Other[Music][Music][Music]okay well gotham johnny it's a pleasure to be here and i think you guys are very accomplished and have done really well in life to have a seat at oxford which is awesome my good friend guys pierre is an alum he went to brazenos and i spent a few days living in the dorms of brazenos with guy and a few other friends and that was a lot of fun we had a retreat uh on the on the oxford campus and you know i'm biased towards overdosing on shawarmas and so i found some good shawarmas in oxford and life was great so that was a nice experience the tandoor investor is you know it it uses the patels and the their amazing journey with motels uh not only in the in the us but the patel that really done well in the uk as well so i use that as a backdrop to get some principles and perspectives across but just to just to clarify i am
Otheracross but just to just to clarify i am not a patelnot a patelnot a patel i did not grow up in a moteli did not grow up in a moteli did not grow up in a motel and i did not have the life experienceand i did not have the life experienceand i did not have the life experience that's the central theme of the book ithat's the central theme of the book ithat's the central theme of the book i was really uh an observer and i thoughtwas really uh an observer and i thoughtwas really uh an observer and i thought that the patel experiencethat the patel experiencethat the patel experience has a lot of commonality with valuehas a lot of commonality with valuehas a lot of commonality with value investinginvestinginvesting and soand soand so that's why i use that that as thethat's why i use that that as thethat's why i use that that as the backdrop because i think it's a it's abackdrop because i think it's a it's abackdrop because i think it's a it's a story that needs to be told more oftenstory that needs to be told more oftenstory that needs to be told more often and it's i mean i think at this point inand it's i mean i think at this point inand it's i mean i think at this point in the usthe usthe us probably something like 70probably something like 70probably something like 70 of the motels in the country are underof the motels in the country are underof the motels in the country are under patel ownershippatel ownershippatel ownership andandand patel's make uppatel's make uppatel's make up i would guess less thani would guess less thani would guess less than 0.20.20.2 of the u.s populationof the u.s populationof the u.s population sososo when this point two percent comes intowhen this point two percent comes intowhen this point two percent comes into the country as refugeesthe country as refugeesthe country as refugeesthe country as refugees in the 70s and then they end up owningin the 70s and then they end up owningin the 70s and then they end up owning 707070 of a fairly large industry it's aof a fairly large industry it's aof a fairly large industry it's a peculiar eventpeculiar eventpeculiar event and it's a peculiar outcome and it'sand it's a peculiar outcome and it'sand it's a peculiar outcome and it's interesting to study why that happenedinteresting to study why that happenedinteresting to study why that happened and so that's kind of what drove myand so that's kind of what drove myand so that's kind of what drove my interest
Questionerinterest and the framework that the patel's used to establish their dominance is a very powerful framework so the patels had gone to east africa uganda etc more than a century ago and they had gone they've been actually taken there as indentured laborers almost like slaves but because of their thunder ways over a century they came to control most of the ugandan economy so similar type of situation where a very small minority is controlling large swaths of an economy and in the 70s when idiamine came to power in uganda his perspective was that africa is for africans and uh of course he's kind of ignored the fact that the patels were really africans they'd been there you know they were born there their fathers were born there and so on but that didn't quite resonate with easy amine so he pretty much confiscated all their assets
Otherall their assets and gave them like 60 days to leave the country and so their businesses were taken over and their homes and properties so patel pretty much overnight lost everything and they were stateless because they were ugandan citizens they were not citizens of any other country so britain took in quite a large number of uh refugees from uganda canada did as well and surprisingly india refused to allow them to enter india was at that time dealing with the bangladesh refugee crisis bangladesh had just been formed so they really had no appetite for more refugees and so the united states under nixon and kissinger took a large number as well and the patels were able to convert some of their assets into gold and such and maybe they got out with five ten fifteen thousand dollars and uh that was it and the motel business seemed to
Questionerand the motel business seemed to resonate with them because the first needed satisfied is it gave them housing so these 10 20 30 room hotels that were built along in the 50s and 60s as the u.s interstate system got built were a bunch of mom and pops and those folks were getting older and ready to retire and their kids really weren't interested in the mortal prison so the first patel who came bought some of these motels and they bought them very highly levered so usually like kind of these motels at that time like 50 000 they're like you know 10 20 30 room type properties in the middle of nowhere fifty thousand seventy five thousand and the patel's put up like five or ten thousand of cash and the rest was either owner or bank financed and they put the family in one or two rooms and the motel business is labor-intensive and so the families pretty much worked
Questionerand so the families pretty much worked around the clock and they got rid of all the hired help and so they were cleaning the rooms and manning the front desk and all of that and so very quickly the patel's became low-cost providers if there was a patel owned motel in a particular geography its operating cost was lower than all the other neighboring hotels because they had no payroll payroll was zero and all the others had higher health so but what the patels would do is they would price the rooms lower than anyone else so their properties were always almost completely occupied and while the others when they try to match those prices they would end up either not making money or losing money so low-cost providers gives many businesses a long-term enduring competitive advantage i mean we see that with geico with berkshire hathaway and and you see
Todd Combswith berkshire hathaway and and you see that with costco and so on so walmartthat with costco and so on so walmartthat with costco and so on so walmart and so on so low costand so on so low costand so on so low cost will give you even with new core forwill give you even with new core forwill give you even with new core for example with their mini mailsexample with their mini mailsexample with their mini mails low cost gives you a huge advantage andlow cost gives you a huge advantage andlow cost gives you a huge advantage and because they were a low-cost providerbecause they were a low-cost providerbecause they were a low-cost provider and because they were their financialsand because they were their financialsand because they were their financials were healthierwere healthierwere healthier as they and they lived a very basicas they and they lived a very basicas they and they lived a very basic frugal lifestyle most of them werefrugal lifestyle most of them werefrugal lifestyle most of them were vegetarians anyway they couldn't go outvegetarians anyway they couldn't go outvegetarians anyway they couldn't go out to eat the 70s in the u.sto eat the 70s in the u.sto eat the 70s in the u.s you know your choices for eating as ayou know your choices for eating as ayou know your choices for eating as a vegetarian were very very limitedvegetarian were very very limitedvegetarian were very very limited so basically theyso basically theyso basically they ate their simple meals they had theirate their simple meals they had theirate their simple meals they had their simple roomssimple roomssimple rooms in their hotel so they had no housingin their hotel so they had no housingin their hotel so they had no housing costs and their living costs were low socosts and their living costs were low socosts and their living costs were low so their savings rate was hightheir savings rate was hightheir savings rate was high and what they did with the savings wasand what they did with the savings wasand what they did with the savings was they started to buy more motelsthey started to buy more motelsthey started to buy more motels and so the family would take one familyand so the family would take one familyand so the family would take one family member and move about into another motelmember and move about into another motelmember and move about into another motel and then that person would get going
Otherand then that person would get going with that and you know cascade that over time and it worked well and the end result is what we see today which is they completely dominated an industry and they took over so that that story i think has a lot of resonance with value investing because in investing what we are trying to do is we're trying to get a unfair advantage you know there is some quirk with some company where they have a you know so taking a step back capitalism is brutal it's a doggy dog world and one of the things you may enjoy is there is a video on youtube which was i think maybe put up five or six years ago and the title of the video is competition is for losers and i think you guys will enjoy that video it was it's a video recording of peter thiel teaching a class at stanford business school he used to teach a class on startups and
