything to do with leading a great life. And whenever I'd meet Charlie I'd probably meet him like four or five times a year for dinner at his place.
Warrentimes a year for dinner at his place. Whenever I'd meet Charlie for dinner he's always be sitting in the same chair you know always reading something whatever. And uh I learned a lot from those dinners. Not because of what he said. I just observe the way he's interacting with his grandkids, the way he's interacting with his daughter-in-law or his sons or his daughters or his manservant or other visitors. and the way he was living his life, you know, the kind of his habits with eating and dessert and things. So just observing him in the way he was had huge lessons for me and but I think that for all of us both these guys put so much in the public domain you know and that I think that we have so much to learn from them from that and I think that if we learn only the investing side we miss most of it I will ask one last question and then it's your turn so the
Questionerquestion and then it's your turn so the last one is more personal when we recently chatted You mentioned your golf game and how you approach it with the same intensity and presence as investing. So doing everything with 100%. So how has that mindset influenced the way you make decisions? Not just in business, but in life.
QuestionerYeah. So I'm a new golfer. You know, I don't have too many regrets in life, but one of my regrets in life is I should have started in my 30s. That would have been better. But the way I'm programmed is I usually go all in. If I get excited about something, I go all in. I've always found that if you go all in on something, you're going to get really good at it. I think we should think about what we are passionate about, think about what we're excited about, and try to overdose on those. Like I got interested in golf. I found that it's a
Questionerinterested in golf. I found that it's a way more complicated game than I thought. may way more interesting game. My club is like 9 minutes away and the situation in my investing is that I was reading a quote the other day, the more you mess with your portfolio, the lower your returns. So I said, okay, you know, everything I own, I don't need to do anything with it. Especially if we look at the talk today just we just need one hit and we're good. So basically the investments are in good shape. I still obviously spend time looking at things but I don't need to you know if we found no new ideas for the next five or 10 years it's okay not a big deal. So I said okay we'll go deeper into golf and that's what we're doing. It's fun. Thank you Nich and Jane. uh very inspiring uh presentation and the Q&A session. I want to roll back a little bit maybe uh hammonish to
Questionera little bit maybe uh hammonish to elaborate a little bit more on how we uh elaborate a little bit more on how we uh elaborate a little bit more on how we uh find all those critical um um decisions find all those critical um um decisions find all those critical um um decisions like the good business or the like the good business or the like the good business or the longlasting mediocre business cuz I longlasting mediocre business cuz I longlasting mediocre business cuz I remember in your YouTube channel you remember in your YouTube channel you remember in your YouTube channel you mentioned once that uh Warren Buffet mentioned once that uh Warren Buffet mentioned once that uh Warren Buffet when he was young he used to pick up old when he was young he used to pick up old when he was young he used to pick up old batting ticket at the racetrack and batting ticket at the racetrack and batting ticket at the racetrack and check if any were winners that people check if any were winners that people check if any were winners that people throw way by mistake. So it seems that throw way by mistake. So it seems that throw way by mistake. So it seems that Warren Buffett already have this kind of Warren Buffett already have this kind of Warren Buffett already have this kind of talent when he was young. But for other talent when he was young. But for other talent when he was young. But for other investors and how we uh find our investors and how we uh find our investors and how we uh find our opportunities and uh I remember both you opportunities and uh I remember both you opportunities and uh I remember both you and Warren Buffett uh trust on the and Warren Buffett uh trust on the and Warren Buffett uh trust on the Moody's menus and I also want to know Moody's menus and I also want to know Moody's menus and I also want to know like in this kind of AI era like do you like in this kind of AI era like do you like in this kind of AI era like do you have other ways to find your options? have other ways to find your options? have other ways to find your options? Thank you. That's a great question and Thank you. That's a great question and Thank you. That's a great question and actually it's a question that Warren was actually it's a question that Warren was actually it's a question that Warren was asked at an annual meeting and his asked at an annual meeting and his asked at an annual meeting and his answer was start with the
Otheranswer was start with the A's you know and so basically what he was saying is that there isn't a shortcut so when he was collecting those racetrack tickets on from the ground maybe only one in 200 tickets is actually useful right? 199 are actual loser tickets. But he didn't mind. He didn't mind going through 200 tickets to find one. And later when he was going through the Moody's manuals, which he did the same thing. Moody's manual is very fine print. I think it's like font size must be six or something and it's 1500 pages and there are six or seven of them. So he went through all those manuals several times and again he was doing the same thing as what he was doing in the racetrack which is he's going through one by one by one and one direct example I can give you is that Buffett recently made the few years back he made the the
Questionermade the few years back he made the the Japan pets the five conglomerates ofJapan pets the five conglomerates ofJapan pets the five conglomerates of Japan that he bought and he's been aJapan that he bought and he's been aJapan that he bought and he's been a reader of the Japan company handbook forreader of the Japan company handbook forreader of the Japan company handbook for many years Japan company handbook bookmany years Japan company handbook bookmany years Japan company handbook book probably more than 1015 years is likeprobably more than 1015 years is likeprobably more than 1015 years is like value line for Japan. It's it's invalue line for Japan. It's it's invalue line for Japan. It's it's in English. It's two companies to a page.English. It's two companies to a page.English. It's two companies to a page. It's very similar to the Moody's manualIt's very similar to the Moody's manualIt's very similar to the Moody's manual and all that. And I remember that I wasand all that. And I remember that I wasand all that. And I remember that I was visiting his office I think in 2012 andvisiting his office I think in 2012 andvisiting his office I think in 2012 and I saw the Japan company handbook on hisI saw the Japan company handbook on hisI saw the Japan company handbook on his desk and I was actually going throughdesk and I was actually going throughdesk and I was actually going through the handbook at the same time. And so Ithe handbook at the same time. And so Ithe handbook at the same time. And so I said, "Oh, Warren, you know, there aresaid, "Oh, Warren, you know, there aresaid, "Oh, Warren, you know, there are some companies I already know are goodsome companies I already know are goodsome companies I already know are good in there that you can take a look at."in there that you can take a look at."in there that you can take a look at." So without waiting for him to answer, ISo without waiting for him to answer, ISo without waiting for him to answer, I took his book and I dogeared some pages.took his book and I dogeared some pages.took his book and I dogeared some pages. You know, I went ahead and took theYou know, I went ahead and took theYou know, I went ahead and took the liberty of dog earing Warren Buffett'sliberty of dog earing Warren Buffett'sliberty of dog earing Warren Buffett's copy of his manual. And I told him, "Acopy of his manual. And I told him, "Acopy of his manual. And I told him, "A
Questionercopy of his manual. And I told him, "A lot of the stuff is at the back of the book." He said, "Yeah, all the good stuff is usually at the back, right?" I had then found that you could do the same thing as flipping through Japan company handbook one page at a time with Capital IQ. Capital IQ is a subscription you know like $10,000 or something. The handbook is 100 bucks or 50 bucks. But Capital IQ would you could set up any screen and in you know 2 minutes you basically got a condensed version. and I tried to convince him and that I actually work with Tracy Britt to switch from the handbook to Capital IQ. And Tracy told me that he'll never spend the 10,000, okay? And he'll never do it this way, okay? And I said, "But Tracy, I want to I want you to know it so you can do it for him." Okay? So I trained Tracy on how to use Capital IQ to do that. And after the training,
QuestionerIQ to do that. And after the training, she said, "Yeah, you know, I know how to do this. He's not going to be interested." Okay. And the thing is at the end of the day what ended up happening is Warren stuck to his old method. No AI, no nothing, no technology, flipping one page at a time. And he found those five bets. I didn't find those bets. He found those five bets. Right now, it took him more than 10 years to find those bets. But in investing, we have infinite time. But those five Japanese bets, those are pure genius because the way he did those bets. So, first of all, he found these companies. They have a 8% dividend yield at the time he finds them. He borrows the whole thing in yen at half a percent. Okay? So, never puts up any of Burkshire's capital even though they're drowning in cash. 7 and a half% instant yield delta of no money that he's put
Otheryield delta of no money that he's put up. Then all those stocks double their dividends double now he's got like 16% coming on the half percent and then they've gone on beyond that. So that was just uh and he was forced to do five because of the size of Burkshire. If it was smaller he would have picked one and gone for that one. So I learned a lot of lessons from that which is that less is more. And the second lesson I learned is fast is slow. There's a friend of mine from China. He's the founder of OPPO and Vivo. Yongpin Dwan. All the Chinese people here know him. Raise raise your hands if you know Yongpin. There you go. They all know him. So Ping plays more golf than me. Okay. and Oppo and Vivo are both private companies. He lives in San Francisco. Every year he goes to meet his management team running these dominant businesses in China. And he
Warrendominant businesses in China. And he tells me that there's a big conference table with all his managers. And he says, I I'm there for 10 minutes and then I'm done for a year. I'll meet them after a year for 10 minutes. And he said, "The last time I met them, I only said three words and then I walked out." I said, "Ping, what were the three words you tell told them?" He said, "I gave them these three words and then a year later they tripled the profits." So I said, "What were the three words, Ping?" He said, "Fast is slow." If you want to email Ping, his email ID is fast is slow@yahoo.com. Don't inundate his inbox. Okay. So he says that after I left I don't know if you guys have ever seen the movie called Being There. Has anyone seen the movie Being There? It's Before Your Time. They don't know. We know, right? You're like, "Yeah." So go
Questionerknow, right? You're like, "Yeah." So go back and see the movie called Being There with Peter Sellers and then you'll kind of understand where this is going. So, Ping says that after I leave the room, they spent two months trying to figure out what those three words mean and they finally figure it out and then they kill the competition. So, fast is slow. Warren did the same thing. Thank you for inviting us here today. Um, I wanted to just kind of ask a question in terms of your thoughts. Last year when we were at the meeting, uh, it had just been announced that Warren had kind of reduced his Apple position and I think at that time, if I'm not mistaken, it was about a 10% reduction in his total stake in holdings. And at the beginning of the shareholder meeting, he kind of implied some tax favorable consequences as to the reason why he was doing that.
