Other[Music][Music][Music] foreignforeignforeign [Music][Music]was inspired by Warren Buffett indeed hewas inspired by Warren Buffett indeed hewas inspired by Warren Buffett indeed he had actually lunch with Warren Buffett ahad actually lunch with Warren Buffett ahad actually lunch with Warren Buffett a while ago and they they have thiswhile ago and they they have thiswhile ago and they they have this celebrity or this uh Charity Auctioncelebrity or this uh Charity Auctioncelebrity or this uh Charity Auction where you can and that's how he was wellwhere you can and that's how he was wellwhere you can and that's how he was well influenced byinfluenced byinfluenced by his performance has been exceptional Ihis performance has been exceptional Ihis performance has been exceptional I think starting in 1999think starting in 1999think starting in 1999 to today a hundred thousand dollarsto today a hundred thousand dollarsto today a hundred thousand dollars would have grown to 1.1 million afterwould have grown to 1.1 million afterwould have grown to 1.1 million after fees in the expenses and thatfees in the expenses and thatfees in the expenses and that outperformed the s p by four and a halfoutperformed the s p by four and a halfoutperformed the s p by four and a half percentpercentpercent uh per year which is very impressiveuh per year which is very impressiveuh per year which is very impressive performance especially for Value in theperformance especially for Value in theperformance especially for Value in the last decadelast decadelast decade before being an asset manager uh providebefore being an asset manager uh providebefore being an asset manager uh provide waswaswas uh taking uh Tech entrepreneur and heuh taking uh Tech entrepreneur and heuh taking uh Tech entrepreneur and he won as well an award fromwon as well an award fromwon as well an award from KPMG Illinois for his entrepreneurshipKPMG Illinois for his entrepreneurshipKPMG Illinois for his entrepreneurship uh he has been quoted very widely in theuh he has been quoted very widely in theuh he has been quoted very widely in the media it's uh he's very active on socialmedia it's uh he's very active on socialmedia it's uh he's very active on social media and it's a great pleasure tomedia and it's a great pleasure tomedia and it's a great pleasure to introduce you today and to learn fromintroduce you today and to learn from
Otherintroduce you today and to learn from you thank you very much
Otheryou thank you very much
Otheryou thank you very much
Other[Applause]
Other[Applause]
Other[Applause]
Otherthank you so it's uh
Otherthank you so it's uh
Otherthank you so it's uh it's a pleasure and honor to be with all
Otherit's a pleasure and honor to be with all
Otherit's a pleasure and honor to be with all of you and I just have a few kind of
Otherof you and I just have a few kind of
Otherof you and I just have a few kind of opening remarks and then probably more
Otheropening remarks and then probably more
Otheropening remarks and then probably more interested in what you want to talk
Otherinterested in what you want to talk
Otherinterested in what you want to talk about so then we can we can go to q a
Otherabout so then we can we can go to q a
Otherabout so then we can we can go to q a after that
Otherafter that
Otherafter that so some of you or maybe all of you read
Otherso some of you or maybe all of you read
Otherso some of you or maybe all of you read Buffett's letter that came out on
OtherBuffett's letter that came out on
OtherBuffett's letter that came out on Saturday maybe show of hands
OtherSaturday maybe show of hands
OtherSaturday maybe show of hands people read it
Otherpeople read it
Otherpeople read it some of you started
Othersome of you started
Othersome of you started that's good progress yeah it was a it
Otherthat's good progress yeah it was a it
Otherthat's good progress yeah it was a it was a pretty short letter and you know
Otherwas a pretty short letter and you know
Otherwas a pretty short letter and you know God Google can take you to the ladder so
OtherGod Google can take you to the ladder so
OtherGod Google can take you to the ladder so that's good and I just wanted to
Otherthat's good and I just wanted to
Otherthat's good and I just wanted to highlight
Otherhighlight
Otherhighlight two or three comments he made in the
Othertwo or three comments he made in the
Othertwo or three comments he made in the letter and so I'll just read you
Otherletter and so I'll just read you
Otherletter and so I'll just read you Buffett's words because he's a lot more
OtherBuffett's words because he's a lot more
OtherBuffett's words because he's a lot more eloquent than I can ever be
Othereloquent than I can ever be
Othereloquent than I can ever be so
Otherso
Otherso he says over the years I have made many
Otherhe says over the years I have made many
Otherhe says over the years I have made many mistakes
Othermistakes
Othermistakes consequently our extensive collection of
Otherconsequently our extensive collection of
Otherconsequently our extensive collection of businesses
Otherbusinesses
Otherbusinesses currently consists of a few Enterprises
Warrencurrently consists of a few Enterprises that have truly extraordinary economics many that enjoy very good economic characteristics and a large group that are marginal then you know going to another section on the same page at this point a report card for me is appropriate in 58 years of Berkshire management most of my Capital allocation decisions have been no better than so-so our satisfactory results have been the product of about a dozen truly good decisions that would be about one every five years and sometimes forgotten advantage that favors long-term investors such as Berkshire so you know this is arguably probably the best investor who's ever been around and he says he's just done so so his record is exceptional you know if you look at the over the last 58 years he's compounded at about 20 percent a year and it's it's about I mean versus the s
Questionerand it's it's about I mean versus the sand it's it's about I mean versus the s p it's like you know 33.7 millionp it's like you know 33.7 millionp it's like you know 33.7 million percent up versus you know a few tens ofpercent up versus you know a few tens ofpercent up versus you know a few tens of thousands up or maybe twenty fourthousands up or maybe twenty fourthousands up or maybe twenty four thousand percent for the s p so it's athousand percent for the s p so it's athousand percent for the s p so it's a very significant Delta once you get evenvery significant Delta once you get evenvery significant Delta once you get even small percentages above the s p the thesmall percentages above the s p the thesmall percentages above the s p the the Aggregates line upAggregates line upAggregates line up sososo I was I was thinking about you know likeI was I was thinking about you know likeI was I was thinking about you know like him saying that the the 12 decisionshim saying that the the 12 decisionshim saying that the the 12 decisions he's made and one of the things I wouldhe's made and one of the things I wouldhe's made and one of the things I would I would recommend to all of you is thatI would recommend to all of you is thatI would recommend to all of you is that there's athere's athere's a there's a website oh do we have a markerthere's a website oh do we have a markerthere's a website oh do we have a marker there's a website calledthere's a website calledthere's a website called buffett.cnbc.com it's actually hosted bybuffett.cnbc.com it's actually hosted bybuffett.cnbc.com it's actually hosted by CNBCCNBCCNBC and and so that's a that's a goodand and so that's a that's a goodand and so that's a that's a good website to go toso what what Buffett did a few yearsso what what Buffett did a few yearsso what what Buffett did a few years back is he posted all the videos of allback is he posted all the videos of allback is he posted all the videos of all his annual meetings I think going backhis annual meetings I think going backhis annual meetings I think going back from the mid 90sfrom the mid 90sfrom the mid 90s to today and they're all on that websiteto today and they're all on that websiteto today and they're all on that website and they've got annotations and so onand they've got annotations and so onand they've got annotations and so on and I actually spent about I think