Questionerhe used to teach a class on startups and entrepreneurshipentrepreneurshipentrepreneurship and i think the videos got a huge viewand i think the videos got a huge viewand i think the videos got a huge view count and i think it's an excellentcount and i think it's an excellentcount and i think it's an excellent videovideovideo i don't know whether peter thiel wouldi don't know whether peter thiel wouldi don't know whether peter thiel would like that video out there now becauselike that video out there now becauselike that video out there now because he's become somewhat you know notorioushe's become somewhat you know notorioushe's become somewhat you know notorious but what peter what peter says is thatbut what peter what peter says is thatbut what peter what peter says is that if you look at most businesses almostif you look at most businesses almostif you look at most businesses almost all businesses you can put them in twoall businesses you can put them in twoall businesses you can put them in two categories around the planetcategories around the planetcategories around the planet there are a small sliver of businessesthere are a small sliver of businessesthere are a small sliver of businesses whichwhichwhich areareare basically monopolies oligopoliesbasically monopolies oligopoliesbasically monopolies oligopolies and they have very strong competitiveand they have very strong competitiveand they have very strong competitive advantagesadvantagesadvantages and then there's a overwhelming majorityand then there's a overwhelming majorityand then there's a overwhelming majority of businesses which are basicallyof businesses which are basicallyof businesses which are basically really tough businesses to be inreally tough businesses to be inreally tough businesses to be in and so 99 of capitalism is these reallyand so 99 of capitalism is these reallyand so 99 of capitalism is these really tough businessestough businessestough businesses and maybe one percent or less is theseand maybe one percent or less is theseand maybe one percent or less is these you know monopolies or you know somehowyou know monopolies or you know somehowyou know monopolies or you know somehow somehow insulated business and peter'ssomehow insulated business and peter'ssomehow insulated business and peter's point to his his students was that therepoint to his his students was that therepoint to his his students was that there is no point
Otheris no point following the masses of capitalists and either working at or founding a business that is dealing with all these competitive forces we want to be sitting there with monopolies and that's how we make a lot of money and i think in investing too basically what you're looking for is some kind of an edge that the business has that is an enduring edge and if you can invest in a business which has that edge at a reasonable price good things will happen to you so that was basically the genesis of the dhandu investor and why i use the patels and so on as my foil if you will that that makes sense thank you thank you for clarifying explaining that i'm curious when you started out investing was it easier to find these one percent of minimalistic companies than it is today have markets become more efficient and have these kind of
Questionermore efficient and have these kind of have more people kind of understood what to look for or do you think that your hit rate has kind of always been the same
Otherwell actually the monopolies even if they are one percent you know there's 50 000 listed businesses around the planet so even at one percent you would have 500 of these you know awesome businesses so actually identifying awesome businesses is not a problem there are many many great businesses around okay i mean you know amazon's a great business and alphabet's a great business and microsoft's a great business and what the patels have done has been a great business so actually great businesses all around us and it's it's also not that hard to be able to tell that a business is great and that's another point that peter thiel makes in his talk he says that the monopolists go through extreme lengths to convince
Questionergo through extreme lengths to convince you that they are not a monopoly that they exist in very competitive spaces because they know that if they are a monopoly and they you know beat their chest about it they will attract unwanted attention i mean like facebook doesn't really want the us government to think it's a monopoly and google doesn't want anyone to think it's a monopoly you know so the monopolists try really hard to convince us oh poor me i'm not a monopoly okay and the loser 99 of comparative businesses go through extreme lengths to convince you that they are a monopoly they try to convince you that i got the secret sauce look at me i'm awesome okay so the monopolists basically are telling you i'm just joe public man i got nothing going on don't look here go keep walking and the the competitive ones are beating their chest saying no no come come to me
Questionertheir chest saying no no come come to me you know i have this awesome business you know i have this awesome business you know i have this awesome business and let me tell you why it's so awesome and let me tell you why it's so awesome and let me tell you why it's so awesome right right right but i think that from uh for an investor but i think that from uh for an investor but i think that from uh for an investor to figure out to figure out to figure out whether a business is great or not and whether a business is great or not and whether a business is great or not and whether it's a monopoly or not whether it's a monopoly or not whether it's a monopoly or not is a relatively simple exercise is a relatively simple exercise is a relatively simple exercise not that hard to do because not that hard to do because not that hard to do because i think a simple thing you can do i think a simple thing you can do i think a simple thing you can do is if you make a list of all the is if you make a list of all the is if you make a list of all the products and services and places products and services and places products and services and places that you shop at okay you will find the that you shop at okay you will find the that you shop at okay you will find the overwhelming number of those a overwhelming number of those a overwhelming number of those a monopolies monopolies monopolies okay so so so you know do you use an iphone you know do you use an iphone you know do you use an iphone guess what it's a monopoly okay do you guess what it's a monopoly okay do you guess what it's a monopoly okay do you shop at amazon okay and shop at amazon okay and shop at amazon okay and do you do you do you who sends you your who sends you your who sends you your utility bill utility bill utility bill they're all monopolies they're all monopolies they're all monopolies okay so identifying monopolies is okay so identifying monopolies is okay so identifying monopolies is relatively easy you can identify them by relatively easy you can identify them by relatively easy you can identify them by looking at looking at looking at companies that you're really familiar companies that you're really familiar companies that you're really familiar with that you're a customer of a client with that you're a customer of a client with that you're a customer of a client or whatever or whatever or whatever the other way you can get to
Questionerthe other way you can get to understanding a monopoly is looking at the numbers their financials will scream out and tell you i'm a monopoly even when they just want you to go away and not look at them so it's not about finding great businesses it's easy to find great businesses it's about finding great investments and the two are different so once we identify that a business is great that's awesome we can collect a list of those and then we have to go to the next level which is try to find ones which somehow the market has not figured out and somehow there's an aberration where the price does not reflect the great underlying economics and then you're off to the races hallelujah it's great so that's what the game's all about it's easy to sift the grate from the not so great but then the second piece which is is it a good investment from that subset
Questioneris it a good investment from that subset list that becomes a little bit harder
Warrenbut as my guru and mentor behind me charlie munger likes to say why should it be easy to get rich that makes sense i'm curious has it become easier harder for the same level of difficulty to find great investments as it was 10 15 years ago so humans vacillate between fear and greed as long as there are humans making investment decisions we will have mispricing of securities and the mispricing can be in both directions they can be ridiculously overvalued and they can be ridiculously undervalued so from time to time humans get very euphoric and they get really excited about certain assets and classes and such and you know they get overheated and and many times things are not of interest so i you know so i would say that if one is a bargain hunter looking for great businesses that are
Questionerlooking for great businesses that are underpriced there's always a set of them somewhere that fitted criteria the problem is that the ones that fit the criteria aren't the easiest ones to invest in or to actually even convince yourself so for example in 2019 i made an investment in a company in turkey okay and at that time in turkey and even till today from then till now their backwards macro policies has decimated the lira the turkish lira pretty much for the most part has collapsed i mean in 2019 when i was looking at turkey it was under five you know a dollar dollar was under five lira now for a dollar you can get more than nine lira so it's a pretty significant move in a couple of years and the leader will continue to weaken because of their backwards policies of how they think about you know the exchange rates and such
Othersuchsuch sososo anyway when i was looking at turkey ianyway when i was looking at turkey ianyway when i was looking at turkey i found and even now i find turkey is onefound and even now i find turkey is onefound and even now i find turkey is one of theof theof the cheapest markets in the worldcheapest markets in the worldcheapest markets in the world and it's the reason it's cheap isand it's the reason it's cheap isand it's the reason it's cheap is because everyone and their brother justbecause everyone and their brother justbecause everyone and their brother just wants to exitwants to exitwants to exit they just do not find it comfortablethey just do not find it comfortablethey just do not find it comfortable being there with erdogan and companybeing there with erdogan and companybeing there with erdogan and company and they just don't want to be thereand they just don't want to be thereand they just don't want to be there and if everyone isand if everyone isand if everyone is rushing to the exitsrushing to the exitsrushing to the exits the odds are pretty good that you mightthe odds are pretty good that you mightthe odds are pretty good that you might find a bargain or twofind a bargain or twofind a bargain or two and so for example in 2019and so for example in 2019and so for example in 2019 i found this really incredible monopolyi found this really incredible monopolyi found this really incredible monopoly businessbusinessbusiness you know peter thiel would be proudyou know peter thiel would be proudyou know peter thiel would be proud wherewherewhere us this company in turkey are investedus this company in turkey are investedus this company in turkey are invested ininin they had 12 million square feet ofthey had 12 million square feet ofthey had 12 million square feet of prime warehouses they have a bunch ofprime warehouses they have a bunch ofprime warehouses they have a bunch of other businesses too but they have 12other businesses too but they have 12other businesses too but they have 12 million square feet of prime warehousesmillion square feet of prime warehousesmillion square feet of prime warehouses 99 percent leased99 percent leased99 percent leased to amazon ikea car four justto amazon ikea car four justto amazon ikea car four just brand top brandbrand top brandbrand top brand ten year leases inflation indexedten year leases inflation indexedten year leases inflation indexed rent adjusted every year and the
