Other[Music][Music][Music] foreign[Music][Music][Music]
QuestionerI have a I have aI have a I have aI have a I have a selfish reasonselfish reasonselfish reason to be here in front of you and theto be here in front of you and theto be here in front of you and the selfish reason is that the best way toselfish reason is that the best way toselfish reason is that the best way to learn is to teach and so what I'm reallylearn is to teach and so what I'm reallylearn is to teach and so what I'm really trying to do here is teach myselftrying to do here is teach myselftrying to do here is teach myself so thank you for trying to educate meso thank you for trying to educate meso thank you for trying to educate me it's it's great I haven't made thisit's it's great I haven't made thisit's it's great I haven't made this presentation before so it's relativelypresentation before so it's relativelypresentation before so it's relatively new and I'm still trying tonew and I'm still trying tonew and I'm still trying to figure out some of the bells andfigure out some of the bells andfigure out some of the bells and whistles and I actually don't have allwhistles and I actually don't have allwhistles and I actually don't have all the answers so I think I'm I'm hoping Ithe answers so I think I'm I'm hoping Ithe answers so I think I'm I'm hoping I get more clarity as we go on andget more clarity as we go on andget more clarity as we go on and some of you might have seen Yellowstonesome of you might have seen Yellowstonesome of you might have seen Yellowstone you know the series who's seenyou know the series who's seenyou know the series who's seen YellowstoneYellowstoneYellowstone we've got a few Yellowstone fans I thinkwe've got a few Yellowstone fans I thinkwe've got a few Yellowstone fans I think I was watching the what is it the 1889I was watching the what is it the 1889I was watching the what is it the 1889 or something the secondor something the secondor something the second right the second one and you know thatright the second one and you know thatright the second one and you know that they're heading west and and there's onethey're heading west and and there's onethey're heading west and and there's one particular scene when the Nativeparticular scene when the Nativeparticular scene when the Native Americans are are attacking and thenAmericans are are attacking and thenAmericans are are attacking and then they they say you know circle the wagons
Questionerthey they say you know circle the wagons right I mean there's a you might you guys might not remember that but there's a particular point in which they actually circle the wagons and circle the wagons actually is a term that comes from the 19th century and we had these large Wagon Trails going west you know claiming land and conquering the frontier if you will and when the Native Americans attacked the best defensive posture was to put the wagons in a circle and then try to defend as best as you can with that configuration and I thought that that analogy might be a good way to think about investing in terms of circling the wagon so I'll just go through a few slides and then we'll go through what you guys want to talk about so this year in Buffett's letter he had a couple of very candid and great quotes you know he said over the years
WarrenI've made many mistakes and our extensive collection of businesses consist of a few Enterprises that have truly extraordinary economics many that enjoy very good economic characteristics and a large group that are marginal you know so actually if you look at the the 80 plus Acquisitions that Berkshire has done Warren and Charlie probably themselves would acknowledge that probably at least have are outright mistakes and this is you know the the best practitioners of the art and then he goes on to say you know in 58 years of Berkshire management most of my Capital allocation decisions have been no better than so-so and our satisfactory results have been the product of about a dozen truly great decisions and which he's saying is about once every five years
Questionerso I try to basically look at this period from like 65 to 22 and so you
Questionerperiod from like 65 to 22 and so you know you have let's say 80 Acquisitions in this 58-year period in this 58-year period in this 58-year period he probably bought at least 210 stocks I he probably bought at least 210 stocks I he probably bought at least 210 stocks I used 210 for my convenience I get to a used 210 for my convenience I get to a used 210 for my convenience I get to a round number you know I like to work round number you know I like to work round number you know I like to work with round numbers but it's probably a with round numbers but it's probably a with round numbers but it's probably a larger number than 210. and his key larger number than 210. and his key larger number than 210. and his key hires I'm I'm expecting that in the last hires I'm I'm expecting that in the last hires I'm I'm expecting that in the last 58 years he had at least 10 key hires 58 years he had at least 10 key hires 58 years he had at least 10 key hires you know which were very important to you know which were very important to you know which were very important to Berkshire so if you look at these Berkshire so if you look at these Berkshire so if you look at these decisions there's about 300 important decisions there's about 300 important decisions there's about 300 important decisions and he's saying that 12. move decisions and he's saying that 12. move decisions and he's saying that 12. move the needle and so basically it ends up the needle and so basically it ends up the needle and so basically it ends up being something like four percent being something like four percent being something like four percent and we have four percent from the like and we have four percent from the like and we have four percent from the like the gods of investing which is uh the gods of investing which is uh the gods of investing which is uh doesn't doesn't give us a lot of doesn't doesn't give us a lot of doesn't doesn't give us a lot of confidence and I took a stab at what the confidence and I took a stab at what the confidence and I took a stab at what the 12 businesses might be or the 12 12 businesses might be or the 12 12 businesses might be or the 12 decisions might be one of them we know decisions might be one of them we know decisions might be one of them we know is Ajit so we put his picture up there is Ajit so we put his picture up there
Questioneris Ajit so we put his picture up there because you know they've always pointed out that the single best decision they made was the search fee they paid to hire a Jeep chain and there's a guy who used to I think theoretically still works at Berkshire Michael Goldberg and Michael Goldberg I think now must be in his 80s and Michael Goldberg was the guy who hired Ajit and he hasn't really been active in Berkshire for probably more than 20 years so Warren kept him on the payroll and every year he gets a million dollars from Berkshire and if he lived to a one to till 150 they would keep paying him the million because it's still a great deal so if you look at the other candidates you know Geico is probably one of those and then Coke Amex sees Apple BNSF Mid-American National Indemnity Gillette Washington Post and then Cap City the ABC I mean I think it might be that one
QuestionerABC I mean I think it might be that one or two of these might be off and Warren or two of these might be off and Warren or two of these might be off and Warren might say well you've got maybe 90 or 80 might say well you've got maybe 90 or 80 might say well you've got maybe 90 or 80 but most of it not directionally correct but most of it not directionally correct but most of it not directionally correct that these were the these were the large that these were the these were the large that these were the these were the large or the most important decisions that or the most important decisions that or the most important decisions that happened over almost 60 years happened over almost 60 years happened over almost 60 years and and and what was really important if you go back what was really important if you go back what was really important if you go back to these decisions to these decisions to these decisions the important thing was not that they the important thing was not that they the important thing was not that they bought these 12 or they hired ajith the bought these 12 or they hired ajith the bought these 12 or they hired ajith the important thing was important thing was important thing was they kept them all they kept them all they kept them all so it wasn't the buy that was because so it wasn't the buy that was because so it wasn't the buy that was because they had you know they had you know they had you know 288 mediocre to poor decisions they kept 288 mediocre to poor decisions they kept 288 mediocre to poor decisions they kept those too those too those too right so basically in effect they kept right so basically in effect they kept right so basically in effect they kept all 300 they lived with all 300 all 300 they lived with all 300 all 300 they lived with all 300 decisions and it was really important decisions and it was really important decisions and it was really important for these 12 not to be have been deleted for these 12 not to be have been deleted for these 12 not to be have been deleted or sold so basically when we look at or sold so basically when we look at or sold so basically when we look at this kind of statistic what we find is this kind of statistic what we find is this kind of statistic what we find is that investing is a very forgiving that investing is a very forgiving that investing is a very forgiving business business business and but it is forgiving