Questionerand I actually spent about I think maybe seven or eight months I put a I still I still do I have a waterproof Bluetooth speaker in my shower and basically I just listened to a different podcasts whatever but for about seven or eight months I went through all the meetings while I was shaving and showering and then I went through it twice actually because it was and I'm sure if I went through it again I would learn even more so it's a great resource The Price is Right it's free and and you might you might enjoy that I think there's a lot to learn from those archives because each meeting is about five or six hours and there's a lot of jokes and whatever else going on which is fun but you know he was talking about the Dozen uh so great decisions that have set Berkshire apart and if you look at Berkshire Hathaway over the last 58 years they've probably
Questionerover the last 58 years they've probably acquired whole businesses maybe around 80 whole businesses over that period of time and they've bought and sold probably well over a hundred stocks which would be very little would be like less than two a year maybe it's 125 or 150 something it's somewhere in that range is maybe two or three a year and with all of that mess of let's say investments in north of 200 businesses wholly or partially owned there's only a dozen that he points to that he thinks are responsible for setting Berkshire apart so I try to come up with the list of the 12 based on everything I can think of what he said in the past and and so on and I don't know whether this list is accurate but I'll I'll I'll put it up and it may be off by a couple of names but I think it's it's it's pretty close so the first name is he says the the
Questionerso the first name is he says the the headhunting fee paid to hire ajith Jain there's a Berkshire Hathaway energy there's the Burlington Northern Railway and these are not in a particular order they could be more important up and down Geico and then we have See's Candy and then we have Washington Post we have cap cities ABC and then Coke Amex and let me just see what I'm missing here yeah so Bank of America and National Indemnity which was the first insurance company he bought and so you look at this list and then you look at this very astute investor who's the best that we've been able to produce as humans and you basically end up with something like I I my estimate is that out of the 80 or so businesses that they've acquired whole at least half were just outright mistakes in the sense that they've either disappeared or their analyze returns that they've generated for Berkshires since they've been bought or even in the first 10
Warrenbeen bought or even in the first 10 years after buying them was well below the s p and so on and on the on the marketable security side it's somewhat similar I would say that probably at least at least half are you know kind of okay now the the good news with the investing business is it's a very forgiving business and there was a there was a very good investor in India who passed away recently some of you may have heard of him and Rakesh actually never managed money as a profession he just managed his own capital and he started with basically I would say less than a couple hundred dollars and he died pretty young he was 62 when he passed away so didn't have more than four Decades of compounding and in that four decades you know with never collecting fees or outside Capital anything he passed away he had about 7 billion or so and half of that 7 billion
Otherand half of that 7 billion was one company which is a publicly listed company in India called Titan Industries and Rakesh had put about four percent of the total assets he had about maybe 27 or 28 years ago into Titan and he just left it there and he had a kind of a split brain in the sense that he was a hyperactive Trader many times he was in and out positions you know in a few minutes a few hours but at the same time there were a few companies that he just kept forever and so if you look if you think about someone like Rakesh 96 of the portfolio could have gone to zero and if he just never touched Titan he'd still have three and a half billion and and so it really didn't matter what happened with the other 96 percent as long as he didn't touch Titan and I think with Berkshire it's really similar the the reason why these businesses have worked out so well
Questionerthese businesses have worked out so well their their businesses were great fundamentals and they have high returns and equity is that Buffett has held them for a very long period of time and it's the long-term compounding of a great business that has delivered these great results and so you know I think you guys have probably what I think is the largest size investment fund being managed by students anywhere that I ever heard of but we are at UT Austin you know this is not a poor school by any means so so that's pretty good good place to be but one of the I think one of the dilemmas that probably comes up depending on the rules and you know kind of setup you have for managing those funds is that in most cases there isn't a long enough time Horizon and so really when we make investments the payoffs may come in 10 20 30 years and you know
Questionerand you know and you know the you may be done with managing the the you may be done with managing the the you may be done with managing the fund in two years or less so that is a fund in two years or less so that is a fund in two years or less so that is a little bit of a bummer in terms of you little bit of a bummer in terms of you little bit of a bummer in terms of you know but hopefully you're making know but hopefully you're making know but hopefully you're making Investments which are longer term and Investments which are longer term and Investments which are longer term and maybe I can ask you a question what maybe I can ask you a question what maybe I can ask you a question what happens to the positions when you guys happens to the positions when you guys happens to the positions when you guys graduate graduate graduate what happens what happens what happens maybe one of you can maybe one of you can maybe one of you can we where's the mic can we just we where's the mic can we just we where's the mic can we just pass the mic to you so we can the Rex Holden was world world room for the Rex Holden was world world room for the Rex Holden was world world room for the next year it's so weird how they the next year it's so weird how they the next year it's so weird how they could collect whole weights from in your could collect whole weights from in your could collect whole weights from in your choirs to us choirs to us choirs to us okay and have you touched those Holdings what's the plan what's the plan what's the plan
Otherwe will eventually start stuff there were some heavy duty horsepower there were some heavy duty horsepower there were some heavy duty horsepower that went into buying those positions that went into buying those positions that went into buying those positions and I guess we don't we don't have as and I guess we don't we don't have as and I guess we don't we don't have as much respect for the past horsepower much respect for the past horsepower much respect for the past horsepower because the present horsepower is better because the present horsepower is better because the present horsepower is better than the past horsepower but that's a somewhat difficult but that's a somewhat difficult but that's a somewhat difficult situation because the fund managers have situation because the fund managers have situation because the fund managers have changed effectively and so the the