Questionerrent adjusted every year and the market cap of the company was 20 million dollars and the the debt the business had was less than 200 million okay so if you take the entire 220 million so if you take the entire 220 million so if you take the entire 220 million whatever 220 230 million whatever whatever 220 230 million whatever whatever 220 230 million whatever let's say it's 240 million let's make let's say it's 240 million let's make let's say it's 240 million let's make the math easy the math easy the math easy okay okay okay 12 million square feet 12 million square feet 12 million square feet it's 20 dollars a square foot it's 20 dollars a square foot it's 20 dollars a square foot okay okay okay anyone would be willing to buy those 12 anyone would be willing to buy those 12 anyone would be willing to buy those 12 million square feet in about five million square feet in about five million square feet in about five minutes from them minutes from them minutes from them for around for around for around 75 or 80 dollars a square foot 75 or 80 dollars a square foot 75 or 80 dollars a square foot like the deal would just happen like like the deal would just happen like like the deal would just happen like that that that okay okay okay these are very prime properties these are very prime properties these are very prime properties with with with class a tenants with pristine credits class a tenants with pristine credits class a tenants with pristine credits okay and so okay and so okay and so if you sold this 12 million square feet if you sold this 12 million square feet if you sold this 12 million square feet you would end up with like a billion you would end up with like a billion you would end up with like a billion dollars dollars dollars okay okay okay and then you pay off the 200 million and then you pay off the 200 million and then you pay off the 200 million and you'd have what 800 million and you'd have what 800 million and you'd have what 800 million and the market cap was 20 and the market cap was 20 and the market cap was 20 million hallelujah million hallelujah million hallelujah and then we come to the pesky issue of and then we come to the pesky issue of and then we come to the pesky issue of rampant inflation
Otherrampant inflation and rampant devaluation of the lyra and i looked at it and said this is the complete non-event because if inflation goes up then cement prices go up land prices go up the replacement cost of those warehouses goes up so instead of eighty dollars a foot they'll be at 120 a foot okay so who cares about the inflation bring it on okay and if the lyra weakens implicitly what is happening is that the properties would appreciate in lyra but in dollars they would stay similar this was the theory i had okay that one is i was buying at like four percent of liquidation value you know i was buying a dollar for four cents okay nobody was interested okay i thought i won't get much stock the rush to the exits was so intense that i ended up owning a third of the company well done well done he i think i outed even the patel's i don't think the patel's ever picked up
Questioneri don't think the patel's ever picked up a property for four cents on the dollar a property for four cents on the dollar a property for four cents on the dollar and my last name isn't even patel and my last name isn't even patel and my last name isn't even patel okay so now fast forward okay so now fast forward okay so now fast forward two years two years two years the lead i went from four and change to the lead i went from four and change to the lead i went from four and change to nine and change nine and change nine and change in dollars my investment is up 6x in dollars my investment is up 6x in dollars my investment is up 6x in dollars in dollars in dollars in lira it's up 10x who cares about that in lira it's up 10x who cares about that in lira it's up 10x who cares about that that's irrelevant that's irrelevant that's irrelevant but in dollars we're up 6x but in dollars we're up 6x but in dollars we're up 6x okay and basically even at 6x okay and basically even at 6x okay and basically even at 6x we are still undervalued we are still undervalued we are still undervalued we've only gone to 24 cents on the we've only gone to 24 cents on the we've only gone to 24 cents on the dollar from 4 cents to 24 cents dollar from 4 cents to 24 cents dollar from 4 cents to 24 cents you know you know you know still have still have still have another forex another forex another forex to get to get to get and the company is not sitting idly the and the company is not sitting idly the and the company is not sitting idly the last two years they raised the intrinsic last two years they raised the intrinsic last two years they raised the intrinsic value of the business because they were value of the business because they were value of the business because they were a bunch of smart things they put a bunch of smart things they put a bunch of smart things they put solar panels on all their rooftops solar panels on all their rooftops solar panels on all their rooftops they're not going to be generating like they're not going to be generating like they're not going to be generating like 50 megawatts of power 50 megawatts of power 50 megawatts of power with with with turkey's new net metering laws which turkey's new net metering laws which turkey's new net metering laws which they sell to the government they sell to the government they sell to the government at the same price of the government at the same price of the government
Questionerat the same price of the government sells electricitysells electricitysells electricity and solar panel prices have dropped likeand solar panel prices have dropped likeand solar panel prices have dropped like crazy and turkey has no fossil fuels socrazy and turkey has no fossil fuels socrazy and turkey has no fossil fuels so their electricity prices are indexed totheir electricity prices are indexed totheir electricity prices are indexed to oiloiloil and so those prices keep going upand so those prices keep going upand so those prices keep going up they've already spent the money on thethey've already spent the money on thethey've already spent the money on the panels and they keep getting more moneypanels and they keep getting more moneypanels and they keep getting more money so the value of the business went up iso the value of the business went up iso the value of the business went up i think another 200 million in the lastthink another 200 million in the lastthink another 200 million in the last two yearstwo yearstwo years on a 20 million market capon a 20 million market capon a 20 million market cap okayokayokay sososo we don't need to bewe don't need to bewe don't need to be very smartvery smartvery smart we don't need high iqswe don't need high iqswe don't need high iqs we don't needwe don't needwe don't need high grades from oxfordhigh grades from oxfordhigh grades from oxford we just need to have basic common sensewe just need to have basic common sensewe just need to have basic common sense that's itthat's itthat's it
Otherthat that's a that's really good answerthat that's a that's really good answerthat that's a that's really good answer you didn't usually need a calculator foryou didn't usually need a calculator foryou didn't usually need a calculator for this and you definitely didn't needthis and you definitely didn't needthis and you definitely didn't need excel i don't have a calculator or highexcel i don't have a calculator or highexcel i don't have a calculator or high grade third what two things rightgrade third what two things rightgrade third what two things right umumum some of your earlier arguments um aboutsome of your earlier arguments um aboutsome of your earlier arguments um about what makes a value investor a good valuewhat makes a value investor a good valuewhat makes a value investor a good value investor could be applied in reverse you
Questionerinvestor could be applied in reverse you could also say that a value investor could also say that a value investor could also say that a value investor would be able to identify when a company would be able to identify when a company would be able to identify when a company is very overpriced and when there's too is very overpriced and when there's too is very overpriced and when there's too much greed much greed much greed um so with that in mind why aren't more um so with that in mind why aren't more um so with that in mind why aren't more value investors like yourself buffett or value investors like yourself buffett or value investors like yourself buffett or manga manga manga active on the short side
Unknown Primary Speakeryeah i think i think i think shorting is uh shorting is uh shorting is uh one of the dumbest one of the dumbest one of the dumbest activities you can engage in activities you can engage in activities you can engage in and roaring kitty and roaring kitty and roaring kitty gave you a great lesson this year on why gave you a great lesson this year on why gave you a great lesson this year on why it's a dumb activity it's a dumb activity it's a dumb activity you know you know you know i just finished reading this book i just finished reading this book i just finished reading this book and and and i actually sent it i actually sent it i actually sent it to warren and charlie to warren and charlie to warren and charlie and i really enjoyed it you know the and i really enjoyed it you know the and i really enjoyed it you know the anti-social network anti-social network anti-social network and the guy who wrote the same guy who and the guy who wrote the same guy who and the guy who wrote the same guy who wrote bringing down the house you know wrote bringing down the house you know wrote bringing down the house you know the mit blackjack team that the mit blackjack team that the mit blackjack team that cleaned up all the casinos and then they cleaned up all the casinos and then they cleaned up all the casinos and then they made it to the movie he rambles a bit so made it to the movie he rambles a bit so made it to the movie he rambles a bit so i think this is not one that you sit and i think this is not one that you sit and i think this is not one that you sit and underline i think this is a book that