Questionerand but it is forgiving if you don't cut the flowers and you don't water the weeds you know so the the difficulty comes when you start cutting flowers and watering weeds but we see this pattern so when we go and look at his record you know with just a dozen decisions the you know it's just completely he's completely trounced the s p so even with this four percent great decisions they are like you know at almost four million percent in annual returns and basically the s p is just a very small fraction of that and I want to go over a few other examples because I want to show that it wasn't that Warren and Charlie were anomalies here I think Warren and Charlie are more kind of par for the course in terms of how things work so many of you may be familiar there's a South African company called naspers and naspers used to be a newspaper publisher
Questionernaspers used to be a newspaper publisher and they've been around for about a hundred years and in 19 I think 1999 or 1998 they brought in a Hired Gun CEO Cruz Becker and when they brought in uh Goose Becker basically at that time naspers had a 500 million dollar market cap and Cruz in 2001 took 32 million dollars of that and bought a obscure Chinese company called tencent and he got a 46 percent stake 46 and a half percent stake in 10 cent for the 32 million and in fact interestingly they he they bought the steak from Lee kashing he was a billionaire in Hong Kong who's a very Savvy investor so it actually was a private transaction with likashing selling who's probably you know kicking himself or selling and if we look at what happened so naspers has a 500 million dollar market value in 2004 when tencent went public the market the value of 10 cent was about 900
Questionerthe value of 10 cent was about 900 million at the IPO and so the nasper's chair was almost like north of 400 million which would have been most of the value of the company in the company was about 500 million it was now approaching like half the value they sold a little bit of a few shares at the IPO but they pretty much did nothing after that so from 2004 to 2018 they never sold a single share of 10 cent and and and if you look at it in 2018 10th enter the market cap of 530 billion so it went from 900 million 10 billion 50 billion 100 billion and they're not touching it at this point you know when tencent is 100 billion dollar market cap it's like 99 of the value of naspers is sitting in 10 cent you know it's basically almost the whole thing and it's sitting in a company that they do not control and it's sitting in a company that is in
Otherand it's sitting in a company that is in China and through all of that China and through all of that China and through all of that Goose Becker doesn't sell and amazingly the family because he's not the family because he's not the family because he's not from the family from the family from the family the the family with the Hired Gun lets the the family with the Hired Gun lets the the family with the Hired Gun lets The Hired Gun do what he wants and I The Hired Gun do what he wants and I The Hired Gun do what he wants and I just want to give you a story about just want to give you a story about just want to give you a story about Goose Becker When when he was being Goose Becker When when he was being Goose Becker When when he was being hired so he told the family hired so he told the family hired so he told the family I do not want a salary please make my I do not want a salary please make my I do not want a salary please make my salary zero salary zero salary zero I also don't want any bonus please make I also don't want any bonus please make I also don't want any bonus please make my bonus zero and and he said all I want my bonus zero and and he said all I want my bonus zero and and he said all I want is whatever value creation occurs is whatever value creation occurs is whatever value creation occurs on my watch on my watch on my watch just six percent of that comes to me comes to me comes to me and the family said where do we sign and the family said where do we sign and the family said where do we sign right and so it was a great win-win for right and so it was a great win-win for right and so it was a great win-win for both sides right I mean I mean everybody both sides right I mean I mean everybody both sides right I mean I mean everybody won and to their credit even when it got won and to their credit even when it got won and to their credit even when it got to 100 billion or 200 billion of 10 cent to 100 billion or 200 billion of 10 cent to 100 billion or 200 billion of 10 cent market cap they just they sat there I market cap they just they sat there I market cap they just they sat there I think the reason they had the Comfort to think the reason they had the Comfort to think the reason they had the Comfort to sit there was that goosebacker was on sit there was that goosebacker was on sit there was that goosebacker was on the board
Otherthe board and he had a chance to spend a lot of time with Pony ma the founder of tencent who is a very unusual uh probably one of the best entrepreneurs we've ever had in the history of Entrepreneurship so they kept anyway so even in 2018 when it was a 170 billion dollar value and they started to in 2018 to close the gap between the naspers nav and that and the look through value they started to sell but even even today basically you know they've for the most part held the position and it's like a 50 compounded over like you know 20 plus years and again the important thing was not that they invested in tencent you know because they invested in many other things the important thing was that they didn't touch it and and even today in 2023 naspers is the largest shareholder of tencent and on a per share basis so if you look at each naspers or process
Otheryou look at each naspers or process share their look through ownership of 10 cent has only gone up so even as they sold the look through ownership per share has gone up because they've done BuyBacks and again the circling the wagons around 10 cent was really key then we have Rakesh janjanwala from India some of you may know him and he passed away last year unfortunately he was only 62. and Rakesh was in exceptional investor but he never managed money for others he only managed money for his own account and until maybe a year or two before his death he really never started any businesses so it was all the wealth was created organically from his investing and he started with four hundred dollars when he was 25 years old and when he passed away it was 5.8 billion and which was a tremendous you know 56 compounded over 36 37 years in 2003 Rakesh bought 5.9 percent of a
Questionerin 2003 Rakesh bought 5.9 percent of ain 2003 Rakesh bought 5.9 percent of a company in India called Titan Industriescompany in India called Titan Industriescompany in India called Titan Industries which has a brand called tanishq andwhich has a brand called tanishq andwhich has a brand called tanishq and tanishq is basically a jewelry andtanishq is basically a jewelry andtanishq is basically a jewelry and fashion retailer so he owned 5.9 percentfashion retailer so he owned 5.9 percentfashion retailer so he owned 5.9 percent and then by 2011 he had increased hisand then by 2011 he had increased hisand then by 2011 he had increased his stake in Titan to 11 percentstake in Titan to 11 percentstake in Titan to 11 percent the second six percent or so that hethe second six percent or so that hethe second six percent or so that he bought or five percent that he boughtbought or five percent that he boughtbought or five percent that he bought he paid almost 20 times what he paid forhe paid almost 20 times what he paid forhe paid almost 20 times what he paid for the first six percentthe first six percentthe first six percent which is psychologically really hard forwhich is psychologically really hard forwhich is psychologically really hard for us to do you know we investors get tous to do you know we investors get tous to do you know we investors get to anchoring you know I bought something atanchoring you know I bought something atanchoring you know I bought something at ten dollars I'm not going to pay 200 forten dollars I'm not going to pay 200 forten dollars I'm not going to pay 200 for the same thing you know but hethe same thing you know but hethe same thing you know but he amazingly kept adding to his his Titanamazingly kept adding to his his Titanamazingly kept adding to his his Titan position at higher and higher prices andposition at higher and higher prices andposition at higher and higher prices and basically that's very difficult to dobasically that's very difficult to dobasically that's very difficult to do psychologically and when he passed awaypsychologically and when he passed awaypsychologically and when he passed away you know so he sold some as he wentyou know so he sold some as he wentyou know so he sold some as he went along and so on but we passed away healong and so on but we passed away healong and so on but we passed away he still owned 5.2 percent of Titan valued
Warrenstill owned 5.2 percent of Titan valued at 1.4 billion I'm excluding all dividends there was some pretty significant dividends over the years so the basically the 3.7 million became more than 1.4 billion and if everything else had gone to zero after 2003 for him he would still be 400 to 1.4 billion it would still have been a tremendous record and the amazing thing about Titan is that it's still firing on all cylinders and it's actually even today in my opinion still embryonic in its in its growth and development it's a remarkable amazing company and it's been a great journey for Rakesh and his wife who now looks after the portfolio I'd be really surprised if she trimmed tightened you know I think I think she probably understand it better than he did and most of you are probably familiar with Nick sleep you know Nick sleeps a good friend of mine and he ran