Ted Weschlerchanged effectively and so the the number one the number one skill set number one the number one skill set number one the number one skill set that is that is important for investing that is that is important for investing that is that is important for investing is is patience is is patience is is patience there's a there's an investor I admire a there's a there's an investor I admire a there's a there's an investor I admire a lot his name is Chuck acree some of you lot his name is Chuck acree some of you lot his name is Chuck acree some of you may have heard of him may have heard of him may have heard of him and Chuck is now 80 years old and he and Chuck is now 80 years old and he and Chuck is now 80 years old and he manages about manages about manages about I don't know 14 15 billion I don't know 14 15 billion I don't know 14 15 billion out of a one traffic light out of a one traffic light out of a one traffic light town in Virginia Middleburg town in Virginia Middleburg town in Virginia Middleburg and I wanted to connect with Chuck and I and I wanted to connect with Chuck and I and I wanted to connect with Chuck and I didn't know him so I just wrote him a didn't know him so I just wrote him a didn't know him so I just wrote him a cold letter last year you know telling cold letter last year you know telling cold letter last year you know telling him that I'd love to meet him and love him that I'd love to meet him and love him that I'd love to meet him and love to visit the one traffic lights you know to visit the one traffic lights you know to visit the one traffic lights you know town and so on and he responded and then town and so on and he responded and then town and so on and he responded and then I made the trip to Middleburg and I made the trip to Middleburg and I made the trip to Middleburg and met with Chuck and Chuck's basic kind of met with Chuck and Chuck's basic kind of met with Chuck and Chuck's basic kind of approach and I think if you if you go on approach and I think if you if you go on approach and I think if you if you go on YouTube or Google you know he's got this YouTube or Google you know he's got this YouTube or Google you know he's got this approach which he calls the three-legged approach which he calls the three-legged approach which he calls the three-legged stool of investing and he only does one stool of investing and he only does one stool of investing and he only does one kind of investing he doesn't you know I
Questionerkind of investing he doesn't you know I kind of investing he doesn't you know I would say someone like Buffett or would say someone like Buffett or would say someone like Buffett or Charlie Munger is a Swiss Army knife you Charlie Munger is a Swiss Army knife you Charlie Munger is a Swiss Army knife you know they're doing you know 14 different know they're doing you know 14 different know they're doing you know 14 different things and they're really good at all of things and they're really good at all of things and they're really good at all of them Chuck claims that he's a very slow them Chuck claims that he's a very slow them Chuck claims that he's a very slow learner learner learner and he only does one thing so he looks and he only does one thing so he looks and he only does one thing so he looks for businesses for businesses for businesses where first of all the businesses where first of all the businesses where first of all the businesses have great economics they generate very have great economics they generate very have great economics they generate very high Returns on equity high Returns on equity high Returns on equity the second is that they have a very long the second is that they have a very long the second is that they have a very long Runway Runway Runway so they can so they can so they can take those take those take those cash flows that are coming out cash flows that are coming out cash flows that are coming out and redeploy into these high wonderful and redeploy into these high wonderful and redeploy into these high wonderful economic businesses and the third is economic businesses and the third is economic businesses and the third is extremely high integrity management with extremely high integrity management with extremely high integrity management with skin in the game skin in the game skin in the game so those are the three legs of his tool so those are the three legs of his tool so those are the three legs of his tool and so whenever they look at any and so whenever they look at any and so whenever they look at any business they just look at these three business they just look at these three business they just look at these three factors factors factors and it's worked out really well I mean and it's worked out really well I mean and it's worked out really well I mean they've delivered well love of the s p they've delivered well love of the s p they've delivered well love of the s p and so on so
Ted Weschlerand so on so pretty straightforward process and it's not very difficult to look at a business and look at the history and see what the you know returns that Equity have been over time and of course you know you want higher returns and Equity without the use of Leverage because that's the kind of Hallmark of a great business and so if you can identify those and you know of course it's very similar to what Warren and Charlie look for
Ted Weschlerbut the whole idea of looking into the future and trying to extrapolate what a business looks like 10 years or 20 years or 30 years from now is a very difficult exercise you know we've got creative destruction and we've got things coming from Left Field and I remember that when I was living in California and used to fly in and out of LAX many years back there was a really good parking operator
Questionerthere was a really good parking operator called Wally Park near the airport and Wally Park had really good service so first of all what they had done in their parking lot is that they had put these leather dividers between each car so that your car couldn't get dinged so once you park basically you know any doors opening whatever you would never get dinged and the second is they just ran a very high frequency of shuttles back and forth so it was just always really good service that you know you parked there it was very quick to get to the airport very quickly and picked up and I used to think this is probably going back you know maybe 15-20 years that you know Wally Park is the kind of business that looks Bulletproof you know they have a high customer service and none of their competitors around ever cloned or copied the the leather
Otherever cloned or copied the the leather dividers I I looked at all of them none of them ever did that and they never even bothered with you know the frequency of the shuttles and all of that so I said you know these guys have been around for so many decades and it's great and if the business ever comes up for sale I should think about buying it if it is available at a reasonable price and these are just thoughts in my head and then next thing you know is you have Uber and then people aren't parking at the airport rather than driving to the airport anymore and so you just have things come from Left Field which are not on your radar at all you know you just don't think that there's anything that would create a distortion and but that's the nature of capitalism with the creative destruction so with that you know I'm probably more interested in what you have on your
Questionerinterested in what you have on your minds and what you'd like to talk about so we can we can go from there and just take the mic or you can come up to the mic whatever you prefer
Otherforeign