Otherunderline i think this is a book that gets skimmed and i think he wrote it from the point of view that becomes a movie someday one day we will see roaring kitty on the big screen instead of just at a congressional hearing or in his basement so anyway the thing is that shorting the economics make no sense because if you're wrong the answer is bankrupt you've gone bankrupt if you're wrong so there is no limit to how much a stock price can rise as amc and gamestop etc have shown us the maximum you can make in a short position is you can double your money and the maximum you can lose is everything so right there why would you want to engage in that type of a bet if you went to a race track and someone said listen man if you pick the right horse you get 2x you pick the wrong horse you get nothing and we take all the money you have you'll never make
Questionerall the money you have you'll never make that bet sothat bet sothat bet so shorting just seems like ashorting just seems like ashorting just seems like a really difficultreally difficultreally difficult so i think the nature of investing thatso i think the nature of investing thatso i think the nature of investing that there are two major advantagesthere are two major advantagesthere are two major advantages you get as an investor even though youyou get as an investor even though youyou get as an investor even though you guys don't play baseball maybe you knowguys don't play baseball maybe you knowguys don't play baseball maybe you know some of the rules so one is that buffettsome of the rules so one is that buffettsome of the rules so one is that buffett says that in investing there are no callsays that in investing there are no callsays that in investing there are no call strikesstrikesstrikes right so basically in baseballright so basically in baseballright so basically in baseball which is a less civilized version ofwhich is a less civilized version ofwhich is a less civilized version of qriket if you get three strikes you'reqriket if you get three strikes you'reqriket if you get three strikes you're outoutout you know in cricket you can just sityou know in cricket you can just sityou know in cricket you can just sit there andthere andthere and let 100 balls go by as long as you knowlet 100 balls go by as long as you knowlet 100 balls go by as long as you know they don't hit your stumps or your legsthey don't hit your stumps or your legsthey don't hit your stumps or your legs or whatever you're in good shapeor whatever you're in good shapeor whatever you're in good shape and uh and that's fine uh but inand uh and that's fine uh but inand uh and that's fine uh but in baseball you have to swing and if you ifbaseball you have to swing and if you ifbaseball you have to swing and if you if you miss three times you're outyou miss three times you're outyou miss three times you're out and so the rules are kind of moreand so the rules are kind of moreand so the rules are kind of more difficult but in investing there are nodifficult but in investing there are nodifficult but in investing there are no called strikes which means that you cancalled strikes which means that you cancalled strikes which means that you can let a thousand balls go bylet a thousand balls go by
Charlielet a thousand balls go by so you don't need to have an opinion on everything you just need to have an opinion on a very small sliver of the planet and so one can live a very healthy life in a very wealthy life without ever shorting a straw
Charliethe inversion to the store shorting issue is i don't see any short sellers in the top 10 positions of forbes where are they well they lost their shorts that's where they are so we can we can do well without shorting that checks out
Questionerum i'd like to abstract a little bit away from the specifics and investing to some broader questions so one one of the things that both you and buffett talk about is managing your psychology and one of the ways in which you do this is you have an inner scorecard like a checklist of the things that are important to you um if you're comfortable would you be able to tell us what's on your inner
Questionerable to tell us what's on your inner scorecard and on top of that would you be able to tell us how and when you knew that those were the right things to have on your inner scorecard
Warrenwell i think this the inner scorecard is is uh it's not a static it's not a static kind of template if you will basically like when i when i met buffett for lunch with my friend guys pierre he said to us that would you rather be the greatest lover in the world but known as the worst or the worst lover in the world but known as the greatest and he said that if you know how to answer that question you've got it made okay so the inner scorecard for all of us is very straightforward we always know what the internal correct answer is we know that we have a conscious and we know that it's just that it's very tempting to live life with an outer school card which is if people think i'm the
Otherwhich is if people think i'm the greatest lover well let them think that that's awesome and that would be an outer scorecard way of living life and so all you have to do is that when you encounter distortions between the inner scorecard and the outer scorecard focus on the inner scorecard and for each different type of you know activity or conclusion or whatever you come to about something your inner scorecard is really what should guide you so for example if my fund is up 30 next year you know everyone would be saying oh that was awesome but what i have to do internally is ask myself well what was the risk i took was it risk-free was it truly a great return relative to and was it the best opportunity cost of the way i could put the money these are questions i can answer better because i have underlying data a lot richer underlying data and so the
Othera lot richer underlying data and so the easiest person to fool is to fool yourself and you really have to make sure you're not fooling yourself so an inner score card is a really important it's it's a really huge advantage in life to live live your life with an inner scorecard what will happen is that if you live with an underscore card you will become more trustable you'll become more trustworthy and and if a lot of humans are willing to put a lot of trust in you that's a starting point that's going to give you a huge edge in life that that that's a very very very poor private answer
Questionerthank you i was hoping you could tell us a little bit more about the things you've learned from knowing buffett personally that you would not have picked up from reading his books i don't know warren that well i mean you know i've met him a few times but i would say that i'm acquainted with
Otherbut i would say that i'm acquainted with him i'm not a friend of his but it's been interesting to observe him at close quarters sometimes i think that's been so i think i think the thing about warren is that warren is a very and a lot of a lot of things about warren buffett you can get to without ever knowing him is one of the most open books you can you can think about so so so for example and you know one of the things about humans is that the way we are are are at the age of five at the age of five at the age of five our personality templates our likes and our personality templates our likes and dislikes our traits dislikes our traits dislikes our traits between our genetics in the first five between our genetics in the first five between our genetics in the first five or six years of life experience they are or six years of life experience they are or six years of life experience they are hard coded hard coded hard coded between the age of 6 and 96 humans do between the age of 6 and 96 humans do between the age of 6 and 96 humans do not change not change not change and and and once you understand that and you take once you understand that and you take once you understand that and you take that as a gospel truth that as a gospel truth that as a gospel truth it becomes really easy to it becomes really easy to it becomes really easy to figure out which humans to figure out which humans to figure out which humans to interact with which humans to have with interact with which humans to have with interact with which humans to have with your friends
Otheryour friends and that sort of thing because so that's one data point which is humans basically don't change the second data point is that there's a gravitational pull so if i hang out with people who are better than me i'm going to get better if i hang out with people worse than me i'm going to get worse so given that humans are not going to change once i know the nature of the human it'll be wishful thinking to think that you're going to change them or something is going to improve in them it is what it is so being extremely picky on who your friends are is going to give you a huge advantage in life so in the case of buffett he used to go to the sarban race track in omaha when he was nine or ten years old like sovereign is nebraska fell back spelled backwards and what he used to do is at the end of the races he'd pick up all the tickets that were on the
Otherpick up all the tickets that were on the ground because they would be drunks who'd want something but they wouldn't even know they won they just tossed the ticket and he'd go through each and every ticket to see if there were some tickets that were actually winning tickets that they were discarded and he would find some winning tickets but then he was too young to go to the window to collect so he sent his aunt alice to collect for him okay and he did this every weekend okay and he was very so it's a very dogged person who's going through that exercise of you know because you would go through 500 tickets and find one or a thousand and find one you know it's a needle in the hair stack in his mid-20s he was going through the moody's manual the moody manual is really thick manuals which had like four companies fine print on each page