Questioneras to the reason why he was doing that. I mean, the the stake had grown almost to 186 to $190 billion. He's reduced his stake by 2/3. Wanted to kind of get your thoughts as to kind of what you think and thought as to perhaps what the reasons may be in terms of how you how you view that reduction in that that position considering how publicly he has adored and admired Apple as being a core holding in his portfolio.
WarrenYeah. Well, I mean that's why he's Warren Buffett. I mean, look how awesome that decision looks now, you know? I mean, the thing is Burkshire is sitting on a huge pile of cash where a lot of things have been, you know, drawn down in price and yeah, I mean, the Apple situation is interesting because he's in effect destroying one of his best loved ideas, which is he wants to hold forever. And at the same time, I think he alluded to the fact that tax rates could be higher,
Questionerthe fact that tax rates could be higher, but he might have also alluded to the fact that is it fully priced or do I want to have more firepower for things that may come up in the future? I don't know. I mean, I'm just saying that I don't know exactly what his thinking was, but I'd say so far that thinking seems fantastic. Manish Paray, I really appreciate your time. This has been fantastic. I'm a shameless copier of you, more so than Warren Buffett and Charlie Munger in aggregate. Uh, and the one thing I quote a lot is heads I win, tails I don't lose much. And specifically, I'm looking at economic moes. You know, when I'm looking at economic moes, I'm looking at the company I'm looking at and then all the competitors, how they're going to encroach on these moes. But I've been right and uh occasionally wrong. And so how do you see economic modes and more
Questionerhow do you see economic modes and more importantly the the durability uh specifically with a company you're looking at and the competitors who wants to encroach?
Todd CombsYeah. Well, that's a good question. I think that it's hard to answer in generalities, but I would just say that when I'm looking at a business, if I can't get to very high conviction and I can't get to the point where I could describe it to a 10-year-old in about four sentences, then I'm usually not interested. So at the end of the day, the thesis needs to be very simple and it needs to be a very impregnable thesis. Even when we have a simple impregnable thesis, we're still going to have a higher error rate, but it's going to be even higher if we don't have that. So I always want any business I invest in, I should be able to in my head know very quickly why that investment makes all the sense
Questionerwhy that investment makes all the sense in the world and why it's going to work. Try to keep it most companies don't lend themselves to that type of clarity but we don't need to invest in most companies. So once in a while you can find something that is simple situation and that can work.
QuestionerHi Mr. Babai, thanks for having us here. It's a pleasure being here. Um this is a question about debt. uh as as everyone knows here uh Burks Burksar Hathaway has grown throughout you know the last few decades without debt and um you know Warren Buffett in one of one of his uh letters said that it that debt is that debt creates an unnecessary stress for shareholders. But as as we all know in the early days of the Buffett partnership, he did use debt when he when he applied his cigar butt investing strategy as he shifted to buying great companies. He he started to stay away
Questionercompanies. He he started to stay away from debt. What are your thoughts on that? Because I mean the argument there is and from what I understand is debt creates volatility in stock prices and in company performance. But if investors of Birkshshire are long-term investors, does that matter anyway?
QuestionerWell, that's a great question. There's a podcast many of you probably listen to, the founders podcast. I really like that podcast. I overdose on the founders podcast and one of his episodes is on IKEA and it's on the founder of IKEA and the IKEA is a private company and the founder of IKEA was hellbent of never ever having any debt and basically when he looked at the business he looked at it with a lens of IKEA being around 500 years from now, thousand years from now like he looked way past his lifetime and he tries to tried to instill a bunch of principles
Questionertried to instill a bunch of principles into the company. Like for example, one of his principles is is that any store they open should not look like all the previous stores. It has to have some innovation that was not there in the previous stores. Whereas we think of retail as like you know cookie cutter going through but he's looking at every store becoming better than the previous store. And when I studied in the checklist, you know, business failures, number one reason is debt. So Warren and Charlie have said that they could have generated higher returns for Burkshire without even taking that much leverage with some leverage and it would not have moved them that much over the risk curve, but they didn't want to go there, right? And I think they wanted to have this Fort Knox absolute, you know, engine. So I think it's a very good idea
Otherengine. So I think it's a very good idea for a company like Burkshire to be conservative. They they effectively have leverage through insurance float. It's quite benign from that perspective and that's and it's helped them a lot. So I think that yeah them not going down the path of having leverage is a very good thing for all of our shareholders. It's wonderful. Thanks for hosting us. uh when it comes to investing I always have this question that I mean all these mega companies like magnificent seven companies uh they have massive growth in terms of revenues and uh I mean the kind of revenue they are growing because yesterday there was a Amazon's earning yesterday right and they are planning to do like 1 trillion in revenue by 2029 so I mean I always have this thought like all these company do you think like we'll see a time in future like all
Questionerwe'll see a time in future like all these company will uh I continue to expand and I mean a point of time we will see that they will rival national power or this company this government will try to you know stop them from growing this big I would say that there's always a entrepreneur somewhere who's going to one up the dominant players so I'm not sure if that's what what your question was yeah like Amazon right for example uh they are doing like close to 600 billion in revenues and like let's say like I'm thinking of investing in the company But I always have this thought like I mean that will do you think like they will keep on growing like this like at point of time we will see like they will I mean able to like you know kind of influence government or they will run the countries like that I mean because they're doing very massive in terms of
Questionerthey're doing very massive in terms of revenues right. Yeah. But I think I think that in capitalism we have creative destruction. So even a dominant company like Amazon there's a lot of things they cannot do lot of things they will fail at lot of opportunities outside of that. So I I'm not really concerned with that. I think that the nature of capitalism would keep them on their toes even though they get dominance and they get some deep and wide modes in some areas. It's okay. I think it's just fine. No problem. Thank you, Mr. Pra. Uh I'm a uh thank you for your great talk and um I came from South Korea an undergraduate student and I'm a big fan of uh investment gurus like Buffett Mongeru and Nomad Investments but also I'm a passionate scientist like immunology. So this is my concern. uh many emerging industries today such as drug development or deep tech involve
Questionerdrug development or deep tech involve long timelines and heavy regulation and binary outcomes. So my question is this seems far from the predictable or accessible like uh qualities or expandable modes which is the lessons from the value investing. So uh do you think it's still uh or is there any kind of way to apply the principles of the lessons from value investings to recent rising industries like drug development or deep tax? How can we uh apply the lessons from value investments like uh expanding mode or qualities to the rising industries like new drug innovative drug development or deep techs?