Questionerwell I really don't have anything homegrown in terms of investment philosophy everything is cloned and copied from someone you know they've been cloned and copied from Buffett and monger and Graham and Chuck acree and a zillion other people and so the good news about the value investing Community starting with Ben Graham was that there's a culture of sharing the knowledge and helping Next Generation to learn and grow and so on and so you know I didn't go to business school and I just learned investing from Reading initially Warren Buffett's biographies then the Berkshire letters then the Buffett partnership letters and then you know Charlie Munger and all of that and Graham and so on so that's
Otherthat and Graham and so on so that's basically the the way I went about it and self-educated myself and then I started to make investments so Buffett has a has a quote he says that I'm a better investor because I'm a businessman and I'm a better businessman because I'm an investor there's an interplay between running a business and running a portfolio and one of the things that attracted me a lot to Warren Buffett was that when I was running my I.T business basically probably three or four or five percent of my time used to go and kind of figuring out strategy and Direction and every two or three years I had to tweak that because the market had changed and probably 80 90 percent of time went in all the blocking and tackling and the heavy lifting of making it happen and getting the people and all of that and I always liked the three or four
Otherand I always liked the three or four percentpercent time a lot better than the 80 90 oftime a lot better than the 80 90 oftime a lot better than the 80 90 of blocking and tacklingblocking and tacklingblocking and tackling and one of the kind of moments ofand one of the kind of moments ofand one of the kind of moments of epiphany that came to me when I actuallyepiphany that came to me when I actuallyepiphany that came to me when I actually accidentally heard about Buffett and Iaccidentally heard about Buffett and Iaccidentally heard about Buffett and I read into how he invests was that he hadread into how he invests was that he hadread into how he invests was that he had converted that four percent time to 80converted that four percent time to 80converted that four percent time to 80 percent so you're using basically thepercent so you're using basically thepercent so you're using basically the same brain cells and you're using thesame brain cells and you're using thesame brain cells and you're using the same kind ofsame kind ofsame kind of mental models in effect you know becausemental models in effect you know becausemental models in effect you know because basically if I'm looking at an expansionbasically if I'm looking at an expansionbasically if I'm looking at an expansion of my business into a new area you knowof my business into a new area you knowof my business into a new area you know I'm looking at the economics and whatI'm looking at the economics and whatI'm looking at the economics and what kind of risk I'm going to take and whatkind of risk I'm going to take and whatkind of risk I'm going to take and what likely rewards and so on which are verylikely rewards and so on which are verylikely rewards and so on which are very similar to what you're looking at andsimilar to what you're looking at andsimilar to what you're looking at and investing and so to me there was thisinvesting and so to me there was thisinvesting and so to me there was this very attractive to be able to take thevery attractive to be able to take thevery attractive to be able to take the four percent to 80 or 90 percentfour percent to 80 or 90 percentfour percent to 80 or 90 percent and so I started to take my foot off theand so I started to take my foot off theand so I started to take my foot off the being an entrepreneur to being anbeing an entrepreneur to being anbeing an entrepreneur to being an investor where I think in 94 there was a
Questionerinvestor where I think in 94 there was a small sale of a portion of my business and after taxes I got left with about a million and it's the first time I had any money in my account because I had bootstrapped the business with credit cards and so on and I didn't really need the money so I started to invest it using what I had learned till then about Buffett's approach and in about five years that million had become about 13 million so I said you know well done monish you know that's pretty good and and I was not spending that much time and I was spending more time on my business but I was getting less and less interested in the business and more and more interested in investing and around 99 I made the switch you know I basically left the company found a CEO and then nipple Brighton started really as a hobby with a few friends that
Questioneras a hobby with a few friends that wanted me to manage their money and then kind of went from there
Questionerso other questions I have a question regarding I know there's been a lot of change happening off late with the stoppage or the reduction of the quantitative easing and perhaps there is a move back to value but with all the technological changes which are happening so are there any themes you are thinking about for the next couple of decades which might be coming in from the left field which we should be thinking about
Todd Combsyeah I think I tend I tend not to think much at all about anything macro and anything the FED is doing or anything anyone says about interest rates and any of that to me all of that is kind of in the noise level and I've always felt that whether the prime rate is three percent or seven percent shouldn't make much difference to what I'm doing in in terms of
Questionerwhat I'm doing in in terms of what I'm doing in in terms of Investments and so on Investments and so on Investments and so on and so basically the the idea is that we and so basically the the idea is that we and so basically the the idea is that we want to look for want to look for want to look for no-brainers no-brainers no-brainers we want to look for things where there we want to look for things where there we want to look for things where there is a is a is a very large gap between price and value very large gap between price and value very large gap between price and value we want to look for things where we want to look for things where we want to look for things where the the the returns in equity are very high we want returns in equity are very high we want returns in equity are very high we want to look up look for things where the to look up look for things where the to look up look for things where the runways are very long you know just like runways are very long you know just like runways are very long you know just like you know you know you know Chuck's three luggage tool right Chuck's three luggage tool right Chuck's three luggage tool right and and and one of the one of the difficulties that one of the one of the difficulties that one of the one of the difficulties that comes up comes up comes up in the U.S markets in the U.S markets in the U.S markets is that it's a very heavily picked over is that it's a very heavily picked over is that it's a very heavily picked over Market Market Market so we have more hedge funds than stocks so we have more hedge funds than stocks so we have more hedge funds than stocks that's a problem you know near Morehead that's a problem you know near Morehead that's a problem you know near Morehead we have more mutual funds than Stocks by we have more mutual funds than Stocks by we have more mutual funds than Stocks by some by some significant margin and just some by some significant margin and just some by some significant margin and just right there which which means that right there which which means that right there which which means that you've got you know in effect thousands you've got you know in effect thousands you've got you know in effect thousands maybe even tens of thousands of maybe even tens of thousands of maybe even tens of thousands of some really smart people picking over a some really smart people picking over a some really smart people picking over a number of businesses and so to be able