Charlieon each page and he was doing a quantitative assessment of thousands and thousands of companies in fact he went through the moody's manuals two or three times and in going through those he found a bunch of extreme bargains not i don't think any of them were at the level of race i still am one up on him okay i don't think he found anything in the moody's manual that could and the reason for it is actually increasing value and whatever but he found a bunch of you know companies with a 15 million market cap making 25 million something like that okay so he found a bunch of these things the activity that the kid that examined was doing and the 25 year old were doing are identical okay it's the same activity and then a few years back kai and i were visiting him in his office and i saw that on his desk was the japan company handbook which is kind of like a
Questionercompany handbook which is kind of like a value line of japan except it's just very quantitative fine print two companies per page every listed japanese business and he was going and this is no berkshire's got 100 billion plus in cash he he's not going to move any needles by finding some company that's worth 25 million but should be worth 50 million of what 100 million should go 200 million that's berkshire can't do anything with that but the kid is programmed that way okay and so this was when he was maybe more than 80 years old okay what he's doing at nine and what he's doing at 25 and what he's doing at 80 are the same thing okay and and i actually it it was a coincidence but i was going through the japan coming handbook at about the same time i had the exact same addition as him and i told him oh warren listen i can make this faster for you there are some
Questionermake this faster for you there are some companies i already found and i took his i took his japan gummy handbook and i dog-eared some pages for him okay i think he might have been horrified that somebody just you know i didn't even ask him oh may i dog-ear it you know i just went ahead and did it i was so excited about it and then you know a lot of the dog ears were in the back of the book he says you know usually all the good stuff is in the back you know so what i'm trying to say is that warren is a very unusual person but i think there are a lot of lessons to learn from him i think most entrepreneurs where you can look at sam walton or warren buffett or howard schultz or jeff bezos they're very intense in their pursuit and they're very singular in their pursuit and when you have those traits you're going to do very well so
Questionergoing to do very well so a lot of people want to be buffeta lot of people want to be buffeta lot of people want to be buffet a lot of people want to clone buffetta lot of people want to clone buffetta lot of people want to clone buffett if you don't have the personality whoif you don't have the personality whoif you don't have the personality who would really enjoy picking up thosewould really enjoy picking up thosewould really enjoy picking up those tickets and examine you're not going totickets and examine you're not going totickets and examine you're not going to get to being buffeted so if somehow youget to being buffeted so if somehow youget to being buffeted so if somehow you have the personalityhave the personalityhave the personality and you can't do anything about it youand you can't do anything about it youand you can't do anything about it you either have it or you don't have iteither have it or you don't have iteither have it or you don't have it it's pretty binary it's not somethingit's pretty binary it's not somethingit's pretty binary it's not something you can add onyou can add onyou can add on okay there's no add-onsokay there's no add-onsokay there's no add-ons that happen so i think the importantthat happen so i think the importantthat happen so i think the important thing for humans isthing for humans isthing for humans is you really have to understand who youyou really have to understand who youyou really have to understand who you areareare and once you understand who you areand once you understand who you areand once you understand who you are then you have tothen you have tothen you have to have behaviorshave behaviorshave behaviors that maximizethat maximizethat maximize the talent that you havethe talent that you havethe talent that you have and your talents may be very differentand your talents may be very differentand your talents may be very different from buffettfrom buffettfrom buffett so you have to focus on those talentsso you have to focus on those talentsso you have to focus on those talents and those behaviors then that's aand those behaviors then that's aand those behaviors then that's a fantastic answer thank you for sharingfantastic answer thank you for sharingfantastic answer thank you for sharing that one-ish i have one final questionthat one-ish i have one final questionthat one-ish i have one final question and then after that we can do some q a
Questionerand then after that we can do some q a if you have the time um noise if not my final question is i think one that that like a lot of us as students and as young people struggle with we haven't had the experience or the time in our careers they've had mistakes and learn from them so if you could compile all your years since you were back at university and think about the most important things that you've learned that you wish you'd picked up earlier what would they be if you could distill it into maybe three top things
Otheri mean i would say that without failure there's no success so it's two sides of a coin so it's i think generally speaking when you look at people who've been very successful and you can appeal the onion you'll find that there were a lot of failures along the ways and without those failures those successes wouldn't have
Questionerfailures those successes wouldn't have happenedhappenedhappened now we are probably better off wherenow we are probably better off wherenow we are probably better off where we learnwe learnwe learn not from our mistakesnot from our mistakesnot from our mistakes but from other people's mistakes and ifbut from other people's mistakes and ifbut from other people's mistakes and if we can do thatwe can do thatwe can do that then it's it's a lot less painful rightthen it's it's a lot less painful rightthen it's it's a lot less painful right but the nature of life is thatbut the nature of life is thatbut the nature of life is that our own mistakesour own mistakesour own mistakes get seared in deeperget seared in deeperget seared in deeper and the lessons get seared and deeper soand the lessons get seared and deeper soand the lessons get seared and deeper so in generalin generalin general it is more difficultit is more difficultit is more difficult to learn from warren or charlie'sto learn from warren or charlie'sto learn from warren or charlie's mistakes and sear it inmistakes and sear it inmistakes and sear it in than it is fromthan it is fromthan it is from our own mistakes and see that one of theour own mistakes and see that one of theour own mistakes and see that one of the things you know i think charlie saysthings you know i think charlie saysthings you know i think charlie says we'rewe'rewe're old too soon and why is too late lastold too soon and why is too late lastold too soon and why is too late last year for example you know for when iyear for example you know for when iyear for example you know for when i first started investing in the mid 90sfirst started investing in the mid 90sfirst started investing in the mid 90s i was trying to find these businessesi was trying to find these businessesi was trying to find these businesses with these long runwayswith these long runwayswith these long runways and you know set it and forget it typeand you know set it and forget it typeand you know set it and forget it type of thingof thingof thing like what buffett had under coke or amexlike what buffett had under coke or amexlike what buffett had under coke or amex and so onand so onand so on and i found a bunch of those and i didand i found a bunch of those and i didand i found a bunch of those and i did really well but thenreally well but thenreally well but then 99 2000 the dot-com bubble was getting
Ted Weschler99 2000 the dot-com bubble was getting pretty intense and i was very concerned and so i switched to ben graham looking at businesses which were not necessarily great businesses but they were very cheap and there was downside protection you could make some money you know kind of what peter thiel is saying not to do you know and that did really well i think from 99 probably i think if i had been smart enough to switch around 2012 or 2014 that'd been great but i got so used to doing that you know finding these bargains it's a very natural comfortable place to be then i realized last year when i was studying there's a book called richer wiser happier which came out earlier this year it's a great book and chapter six is on nick sleep who's in london and who's done really well as an investor in fact i think if you google next sleep you can pull up his letters
Questionernext sleep you can pull up his letters next sleep you can pull up his letters they're worth well worth reading they're worth well worth reading they're worth well worth reading and i realized that nick had done really and i realized that nick had done really and i realized that nick had done really well by identifying well by identifying well by identifying some great long runways some great long runways some great long runways and then just and then just and then just leaving things alone leaving things alone leaving things alone you know no activity so when he when he you know no activity so when he when he you know no activity so when he when he shut down his fund he had three stocks shut down his fund he had three stocks shut down his fund he had three stocks he put all his money in berkshire costco he put all his money in berkshire costco he put all his money in berkshire costco and amazon and i think he's outperformed and amazon and i think he's outperformed and amazon and i think he's outperformed pretty much anyone else no matter what pretty much anyone else no matter what pretty much anyone else no matter what they were doing they were doing they were doing because amazon's just done so well since because amazon's just done so well since because amazon's just done so well since then and so i realized that actually then and so i realized that actually then and so i realized that actually i needed to go back to the engine which i i needed to go back to the engine which i i needed to go back to the engine which i is buying these great compounders and i is buying these great compounders and i is buying these great compounders and i started to make my journey back started to make my journey back started to make my journey back so i would say one of the things if i so i would say one of the things if i so i would say one of the things if i could fix it is that i shouldn't have could fix it is that i shouldn't have could fix it is that i shouldn't have abandoned the compounders as early as i abandoned the compounders as early as i abandoned the compounders as early as i did did did i remember in uh i think in 2002 i was i remember in uh i think in 2002 i was i remember in uh i think in 2002 i was taking a class at taking a class at taking a class at harvard business school harvard business school harvard business school and we were doing a case on amazon and and we were doing a case on amazon and and we were doing a case on amazon and was the case on joy kobe which was