Questionersleeps a good friend of mine and he ransleeps a good friend of mine and he ran the Nomad partnership for about 13 yearsthe Nomad partnership for about 13 yearsthe Nomad partnership for about 13 years with his friend uh case Zakaria and youwith his friend uh case Zakaria and youwith his friend uh case Zakaria and you know when they when they shut down theknow when they when they shut down theknow when they when they shut down the fund in 2014 it had about three billionfund in 2014 it had about three billionfund in 2014 it had about three billion under management at the time and Iunder management at the time and Iunder management at the time and I remember one of Nick's LPSremember one of Nick's LPSremember one of Nick's LPS calling me at that time in a verycalling me at that time in a verycalling me at that time in a very panicked modepanicked modepanicked mode and this was a very large universityand this was a very large universityand this was a very large university endowment and so they're saying oh youendowment and so they're saying oh youendowment and so they're saying oh you know Nick is returning our money and weknow Nick is returning our money and weknow Nick is returning our money and we don't want the money we want him to keepdon't want the money we want him to keepdon't want the money we want him to keep running it and I I told them I said herunning it and I I told them I said herunning it and I I told them I said he told you what to dotold you what to dotold you what to do he told you to take the money and justhe told you to take the money and justhe told you to take the money and just put it in three stocks equally Amazonput it in three stocks equally Amazonput it in three stocks equally Amazon Costco and Berkshire so now he's tellingCostco and Berkshire so now he's tellingCostco and Berkshire so now he's telling you that you don't need to pay me anyyou that you don't need to pay me anyyou that you don't need to pay me any fees anymore and you just buy thesefees anymore and you just buy thesefees anymore and you just buy these three stocks and you don't touch it forthree stocks and you don't touch it forthree stocks and you don't touch it for 10 years10 years10 years so he said yeah but we can't do thatso he said yeah but we can't do thatso he said yeah but we can't do that I said why can't you do that he saysI said why can't you do that he saysI said why can't you do that he says we're not allowed to buy stocks I said
Questionerwe're not allowed to buy stocks I said
Otherwe're not allowed to buy stocks I said change the Mandate
Otherchange the Mandate
Otherchange the Mandate [Laughter]
Other[Laughter]
Other[Laughter] but this is the way the world functions
Warrenbut this is the way the world functions
Warrenyou know they they were so distressed
Warrenand they never bought these companies
Warrenand Amazon was I think about before
Warrenbefore the split it was the 115th of
Warrenthis price it is today I mean it's just
Warrenit says it was a radical change and
Warrenanyway what what Nick and Zach did for
Warrentheir own portfolio is they allocated a
Warrenthird each to these three companies and
Warrenthen Amazon became 70 of his portfolio
Warrenwhich he was getting uncomfortable with
Warrenso he sold half to buy a digital
Warrenretailer you know retail is terrible
Warrenit's not good so Asos has not done well
Warrenbut I don't think Nick is suffering you
Warrenknow he's okay
Warrenand basically I met him I think last
WarrenOctober so he still has the one-third
WarrenAmazon which keeps going and so that's
Warrenworked out very well so you know in 2004
Questionerworked out very well so you know in 2004 they had put 20 of their portfolio intothey had put 20 of their portfolio intothey had put 20 of their portfolio into Amazon when they were running the fundAmazon when they were running the fundAmazon when they were running the fund and a number of his investors exited atand a number of his investors exited atand a number of his investors exited at that time because they thought it wasthat time because they thought it wasthat time because they thought it was too concentratedtoo concentratedtoo concentrated and they said oh we are reallyand they said oh we are reallyand they said oh we are really uncomfortable with this concentration souncomfortable with this concentration souncomfortable with this concentration so they left the fund then later when itthey left the fund then later when itthey left the fund then later when it became about 33 or something even morebecame about 33 or something even morebecame about 33 or something even more leftleftleft because they were very uncomfortablebecause they were very uncomfortablebecause they were very uncomfortable with the with the whole situation but ifwith the with the whole situation but ifwith the with the whole situation but if if he has if everything else in hisif he has if everything else in hisif he has if everything else in his portfolio had gone to zero in 2004.portfolio had gone to zero in 2004.portfolio had gone to zero in 2004. they would have still beaten the s p bythey would have still beaten the s p bythey would have still beaten the s p by six percentage points with just the 20six percentage points with just the 20six percentage points with just the 20 in Amazon alone soin Amazon alone soin Amazon alone so Nick and Zach had many many mistakesNick and Zach had many many mistakesNick and Zach had many many mistakes along the way many Investments they madealong the way many Investments they madealong the way many Investments they made did not work but it didn't matter youdid not work but it didn't matter youdid not work but it didn't matter you know you in their case you could haveknow you in their case you could haveknow you in their case you could have been wrong 80 of the time and it didn'tbeen wrong 80 of the time and it didn'tbeen wrong 80 of the time and it didn't matter and it still worked out workedmatter and it still worked out workedmatter and it still worked out worked out very well
Questionerout very well and it's really funny just to go back so Nick you know they still have their office in London and they've given part of the office to some friends of theirs who basically I think they run a Commodities fund which had not done well and Nick was always telling them can you just put like five percent of the fund in Amazon and they said we're not allowed to do that and so they keep suffering and that's the way the world works and so then we have Ben Graham and you know Ben Graham very famous for net net investing and you know deep value and so on but in 1948 he bought half of Geico and he bought half of Geico for 712 000. and Ben's you know Cornerstone of the grammian approach to investing was that you buy things well below liquidation value and and definitely well below intrinsic value and as it gets approved when he
Questionervalue and as it gets approved when he starts approaching those valuations you sell them you know and then you go back and find something else he never applied that to Geico he applied that to all his other stocks he never applied it to Geico and so when he passes away in 76 that 712 000 is 95 million excluding dividends and he never wrote about it so all the Ben Graham books never talk about the fact that the biggest success came from buying a great business it did not come from all the you know great mathematical games of you know net net investing and all of that and the other thing is that he would be very Diversified but he put 25 of the portfolio into Geico and basically if everything else again had gone to zero he would have still been done twice the s p you know 12.9 percent versus 6.9 percent and like I said it was it's never been mentioned you know and when
Questionernever been mentioned you know and whennever been mentioned you know and when he passed away it was more than half ofhe passed away it was more than half ofhe passed away it was more than half of his net worthhis net worthhis net worth and then you know we look at thisand then you know we look at thisand then you know we look at this concept the late 60s and early 70s someconcept the late 60s and early 70s someconcept the late 60s and early 70s some of you may remember the Nifty 50. so theof you may remember the Nifty 50. so theof you may remember the Nifty 50. so the idea at that time was that there wereidea at that time was that there wereidea at that time was that there were these 50 great businesses you know Bluethese 50 great businesses you know Bluethese 50 great businesses you know Blue Chip companies in the US and you shouldChip companies in the US and you shouldChip companies in the US and you should you would invest in all 50 of them likeyou would invest in all 50 of them likeyou would invest in all 50 of them like two percent into each one and valuationstwo percent into each one and valuationstwo percent into each one and valuations didn't matterdidn't matterdidn't matter it didn't matter what price they were atit didn't matter what price they were atit didn't matter what price they were at so these were like McDonald's and Cokeso these were like McDonald's and Cokeso these were like McDonald's and Coke and PNG and Polaroid and Xerox and alland PNG and Polaroid and Xerox and alland PNG and Polaroid and Xerox and all of these companies and there is someof these companies and there is someof these companies and there is some controversy whether Walmart was part ofcontroversy whether Walmart was part ofcontroversy whether Walmart was part of the nifty 50 or not part of the Niftythe nifty 50 or not part of the Niftythe nifty 50 or not part of the Nifty 50. so we'll consider both cases if you50. so we'll consider both cases if you50. so we'll consider both cases if you consider the case that Walmart was partconsider the case that Walmart was partconsider the case that Walmart was part of the Nifty Fifty it Walmart wentof the Nifty Fifty it Walmart wentof the Nifty Fifty it Walmart went public in 1970.public in 1970.public in 1970. and you assume that Walmart is twoand you assume that Walmart is twoand you assume that Walmart is two percent of the nifty 50 in 1970.