Questionernumber of businesses and so to be able to get a differentiated view versus that August group is not easy which is why you know we go back to what Buffett said about you know us so so record you know he has a he has a more difficult time because for example when a when a company is offered for sale as a whole whole company purchase usually the seller controlled the timing to make it a very attractive time for the seller where the business is gonna on the up and up and usually sellers will in the US demand a premium because there's you know I haven't even talked about the private Equity Funds even we've got thousands of those as well so you have a lot of competition for wholly owned businesses you've got a lot of competition for publicly traded businesses and everything in between and so when Buffett is presented an opportunity to buy a business it may
Questioneropportunity to buy a business it may have some great qualities but may also have some warts and he's got very little time and he's got a lot of money and he has to make a decision well do I just say no do I go for it because we're earning you know two percent elsewhere and what do we do right so those are those are not easy decisions to make especially when he's got a you've got something like something like two or three billion coming in every month in in cash flows for Omaha to deploy and my my answer to that nowadays is to not spend much time looking at North American businesses I I found that I mean I I started making trips to Turkey about five years ago and and I'm going there again in about two weeks and and I found that it was uh very hated extremely mispriced Market with a lot of crazy macro situations going on and I couldn't even get some of my best
Li Luand I couldn't even get some of my best friends to look at some of the businesses and so turkey has you know like kind of north of 80 percent inflation and the currency loses a lot of value every year and so on but we've had some good success investing there so it's a trillion dollar economy and the total amount that all foreign investors have in Turkey is like 20 billion and we have we have about 200 million in Turkey which is like one percent it wasn't one percent we didn't put 200 million in we put much less than that and it just it it went up but the thing is that I found very crazy mispricing and I found that even in with all the headwinds we were not going to probably have a problem and so what I did in Turkey is I said okay let's only look at businesses which don't have earnings in lira they should have earnings in Euros or
Questionerthey should have earnings in Euros or dollarsdollarsdollars or they should have assets that have aor they should have assets that have aor they should have assets that have a international valueinternational valueinternational value so in a way what I was looking for is Iso in a way what I was looking for is Iso in a way what I was looking for is I was because the baby got thrown out ofwas because the baby got thrown out ofwas because the baby got thrown out of the bathwater right nobody wants to gothe bathwater right nobody wants to gothe bathwater right nobody wants to go there because it's kind of toxic theythere because it's kind of toxic theythere because it's kind of toxic they think it's toxicthink it's toxicthink it's toxic but I said if I look at businesses wherebut I said if I look at businesses wherebut I said if I look at businesses where we don't have any currency issues so forwe don't have any currency issues so forwe don't have any currency issues so for example I don't have an investment inexample I don't have an investment inexample I don't have an investment in this but there's athis but there's athis but there's a there's a fruit juice manufacturer inthere's a fruit juice manufacturer inthere's a fruit juice manufacturer in Turkey I'm just giving an exampleTurkey I'm just giving an exampleTurkey I'm just giving an example where 90 of 98 of the revenue is exportswhere 90 of 98 of the revenue is exportswhere 90 of 98 of the revenue is exports into the European Unioninto the European Unioninto the European Union and turkey is part of the Europeanand turkey is part of the Europeanand turkey is part of the European common market where they can export andcommon market where they can export andcommon market where they can export and import from Europe with no Duty orimport from Europe with no Duty orimport from Europe with no Duty or tariffs it's free tradetariffs it's free tradetariffs it's free trade and so the more the Lira collapsesand so the more the Lira collapsesand so the more the Lira collapses the lower their cost in eurosthe lower their cost in eurosthe lower their cost in euros and since they're exporting they getand since they're exporting they getand since they're exporting they get operating leverage so their earnings inoperating leverage so their earnings inoperating leverage so their earnings in euroseuroseuros keep going upkeep going up
Otherkeep going up even if they don't groweven if they don't groweven if they don't grow because of this Dynamic right and so asbecause of this Dynamic right and so asbecause of this Dynamic right and so as long as this craziness continues theylong as this craziness continues theylong as this craziness continues they would end up doing pretty wellwould end up doing pretty wellwould end up doing pretty well but because everyone leftbut because everyone leftbut because everyone left everything got mispricedeverything got mispricedeverything got mispriced sososo I I found someI I found someI I found some extremely crazily mispriced businessesextremely crazily mispriced businessesextremely crazily mispriced businesses so I said okayso I said okayso I said okay we've got an you know whole Marketwe've got an you know whole Marketwe've got an you know whole Market that's mispricedthat's mispricedthat's mispriced what I'll do is I won't go after thewhat I'll do is I won't go after thewhat I'll do is I won't go after the cheapest ones which used to be the oldcheapest ones which used to be the oldcheapest ones which used to be the old monish you know after a few decades youmonish you know after a few decades youmonish you know after a few decades you learned I said I'll go after very highlearned I said I'll go after very highlearned I said I'll go after very high quality businesses and I ended up in inquality businesses and I ended up in inquality businesses and I ended up in in one case with an extremely high qualityone case with an extremely high qualityone case with an extremely high quality business which was just extremelybusiness which was just extremelybusiness which was just extremely mispriced so we we bought into thismispriced so we we bought into thismispriced so we we bought into this operator of warehouses it's the largestoperator of warehouses it's the largestoperator of warehouses it's the largest Warehouse operator in Turkey they'reWarehouse operator in Turkey they'reWarehouse operator in Turkey they're kind of like a landlordkind of like a landlordkind of like a landlord and I remember the day I went to meetand I remember the day I went to meetand I remember the day I went to meet them in 2019 for the first timethem in 2019 for the first timethem in 2019 for the first time my friend in Turkey who I had toldmy friend in Turkey who I had toldmy friend in Turkey who I had told listen I just want to go meet all the
Questionerlisten I just want to go meet all the companies that you already have an investment in so don't take me to companies you have not invested in I want like one layer of protection to start with and so he was telling me Monisha company has a market cap of 16 million dollars one six and the liquidation value is probably like 600 to 800 million so I said is it a fraud you know because that's the only reason we'd have such crazy pricing he said no it's not a fraud I own it in my portfolio and I said it's sitting at two percent of liquidation value he said yeah you know a lot of things in Turkey are mispriced before that the previous day actually the previous year the first company I visited in turkey when I again made the trip and I told him I want to visit companies in his portfolio we were going to visit one of the largest banks in Turkey