Otherwas the case on joy kobe which waswas the case on joy kobe which was who was amazon's cfo joy has actuallywho was amazon's cfo joy has actuallywho was amazon's cfo joy has actually unfortunately passed away she had aunfortunately passed away she had aunfortunately passed away she had a biking accident but wonderful ladybiking accident but wonderful ladybiking accident but wonderful lady but this case was about her she was abut this case was about her she was abut this case was about her she was a cfo at amazon and i was so impressedcfo at amazon and i was so impressedcfo at amazon and i was so impressed with joy and i was so impressed withwith joy and i was so impressed withwith joy and i was so impressed with someone like jeff who would hire someonesomeone like jeff who would hire someonesomeone like jeff who would hire someone like joy and at that time amazon stocklike joy and at that time amazon stocklike joy and at that time amazon stock had collapsed it had collapsed down tohad collapsed it had collapsed down tohad collapsed it had collapsed down to ten dollars a shareten dollars a shareten dollars a share and i put ten percent of my fundand i put ten percent of my fundand i put ten percent of my fund at the time in amazonat the time in amazonat the time in amazon at ten dollars a shareat ten dollars a shareat ten dollars a share and very quickly it got to 14 and iand very quickly it got to 14 and iand very quickly it got to 14 and i moved on okaymoved on okaymoved on okay very dumbvery dumbvery dumb okayokayokay they can't be things that are morethey can't be things that are morethey can't be things that are more dumber than thatdumber than thatdumber than that andandand that's like a 330xthat's like a 330xthat's like a 330x that got blown awaythat got blown awaythat got blown away and i remember at that time i wasand i remember at that time i wasand i remember at that time i was managing about maybemanaging about maybemanaging about maybe 70 80 million70 80 million70 80 million so maybeso maybeso maybe even if 5 million went into amazon at 10even if 5 million went into amazon at 10even if 5 million went into amazon at 10 you know 300 times 5 millionyou know 300 times 5 millionyou know 300 times 5 million isisis a billion and a halfa billion and a halfa billion and a halfa billion and a halfa billion and a halfa billion and a half you knowyou knowyou know it didn't it wouldn't have mattered whatit didn't it wouldn't have mattered what
Otherit didn't it wouldn't have mattered what happened to anything elsehappened to anything elsehappened to anything else you knowyou knowyou know but we live and learnbut we live and learnbut we live and learn and so life life life goes on life isand so life life life goes on life isand so life life life goes on life is greatgreatgreat thank you for sharing that one it looksthank you for sharing that one it looksthank you for sharing that one it looks like we're up at the end of our hour whylike we're up at the end of our hour whylike we're up at the end of our hour why don't we take some questions and ifdon't we take some questions and ifdon't we take some questions and if you guys are out of time and want toyou guys are out of time and want toyou guys are out of time and want to leaveleaveleave feel freefeel freefeel free so we'll go for a few minutes and seeso we'll go for a few minutes and seeso we'll go for a few minutes and see how it goeshow it goeshow it goes perfect talking again well before i handperfect talking again well before i handperfect talking again well before i hand over to johnny i just want to say thankover to johnny i just want to say thankover to johnny i just want to say thank you again it has really been greatyou again it has really been greatyou again it has really been great speaking to you and thank you so so muchspeaking to you and thank you so so muchspeaking to you and thank you so so much once again for coming to oxford alphaonce again for coming to oxford alphaonce again for coming to oxford alpha fund it's a real honor for us um sofund it's a real honor for us um sofund it's a real honor for us um so johnny do you want to come on and takejohnny do you want to come on and takejohnny do you want to come on and take over the q a awesome thanks so muchover the q a awesome thanks so muchover the q a awesome thanks so much captain umcaptain umcaptain um yes so so guys thanks for sharing youryes so so guys thanks for sharing youryes so so guys thanks for sharing your questions in the chat um we'll try andquestions in the chat um we'll try andquestions in the chat um we'll try and cover a few of them monitor you don'tcover a few of them monitor you don'tcover a few of them monitor you don't want to take up too much of your timewant to take up too much of your timewant to take up too much of your time butbutbut yeah this is saying the same accountant
Questioneryeah this is saying the same accountant thank you so much again for this for the talk and maybe you don't mind a quick question from me before we move into the others just maybe on like investing psychology or the sort of thought process which goes into making one of these investments so say the sort of turkish warehouse in batman when you're thinking that putting like your capital on the line here and you're thinking i've got a potential 25x investment in front of me no one else seems to want to touch it what am i missing you know i just have overcome that fear of thinking you know i must be missing something surely it can't be this good how do you sort of get beyond that stage i guess and into the one where you can you know you just say everyone is wrong i'm i'm willing to make it that on earth yeah just curious to hear about psychology i
Questionerjust curious to hear about psychology i just curious to hear about psychology i think that was a that was like complete think that was a that was like complete think that was a that was like complete disbelief when i first saw it you know i disbelief when i first saw it you know i disbelief when i first saw it you know i remember there's a good turkish friend remember there's a good turkish friend remember there's a good turkish friend of mine who of mine who of mine who i just told him he's a i just told him he's a i just told him he's a he's a wonderful value investor and i he's a wonderful value investor and i he's a wonderful value investor and i was was was i said listen i said listen i said listen let's just visit all the companies let's just visit all the companies let's just visit all the companies in your portfolio in your portfolio in your portfolio you know you know you know because i i know his in the way his because i i know his in the way his because i i know his in the way his brain works he's a hot the unfortunate brain works he's a hot the unfortunate brain works he's a hot the unfortunate thing with him is he's too overdosed and thing with him is he's too overdosed and thing with him is he's too overdosed and on graham on graham on graham and two under dosed on monger but i'm and two under dosed on monger but i'm and two under dosed on monger but i'm working on that he's a work in progress working on that he's a work in progress working on that he's a work in progress in spite of the 6 and 96 rule i'm hoping in spite of the 6 and 96 rule i'm hoping in spite of the 6 and 96 rule i'm hoping there's some possibility to tweak him there's some possibility to tweak him there's some possibility to tweak him we'll see so we'll see so we'll see so i remember i told him listen i remember i told him listen i remember i told him listen are these guys crooks are these guys crooks are these guys crooks is this like an outright fraud is this like an outright fraud is this like an outright fraud like and and i spent an afternoon with like and and i spent an afternoon with like and and i spent an afternoon with the founder the founder the founder visiting these warehouses visiting these warehouses visiting these warehouses you know we went one after the other you know we went one after the other you know we went one after the other after the other so they were real after the other so they were real after the other so they were real i mean they were real
Otheri mean they were real they were a very strong sense of pride in what they had and i could see that the company did a poor job of laying out its story and they didn't fully i still don't think they fully understand or appreciate the importance of educating your investors they tend to do a not so good job in my opinion on that so i could see that the value was there i repeatedly asked my friend what am i missing why would this thing sell at this price and this sell at this price and and then the whole pie is selling at and he said i can't tell you there's no answer i can give you which would so i i said i can't really find anything i i tried to find if there was a fraud and i could see why so this company a 20 million market cap would be so below the radar of almost any institutional investor they wouldn't even look at it and even