Questionerpercent of the nifty 50 in 1970.percent of the nifty 50 in 1970. and the other 98 goes to zero you knowand the other 98 goes to zero you knowand the other 98 goes to zero you know it just all of it 98 error rateit just all of it 98 error rateit just all of it 98 error rate you would have compounded a 13 percentyou would have compounded a 13 percentyou would have compounded a 13 percent versus 10.7 for the s pversus 10.7 for the s pversus 10.7 for the s p so with you know 98 error rate whereso with you know 98 error rate whereso with you know 98 error rate where they have gone to zero where you onlythey have gone to zero where you onlythey have gone to zero where you only left with one stock which was twoleft with one stock which was twoleft with one stock which was two percentpercentpercent you significantly beat the s p andyou significantly beat the s p andyou significantly beat the s p and basically just highlights how some ofbasically just highlights how some ofbasically just highlights how some of these amazing decisions can work outthese amazing decisions can work outthese amazing decisions can work out now if we take the other case which isnow if we take the other case which isnow if we take the other case which is that there's no Walmart in the Nifty 50.that there's no Walmart in the Nifty 50.that there's no Walmart in the Nifty 50. so in 1972 just before the great crashso in 1972 just before the great crashso in 1972 just before the great crash of 7374 you know these companies wereof 7374 you know these companies wereof 7374 you know these companies were trading at crazy numbers you know Xeroxtrading at crazy numbers you know Xeroxtrading at crazy numbers you know Xerox so that 49 times trailing earnings aso that 49 times trailing earnings aso that 49 times trailing earnings a bond was 65 Polaroid was 91 timesbond was 65 Polaroid was 91 timesbond was 65 Polaroid was 91 times trailing earnings andtrailing earnings andtrailing earnings and you know Xerox felt 71 in the next twoyou know Xerox felt 71 in the next twoyou know Xerox felt 71 in the next two years and Avon fell 86 percent Polaroidyears and Avon fell 86 percent Polaroidyears and Avon fell 86 percent Polaroid fell 91 and eventually they all went tofell 91 and eventually they all went tofell 91 and eventually they all went to zero you know they they disappearedzero you know they they disappeared
Questionerzero you know they they disappeared eventuallyeventuallyeventually and the nifty 50 as a group lost halfand the nifty 50 as a group lost halfand the nifty 50 as a group lost half its valueits valueits value in that 7374 periodin that 7374 periodin that 7374 period and so if you look at these High Flyersand so if you look at these High Flyersand so if you look at these High Flyers in the in 1970 do you see really highin the in 1970 do you see really highin the in 1970 do you see really high PES for like McDonald's and Disney andPES for like McDonald's and Disney andPES for like McDonald's and Disney and so onso onso on but even if you even if you bought thebut even if you even if you bought thebut even if you even if you bought the nifty 50 in 1972 at those absolutelynifty 50 in 1972 at those absolutelynifty 50 in 1972 at those absolutely Peak valuations without Walmart in thePeak valuations without Walmart in thePeak valuations without Walmart in the picturepicturepicture from then till now is 10.2 percentfrom then till now is 10.2 percentfrom then till now is 10.2 percent annualized it's just 0.1 percent a yearannualized it's just 0.1 percent a yearannualized it's just 0.1 percent a year below the s p so even with no pricebelow the s p so even with no pricebelow the s p so even with no price disciplinedisciplinediscipline and even with a lot of zeros and evenand even with a lot of zeros and evenand even with a lot of zeros and even with no outlier like Walmart you almostwith no outlier like Walmart you almostwith no outlier like Walmart you almost go Toe to Toe with the s p and it stillgo Toe to Toe with the s p and it stillgo Toe to Toe with the s p and it still works out but the reality is when theworks out but the reality is when theworks out but the reality is when the nifty 50 drop 50 percent in 7374 by 1975nifty 50 drop 50 percent in 7374 by 1975nifty 50 drop 50 percent in 7374 by 1975 no one was in the Nifty Fifty you knowno one was in the Nifty Fifty you knowno one was in the Nifty Fifty you know they had all moved on you know badlythey had all moved on you know badlythey had all moved on you know badly bruised and so on and again staying withbruised and so on and again staying withbruised and so on and again staying with it would have still worked out quiteit would have still worked out quiteit would have still worked out quite wellwellwell and then we have the example of coke so
Questionerand then we have the example of coke so in in 1988 amazingly Berkshire put in 1988 amazingly Berkshire put in 1988 amazingly Berkshire put a quarter of its Book value into a quarter of its Book value into a quarter of its Book value into Coca-Cola 25 percent Coca-Cola 25 percent Coca-Cola 25 percent accompanied it in control accompanied it in control accompanied it in control and from 88 to 98 they had a just a and from 88 to 98 they had a just a and from 88 to 98 they had a just a spectacular you know 32 percent spectacular you know 32 percent spectacular you know 32 percent annualized return and Coke in 98 was annualized return and Coke in 98 was annualized return and Coke in 98 was trading at a nosebleed valuation it was trading at a nosebleed valuation it was trading at a nosebleed valuation it was trading like the nifty 50 was it was and trading like the nifty 50 was it was and trading like the nifty 50 was it was and you know in the meetings in 1999 and in you know in the meetings in 1999 and in you know in the meetings in 1999 and in 2000 Warren couldn't praise the company 2000 Warren couldn't praise the company 2000 Warren couldn't praise the company enough enough enough you know there was such a great company you know there was such a great company you know there was such a great company and then if you look at it from 98 till and then if you look at it from 98 till and then if you look at it from 98 till today it's been just four percent a year today it's been just four percent a year today it's been just four percent a year it's been positive but it's just four it's been positive but it's just four it's been positive but it's just four percent and actually it went through a percent and actually it went through a percent and actually it went through a long period of time where it was just long period of time where it was just long period of time where it was just flat and actually declined quite a bit flat and actually declined quite a bit flat and actually declined quite a bit and Warren mentioned that in hindsight and Warren mentioned that in hindsight and Warren mentioned that in hindsight he should have sold Coke in maybe the 99 he should have sold Coke in maybe the 99 he should have sold Coke in maybe the 99 2000 because there was really difficult 2000 because there was really difficult 2000 because there was really difficult to justify that valuation
Questionerto justify that valuation and but even even when you take the sub-optimal decision of not selling Coke at this really high multiple when we look at it over the entire period we're still ahead of the index you know it's 12 versus 10 and a half percent and this is one of the things that is a is a dilemma for me that I'm still trying to trying to figure out is basically what happened with you know whether the coke decision to keep it or not keep it which way is it better so there's some key lessons that I've been able to figure out the first key lesson is the error rate is going to be huge so if we have Warren and Charlie having these big errors you know mere mortals like us you know we're just going to have a big error rate the second is don't cut the flowers and don't water the weeds and hold on if it's a great business hold on to it for dear life
Otherbusiness hold on to it for dear life
Otherthird lesson is do not pay fancy prices for great businesses so if you look at all these examples of Titan and Coke and Amex and Geico and Amazon tencent Ajit chain and so on you know Warren shares about Ajit that every year when he pays him his bonus he thinks he left a zero off you know he said I and you know between us girls now that Ajit is part of the board and all of that we get to look at his calm and him and I think last time I looked was like 20 odd million for him and and Greg Abel so you know Louis the zero off you know should be close to 200 million but you know that's okay Ajit is still happy and and then you know we focus on the great businesses with great people and long Runway that actually last night I had dinner with Chuck acree who's a wonderful guy you know Chuck some of you
Ted Weschlerwonderful guy you know Chuck some of you might have heard of Chuck so Chuck lives in a town in Virginia called Middleburg which has one traffic light and I was really interested in seeing this one traffic light town because you know when you hold these great businesses you have nothing to do you know so I wrote a letter to Chuck I didn't know him you know and I said dear Chuck you know I really want to see the one traffic light and would it be okay for me to visit you know and you can show me the traffic light and so on and amazingly he responded he said yeah we'll go take a look at the traffic light together and and I made a very nice trip to rural Virginia last last I think November great weather it was a great very nice drive and so he has Chuck has this concept of the three-legged stool and I went with when I went to his office there were a number
QuestionerI went to his office there were a number of three luggage tools in the conference room and so they've like you know really made sure that they never forget about the three luggage stool and the three-legged stool is usually used for milking cows and one of the things you know chairs should really not have four legs if you don't want a chair to wobble it needs to have three legs so it was really stupid whoever came up with a four-legged chair and if you look at all the furniture that Frank Lloyd Wright created the chairs are all three legs you know and you don't have the wobbles it's great and so the three-legged stool that Chuck has is number one is he wants to invest in businesses which are run by people with the very highest integrity and who have skin in the game so they've they've got an ownership in the business and they're you know integrity and