WarrenI think that industries with rapid change are the enemy of the investor. So in general, one of the things we look for when we're trying to get into value investing investments and so on is we need to have some idea of what the f future cash flows are and
Questionerwhat the f future cash flows are and what the f future cash flows are and then we can discount those back. as you then we can discount those back. as you then we can discount those back. as you get more into tech centered or get more into tech centered or get more into tech centered or innovative businesses that becomes difficult and one of the I think one of difficult and one of the I think one of difficult and one of the I think one of the most brilliant things that Nick the most brilliant things that Nick the most brilliant things that Nick Sleep did he and uh case Zakaria when Sleep did he and uh case Zakaria when Sleep did he and uh case Zakaria when they used to when they come to work in they used to when they come to work in they used to when they come to work in their office case did not have a desk he their office case did not have a desk he their office case did not have a desk he had no desk to work on he had a lazy boy had no desk to work on he had a lazy boy had no desk to work on he had a lazy boy chair and he'd just sit in the lazy boy chair and he'd just sit in the lazy boy chair and he'd just sit in the lazy boy chair the whole chair the whole chair the whole reading and they would read these annual reading and they would read these annual reading and they would read these annual reports. So they sat and read hundreds reports. So they sat and read hundreds reports. So they sat and read hundreds and hundreds of annual reports and of and hundreds of annual reports and of and hundreds of annual reports and of course when they came to the Amazon course when they came to the Amazon course when they came to the Amazon annual report it jumped out at them and annual report it jumped out at them and annual report it jumped out at them and one of the things about Amazon for the one of the things about Amazon for the one of the things about Amazon for the longest period of time was there was no longest period of time was there was no longest period of time was there was no cash flow right I mean it was reporting cash flow right I mean it was reporting cash flow right I mean it was reporting losses for a long time and the losses for a long time and the losses for a long time and the adjustment both these guys had made is adjustment both these guys had made is adjustment both these guys had made is they were able to figure out effectively
Questionerthey were able to figure out effectively how much was being pumped into growth versus the existing business and there was a somewhat of a leap of faith that what Bezos was putting into growth was in aggregate going to produce very high returns. So they were able to apply value principles into a business like Amazon with spectacular results eventually. And so yeah it it can be done if you understand the way the mousetrap works. So one of the critical things about Jeff Bezos was that he made many bets but they were all small. So he threw a lot of stuff against the wall and his assumption was that if those things those bets did not work it wouldn't matter because the few that did work the returns were so much higher and AWS is a good example of something they stumbled onto that they had never actually planned on. Right? I mean, one of the things about Amazon is
Questionermean, one of the things about Amazon is that kind of a trademark of their approach is that they convert cost line items into new businesses. So, for example, we have UPS and FedEx. We don't yet have Amazon providing parcel services where I can go and just have Amazon deliver something to my aunt, for example, right, that I'm sending. But they could enter that business now because they have everything in place to enter that business. And my prediction would be that they will enter that business. And my prediction also would be when they enter that business, their cost structure would be much lower than UPS or FedEx. They would really kind of create havoc for them. They're already creating havoc for them. So the Amazon analysis that Case and Nick did was not a cash flow analysis, right? It wasn't I think what they were doing is they
Questionerthink what they were doing is they basically said this is a very smart guy. He's a fanatic. He's very efficient in how capital is used and he's going to have some of these that are going to work and those are going to be extreme outlier returns and it worked and Amazon is still doing that. So from that point of view it's exceptional. So yeah, you can do it but I think you can do it in a very small sliver of companies like that.
QuestionerThank you so much Monish and Jim for organizing this for us. Really appreciate it. I'm Chloe from Singapore and I want to ask your view on I think one of the YouTube video that you mentioned that index investing is probably like four to 6% ahead. Uh correct me if I'm wrong. uh but what's your take on this for long-term investment especially Buffett he has already laid out his will that 90% of his money for his wife will actually go
Questionerhis money for his wife will actually go into lowcost index fund what's your take on that thank you
Warrenyeah I mean I think that if you go back and look at the presentation I made when you are very rich you don't need to optimize so an investment in the S&P P may not be the best investment, but it doesn't need to be. The important thing is 500 companies cannot sync at the same time. You know, these are 500 dominant companies. And so what he's looking for her to have is not have any issues with cash or cash flow or anything for the rest of her life. that's easily going to be accomplished with doing the S&P 500 and he also doesn't want to her her to be involved with buying or selling Burkshire or any of that just keeps it separate and simple. So I think that it's a very sound decision for the same reasons the Steve Balmer investment in
Otherreasons the Steve Balmer investment in the S&P 500 is also a very sound decision because like I said it it just gives him the freedom to have a huge Microsoft position and not worry about it. So I think having something like a burkshire in your portfolio or having a S&P 500 in your b port portfolio when you are wealthy is very comforting place to be.
QuestionerHey, Aman here. I travel from San Francisco. Uh, Monish, learn a great deal from watching your videos. Um, just hearing you implement certain strategies. So, my question is how do you deal with psychology? Let's say when your investment is not performing for 10 plus years. You took example of um of Microsoft which did nothing for 15 plus years. um what as an investor you would be looking for that would distinguish Microsoft in that instance from the next IBM or Walmart from next Kmart or Sears. Um so how do you think about that and
QuestionerUm so how do you think about that and psychologically are there any hacks that you have developed that really helped you?
QuestionerYeah. So I think in the case of Microsoft it was really simple. The business never ever went into secular decline. Basically had a very strong moat while the stock price was going down because it was overvalued. So it was very clear with Microsoft that there was no issue with the business itself. The issue with the price at which it was trading was the issue which happens with many companies. Cisco had the same issue. It was trading at a very high valuation. And today we have a similar situation where many companies are very dominant but they're trading at very high multiples. So it's relatively simple to separate the ones that are overvalued from the ones that are in decline. Once you can make that separation then the second piece which
Questionerseparation then the second piece which is do you take a Steve Balmer approach to Microsoft or do you take you know Bill Gates approach whatever that's a second decision but I think that I have
Questioneran investment in Turkey I've talked about a few times RAS which is used to be very undervalued still undervalued so from my point of view it's the easiest position to hold and the reason it's the easiest position to hold is it trades below liquidation value and there's nothing I can see that the business is in decline. So my decision will become more complicated once it gets past liquidation value and if it gets past reasonable valuations beyond liquidation value at that point then then the question I would have is okay it's a good business should I keep holding it or should I do something else and my biases right now would be that if the business itself is not in decline just
Questionerbusiness itself is not in decline just leave it alone and let go. But I think you can normally tell the signal separating the signal for the noise. Usually you can separate the signal from the noise if you just give it some time. So Microsoft did have an issue where they had euphoric revenues coming from all the dotcoms. It disappeared but their core business was pretty intact. And if I look at the business today, I see a business with some very solid modes. You know, I mean they're just going from strength to strength on their business. I see you know the going back to my forest come story I think two or three three years back maybe I think every Friday night there used to be a munger dinner Charlie Mer hosted and his daughter-in-law pulled me aside and said Monish I don't want you to freak out but I seated you next to Bill Gates for dinner it going
Questionernext to Bill Gates for dinner it going be two and a half hours next to Bill Gates and she said I seated you next to Bill Gates because I know you won't ask him for anything. I said, "Yeah, that's the furthest thing of my mind. I'm not going to ask him for anything." So, Forest come got seated next to Bill for two and a half hours. So, I said, "Bill, can we play a game?" I said, "I'll name a stock and you tell me whether you're going long, short, or neutral." Right? And he said, "Yeah, sure." He was he was game. and I rattled off a whole bunch of tech names and he was very quickly going through giving me his perspective on what he would do. And I I came to Apple, right? And he went into this long narrative where he basically thought Apple was a very peculiar company. He didn't say he would go long. He just said it's a peculiar company because you
Othersaid it's a peculiar company because you know they're he said unlike other businesses which have a lot of resilience. He says everything was one guy. He's saying it all emanated from one guy and the guy is gone and really nothing is emanating since that guy is gone because they're still running on Steve Jobs vision basically. So his perspective was in the end he said I wouldn't go long Apple right. So basically I think the issue is that when you compare a business like Microsoft to a business like Apple, I would tend to one go with Microsoft just because of the recurring I mean the lock they have on us in my opinion is much stronger than the lock Apple has. So people may disagree with that but I think that the Microsoft lock is much stronger. So but that's what makes this a market. Thank you so much for coming especially in person. really really appreciate it.