Otherthey wouldn't even look at it and even if they looked at itif they looked at itif they looked at it the financials were so convolutedthe financials were so convolutedthe financials were so convoluted uh they wouldn't be able to make head oruh they wouldn't be able to make head oruh they wouldn't be able to make head or tail of themtail of themtail of them you know because the thing is that theyou know because the thing is that theyou know because the thing is that the value of the warehousesvalue of the warehousesvalue of the warehouses doesn't show up in the finances becausedoesn't show up in the finances becausedoesn't show up in the finances because that's book valuethat's book valuethat's book value with depreciation they've been buyingwith depreciation they've been buyingwith depreciation they've been buying these things for 30 yearsthese things for 30 yearsthese things for 30 years and it's in lira so you knowand it's in lira so you knowand it's in lira so you know historically up lyra pricinghistorically up lyra pricinghistorically up lyra pricing is nothing to do with current marketis nothing to do with current marketis nothing to do with current market value so the published financialsvalue so the published financialsvalue so the published financials were not going to help you figure outwere not going to help you figure outwere not going to help you figure out what the value of the business waswhat the value of the business waswhat the value of the business was it's not it wasn't thereit's not it wasn't thereit's not it wasn't there and so i could see the reasons whyand so i could see the reasons whyand so i could see the reasons why people would miss itpeople would miss itpeople would miss it but this was a pretty glaring businessbut this was a pretty glaring businessbut this was a pretty glaring business by a lot of people but turkey hasby a lot of people but turkey hasby a lot of people but turkey has many many businesses not to this extentmany many businesses not to this extentmany many businesses not to this extent but it has many businesses which arebut it has many businesses which arebut it has many businesses which are widely mispricedwidely mispricedwidely mispriced just because it's such a difficult placejust because it's such a difficult placejust because it's such a difficult place to be with all the backwards policiesto be with all the backwards policies
Otherto be with all the backwards policies they have awesomethey have awesomethey have awesome noted uh something to keep in mind um inoted uh something to keep in mind um inoted uh something to keep in mind um i guess some of the thing of things toguess some of the thing of things toguess some of the thing of things to learn early on and keep in mind somelearn early on and keep in mind somelearn early on and keep in mind some really valuable advice for everyonereally valuable advice for everyonereally valuable advice for everyone there um so we have had a few questionsthere um so we have had a few questionsthere um so we have had a few questions in the chat so i saw uh julie asked ain the chat so i saw uh julie asked ain the chat so i saw uh julie asked a question about sort of switching fromquestion about sort of switching fromquestion about sort of switching from uh sort of towards more quality orienteduh sort of towards more quality orienteduh sort of towards more quality oriented investing which i guess we've alreadyinvesting which i guess we've alreadyinvesting which i guess we've already touched upon and what we will have totouched upon and what we will have totouched upon and what we will have to probably go away from any questions onprobably go away from any questions onprobably go away from any questions on on current holdings monash i think weon current holdings monash i think weon current holdings monash i think we can't touch oncan't touch oncan't touch on you know that there's a question hereyou know that there's a question hereyou know that there's a question here about likeabout likeabout like why did you sell shinoku and buy morewhy did you sell shinoku and buy morewhy did you sell shinoku and buy more alibaba i think we we probably can'talibaba i think we we probably can'talibaba i think we we probably can't talk about that yeah i would i wouldtalk about that yeah i would i wouldtalk about that yeah i would i would like to reduce those questionslike to reduce those questionslike to reduce those questions yeah i'm happy to answer them at someyeah i'm happy to answer them at someyeah i'm happy to answer them at some point when we're not you know in thosepoint when we're not you know in thosepoint when we're not you know in those talks sotalks sotalks so luke i saw you asked a question wouldluke i saw you asked a question wouldluke i saw you asked a question would you like me to read it out or do you
Questioneryou like me to read it out or do you want to maybe ask it yourself i was just reading through the blog you had up and you were talking about um your cloned portfolio and the way it performed but i saw like a lot of the guys who had really performed well in sort of like the 2000s and like earlier than that have they closed their funds and their funds really haven't performed as well recently and i was sort of wondering when you decide to sort of cut your losses if you if you previously thought someone was performing well because i guess you might have some kind of emotional attachment or like if they have one bad year i guess you will let it off but like at what point do you sort of that maybe the the skills go on or they've lost their edge or something like that
Otherwell i mean i think cloning cloning is a very powerful mental model
Questionerpowerful mental model and i don't fully understand why but andand i don't fully understand why but andand i don't fully understand why but and i've been a student of learning for morei've been a student of learning for morei've been a student of learning for more than i would say more thanthan i would say more thanthan i would say more than 33 34 years and it's given me a huge33 34 years and it's given me a huge33 34 years and it's given me a huge edge toedge toedge to understand as much as i do about cloningunderstand as much as i do about cloningunderstand as much as i do about cloning but i still don't understand much one ofbut i still don't understand much one ofbut i still don't understand much one of the main things i don't understand aboutthe main things i don't understand aboutthe main things i don't understand about cloning iscloning iscloning is why so many humans have an aversion towhy so many humans have an aversion towhy so many humans have an aversion to ititit what i do understand is just a smallwhat i do understand is just a smallwhat i do understand is just a small sliver of humanssliver of humanssliver of humans embrace it and most don't and so theembrace it and most don't and so theembrace it and most don't and so the ones who do embrace it get an edge butones who do embrace it get an edge butones who do embrace it get an edge but in investing i thinkin investing i thinkin investing i think cloning is acloning is acloning is a approach you should you can take as aapproach you should you can take as aapproach you should you can take as a starting point of researchstarting point of researchstarting point of research so if i find that iso if i find that iso if i find that i respect some investor and understand howrespect some investor and understand howrespect some investor and understand how their brain works and i look at theirtheir brain works and i look at theirtheir brain works and i look at their portfolio and i find some companies andportfolio and i find some companies andportfolio and i find some companies and once ionce ionce i look at their portfolio from then onlook at their portfolio from then onlook at their portfolio from then on the cloning piece is historythe cloning piece is historythe cloning piece is history and i have to turn my own brain on soand i have to turn my own brain on soand i have to turn my own brain on so it's just
Questionerit's justit's just a tool to get a short lista tool to get a short lista tool to get a short list it doesn't really matter whatit doesn't really matter whatit doesn't really matter what that investor does in the future or inthat investor does in the future or inthat investor does in the future or in the pastthe pastthe past or whether they have lost their way oror whether they have lost their way oror whether they have lost their way or whatever has happenedwhatever has happenedwhatever has happened you're looking at a specific positionyou're looking at a specific positionyou're looking at a specific position they've made and you're just using it asthey've made and you're just using it asthey've made and you're just using it as a way to reduce thea way to reduce thea way to reduce the funnelfunnelfunnel of stocks to look at soof stocks to look at soof stocks to look at so if you identified you know five or tenif you identified you know five or tenif you identified you know five or ten great investorsgreat investorsgreat investors and you just spent your time looking atand you just spent your time looking atand you just spent your time looking at their portfolio that is a way better waytheir portfolio that is a way better waytheir portfolio that is a way better way tototo invest than throwing dartsinvest than throwing dartsinvest than throwing darts or running some you know quantitativeor running some you know quantitativeor running some you know quantitative screens or whatever elsescreens or whatever elsescreens or whatever else to get a short list because at the endto get a short list because at the endto get a short list because at the end of the day investing has a basic problemof the day investing has a basic problemof the day investing has a basic problem the basic problem is the data set is toothe basic problem is the data set is toothe basic problem is the data set is too largelargelarge there are 50 000 public stocks in thethere are 50 000 public stocks in thethere are 50 000 public stocks in the world even if i spend all my time on onworld even if i spend all my time on onworld even if i spend all my time on on them i would never be able to become anthem i would never be able to become anthem i would never be able to become an expert on even 5 000 of them or even 500expert on even 5 000 of them or even 500expert on even 5 000 of them or even 500 of them or even
Questionerof them or even 100 of them okay it's just the data sets too large so we need some way of culling the data and cloning is a great way to call that data set thank you
Otherthank you so we have another question here from from miho but that that's also related to sort of current holdings so sorry we'll have to skip that i have one more from from harry as well so so harry's asking maybe this has sort of to do with with the throwing darts idea and so harry says like considering how studies show that statistically only about 55 percent of investment decisions are directionally correct why would you call someone with a good track record an investment expert and not just an extremely lucky outlier i didn't i didn't fully follow the question can you just repeat that again yes so harry's asking um considering studies show that statistically only
Questionerstatistically only 55 of investment decisions um i think 55 of investment decisions um i think 55 of investment decisions um i think what he means is investment decisions by investment professionals why would you call someone with a yeah with a good track record an expert and not just the lucky outlier