Questionerlargest banks in Turkey
Questionerand so he tells me Monash the PE is 0.1
Questionerokay not one which means you like are buying a company at One Time's earnings
Questioneryou would be buying the bank at one month's earnings
Questionerokay
QuestionerI think my trips to Turkey are the most orgasmic trips
Questioneryou know the food is great the weather is great the company is great and the and the companies are great to visit so as we're walking over to go visit this PE of 0.1 you know my only time my life I visited a 0.1 PE company I asked my friend is there hair on it he said yeah there's a little bit of hair on it I said can you tell me what hair it has on it
Questionerhe said well so the com the bank was Hulk bank and health bank is one of the largest banks in Turkey
Questionerhe said well you know the chairman of the company decided to ignore this un U.N embargo and sanctions against Iran you know with the fund transfers and all
Questioneryou know with the fund transfers and all and he was doing nmas all kinds of Permitting all kinds of transfers to take place and the U.S got wind of that and the CFO of the bank had made a personal trip to the U.S where he was going to go to Disney World with his family and when he landed at JFK the feds picked him up and they sent him straight to Rikers prison and the family I don't think continued on to Disney World without him they went back to Istanbul and so he was locked up in Riker's prison and then erdogan is calling Trump to try to get the guy released and Trump is telling his buddy erdogan that it's the state of New York and it's the state of New York's attorney general that's going after this the federal government has no Authority so you say I can't even do anything I don't have any power so he was trying to explain to urugan how the
Otherwas trying to explain to urugan how the president of the United States has no power to get one guy out of prison you know and so when all of this hit the newspapers and you know the U.S federal reserve was thinking about actions where they would just kabash them they would take them out of the Swift system and take them out of everything the stock goes to the P of 0.1 and I'm getting this story as we're going up the elevator to see the company and very high quality honorable people you know I mean I think that CFO had nothing to do with any of this they just needed some body to do that and so I told my friend after that meeting that I can deal with hair but not so much hair this is too much can we just take it down one or two levels let's not do the point one and point two P's let's move up to the P or once I think the PO ones is I can deal with that and so then we were you know
Questionerwith that and so then we were you know the next year we were going to see this you know this company race us and and and this time I could find no hair on it I could find nothing wrong with it the father and son who ran it they seem like really high quality people it just none of it made any sense their warehouses which are just you know works of art they're really beautiful 12 million square feet in very Prime areas in Turkey 99 least 10-year inflation index leases a lot of the leases in dollars in euros Amazon Ikea car 4 Mercedes Dupont these are the tenants you know and so I mean any which way I looked at it I couldn't find anything wrong with it then I'm looking at the market cap at 16 million and I'm going to say you know what can I invest you know I got you know I was managing like 600 million or something I said what are you going to
Warrensomething I said what are you going to do with thisdo with thisdo with this so anyway I started buying and I said weso anyway I started buying and I said weso anyway I started buying and I said we can buy whatever we can get and I wascan buy whatever we can get and I wascan buy whatever we can get and I was surprised that for seven or eightsurprised that for seven or eightsurprised that for seven or eight million dollars we got one third of themillion dollars we got one third of themillion dollars we got one third of the companycompanycompany nobody's interestednobody's interestednobody's interested and I remember we got a block of likeand I remember we got a block of likeand I remember we got a block of like five percentfive percentfive percent of the company from Templeton fundsof the company from Templeton fundsof the company from Templeton funds and some guy at Templeton in New Yorkand some guy at Templeton in New Yorkand some guy at Templeton in New York probably issued some order saying exitprobably issued some order saying exitprobably issued some order saying exit turkeyturkeyturkey you know there was no analysis oryou know there was no analysis oryou know there was no analysis or anything done about what they owned theyanything done about what they owned theyanything done about what they owned they just got a blanket order that we arejust got a blanket order that we arejust got a blanket order that we are nuking all our positions in the countrynuking all our positions in the countrynuking all our positions in the country and I'm saying you know bring it on youand I'm saying you know bring it on youand I'm saying you know bring it on you want to give me the and you know Johnwant to give me the and you know Johnwant to give me the and you know John Templeton would be turning in his graveTempleton would be turning in his graveTempleton would be turning in his grave with you know his firm is selling at twowith you know his firm is selling at twowith you know his firm is selling at two percent of liquidation valuepercent of liquidation valuepercent of liquidation value and that wasn't the best part about raceand that wasn't the best part about raceand that wasn't the best part about race us the best part about race us was whenus the best part about race us was whenus the best part about race us was when I met the father and son theyI met the father and son they
QuestionerI met the father and son they told me that their investment philosophytold me that their investment philosophytold me that their investment philosophy is that they do not want to put moneyis that they do not want to put moneyis that they do not want to put money out if they cannot get it back in two orout if they cannot get it back in two orout if they cannot get it back in two or three years in dollars or Euros sothree years in dollars or Euros sothree years in dollars or Euros so basically not only did they have thebasically not only did they have thebasically not only did they have the warehouses they had the largest freightwarehouses they had the largest freightwarehouses they had the largest freight train Network in Turkey so the thetrain Network in Turkey so the thetrain Network in Turkey so the the railways are owned by the governmentrailways are owned by the governmentrailways are owned by the government government owns a track and they owngovernment owns a track and they owngovernment owns a track and they own their locomotives but the the rail carstheir locomotives but the the rail carstheir locomotives but the the rail cars the freight rail cars those arethe freight rail cars those arethe freight rail cars those are privately those can be privately ownedprivately those can be privately ownedprivately those can be privately owned and they're the largest operator ofand they're the largest operator ofand they're the largest operator of those which is a great business theythose which is a great business theythose which is a great business they have the largest truck Fleet in Turkey Ihave the largest truck Fleet in Turkey Ihave the largest truck Fleet in Turkey I think they've got like 2 000 trucks theythink they've got like 2 000 trucks theythink they've got like 2 000 trucks they have you know the largest forklifthave you know the largest forklifthave you know the largest forklift rental business vehicle inspectionsrental business vehicle inspectionsrental business vehicle inspections every business I looked at that they hadevery business I looked at that they hadevery business I looked at that they had had very favorable economics and ithad very favorable economics and ithad very favorable economics and it wasn't it was interesting the father hadwasn't it was interesting the father hadwasn't it was interesting the father had never been to collegenever been to college