Otherand they're you know integrity and abilities are unquestioned so he doesn't ever want to compromise on the human aspect the second is that it must have very high Returns on equity on invested capital with an ability to reinvest at that high rate for a very long period of time and so we want the great integrity we want the high return on invested capital and the third is a very long Runway and so he said that when we have these three elements we're done you know and so I was listening to podcasts the other day and someone was talking about it was talking to Chuck acree and he was telling Chuck acreage Chuck so Chuck's number one position is American Tower you know they've done extremely well with American Tower it's a great business and he he tells Chuck Chuck I found the next American Tower and Chuck says to him son the next American Tower is American
Questionerthe next American Tower is American Tower you know in a way that only chuck Tower you know in a way that only chuck Tower you know in a way that only chuck could say it so not going to cut the flowers there flowers there flowers there and so you know compounding is the and so you know compounding is the and so you know compounding is the eighth wonder of the world which eighth wonder of the world which eighth wonder of the world which Einstein tells us and if you really look Einstein tells us and if you really look Einstein tells us and if you really look at you know the magic of compounding at you know the magic of compounding at you know the magic of compounding there are three elements that come in there are three elements that come in there are three elements that come in right when you're looking at compounding right when you're looking at compounding right when you're looking at compounding you're starting capital you're starting capital you're starting capital your annualized rate of return your annualized rate of return your annualized rate of return and the length of the runway and the length of the runway and the length of the runway and there's an interplay between these and there's an interplay between these and there's an interplay between these three factors so for example if I have a three factors so for example if I have a three factors so for example if I have a seven percent return a year seven percent return a year seven percent return a year applying the rule of 72 it'll take 10 applying the rule of 72 it'll take 10 applying the rule of 72 it'll take 10 years for my money to double years for my money to double years for my money to double if I have a 10 return rate of return if I have a 10 return rate of return if I have a 10 return rate of return again applying the same Rule of 72 it'll again applying the same Rule of 72 it'll again applying the same Rule of 72 it'll take seven years so basically you can take seven years so basically you can take seven years so basically you can switch and change one variable for the switch and change one variable for the switch and change one variable for the other and so if you're if you're other and so if you're if you're other and so if you're if you're interested in the final outcome being a interested in the final outcome being a interested in the final outcome being a really large number
Otherreally large number really large number it could be a really large number by it could be a really large number by it could be a really large number by starting with a large number and having starting with a large number and having starting with a large number and having a short Runway and even a small a short Runway and even a small a short Runway and even a small annualized rate or it could be you start annualized rate or it could be you start annualized rate or it could be you start with a really small number with a really small number with a really small number and some kind of a rate of return and and some kind of a rate of return and and some kind of a rate of return and then the runway so you know then the runway so you know then the runway so you know whenever Warren is asked you know whenever Warren is asked you know whenever Warren is asked you know some Genie comes to you some Genie comes to you some Genie comes to you and offers you one wish Warren and offers you one wish Warren and offers you one wish Warren what would you like and Warren's answer what would you like and Warren's answer what would you like and Warren's answer always is always is always is I want it to be such that when I die and I want it to be such that when I die and I want it to be such that when I die and they look at my corpse they say man he they look at my corpse they say man he they look at my corpse they say man he was old and he doesn't want to live long was old and he doesn't want to live long was old and he doesn't want to live long because he likes to hang out with us you because he likes to hang out with us you because he likes to hang out with us you know he wants to compound for as long as know he wants to compound for as long as know he wants to compound for as long as possible so that that Runway needs to be possible so that that Runway needs to be possible so that that Runway needs to be as long as possible and so Warren really as long as possible and so Warren really as long as possible and so Warren really understood Warren was actually 56 years understood Warren was actually 56 years understood Warren was actually 56 years old when he became a billionaire old when he became a billionaire old when he became a billionaire so if you and if he had not given money so if you and if he had not given money so if you and if he had not given money away away away to The Gates Foundation Etc it would be to The Gates Foundation Etc it would be
Otherto The Gates Foundation Etc it would be like 230 or 240 billion views oflike 230 or 240 billion views oflike 230 or 240 billion views of wealthiest Candle on the planet so evenwealthiest Candle on the planet so evenwealthiest Candle on the planet so even when you look at the the journey overwhen you look at the the journey overwhen you look at the the journey over the last you know 30 odd years for himthe last you know 30 odd years for himthe last you know 30 odd years for him maybe 35 years it's likemaybe 35 years it's likemaybe 35 years it's like 99 of his wealth99 of his wealth99 of his wealth has come in the last three decades sohas come in the last three decades sohas come in the last three decades so the interplay is really important andthe interplay is really important andthe interplay is really important and one of the things that weone of the things that weone of the things that we have the most control overhave the most control overhave the most control over we have the most control over the lengthwe have the most control over the lengthwe have the most control over the length of the runway when we invest we may notof the runway when we invest we may notof the runway when we invest we may not be able to you know precisely tell howbe able to you know precisely tell howbe able to you know precisely tell how well the company does but we have thewell the company does but we have thewell the company does but we have the runway for surerunway for surerunway for sure sososo some other lessons you knowsome other lessons you knowsome other lessons you know do not sell when things appear fullydo not sell when things appear fullydo not sell when things appear fully pricedpricedpriced so great businesses have a way toso great businesses have a way toso great businesses have a way to surprise on the upset but when thingssurprise on the upset but when thingssurprise on the upset but when things are egregiously pricedare egregiously pricedare egregiously priced selling may make sense and when youselling may make sense and when youselling may make sense and when you figure out the difference betweenfigure out the difference betweenfigure out the difference between overpriced and egregiously overpricedoverpriced and egregiously overpricedoverpriced and egregiously overpriced call me collectcall me collectcall me collect so it's this is where you know it gets
Questionerso it's this is where you know it gets confusing you know at what point do we flip from overpriced to egregiously overpriced and a single great business if we apply this math and methodology could become sixty percent seventy percent even 99 of the portfolio like we saw with naspers and I think naspers had conviction because tensile itself is very Diversified in their income streams and Berkshire you know Buffett's had 99 of his wealth for a long time itself is very Diversified and but when we get to non-diversified fact companies so when I started my fund the very first investment I made July 1st 99 the first day of the fund was Silicon Valley Bank some of you might have heard of it some obscure Bank in California you know and at the time I was interested in Silicon Valley Bank because anytime they made a loan or they got a client you know in Silicon Valley if you're a
Questionerknow in Silicon Valley if you're aknow in Silicon Valley if you're a masseuse at Google you get stock optionsmasseuse at Google you get stock optionsmasseuse at Google you get stock options everybody gets stock options your servereverybody gets stock options your servereverybody gets stock options your server at the at the restaurant get stockat the at the restaurant get stockat the at the restaurant get stock options so when the bank would make aoptions so when the bank would make aoptions so when the bank would make a loan to their Silicon Valley clientsloan to their Silicon Valley clientsloan to their Silicon Valley clients they will always get warrants you knowthey will always get warrants you knowthey will always get warrants you know they would collect the interview theythey would collect the interview theythey would collect the interview they always get some warrants and at thatalways get some warrants and at thatalways get some warrants and at that time in 99 they were sitting on thistime in 99 they were sitting on thistime in 99 they were sitting on this huge basket of warrants with nohuge basket of warrants with nohuge basket of warrants with no disclosure except that we have a lot ofdisclosure except that we have a lot ofdisclosure except that we have a lot of warrants and I realized that the bankwarrants and I realized that the bankwarrants and I realized that the bank was trading at that time slightly abovewas trading at that time slightly abovewas trading at that time slightly above book with no valuation given to all thebook with no valuation given to all thebook with no valuation given to all the warrants that they had and all thesewarrants that they had and all thesewarrants that they had and all these companies at that time are going publiccompanies at that time are going publiccompanies at that time are going public and so I was I was able to see thatand so I was I was able to see thatand so I was I was able to see that there's a bubble but I was trying tothere's a bubble but I was trying tothere's a bubble but I was trying to find a way to play the bubble withfind a way to play the bubble withfind a way to play the bubble with upside with no downside and I I saidupside with no downside and I I saidupside with no downside and I I said Silicon Valley Bank is a perfect way toSilicon Valley Bank is a perfect way toSilicon Valley Bank is a perfect way to play this because