Questionerperson. really really appreciate it. I guess you essentially just talked a lot about how selling is very very difficult and how basically we shouldn't sell like um is there any framework in which you decide when to actually exit a business or like is there any is there any position where you've held very long and you regretted not couldn't hear the last part. Can you Is there any position you've held long term that you regretted not selling earlier? Cuz you you already talked about you should not sell too soon. Yeah. But then is there any position where you've had that you regretted not selling?
UnknownWell, I think my history has been basically all selling too soon. I mean if I if I look at my portfolio the longest I've held something now probably like 8 years which is low you know I mean I think it should be more and we still hopefully have a few more
Todd Combsand we still hopefully have a few more decades of compounding ahead so the idea would be try to extend it but I would say that if you look at what I was trying to communicate is that holding something for too long is not what's going to hurt you even if you end up basically with a suboptimal result of when you sell, right? So something goes from 10 to 100 and you keep it and it eventually gets to 30 and you sell it and you say, "Oh, I could have sold at 100." But that's not where the game's at. The games at something goes from 10 to 500, right? And you kept it. So I think that's the part that is interesting here is that we can do very well without optimizing. we can do very well while being sloppy as long as the sloppiness is on the side of inactivity.
QuestionerTo follow up on that, um you said you should not sell a great business because
Questionershould not sell a great business because it's overvalued. So following up on what Susan said, like what if how do you think about the transition from you know what can cause a great business to become not so great?
QuestionerWell, so there are two parts to the question, right? So the first part is uh let's not we'll go into the business decline later, but let's say a business is extremely good, right? And let's say so there's fair value, overvalued, egregious overvaluation, right? Let's calibrate a little bit. I'm sure we could calibrate more, but let's say there's just those three. So fair value we have we're perfectly okay. No issues. over valued also we have no issues the issue that only comes up is egregious right that's the only time when you really need to kind of think about it and and such and my general sense from what I have understood so far
Questionersense from what I have understood so far and I don't know whether this is the right answer or not is to have a pretty high bar on egregious I'll give you an example the thing is that this company in Turkey they don't have an investor deck they really don't explain their business and they've gone into so many new businesses. What one of the things I was looking at their history they go into a new business which they have no competence in and in five or seven years they're number one or number two in the country in that space then they go into something else that they have no competence in then they again end up at number one number two and I don't know whether I have fully understood why that is but in observing them what I realized is the sun is what I would call an Energizer Bunny. So Buffett says this about Greg Ael and he used to say this about David
OtherAel and he used to say this about David Soal and he says about Greg Ael is that you know what Greg does gets done by 10:00 a.m. I can't get done the whole day. Okay. And he used to say the same thing about David Soal that what Soal got done by 9 or 10 in the morning. Warren would say I wouldn't get done for the whole day. Right? So we don't have these linear relationships with different humans. I mean, we've seen that, you know, you you see some humans, they just are so off the chart, you know? I mean, we have someone amongst us who's not even human. Elon, you guys think he's human? He's not human, you know? He's not part of our species. How can someone from our species operate like that? Okay. So, we get to kind of, you know, these things that are off the curve, if you will. And I mean, Elon is a great example of what is the edge of his competency. Okay? I
Otheris the edge of his competency. Okay? Iis the edge of his competency. Okay? I would not want to bet on what his edgewould not want to bet on what his edgewould not want to bet on what his edge of his competency is. I think thatof his competency is. I think thatof his competency is. I think that doesn't exist. So, I think that thisdoesn't exist. So, I think that thisdoesn't exist. So, I think that this notion of egregious overvaluation maynotion of egregious overvaluation maynotion of egregious overvaluation may not apply with managers like Elon,not apply with managers like Elon,not apply with managers like Elon, right? Just because of what they're ableright? Just because of what they're ableright? Just because of what they're able to do, which we can't even comprehend.to do, which we can't even comprehend.to do, which we can't even comprehend. So I think that bar in my mind needs toSo I think that bar in my mind needs toSo I think that bar in my mind needs to be high and and yeah we'll get tested onbe high and and yeah we'll get tested onbe high and and yeah we'll get tested on this and so so I noticed like the racethis and so so I noticed like the racethis and so so I noticed like the race guy I noticed the way they go about itguy I noticed the way they go about itguy I noticed the way they go about it and the way he steps on the acceleratorand the way he steps on the acceleratorand the way he steps on the accelerator he gets way more done than what mosthe gets way more done than what mosthe gets way more done than what most other people would get done and I don'tother people would get done and I don'tother people would get done and I don't know how to quantify that I also don'tknow how to quantify that I also don'tknow how to quantify that I also don't know enough to know what the kind ofknow enough to know what the kind ofknow enough to know what the kind of boundaries of that are so my take isboundaries of that are so my take isboundaries of that are so my take is that the good news right now is I don'tthat the good news right now is I don'tthat the good news right now is I don't have to worry about it race withhave to worry about it race withhave to worry about it race with underban value easy. So when it gets tounderban value easy. So when it gets tounderban value easy. So when it gets to fair value, that's also easy. Gets tofair value, that's also easy. Gets to
Otherfair value, that's also easy. Gets to overvalued, that's also easy. If it goes overvalued, that's also easy. If it goes overvalued, that's also easy. If it goes to like 20 billion market cap or to like 20 billion market cap or to like 20 billion market cap or something, way before that, I'd be something, way before that, I'd be something, way before that, I'd be getting uneasy, you know, like what's getting uneasy, you know, like what's getting uneasy, you know, like what's going on here and such. So we'll see. going on here and such. So we'll see. going on here and such. So we'll see. But yeah, so if we don't have business But yeah, so if we don't have business But yeah, so if we don't have business decline, I think we need to be careful decline, I think we need to be careful decline, I think we need to be careful about trying to really understand all we about trying to really understand all we about trying to really understand all we can about the manager and the business can about the manager and the business can about the manager and the business and all of that. Now we also have to and all of that. Now we also have to and all of that. Now we also have to understand like Gates was saying in the understand like Gates was saying in the understand like Gates was saying in the end everything's a zero right I mean end everything's a zero right I mean end everything's a zero right I mean it's just the nature of things that it's just the nature of things that it's just the nature of things that everything ends up going to zero so everything ends up going to zero so everything ends up going to zero so basically if there is business decline basically if there is business decline basically if there is business decline and with business decline we have to and with business decline we have to and with business decline we have to separate the signal from the noise right separate the signal from the noise right separate the signal from the noise right so it's very important to separate so it's very important to separate so it's very important to separate signal from noise but if it's you know signal from noise but if it's you know signal from noise but if it's you know secular business decline you have to get secular business decline you have to get secular business decline you have to get off the bus as soon as possible and so off the bus as soon as possible and so off the bus as soon as possible and so you you you have to Watch you have to
Questioneryou you you have to Watch you have toyou you you have to Watch you have to watch that carefully. But it's a toughwatch that carefully. But it's a toughwatch that carefully. But it's a tough thing because on one hand you can't havething because on one hand you can't havething because on one hand you can't have it on a hair trigger and on the otherit on a hair trigger and on the otherit on a hair trigger and on the other hand you have to have clarity about whathand you have to have clarity about whathand you have to have clarity about what is signal and what is noise. I think oneis signal and what is noise. I think oneis signal and what is noise. I think one of the not notable things about yourof the not notable things about yourof the not notable things about your presentation was I guess how many of thepresentation was I guess how many of thepresentation was I guess how many of the structural winners were Americansstructural winners were Americansstructural winners were Americans thoughts and then you talked aboutthoughts and then you talked aboutthoughts and then you talked about racist at at the end and I was wonderingracist at at the end and I was wonderingracist at at the end and I was wondering whether you thought anything about thewhether you thought anything about thewhether you thought anything about the fact that it's I guess in Turkey andfact that it's I guess in Turkey andfact that it's I guess in Turkey and whether there's something about thewhether there's something about thewhether there's something about the American system that contributes toAmerican system that contributes toAmerican system that contributes to companies becoming successful. It givescompanies becoming successful. It givescompanies becoming successful. It gives you pause about investingyou pause about investingyou pause about investing internationally. I think you would findinternationally. I think you would findinternationally. I think you would find great winners everywhere and I thinkgreat winners everywhere and I thinkgreat winners everywhere and I think that's an easy thing to even test for.that's an easy thing to even test for.that's an easy thing to even test for. You know, you can you can go intoYou know, you can you can go intoYou know, you can you can go into different markets and you can go back indifferent markets and you can go back indifferent markets and you can go back in history and say which ones have been