Questionernever been to college he if I asked him you know what is Roehe if I asked him you know what is Roehe if I asked him you know what is Roe RoiRoiRoi irr he would have no idea what I'mirr he would have no idea what I'mirr he would have no idea what I'm talking abouttalking abouttalking about but he understands I put a dollar out Ibut he understands I put a dollar out Ibut he understands I put a dollar out I want it back in two years that's what hewant it back in two years that's what hewant it back in two years that's what he understands and that was the bar byunderstands and that was the bar byunderstands and that was the bar by which they invested so because they hadwhich they invested so because they hadwhich they invested so because they had this High bar they always ended upthis High bar they always ended upthis High bar they always ended up in great businesses all their businessesin great businesses all their businessesin great businesses all their businesses were like recurring Revenue a very goodwere like recurring Revenue a very goodwere like recurring Revenue a very good visibility deep into the future and sovisibility deep into the future and sovisibility deep into the future and so on so I said you know we are an asset ison so I said you know we are an asset ison so I said you know we are an asset is worth seven or eight hundred millionworth seven or eight hundred millionworth seven or eight hundred million the cash flows are being redeployed atthe cash flows are being redeployed atthe cash flows are being redeployed at 25 to 35 percent25 to 35 percent25 to 35 percent where do I signwhere do I signwhere do I sign and if they never increase the value ofand if they never increase the value ofand if they never increase the value of the business we have a 50x or a 30Xthe business we have a 50x or a 30Xthe business we have a 50x or a 30X Because by the time I finish buying itBecause by the time I finish buying itBecause by the time I finish buying it it moved up a little bit so we wouldit moved up a little bit so we wouldit moved up a little bit so we would have like you know three percenthave like you know three percenthave like you know three percent liquidation valueliquidation valueliquidation value and so that 16 million market cap now isand so that 16 million market cap now isand so that 16 million market cap now is more than 300 or 350 million so it's
Warrenmore than 300 or 350 million so it's moved up a bit but their liquidation value is now about a billion and a half or so it may be more because a lot of the assets I'm not able to Value I'm just valuing the real estate I'm ignoring the rest of it and and I'm not valuing the engine that redeploys the engine that we deploy is is the most valuable piece of the whole puzzle and so I think that if I were you guys looking at the fund and so on I would do what Charlie Munger recommends which is you go fishing where the fish are and some of these places can be uncomfortable and some of these will take some time to get your arms around and it took me about I mean now I think you know this would be my 50 or looking at Turkey so what I what I realized is that I understood everything about the fear and all the foreign investors exiting and all of that
Questionerand all of that and and I realized that there were a few and and I realized that there were a few and and I realized that there were a few businesses businesses businesses probably probably probably you know I can think of at least four or you know I can think of at least four or you know I can think of at least four or five maybe more maybe close to 10. five maybe more maybe close to 10. five maybe more maybe close to 10. where when I met these management teams where when I met these management teams where when I met these management teams they had been U.S ivy league educated they had been U.S ivy league educated they had been U.S ivy league educated you know mbas from Cornell or Harvard or you know mbas from Cornell or Harvard or you know mbas from Cornell or Harvard or Colombia very high quality people that I Colombia very high quality people that I Colombia very high quality people that I met very high integrity met very high integrity met very high integrity and very high quality business that they and very high quality business that they and very high quality business that they were running but nobody was interested were running but nobody was interested were running but nobody was interested because of the stigma of where it was because of the stigma of where it was because of the stigma of where it was located there's a there's an airport located there's a there's an airport located there's a there's an airport operator in Turkey which is the other operator in Turkey which is the other operator in Turkey which is the other investment we have operating airports investment we have operating airports investment we have operating airports can be a good business if you don't can be a good business if you don't can be a good business if you don't overpay overpay overpay in the U.S in in the U.S in in the U.S in the Continental 48 states the Continental 48 states the Continental 48 states all the airports used to be government all the airports used to be government all the airports used to be government owned and so we don't have the phenomena owned and so we don't have the phenomena owned and so we don't have the phenomena of this you know private operators but of this you know private operators but of this you know private operators but LaGuardia now is the only one the LaGuardia now is the only one the LaGuardia now is the only one the LaGuardia used to be you know an armpit LaGuardia used to be you know an armpit
QuestionerLaGuardia used to be you know an armpit of the us as well as airports go and now it's a spectacular airport they actually gave it to a private operator and it's become a great airport and but in other parts of the world private airports are much more prevalent but still out of out of something like I would say more than 10 000 airports around only about 300 are private so it's a very small number but that number will grow you know the number of airports coming up in Africa and Asia will go up a lot and a lot of them will end up in private hands because it's a win-win for everyone so this this airport operator in which is based in Istanbul they operate 15 approach eight of which are outside turkey but they still get the stigma of turkey and even the airports within turkey all their contracted revenues and everything is in euros nothing is in Lira so all there it's a
Othernothing is in Lira so all there it's a completely insulated and in Turkey their cosigned Lira you know the the people and the the labor and employees and all that is all India so the all the devaluations and everything actually give them Tailwinds and all the airports the ones that are private in the in the world they operate on what they call bot build operate transfer so typically these concessions might be 20 years 30 years 50 years but I when they expire they go back to the government or they get renewed with another pound of Flesh extracted by the government and so on but in the middle of covid tab airports acquired an airport in Kazakhstan in almari outright it's the only airport I know of significant airport around the world which is completely privately owned forever and this deal happened when there were no planes flying