Questionerplay this because it's not in the price so if all those warrants are worthless we still have a decent bank or what we thought was a decent bank and so about a year later it had gone up like 150 because they started to monetize and then in their quarterly earnings what was happening is the monetization of the warrants was dwarfing their banking income it was so much coming out and in a moment of Brilliance in 2000 I sold Silicon Valley Bank and it's a Well Done bonus you know this worked exactly like you wanted in a year you more than double your money and then I watched for the next 23 years they compounded at 25 a year you know because actually it was a tremendous franchise even today in many ways it's a monopoly in terms of the you know they're really good at understanding that the needs of the tech business but but then you know we come to the 23rd
Questionerbut then you know we come to the 23rd year and goes to zero you know so any number multiplied by zero is zero no matter how big that number is so this makes it really hard that you know if I was very enlightened and I said no this is a great bank with a great franchise and I had just kept it there would have been very few warning signs in I mean some people saw it with their Book value was upside down and so on and so forth but maybe the answer there is you keep it to 50 or something and then I have a real world situation you know this is why we get to the core of the matter why I'm here you know the core of the matter is I need to learn you know not teach I need to learn so one of my fans the public investment fund three which is an offshore fund has about 200 million assets there's a company in turkey called raceas which makes up 40 of this fund I didn't invest
Questionermakes up 40 of this fund I didn't invest 80 million in racas I invested 80 million in racas I invested 80 million in racas I invested single-digit millions in it it just went up a lot and up a lot and up a lot and there are two more two other buds that there are two more two other buds that there are two more two other buds that are about 30 together so if we look at are about 30 together so if we look at are about 30 together so if we look at the fund 70 about 140 million out of the the fund 70 about 140 million out of the the fund 70 about 140 million out of the 200 million is three bets right and race 200 million is three bets right and race 200 million is three bets right and race us has already been a 10 bagger but it's us has already been a 10 bagger but it's us has already been a 10 bagger but it's still cheap it's not even fairly priced still cheap it's not even fairly priced still cheap it's not even fairly priced it's actually probably today sitting at it's actually probably today sitting at it's actually probably today sitting at something like one third of what its something like one third of what its something like one third of what its liquidation value is liquidation value is liquidation value is and and and so the resource went to its full so the resource went to its full so the resource went to its full liquidation value liquidation value liquidation value it would be 250 million in the fund that it would be 250 million in the fund that it would be 250 million in the fund that today has a value of 200 million today has a value of 200 million today has a value of 200 million and it would become like close to 70 and it would become like close to 70 and it would become like close to 70 percent of the pie percent of the pie percent of the pie so so so I love the business I love the business I love the business we see all these lessons we see all these lessons we see all these lessons and what am I supposed to do and what am I supposed to do and what am I supposed to do and I have no idea you know I have no and I have no idea you know I have no and I have no idea you know I have no idea what I'm supposed to do but these idea what I'm supposed to do but these idea what I'm supposed to do but these are happy problems you know they're not are happy problems you know they're not are happy problems you know they're not sad problems they're happy problems and
Warrensad problems they're happy problems and I'm hoping at some point I will get enlightened on some good answer on how this should be handled so far I don't have a very good answer but we'll try to figure it out and that's pretty much the song and dance so thank you very much
Questionerso you had a question can I ask another one
Warrenoh you've given up on that question it was such a beautiful question but now that it's chopped liver let's go to the next question
Questionerthere are many companies you taught this was a fantastic presentation oh thank you very much uh you talked about Titan uh rakeshiman amazing uh 10 cent Amazon Walmart um it looks like uh it comes down to Pony ma Sam Walton Jeff Bezos how many of them are there really I mean of those type of people it looks like it comes down really to those guys I mean executing and so it seems like it's extremely important to find those people
Otherextremely important to find those people actually you're right it comes down to them but we don't need to identify them up front so you know we do well with a 98 error rate as long as we have Pony with 30 other yo-yos in the portfolio we're okay and we don't know which of the 30 is purnima but over time we will know that so I I think it's it would be you know the the funny thing is the guy was in in Turkey a few few weeks ago and I've now owned race us for four years and something that always puzzled me was they repeatedly enter kind of brand new businesses in which they have no competence and in a few years they're number one in the country in that business so they from a standing start they go into these areas where they have no expertise and there's you know it just and I couldn't understand I said is everyone else idiots like what's going on here
Questionerelse idiots like what's going on here you know and I I realized this is the first time when I met the guy I realized that he's the Energizer Bunny so he probably gets like 72 hours of work done in 24 hours and I never saw that trait in the last several meetings and interactions I mean I could see it in the numbers that they were they they hardly ever failed and they were able to enter these things and they were able to do all that but I could never really and what I realized is that Warren has made the same statement about Greg Abel you know recently I think he was talking and he said you know I just see what gets done in a day with Greg and it would take me like you know three or four days to do those things so the the thing is that I my my perspective is that I don't think we can tell in advance I mean I think very few of us have would have the gifts to look at somebody but I
Questionerhave the gifts to look at somebody but I have the gifts to look at somebody but I think but what you can tell easily think but what you can tell easily think but what you can tell easily is after the fact is after the fact is after the fact and and so obviously when we are going and and so obviously when we are going and and so obviously when we are going into a business when we're investing in into a business when we're investing in into a business when we're investing in a business we have to look at the a business we have to look at the a business we have to look at the historic trademarks and we do we can historic trademarks and we do we can historic trademarks and we do we can look at the numbers we can look at look at the numbers we can look at look at the numbers we can look at return on invested Capital we can look return on invested Capital we can look return on invested Capital we can look at a few metrics which would point us to at a few metrics which would point us to at a few metrics which would point us to businesses that are likely to be great businesses that are likely to be great businesses that are likely to be great businesses businesses businesses I think after that separating the wheat I think after that separating the wheat I think after that separating the wheat from the shaft will happen automatically from the shaft will happen automatically from the shaft will happen automatically as we get to we only get to know a as we get to we only get to know a as we get to we only get to know a business after it drops about 40 percent business after it drops about 40 percent business after it drops about 40 percent in our portfolio that's when you really in our portfolio that's when you really in our portfolio that's when you really get to know the business and so the same get to know the business and so the same get to know the business and so the same thing with the companies we invest in I thing with the companies we invest in I thing with the companies we invest in I think we may have a idea about these think we may have a idea about these think we may have a idea about these businesses but we really will get to businesses but we really will get to businesses but we really will get to know them far far better after we've know them far far better after we've know them far far better after we've owned them for a few years so I would owned them for a few years so I would owned them for a few years so I would say that basically as much as we would
Todd Combssay that basically as much as we would we might like to try to have a portfolio filled now think about a portfolio at Walmart and Amazon and Costco and tencent all together never happened you know that might be superhuman capability we haven't seen that happen with any investor so far and we even seen with Warren and Charlie with Incredible temperaments and incredible brain power and really good at the art still a lot of Errors so I think the the best way to answer that is to accept that we'll make the errors but to really study what we've got and I can I can point to many Investments I made in the past where the buy decision was exceptional and the cell decision was horrible and you know it's happened so many times and and I know it'll keep happening so I'm trying to you know make amends yeah go ahead uh how do you differentiate when you have
Questionerhow do you differentiate when you have to concentrate let's say it's 50 of your portfolio how do you produce differentiate between just normal business problems or like things that come up and the complete and the opposite of complete stagnation for example the IBM they completely stagnated since 20 years but before they were a great business or a Geo is well it nearly died so how do you differentiate between there because that's very hard then