Otherhistory and say which ones have been 100x or 200x or 300x in 20 years and you would find them and I think there are lots of examples of that in India for example if bank you know Asian paints a lot of companies that have done extremely well so I think those exist everywhere I mean the US is very deep market one of the largest markets and free market capitalism so there's a lot of things that are going for it. But I think you can find those examples everywhere. So that wasn't by design. It's just, you know, I didn't spend a lot of thought trying to be politically correct about being inclusive, etc. I just went through and picked a few examples. One thing that I thought was notable from some of the the pre-ereading I did was your kind of thought on specializing within a sector and saying, "Oh, I don't want to be I don't want to necessarily know about the
Questionerdon't want to necessarily know about the greatest businesses within this sector. I just want to know about what the greatest businesses are and I'm curious about how that kind of informs your idea generation process if it really is kind of certain themes that you find interesting in the moment or how you kind of what ends up getting expressed in
Questionerand yeah that's a that's a great question. So I think when we all start out we have small circle of competence just the nature of our life experiences and we're when we're young we're not going to know a lot about a lot of things and Buffett also says that we don't need to have some kind of structured program to expand our circle. I think that, you know, the quote, the Charlie Munger quote you use, which is, you know, you're reading everything in sight. Over time, your circle of competence is going to grow, especially
Questionercompetence is going to grow, especially when you make mistakes. That'll make it grow very fast. And so, the circle is going to expand over time. But I also feel that it's important to understand that the most successful humans have very narrow circles. So we go past investing and we look at entrepreneurs, they tend to be very narrow, right? I mean the founder of Zara for example, right? I mean he's got a or LVMH and so on, you know, they they're very good at what they do, but they don't they're not everything on everything. So as investors, it is always better to have the focus to be an inch wide and a mile deep than to be a mile wide and an inch deep. Right? So basically our focus should be to get really good at what we know and yeah there's a lot of peripheral stuff that we don't know but over time that will that will come in and I Charlie used to
Warrenthat will come in and I Charlie used to talk about his friend John Arriga multi-billionaire passed away his uh his daughter's married to Mark and John Arriga in his whole life only invested within 2 miles of the Stanford campus real estate within 2 miles of the Stanford campus never did anything else, right? And if you walked with him around Stanford, every building, I mean, could tell you the history of every building, could tell you what the rents were, what could be bought for, and basically he was sitting very underleveraged and when the downturns came, you know, he picked up a bunch of stuff and then, you know, sat there and then again very underleveraged, next downturn, picked up more stuff and just kept going at it. And so he had a very narrow circle of competence. It wasn't even real estate. It wasn't even California real estate. What is it?
QuestionerCalifornia real estate. What is it? Wasn't even Northern California real estate. It was just very very narrow.
QuestionerBut he was very successful. And I think in investing that type of depth can be really useful. So I'm always interested in going deeper versus wider. So that's the way I would suggest. I want to go back to the Turkey exam. So you're new to this concept. Let's say making business within Turkey. your different experience. You're reading this wonderful company that they had like such a big gap between like the fundamentals and market and etc. If I were you, like tons of red flags will come up and I would say you know what doesn't make sense. But if you continue to kind of like push forward and said I'm willing with the management I'm happy with that why you were doing that. Maybe can you take us to the mental model that you kind of like said you
Questionermodel that you kind of like said you know what maybe I don't understand fully but I'm willing to continue because a lot of people probably step back in this.
OtherYeah.
QuestionerSo there were a couple of things. One is I couldn't put much in. So you know it was going to be 1 and a half% of what I was managing. So first of all even if I wanted to there wasn't this wasn't going to be a big bet because just the size of the bet. And the second is that when I went through the kind of list of things kind of what I was going through in my head is one of the things I was very that was very important to me in Turkey is I wanted to make bets where the currency was irrelevant and inflation was irrelevant. So every bet I looked at in Turkey I said if inflation is 1,000% a year the currency declines by 95% a year what happens to my bet? And there were a few
Todd Combshappens to my bet? And there were a few bets that I could have made where ifbets that I could have made where ifbets that I could have made where if those were true, we would still do verythose were true, we would still do verythose were true, we would still do very well. And this was a case, you know, awell. And this was a case, you know, awell. And this was a case, you know, a warehouse is land,warehouse is land,warehouse is land, cement, steel, concrete. That's what acement, steel, concrete. That's what acement, steel, concrete. That's what a warehouse is. All of those are inflationwarehouse is. All of those are inflationwarehouse is. All of those are inflation index.index.index. So if we have crazy inflation then theSo if we have crazy inflation then theSo if we have crazy inflation then the price of steel is going to go up and theprice of steel is going to go up and theprice of steel is going to go up and the price of land is going to go up andprice of land is going to go up andprice of land is going to go up and rents are going to go up and in factrents are going to go up and in factrents are going to go up and in fact last 6 years we saw crazy inflationlast 6 years we saw crazy inflationlast 6 years we saw crazy inflation crazycrazycrazy everything and their contracts wereeverything and their contracts wereeverything and their contracts were inflation indexed and they were actuallyinflation indexed and they were actuallyinflation indexed and they were actually the contracts aren't even that greatthe contracts aren't even that greatthe contracts aren't even that great because they get indexed based on thebecause they get indexed based on thebecause they get indexed based on the official rate which is understated.official rate which is understated.official rate which is understated. So they're not able to increase rentsSo they're not able to increase rentsSo they're not able to increase rents even at the rate of inflation. The beteven at the rate of inflation. The beteven at the rate of inflation. The bet has still worked. So RAS's entirehas still worked. So RAS's entirehas still worked. So RAS's entire portfolio is sitting at below marketportfolio is sitting at below marketportfolio is sitting at below market rents. If they were to release the wholerents. If they were to release the wholerents. If they were to release the whole thing today, the income would almost
Questionerthing today, the income would almost double. So even with that lag, it has still worked because these factors were more relevant that we were not going to be there's another bet we had made in Turkey which I think in the end we'll end up making more money than we will in race because I could make a full bet there. So that's we were able to put 100 million in in the other bet. So that's Tav Airports and Tav Airports is basically all their revenues almost all their revenues are in euros or dollars. So they're not even the top line is not coming in LRA. They pay their employees in LRA. So they actually are a huge beneficiary. The employees get poorer every year because wages are not going up at the same rate of inflation. So they actually have a tailwind they're getting because of inflation. But yeah, TAV airports was I mean it was sitting
OtherTAV airports was I mean it was sitting very cheap, not as cheap as RAS, but we were able to put more capital in. So I think in the end of the day, I think just in terms of raw dollars, we'd probably make more there than the other place. So I didn't see what I was clearly seeing in Turkey was extreme panic and I remember that when we were buying when we were buying RAS Templeton fund so there was a mass exodus happening the foreign investors were all leaving door wasn't big enough for the for them to leave Templeton funds had a 5% position in RAS which they sold to me for $1 million okay and they probably knew better than me what that position was worth but some guy in New York said exit Turkey, you know, so that's what they were doing. It didn't matter what the valuations or anything were. I didn't see a lot of issues with that investment partially because of the bet