Questioneri mean i think so i think investing investing is one of the broadest disciplines you can engage in the kinds of factors that affect the future performance of a business are are numerous they cross boundaries of different disciplines and so one really has to be kind of a you know swiss army knife kind of thinker of different ways and the world is a very uncertain place so if we are trying to figure out what a business looks like five years or 10 years or 15 years from now by definition that's going to have a high error rate there are so many variables that can change those outcomes right and so john templeton said that
Questionerjohn templeton said that even the best investor will be right only two out of three times and if your batting average is 65 that's the top end of what you can expect of the batting app if i looked at every acquisition berkshire hathaway did they may have done maybe 100 acquisitions in the last 50 years a majority of those acquisitions i don't think worked this is warren buffett making these acquisitions the supposedly the best investor of all time and there were lots and lots of bets he made on retailers that did not work so when i look at someone like warren buffett and i look at his track record when he's bought retailers it's a terrible track record when i look at his track record when he's invested in banks it's a perfect record he's never lost money but he's invested in airlines and that hasn't worked so well he's invested in retailers and that
Questionerhe's invested in retailers and that hasn't worked so well in a number of areas that he went into it didn't work so well but i gave you the extreme example of my investment in amazon if i had just kept that investment it was it was just five percent and the other 95 percent was all mistakes and they all went to zero it wouldn't have mattered okay so in that case it would have tolerated a 95 error rate and still had a incredible outcome so the interesting thing about investing is because the returns you can generate from some businesses are so asymmetric with the risk taken that this is a business that can tolerate a pretty high error rate so one should be under no illusions that one is going to be right all the time or even right 40 percent of the time or 50 of the time as long as you are patient very patient as long as you stick to your circle of
Otheras long as you stick to your circle of competence invest in things that you understand well even if you're patient and stick to your circle confidence you'll still have an error rate like buffett did but it won't matter he still became the wealthiest guy on the planet it didn't really matter mistakes are part of the landscape we embrace them we learn from them don't try to learn too much from them and we keep moving forward
Questionerso shall we wrap it up maybe one more question i i think yeah maybe we're sort of running towards the end of time but um i've had a quite a funny one from that i'm here i think this is a sort of nice light-hearted way to to wrap up the chat as well um so usually we'd wrap up with a sort of like advice to students thing but i think this is this is better so um mitham is asking who does guys fear admire more out of uh you and uh buffett
Questioneradmire more out of uh you and uh buffett who does guys fear admire more than buffett or me
Questioneryeah that is sorry who does he admire more out of yourself or uh or buff it
Otheri don't know you know the thing is that what's happened with guy is that he comes with me sometimes on my eska page to india and when i'm meeting all these different indian companies and a few years back you know he the great thing about him is that he takes in a lot of data but he already hardly acts on it so his his propensity to make changes changes in portfolio is very low and that's a huge edge in investing if you have high degree of patience and such and in fact you told me once you know i don't trust myself to make decisions so i try to make as few decisions as possible we were visiting this company in in india in 2018 or 2019 called the indian energy exchange i felt
Questionercalled the indian energy exchange i felt likelikelike out of maybe 200 plus management teamsout of maybe 200 plus management teamsout of maybe 200 plus management teams that i've met in india and companiesthat i've met in india and companiesthat i've met in india and companies that visitedthat visitedthat visited iex wasiex wasiex was by far the bestby far the bestby far the best highest quality businesshighest quality businesshighest quality business very high quality management and anvery high quality management and anvery high quality management and an incredible business model and it wasincredible business model and it wasincredible business model and it was ridiculously expensiveridiculously expensiveridiculously expensive okayokayokay and basically they are an energyand basically they are an energyand basically they are an energy exchange soexchange soexchange so at that time about three percent ofat that time about three percent ofat that time about three percent of india the electricity was flowingindia the electricity was flowingindia the electricity was flowing through them andthrough them andthrough them and they collected about a one percent feethey collected about a one percent feethey collected about a one percent fee of the amount transacted through theirof the amount transacted through theirof the amount transacted through their servers so they had no cost so about 70servers so they had no cost so about 70servers so they had no cost so about 70 of revenue was net income and that 3 wasof revenue was net income and that 3 wasof revenue was net income and that 3 was going to grow pretty spectacularly andgoing to grow pretty spectacularly andgoing to grow pretty spectacularly and india's per capita energy usage alsoindia's per capita energy usage alsoindia's per capita energy usage also would grow spectacularly over time sowould grow spectacularly over time sowould grow spectacularly over time so there was a huge tailwinds for a longthere was a huge tailwinds for a longthere was a huge tailwinds for a long time because it was such a criticaltime because it was such a criticaltime because it was such a critical asset for india foreigners are notasset for india foreigners are notasset for india foreigners are not allowed by more than five percentallowed by more than five percentallowed by more than five percent of the companyof the companyof the company so
Questionersoso guy loves theseguy loves theseguy loves these guy hates businesses like reisas inguy hates businesses like reisas inguy hates businesses like reisas in turkeyturkeyturkey i cannot get him to even come with me toi cannot get him to even come with me toi cannot get him to even come with me to istanbul okayistanbul okayistanbul okay much less ever invest in somemuch less ever invest in somemuch less ever invest in some warehouse operator in turkeywarehouse operator in turkeywarehouse operator in turkey but he was all over iex he loved iex andbut he was all over iex he loved iex andbut he was all over iex he loved iex and i think he bought like 4.4 millioni think he bought like 4.4 millioni think he bought like 4.4 million sharessharesshares i think at that time they were like twoi think at that time they were like twoi think at that time they were like two dollars a share or something so he maydollars a share or something so he maydollars a share or something so he may be invested about 9 million iex has gonebe invested about 9 million iex has gonebe invested about 9 million iex has gone bananasbananasbananas the business is going crazy and whateverthe business is going crazy and whateverthe business is going crazy and whatever else it'selse it'selse it's up like five six timesup like five six timesup like five six times since thensince thensince then and so nowand so nowand so now i think for him iex has becomei think for him iex has becomei think for him iex has become more than a 50 million dollar positionmore than a 50 million dollar positionmore than a 50 million dollar position it's a significant portion of his fundit's a significant portion of his fundit's a significant portion of his fund it might be one of the largest positionsit might be one of the largest positionsit might be one of the largest positions in his fund and i think he's tornin his fund and i think he's tornin his fund and i think he's torn between isbetween isbetween is monishmonishmonish the bestthe bestthe best or his monish godor his monish godor his monish god is some vacillating somewhere betweenis some vacillating somewhere betweenis some vacillating somewhere between those twothose twothose two sososo i don't think if you talk to guys peeri don't think if you talk to guys peeri don't think if you talk to guys peer maybe you should bring him onmaybe you should bring him onmaybe you should bring him on uh that these days i think he's created
Questioneruh that these days i think he's created like an altar to monish and uh he worships at that altar i mean like like last night i think the iex price went up at one point twenty percent in a single day you know so it was it's a but it but they've got some incredible tailwinds and thankfully i was also able to buy some iex in spite of my resume in fact i i used to own 4.99 of the company and i was very dumb when i sold during covid but we still have a a good amount and so similar position to guy i think so it's worked out great but i think i don't think i think guy would maybe admire his parents more but i think he worship worships at the church of monash especially after i well if ever we have a guy come on as a speaker we'll make sure to ask him whether he has one of these uh mono shulkers at home yeah and i think maybe you should
Questioneryeah and i think maybe you should surprise him and start the conversation in indian energy exchange it'll bring a big smile awesome well um anyway i think i think with that we probably are at time i know we've run over a bit but thank you so much monash for speaking with us uh that was such a useful conversation and a lot of really valuable advice for everyone here on the call to take home especially as a lot of us sort of begin begin careers in investing so one day trying to maybe replicate for a small small uh degree while you've done managed so yeah just on behalf of everyone on behalf of the fund thank you so much for coming down and
Otheryeah well i i very much enjoyed the session and i think like i said you guys have uh i have a wonderful part of the world and a wonderful institution a wonderful institution and i wish you all the best so thank you very much thank you monis all right have a good evening much