Warrenlike Charlie says why should it be easy to get rich you know and but but these are difficult I mean I agree with you I think that separating the signal from the noise is not easy but I would say that you should air on the side of patience so business businesses are going to go through cyclicality they're going to go through ups and downs some things will work some things won't work and so you
Questionerwork some things won't work and so you need enough time to be able to tell that and yeah so the the risk is we will not be able to sell optimally but the risk is even greater if you're too Trigger Happy So yeah thank you for the wonderful presentation and I've been a big fan and I've been following your work um interesting thing about this presentation is I think it's quite paradoxical from what I mean many other great investors have also spoken about I remember like reading one of your very old write-ups or one of your presentations where you met Charlie Munger and asked him if he still Advocates Buy and Hold approach or like let's say if he was running a smaller pool of capital would he still buy and hold it forever sort of thing and I think the sort of answer that Charlie gave which which I recall is he said if I was if I was running a smaller pool I
QuestionerI was if I was running a smaller pool I would do something which I was doingwould do something which I was doingwould do something which I was doing during my partnership days buy somethingduring my partnership days buy somethingduring my partnership days buy something which is at a discount when it goes to awhich is at a discount when it goes to awhich is at a discount when it goes to a full value sell it and then do it allfull value sell it and then do it allfull value sell it and then do it all over again only problem is at this pointover again only problem is at this pointover again only problem is at this point of time we are at this situation whereof time we are at this situation whereof time we are at this situation where our size is so large we cannot do thisour size is so large we cannot do thisour size is so large we cannot do this anymore effectively on a very largeanymore effectively on a very largeanymore effectively on a very large scale basis so on a smaller scalescale basis so on a smaller scalescale basis so on a smaller scale probably that makes much more sense thanprobably that makes much more sense thanprobably that makes much more sense than doing something like buy and holddoing something like buy and holddoing something like buy and hold forever but where we are talking aboutforever but where we are talking aboutforever but where we are talking about like today is circling the wagons I meanlike today is circling the wagons I meanlike today is circling the wagons I mean this is something which is verythis is something which is verythis is something which is very different and very opposite to what thatdifferent and very opposite to what thatdifferent and very opposite to what that sort of a thought is so what are yoursort of a thought is so what are yoursort of a thought is so what are your thoughts
Warrenwell I would say what you are describing is more warned than Charliedescribing is more warned than Charliedescribing is more warned than Charlie yes so I think this is more warnsyes so I think this is more warnsyes so I think this is more warns approach and Charlie did similar thingsapproach and Charlie did similar thingsapproach and Charlie did similar things but I think Charlie was much quickerbut I think Charlie was much quickerbut I think Charlie was much quicker between the two of them to understand
Questionerbetween the two of them to understand that you really want to get the great businesses so one of the interesting things about investing is we have like 50 000 stocks around the world if you said that I only want to buy businesses that are peo one you can find those if you set P of 0.1 you would find those two so pretty much you know you could set whatever criteria you want and because the the pool is so large as long as you're willing to dig in you would find all those things what I realized recently is you know my favorite place to visit is turkey I wonder why you know but I really enjoy my time there and what I realized is that I get to invest at Grammy and prices in mongeresque businesses what could be more orgasmic than that that you buy in Grammy in prices and then you it's actually a monger business and so the the thing that made it really
Questionerand so the the thing that made it really easy in Turkey I think was that the business qualities were so high and then the prices were so low and so the Dilemma will come later like I described you know but those are good problems yeah at the back there yeah
Questioneryeah so thanks for taking our questions I hear one question what do you think about U.S debt level and U.S dollar as a reserve currency and now being factor that for next 10 years in Europe investing stock that's your talk so far
Otheroutside my circular competence so I will duck that question because I have nothing intelligent to say about it
Questioneryou go ahead yeah
Questionervision talk us through the story and the lessons learned from from Heritage oh Saturday sure yeah I mean I think I think the the logic and idea there was that we had this large amount of prime real estate all over the place some not so Prime and depending on how these
Questionerso Prime and depending on how these different I mean I think Saturday is a is a case where it's kind of a 80 20 rule or maybe if it's a 90 10 rule where you know 10 or five percent of the properties have most of the value so the BET was that the liquidation values Etc were significantly above where the stock was so the stock used to be in the 30s and then suddenly it was six dollars and it appeared at the six seven dollar price was too low in hindsight when we look at what everything's happened so far especially now with Rising interest rates Etc and a lot of distress in real estate probably the 30 odd dollar price would be too optimistic so my my best conclusion on Saturday is that there's no need to circle the wagons we can let it go uh yeah go ahead a little louder thanks for all your teachings like I feel like coming here is a T4 to 600
Questionera T4 to 600a T4 to 600 600.600.600. oh my question is you mentioned multipleoh my question is you mentioned multipleoh my question is you mentioned multiple times that we have a age between ourtimes that we have a age between ourtimes that we have a age between our teenage years 11 to 19 where uh weteenage years 11 to 19 where uh weteenage years 11 to 19 where uh we develop and specialize or primarilydevelop and specialize or primarilydevelop and specialize or primarily optimal to specialize in you are luckyoptimal to specialize in you are luckyoptimal to specialize in you are lucky enough to specialize in business duringenough to specialize in business duringenough to specialize in business during that time what would you tell the otherthat time what would you tell the otherthat time what would you tell the other Mortals who didn't get that educationMortals who didn't get that educationMortals who didn't get that education and still want to pursue a Finance or aand still want to pursue a Finance or aand still want to pursue a Finance or a business type field
Otherwell I think I thinkwell I think I thinkwell I think I think if that as parents we are aware of theif that as parents we are aware of theif that as parents we are aware of the fact that the human brain is set upfact that the human brain is set upfact that the human brain is set up optimally to specialize between let'soptimally to specialize between let'soptimally to specialize between let's say 11 and 20. and thesay 11 and 20. and thesay 11 and 20. and the the traditional education system inthe traditional education system inthe traditional education system in especially the 11 to 18 time windowespecially the 11 to 18 time windowespecially the 11 to 18 time window makes you a jack of all trades rightmakes you a jack of all trades rightmakes you a jack of all trades right it's it's not it's not set up to makeit's it's not it's not set up to makeit's it's not it's not set up to make you specialize but but the kids and theyou specialize but but the kids and theyou specialize but but the kids and the parents can do thingsparents can do thingsparents can do things outside of school extracurricularoutside of school extracurricularoutside of school extracurricular different things to hone in so I woulddifferent things to hone in so I woulddifferent things to hone in so I would say that there should be more of a more
Questionersay that there should be more of a more of an education to parents to try to of an education to parents to try to of an education to parents to try to understand you know what might possibly be the aptitudes and leanings and be the aptitudes and leanings and be the aptitudes and leanings and interests of their kids as they're interests of their kids as they're interests of their kids as they're getting 10 11 12 years old and to see if getting 10 11 12 years old and to see if getting 10 11 12 years old and to see if it's possible to increase it's possible to increase it's possible to increase time in those Endeavors and those areas time in those Endeavors and those areas time in those Endeavors and those areas so I think basically with Warren and so I think basically with Warren and so I think basically with Warren and with Bill Gates Etc it happened outside with Bill Gates Etc it happened outside with Bill Gates Etc it happened outside the school system the school system the school system right I mean they were they were going right I mean they were they were going right I mean they were they were going through a jack of all trade school through a jack of all trade school through a jack of all trade school system but they were able to specialize system but they were able to specialize system but they were able to specialize as teenagers and so it's possible but I as teenagers and so it's possible but I as teenagers and so it's possible but I think you need kind of a team around you think you need kind of a team around you think you need kind of a team around you to help you do that and I think that's to help you do that and I think that's to help you do that and I think that's unfortunately it's not well known I mean unfortunately it's not well known I mean unfortunately it's not well known I mean most parents just assume the school most parents just assume the school most parents just assume the school system will take care of things so but system will take care of things so but system will take care of things so but you are aware and so you guys can do you are aware and so you guys can do you are aware and so you guys can do that for your kids which is great yeah that for your kids which is great yeah that for your kids which is great yeah behind you yeah right there my question is