Questionerinvestment partially because of the bet size and also because of the simple nature of the of the bet. So, thanks for your time making this. Uh my question is like what's your process probably like which uh ideas you want to like spend more time uh specifically the uh co mining industry? how you figure out okay I want to spend more time on this industry and then decided to concentrate investing in this industry I like your approach which is forget all the nonsense about the past can we talk about stock tips is that where we want to go here
Questionerwell I mean actually the thing is I'm opportunistic right so I I don't know what I will be investing in a year from now or two years from now or I would not have forecasted that I would have made a bet in the coal industry 2 years ago. I wouldn't have guessed that. But, you know, things show up on the
QuestionerBut, you know, things show up on the radar. They sometimes make sense. You know, I think the thing is that you try to do things where things hit you on the head like a 2x4 where it seems very obvious. Even when it seems very obvious, you'll still not be right many times. And the good news with this business is like you saw with Buffett's example of 4% is it's a very forgiving business or we saw with the Nifty 50, you know, like 98% error rate, you still do okay, right? So we don't need to always be right about everything and we're not going to always be right just because when we are looking at businesses and we're looking at where they will be in 1 2 5 7 years from now that can get very murky there too many variables that can come in that can affect it. thinking I had on the coal business is relatively straightforward is that in order to have a civilization,
Questioneris that in order to have a civilization, is that in order to have a civilization, humans need iron and steel. Cannot humans need iron and steel. Cannot humans need iron and steel. Cannot really have a civilization without iron really have a civilization without iron really have a civilization without iron and steel. The way iron and steel is and steel. The way iron and steel is and steel. The way iron and steel is made most of it needs to be made in a made most of it needs to be made in a made most of it needs to be made in a blast furnace. If you make iron and steel in an If you make iron and steel in an If you make iron and steel in an electric arc furnace that's usually made electric arc furnace that's usually made electric arc furnace that's usually made out of recycled steel and out of recycled steel and out of recycled steel and usually you will not get the highest usually you will not get the highest usually you will not get the highest quality of steel coming out of that. You quality of steel coming out of that. You quality of steel coming out of that. You also need a lot of recycled steel which also need a lot of recycled steel which also need a lot of recycled steel which places like India etc don't have because places like India etc don't have because places like India etc don't have because they're just growing so much. One they're just growing so much. One they're just growing so much. One assumption is that it's difficult to assumption is that it's difficult to assumption is that it's difficult to change some of these processes. So it's change some of these processes. So it's change some of these processes. So it's difficult to change how iron and steel difficult to change how iron and steel difficult to change how iron and steel is made. So if it is correct that 30 is made. So if it is correct that 30 is made. So if it is correct that 30 years from now or 50 years from now iron years from now or 50 years from now iron years from now or 50 years from now iron and steel will still be produced in and steel will still be produced in and steel will still be produced in blast furnaces then for every ton of blast furnaces then for every ton of blast furnaces then for every ton of steel produced you need .7 tons of steel produced you need .7 tons of steel produced you need .7 tons of metallological coal and metallological metallological coal and metallological metallological coal and metallological coal only exists in very few places
Greg Abelcoal only exists in very few places around the planet just a few geographies and coal is a four-lettered word you know nobody wants to open a coal mine and when one gets closed it's difficult to get it restarted started. So we had a situation in 2023 where we had a bunch of coal companies, metallological coal companies which had no debt. You know, a mining company with no debt is an oxymoron. You know, that just doesn't exist. But they had made so much money in 2022 with the Ukraine war, supernormal profits that they all wiped out all the debt on their balance sheets and they became debtree. So we have these companies that are debtree and you know so if you have a business that's going to produce cash flow for let's say 50 years and over 50 years that cash flow will vary between maybe 0 to 100 million a year on the low end to maybe a couple of billion a year
Questionerend to maybe a couple of billion a year on the high end each year and the market cap is 2 billion where do I sign right so that's the bet is we buy a business for 2 billion and we just sit and go to Let's wake up in 20 years and see what happens. I think the stats you showed on Muffet 4% that's really interesting. I think my takeaway from that is it's really hard to know what your great great decisions are X and Z. So knowing that how do you think about just sizing those decisions and bets that you make in your portfolio?
Todd CombsYeah, that's correct actually. So I think Warren would not have been able to tell in advance what his 12 grade bets would have been. He only knew Ajit was great 20 years later. So you're not going to know that either. If God doesn't know that, then we are not going to know that for sure. But that's why we have a
Todd Combsthat's why we have a portfolio and we don't need to have two of everything like Noah. But what we can do is, you know, if you have 10 or 15 bets, what is going to happen is that if you've done the work and you've got maybe one or two outlier winners, it's going to become obvious. You only learn a business after you own it. So you may do all the work you want, but you're really going to get your education on the business after you own it. And you get a really good education when it drops 50%. That's when you truly understand the business. So basically the bottom line is we make these bets, we think they're all great, and then we realize they're not all great, but some of them are great, and then we try to hang on to those if it makes sense. So that's the way it is. I don't think there's a easy way to improve on that. You know, if you look at a business like
QuestionerYou know, if you look at a business like Amazon, you know, Bezos, I mean, his approach has been a lot of small bets, a lot of stuff thrown up against the wall, very high failure rate and very rapid innovation. And that works, you know, because if a bet doesn't work, it's irrelevant. Doesn't matter. And it's the ones that work that going to drive it. So one of your main quotes during the presentation wanted that you should never sell a high quality business because it's overvalued if it's 95% your pile. If you take the mier approach and invert in there, why wouldn't you today be minding the highest quality business you can and then investing 90% of your net worth into it regardless of the valuation? Like that doesn't seem a lowrisisk, you know, an appropriately risk approach. But isn't that the same as making a decision in the inverse? Well, the one
CharlieWell, the one issue is that if you bought something and it was 5% of your portfolio and then it became 95%. You are now rich. But if you just start off with the 95% in the best business, how are we going to get rich? What I'm trying to say is that now you have you so we just talked about that we cannot tell in advance which ones are going to do well. What you're doing is you're taking a yesterday's winner. You're putting everything into yesterday's winner and saying that yesterday's winner is going to be tomorrow's winner. That's effectively what you're saying, right? Because what I'm saying is we know that Amazon is great, right? And we put everything into Amazon today. It could work. The way I'm wired, I wouldn't be able to make that bet because I wouldn't be able to get the conviction. It would be easier for someone like me with my
Questionerbe easier for someone like me with mybe easier for someone like me with my wiring to go and make 10 or 15 betswiring to go and make 10 or 15 betswiring to go and make 10 or 15 bets where each one looks undervalued, lookswhere each one looks undervalued, lookswhere each one looks undervalued, looks like a good business, look like all thelike a good business, look like all thelike a good business, look like all the pieces are in place and then let it playpieces are in place and then let it playpieces are in place and then let it play out. But even if you're say wise to haveout. But even if you're say wise to haveout. But even if you're say wise to have that conviction and you built yourthat conviction and you built yourthat conviction and you built your wealth for that one position, does itwealth for that one position, does itwealth for that one position, does it still make sense to follow thatstill make sense to follow thatstill make sense to follow that approach? Like say take the example thatapproach? Like say take the example thatapproach? Like say take the example that Frank invested $100,000 into Amazon 20Frank invested $100,000 into Amazon 20Frank invested $100,000 into Amazon 20 years ago and now he has $10 million.years ago and now he has $10 million.years ago and now he has $10 million. Yeah. and I'm investing in Amazon todayYeah. and I'm investing in Amazon todayYeah. and I'm investing in Amazon today and I have $10 million. So, we're bothand I have $10 million. So, we're bothand I have $10 million. So, we're both kind of at single point in time $10kind of at single point in time $10kind of at single point in time $10 million into Amazon. Are you saying thatmillion into Amazon. Are you saying thatmillion into Amazon. Are you saying that would be sort of an optimal strategy forwould be sort of an optimal strategy forwould be sort of an optimal strategy for Frank? Because he has the convictionFrank? Because he has the convictionFrank? Because he has the conviction build up over time, but it wouldn't bebuild up over time, but it wouldn't bebuild up over time, but it wouldn't be optimal for me.