Questionerso how do you start developing your social confidence and because I think you need everything your boundaries as you start so how do you reduce that in their opinion about this and how do you know um like I should stay inside this content like around the city yeah so the
Questionergood news is that we can do very well with very narrow Circles of competence we don't need to have large circles of competence thus initial starting point of things that we are likely to understand are things that we consume so the products we buy and the services we we buy or use so I would limit us you know so for example you might be might have an Apple phone you know you might buy Levi's jeans and you might buy Nike shoes and so on and so you're doing those for certain reasons and you already have some understanding of those businesses and probably that's
Questionerof those businesses and probably that's the initial starting point is to look at things that you're familiar with you know you've got some understanding of these companies because it's a very big leap for a company to be able to get even a dollar from you I mean for a company to get a dollar from you means that they've got some tremendous mode because as humans we're going to be very careful about optimizing and so if someone is actually able to get your interest or get you in their store or get you to buy their products that means you might not be the only human who might have that interest and so that might be the way to to get going yeah right here go ahead
Questionerthank you so much for your presentation wonderful I don't have a question you know of the 12 success that uh Mr buffalOS to Warren or childhood he just seems to be the will that never surface what
Questionerto be the will that never surface what was so special about him that you canwas so special about him that you canwas so special about him that you can learn fromlearn fromlearn from
OtherAjit did a very good bookieAjit did a very good bookieAjit did a very good bookie
Questioneryeah if he wasn't an insurance it'd be ayeah if he wasn't an insurance it'd be ayeah if he wasn't an insurance it'd be a great bookiegreat bookiegreat bookie
Questionerso one time I got to hang out with twoso one time I got to hang out with twoso one time I got to hang out with two of ajit's direct reports it was manyof ajit's direct reports it was manyof ajit's direct reports it was many years back in Omaha and I I asked themyears back in Omaha and I I asked themyears back in Omaha and I I asked them this question I saidthis question I saidthis question I said how come you guys do so well like what'show come you guys do so well like what'show come you guys do so well like what's going on okay so they said monish we'regoing on okay so they said monish we'regoing on okay so they said monish we're going to play a game with you which isgoing to play a game with you which isgoing to play a game with you which is going to explain to you so now I'm goinggoing to explain to you so now I'm goinggoing to explain to you so now I'm going to open the kimono for you it's neverto open the kimono for you it's neverto open the kimono for you it's never been opened before definitely Ajit isbeen opened before definitely Ajit isbeen opened before definitely Ajit is never going to talk about this okay sonever going to talk about this okay sonever going to talk about this okay so they said well we're gonna bring up tothey said well we're gonna bring up tothey said well we're gonna bring up to you certain certain deals that wereyou certain certain deals that wereyou certain certain deals that were presented to uspresented to uspresented to us and we want you to tell us the premiumand we want you to tell us the premiumand we want you to tell us the premium that you would charge to ensure thisthat you would charge to ensure thisthat you would charge to ensure this particular risk okay so they said thatparticular risk okay so they said thatparticular risk okay so they said that like for example this is the first thinglike for example this is the first thinglike for example this is the first thing they said is that there werethey said is that there were
Otherthey said is that there were two Chinese satellitestwo Chinese satellitestwo Chinese satellites that we're going to put up when we sentthat we're going to put up when we sentthat we're going to put up when we sent up into orbit each one had a cost of oneup into orbit each one had a cost of oneup into orbit each one had a cost of one billionbillionbillion and they've Berkshire was approached toand they've Berkshire was approached toand they've Berkshire was approached to ensureensureensure so the insurance policy was thatso the insurance policy was thatso the insurance policy was that the satellite just gets to the rightthe satellite just gets to the rightthe satellite just gets to the right orbit distance on the Earthorbit distance on the Earthorbit distance on the Earth beyond that if it works or doesn't workbeyond that if it works or doesn't workbeyond that if it works or doesn't work is irrelevant it just has to clear theis irrelevant it just has to clear theis irrelevant it just has to clear the tower and get to the right geostationarytower and get to the right geostationarytower and get to the right geostationary orbit so they asked me you know so youorbit so they asked me you know so youorbit so they asked me you know so you got this 2 billion payout you would havegot this 2 billion payout you would havegot this 2 billion payout you would have if it didn't make itif it didn't make itif it didn't make it what would be the premiumwhat would be the premiumwhat would be the premium and I'm like saying well what are theand I'm like saying well what are theand I'm like saying well what are the oddsoddsodds you know what are the odd there's a yeahyou know what are the odd there's a yeahyou know what are the odd there's a yeah you know maybe likeyou know maybe likeyou know maybe like one in five or one in ten or somethingone in five or one in ten or somethingone in five or one in ten or something doesn't work you know maybe you can saydoesn't work you know maybe you can saydoesn't work you know maybe you can say like 10 or 15 percentlike 10 or 15 percentlike 10 or 15 percent might be the riskmight be the riskmight be the risk so I said oh you know maybe you canso I said oh you know maybe you canso I said oh you know maybe you can collect like 400 millioncollect like 400 millioncollect like 400 million they said we collected 800 millionthey said we collected 800 million
Questionerthey said we collected 800 million and I said did you ring the register he said absolutely you know so he said the satellites went up no problem and we just sent the money to Warren to buy more coke you know so they went through a bunch of these different things with me and and what I realized when I was looking at there the economics of what they were doing because the thing is like I think one time the California earthquake Authority came to them and you know it had been like a hundred years since the 1906 earthquake so basically you know San Francisco blows about every 100 years or so or San Andreas with a significant earthquake so they wanted a policy which would cover 8.0 and above and the California earthquake Authority was looking for that policy for five years so you know we won a five-year coverage of 8.0 and so first of all Berkshire
Warrenof 8.0 and so first of all Berkshire said we're not going to five years wesaid we're not going to five years wesaid we're not going to five years we will give you one year or two years andwill give you one year or two years andwill give you one year or two years and it was several billion in premiumit was several billion in premiumit was several billion in premium and basically the situation there wasand basically the situation there wasand basically the situation there was nobody else was going to write thatnobody else was going to write thatnobody else was going to write that policy so they did some calculationspolicy so they did some calculationspolicy so they did some calculations they probably charged about four timesthey probably charged about four timesthey probably charged about four times what the risk was or something andwhat the risk was or something andwhat the risk was or something and because there's nobody else in the gamebecause there's nobody else in the gamebecause there's nobody else in the game and California wanted an assurance thatand California wanted an assurance thatand California wanted an assurance that the state has the money they paid thethe state has the money they paid thethe state has the money they paid the premiumpremiumpremium you know and so what I realized whenyou know and so what I realized whenyou know and so what I realized when they were just writing these things andthey were just writing these things andthey were just writing these things and that's why Ajit is so exceptional isthat's why Ajit is so exceptional isthat's why Ajit is so exceptional is that they are able to so Berkshire hasthat they are able to so Berkshire hasthat they are able to so Berkshire has an appetite to take on significantan appetite to take on significantan appetite to take on significant payouts and because they aren't in apayouts and because they aren't in apayouts and because they aren't in a field where there's a lot of people whofield where there's a lot of people whofield where there's a lot of people who would even be trusted because the thewould even be trusted because the thewould even be trusted because the the person buying the policy wants to makeperson buying the policy wants to makeperson buying the policy wants to make sure the guy is around to pay you yousure the guy is around to pay you yousure the guy is around to pay you you know when the thing happens and so when
Warrenknow when the thing happens and so when we finish the exercise everything was priced like three times but it should have been priced at so that's why ajit's picture is up there so but but you know we are at a 9 11. so should we call it a day what do you say
Questionerone one more okay right here okay all right well
Warrentherefore I default to indexed investing and if my goal in life is to secure a upper middle class retirement with your endorse that approach yeah because you've you've circled around 500 great wagons and you know for sure some of them are the Walmarts and the Costco's and so on and that's the indexing is a great way to go I think you've made a very wise choice and the more important thing is the savings rate and uh healthy lifestyle long Runway and everything else will take care of itself and you will you will end up an extremely wealthy man congratulations all right thanks a lot thank you
Other[Applause][Music]