QuestionerWell, the one inoptimal for me. Well, the one inoptimal for me. Well, the one in the armor I see for Frank, sorry to makethe armor I see for Frank, sorry to makethe armor I see for Frank, sorry to make you a guinea pig, Frank. One inyou a guinea pig, Frank. One in
Questioneryou a guinea pig, Frank. One in the armor that I have is that I preferthe armor that I have is that I preferthe armor that I have is that I prefer the Nick leap approach where I don'tthe Nick leap approach where I don'tthe Nick leap approach where I don't have one bet, right? I mean, so thehave one bet, right? I mean, so thehave one bet, right? I mean, so the Walton family took the approach of oneWalton family took the approach of oneWalton family took the approach of one bet. Nick Lee took the approach of threebet. Nick Lee took the approach of threebet. Nick Lee took the approach of three bets, right? And one of those three betsbets, right? And one of those three betsbets, right? And one of those three bets effectively is an index kind of bet likeeffectively is an index kind of bet likeeffectively is an index kind of bet like Burkshire is like an S&P type bet. SoBurkshire is like an S&P type bet. SoBurkshire is like an S&P type bet. So it's very difficult to see somethingit's very difficult to see somethingit's very difficult to see something like Burkshire going. But if let's saylike Burkshire going. But if let's saylike Burkshire going. But if let's say Frank has 10 million and let's say FrankFrank has 10 million and let's say FrankFrank has 10 million and let's say Frank has 5 million the S&P 500 and 5 millionhas 5 million the S&P 500 and 5 millionhas 5 million the S&P 500 and 5 million in Amazon and he goes to sleep. I thinkin Amazon and he goes to sleep. I thinkin Amazon and he goes to sleep. I think that's fine. He even though the S&Pthat's fine. He even though the S&Pthat's fine. He even though the S&P probably low valued whatever else rightprobably low valued whatever else rightprobably low valued whatever else right now it's okay. I think he's not going tonow it's okay. I think he's not going tonow it's okay. I think he's not going to go back to zero. You know like Bungergo back to zero. You know like Bungergo back to zero. You know like Bunger says I don't want to go back to gosays I don't want to go back to gosays I don't want to go back to go again. I've been at go. I know what goagain. I've been at go. I know what goagain. I've been at go. I know what go feels like. I don't want to go back tofeels like. I don't want to go back tofeels like. I don't want to go back to go again. So in his case the 5 milliongo again. So in his case the 5 milliongo again. So in his case the 5 million each is a very comfortable situation to
Questionereach is a very comfortable situation to be in because no matter what happens he's fine. He's still got the second 5 million if something happens to Amazon. The 955 with 9.5 million in Amazon. Now I need to have a lot of conviction in Amazon whereas he doesn't whether whatever happens to Amazon is irrelevant to him but it would be very relevant to you. So I think that's where some of this so what I would say is that the all eggs in one basket is a little extreme for me at least. I mean the Waltons have done that bomber has done that. Many people have done that. you know, Elon is doing that to some extent though he's trying to spread it out a little bit. So, if you just change it from the one bet to maybe two bets where the second bet is more a little bit more resilient like a Burkshire and S&P then I think you can totally relax. But some people
Warrenyou can totally relax. But some people can be totally relaxed like the Walton family with the single bed because they maybe have an understanding of Walmart that goes way beyond what I can understand. But these are valid questions. I'm not sure I'm giving you the right answer, but just telling you what I can process. So, yeah. Another way of putting like John's question is that Frank puts $100,000 in 10 stocks. Amazon is one of them. Sleeps for 20 years. Is now 95% of the portfolio. Shouldn't he look for another 10 stocks and sleep for another 20 years? Rebalance the portfolio that I mean the the title of the presentation was the only to get rich. We're already rich. He doesn't want to work anymore. He just wants to lay back and relax. Right? I mean, I'm I'm just playing devil's advocate. What I what I'm just trying to say is that if I look
QuestionerI'm just trying to say is that if I look at a Berkshire or any of these successful entrepreneurs, they end up in a concentrated in the end you end up concentrated. Right? What you're saying is let's now restart. We've run this thing through. Let's redo, right? it's play the game another 20 years with new bets and that can be very valid. That can work out. But we also have a couple of things to keep in mind. One is we have finite lifetimes, right? At some point we pass away or whatever else. It may take you 20, 30, 40 years to get to that point. If you are focused on staying rich, then I don't know how much sense it would make to take the whole thing and do 10 more bets. You know, because if you buy into the law that 95% of what you think is going to do extremely well is not going to do well as well as you think and you already have one goose that's laying a
Questioneralready have one goose that's laying a lot of golden eggs, why kill the goose? The next goose may not lay any eggs, but you know, nothing ventured, nothing gained. So when I think about the next week restock portfolio, how deal with the boredom that comes with it and also I'm sorry not get bored like how do you not get bored? Like what do you need for the investments but you're not going to do anything with it? We need to be really good and happy watching paint dry. Can you be excited about watching paint dry for 20 years? Because that's a beautiful skill to have. But you know the way to do this is I was a couple of weeks back I was the bridge national championships in Memphis where all these nutcase bridge players are going all in for points. It's not even dollars or points. You know I don't know why they get excited about points but they're all
Questionerexcited about points but they're all super excited about points. We can find other ways to use the brain power. So you know Munger Munger says that it's a really good thing that Buffett played bridge because if he had put that time into Berkshire it would have had a negative impact. So one of the issues with investing is everyone in this room except me has too much brain power. Okay like Warren says you can give away 50 IQ points and your results are not going to change. They might even get bearable. It's a very important skill to build to be able to, you know, the Pascal quote, all man's miseries stem from his inability to sit alone in a room and do nothing. And actually, Pascal misspoke. What he actually meant was all investor miseries stem from the inability to sit quietly in a room and do nothing. So you have to be able to go through several
Charliehave to be able to go through several decades of no activity. Can you do that, Alex? It's the most important thing to learn. The most important thing. And you know, there's a hack, a very easy hack. Just find something else you're excited about which doesn't involve dollars or money or investing or anything. You know, you can become a bridge player. You can become a golf player. You can go race F1 cars. Whatever. Find something else activity number two which is going to suck up all the time so that you will live an excited life with the uh portfolio not being touched. So Nick sleep actually I think he's in Nirvana. You know that's where we have to get you to Alex. We have to get you to Nirvana before you enter the real world. Okay, we have very little time left. Can we have a course on it? Oh, thank you so much for the showering and I really appreciate the
Questionershowering and I really appreciate the humidity and humor inside your speech and also the wisdom share. I found the Coca-Cola charts very intriguing. uh undocument is a very qual like is a quality business but I think some part of the stock growth also attribute to like the series of QE the market experience after the financial crisis and with the current economic condition and the depth level I think the next QE probably is not in the near horizon do you think there is a foundation of like is a change of foundation of the market conditions and how do you suggest us to navigate this new environment
Warrencoke is a very complicated business. It looks simple but it's actually very complicated. So there is a talk Charlie Mer gave on coke. Have you read that talk? Okay. It's worth reading. Yeah. So basically you know the way to think about coke is percentage market
Questionerabout coke is percentage market share of the fluids consumed by humans globally every day. Right? So we need like I don't know 64 ounces or something per day to stay alive and some portion of that needs to be flavored so that we don't get bored like you know. Yeah. So if you gave Alex only water you know that would not last more than two days you know. So some portion needs to be flavored. And then the thing is that there's a distribution engine that Coke has which gets that flavored thing to several billion humans at a cost that almost no other company can do. So it's not, you know, when we think of Coke, you immediately go to sugar and those sorts of things, but it's really a flavored water delivery mechanism and flavored water delivery mechanism doesn't need to be unhealthy, right? It can be anything they could. So their
Questionercan be anything they could. So their pipe, their pipe, the coke pipe, you canpipe, their pipe, the coke pipe, you canpipe, their pipe, the coke pipe, you can pump anything through that pipe.pump anything through that pipe.pump anything through that pipe. Rebuilding that pipe by somebody else isRebuilding that pipe by somebody else isRebuilding that pipe by somebody else is very hard and very expensive andvery hard and very expensive andvery hard and very expensive and unlikely to happen. And what Coke can dounlikely to happen. And what Coke can dounlikely to happen. And what Coke can do is they just can look around and say,is they just can look around and say,is they just can look around and say, "Oh, Gatorade looks good. Let's just buy"Oh, Gatorade looks good. Let's just buy"Oh, Gatorade looks good. Let's just buy Gatorade and send it through the pipeGatorade and send it through the pipeGatorade and send it through the pipe for example, right? They don't need tofor example, right? They don't need tofor example, right? They don't need to actually come up with the stuff thatactually come up with the stuff thatactually come up with the stuff that needs to go through the pipe." But theneeds to go through the pipe." But theneeds to go through the pipe." But the point is yeah I mean I would say thatpoint is yeah I mean I would say thatpoint is yeah I mean I would say that that's why I said that a business likethat's why I said that a business likethat's why I said that a business like Coke to me is more resilient than aCoke to me is more resilient than aCoke to me is more resilient than a business like Microsoft for that reasonbusiness like Microsoft for that reasonbusiness like Microsoft for that reason because of that pipe and because unlessbecause of that pipe and because unlessbecause of that pipe and because unless humans stop needing that amount ofhumans stop needing that amount ofhumans stop needing that amount of liquid that equation stays right and soliquid that equation stays right and soliquid that equation stays right and so even though you've got other players buteven though you've got other players buteven though you've got other players but there's only like two three players inthere's only like two three players inthere's only like two three players in the world that have enough bandwidth onthe world that have enough bandwidth onthe world that have enough bandwidth on that pipe and enough kind of cost
Otherthat pipe and enough kind of cost advantage on that pipe. So the way I look at it with Warren and Charlie is that you know the in the mid 80s late 80s they cracked fundamentals of what CO was and of course they had a huge run up they made a lot of money in the next 10 years 12 years on Coke and they didn't make so much money for a while but now it's so it's again like you you only need to get rich once basically if you have something like that in your portfolio don't try to optimize just you know there's a podcast called the founders podcast I don't know if You guys listen to it. I tend to overdose on it. I think I've listened to like more than 100 episodes so far, but he keeps putting out more. I was listening to the one on what's that woman's name? Harriet Green. I think that's her name. Harriet Green. Her father was very successful
OtherGreen. Her father was very successful and wealthy. He didn't want a daughter.and wealthy. He didn't want a daughter.and wealthy. He didn't want a daughter. He wanted a son. He wanted to transferHe wanted a son. He wanted to transferHe wanted a son. He wanted to transfer business acumen to a son. But, you know,business acumen to a son. But, you know,business acumen to a son. But, you know, Harriet lived maybe more than 100 yearsHarriet lived maybe more than 100 yearsHarriet lived maybe more than 100 years ago. But anyway, he ended up withago. But anyway, he ended up withago. But anyway, he ended up with Harriet being his only heir. So he wasHarriet being his only heir. So he wasHarriet being his only heir. So he was forced to teach her business and he wasforced to teach her business and he wasforced to teach her business and he was forced to basically explain to her howforced to basically explain to her howforced to basically explain to her how to do well etc. But when he passed awayto do well etc. But when he passed awayto do well etc. But when he passed away and she was really pissed off when heand she was really pissed off when heand she was really pissed off when he passed away even though she was superpassed away even though she was superpassed away even though she was super super smart and ended up being 10xsuper smart and ended up being 10xsuper smart and ended up being 10x better than the father ever was. In hisbetter than the father ever was. In hisbetter than the father ever was. In his will, he said he gave the entire familywill, he said he gave the entire familywill, he said he gave the entire family fortune to her, but he put it in a trustfortune to her, but he put it in a trustfortune to her, but he put it in a trust and he made the trustees a few men, notand he made the trustees a few men, notand he made the trustees a few men, not her, who would control the how the trusther, who would control the how the trusther, who would control the how the trust was invested. And all Harriet waswas invested. And all Harriet waswas invested. And all Harriet was getting was the income from the trust.getting was the income from the trust.getting was the income from the trust. So if he left her like 10 million, youSo if he left her like 10 million, youSo if he left her like 10 million, you know, she was getting like half aknow, she was getting like half aknow, she was getting like half a million or something, 600,000 a year,
Questionermillion or something, 600,000 a year, right? from that stream of the little bit of money coming out she blew past the principle by a huge factor like really went way beyond. So basically the idea is that you can have Coke and you can think like Harriet and you know for Alex's benefit we can give him the dividend of Coke to go have fun with. How's that? Then we can do it like Harriet, you know, he can go all out on the dividend. Leave the principle and that can work too because Harriet proved it can be done, you What's your view on? You said never to sell a great business just on, you know, valuation, which I thought on hedging it and be like, all right, like it's at, you know, 50 times unit or whatever and maybe it keeps on going, you know, even better than I think it can. So, let me buy some puts and then I'd rather lose, you know, x
Questionerand then I'd rather lose, you know, x amount of puts than sell the stock and have it keep going up.
QuestionerYeah. I mean, I think it's it's possible. issue with hedging is that hedges are not perfect. Hedges can be expensive, then they expire and you got to kind of redo it and all that. I think if you're if it were me, I would focus more on using that resource and horsepower for something else. But it could work. That's that that might be okay. But I like I said, I go back to me Nick Sleep is a gold standard, you know, no hedging, no nothing. He's got three of them. He's got 200 million. It's 60 70 million each one. He doesn't need more than 10 20 million to have a good life. He's giving it all to charity anyway. So why try to get cute? All this falls into the cuteness character category like buying ASOS. That was getting cute. So I guess with coal like you went top
QuestionerSo I guess with coal like you went top down, you like the sector and then you picked the companies you wanted. With Turkey you like the country, you pick companies you wanted. Do you ever go bottom up or are you just like a top down investor?
QuestionerI'm actually bottom up. I'm not top down. I actually usually start at the business and actually coal coal has been interesting because in 2 years as my understanding grew, I I spent 15 days in the coal mines last year and it was an orgasmic experience. Coal miners are the best people to hang out with, just awesome people. And uh but as my competency grew in coal, I found myself shifting, you know, kind of which company and and all of that and I think I finally got it nailed. It took took a couple of years to get that kind of head screwed on right about which one and whatever. But in general, I think if you're investing
Questionerin general, I think if you're investing in a commodity business, if you're in a commodity business, if you're investing in a mining company, for example, the low cost producer is going to win. So you have to make sure there's no leverage because then you get to play your hand out. You have to make sure that you are best management team and lowest cost and the lowest cost producer will always be produced. So it's not that hard to figure out which ones those are and then go to sleep.
QuestionerYeah. You spoke about yesterday's winners and you said like you're buy to like not sort of bet on them just from the I'm sorry. Bet on what? Yesterday's winner. Yeah. Yeah. Yeah. Um and but then just going back to the Walmart example uh from 1970 to 1990 I'm assuming at 1990 it looked like a yesterday's winner but even if you invested in 1990 and you rolled it forward in 2025 how you sort
Questionerrolled it forward in 2025 how you sort of take a bet on the durability of aof take a bet on the durability of aof take a bet on the durability of a great business and just because I thinkgreat business and just because I thinkgreat business and just because I think doubling down on a great business isdoubling down on a great business isdoubling down on a great business is
Questioneryeah no I think I think uh you have ayeah no I think I think uh you have ayeah no I think I think uh you have a very valid point and he has a very validvery valid point and he has a very validvery valid point and he has a very valid point in the sense that Amazon on couldpoint in the sense that Amazon on couldpoint in the sense that Amazon on could very well be in its infancy today,very well be in its infancy today,very well be in its infancy today, right? I mean, we may look back in 30right? I mean, we may look back in 30right? I mean, we may look back in 30 years and say, "Oh, this was a bargainyears and say, "Oh, this was a bargainyears and say, "Oh, this was a bargain even in 2025, right?" That's entirelyeven in 2025, right?" That's entirelyeven in 2025, right?" That's entirely possible. In fact, likely, not evenpossible. In fact, likely, not evenpossible. In fact, likely, not even possible. Well, I think it's likely justpossible. Well, I think it's likely justpossible. Well, I think it's likely just because of the way the that business isbecause of the way the that business isbecause of the way the that business is run.