Otherthere were no planes flying so the entire all-in cost of that deal was 650 million most of it financed at three or four percent over a very long period of time a fixed rate and an airport in this airport in a few years will be producing about something north of 150 million or more in cash flows and those cash flows will be growing at about five or seven percent a year as far as the eye can see because Kazakhstan actually is a very wealthy country with a lot of oil and so anyway we we own like you know little over five percent of the airport but just the Almaty airport alone in my opinion is worth several billion dollars and the market cap of the company was like seven or eight hundred million and I'm not counting the other 14 airports and I'm not counting their other other subsidiaries they have a whole bunch of other subsidiaries
Questionerother subsidiaries and so yeah so basically and so yeah so basically and so yeah so basically like like like this time when I'm going to Turkey I'm this time when I'm going to Turkey I'm this time when I'm going to Turkey I'm going to be visiting a bunch of going to be visiting a bunch of going to be visiting a bunch of businesses I haven't met before businesses I haven't met before businesses I haven't met before and I know people are not interested and I know people are not interested and I know people are not interested which is great you know we'll uh which is great you know we'll uh which is great you know we'll uh hopefully not go to the point one piece hopefully not go to the point one piece hopefully not go to the point one piece we'll try to keep it at the 1p 1p is a we'll try to keep it at the 1p 1p is a we'll try to keep it at the 1p 1p is a good place to be so anyway next question oh so so so I think Phil Fisher has a court he says I think Phil Fisher has a court he says I think Phil Fisher has a court he says that that that and that's a great book if you haven't and that's a great book if you haven't and that's a great book if you haven't read it you know comments talks and read it you know comments talks and read it you know comments talks and uncommon profits it's a really good book uncommon profits it's a really good book uncommon profits it's a really good book but here's a quote that if the job is but here's a quote that if the job is but here's a quote that if the job is done right every cell decision is a done right every cell decision is a done right every cell decision is a mistake mistake mistake and so this took me a long time to and so this took me a long time to and so this took me a long time to figure out figure out figure out a few decades and I have made a a few decades and I have made a a few decades and I have made a gazillion selling mistakes I mean it's gazillion selling mistakes I mean it's gazillion selling mistakes I mean it's just such a long list it you know just such a long list it you know just such a long list it you know Buffett thinks his list is long by list Buffett thinks his list is long by list Buffett thinks his list is long by list is even longer is even longer is even longer so ideally you want to be so ideally you want to be so ideally you want to be like Chuck acre you know they run a like Chuck acre you know they run a like Chuck acre you know they run a mutual fund
Todd Combsmutual fund and you know how the typical mutual fund has like 70 80 annual turnover the acree fund is one percent annual turnover and that one percent I think is mostly coming because they have some redemptions or whatever you know people going in and out of the funds forcing them to sell something but basically ideally what we want to be doing is we want to be very patient we want to be you know buying businesses that have favorable economics that have long runways and yeah I mean we can have a very high error rate and still do okay so when you are absolutely convinced that you have made a mistake where either you misunderstood the mode or you misunderstood the runway or you misunderstood what the future of the business would look like then those may become candidates for sales but I think that selling is very hard I think selling is much harder than buying
Todd Combsthink selling is much harder than buying and so that's just the nature of investing but because it's such a forgiving business we can be okay on the selling it's still we can be you know sloppy on the selling and still be okay as long as we keep the crown jewels intact so
Questioneryou mentioned that the digestion for the students since our mandate is to invest in U.S Securities and they have now this week to think about the pitch what would you suggest for them to to do how to generate ideas how to evaluate the stock if it's a good value stock
Todd Combswell I feel sorry for them it's a difficult job well I would say that I don't know what all the restrictions are but generally speaking you will have more inefficiency in the smaller names you could look I mean I would say given the time Horizons some areas like merger Arbitrage might be interesting you know like the we have this Activision
Questionerlike the we have this Activision Microsoft deal which has a pretty wide Delta and Buffett seems to think that Delta is not justified that might fit in your time frames before you leave you can have an outcome on that which is good so I would I would look for what I would do in in that case is I would look for quirks and anomalies and what I would do is I would zoom in on places and things like the value investors Club and because those are a bunch of pretty high quality write-ups and I would look at the ones that were in the US or North America and see which ones of those are Theses that I would buy into and kind of take it from there so that's what I would do I mean I think the the fact that you're running 30 you know 20 30 million is an advantage that's a big Advantage so one of the things you could do is are they allowed to go Nano cap
Questionerdo is are they allowed to go Nano cap what is the lowest cap they're allowed to do
Questioneroh so sad you know it's like the knife went in and then got turned
Questionerso try to stick to things that are under a couple of billion you know I would take other than something like a merger arbitrary like Activision or something I would take the whole radar to be between one and two billion and I would not look at these you know Googles and all of that I would just look at that space and I'd be trying to see if I can find anomalies in that space and that's what you would try to do and how many positions minimum three zero they can't put it in one name they can so Buffett hired two managers you know Todd and Ted and he told them because they have like 15 20 billion each now he says I don't care if you put it all in one name so that was the third issue is that the the you have a very wide number of names
Questionerthe you have a very wide number of names
QuestionerI mean after five years of going to Turkey and drilling down all these businesses I have two Investments there you know that's it I just found two out of so many that I mean I each trip I visited like 20 companies and it's a market that's been clobbered you know so even with all the clobbering and everything else I still couldn't find that many you know and yeah so I think the the US I mean there is opportunity I think the the thing that you would have to do is you would have to have a differentiated View on these businesses which have a high probability of playing out and those just are just difficult you know there's a lot of smart people looking at things but if you have an edge in some area and you can see things a little bit differently then then that that edge can actually give you a big advantage
Questionergive you a big advantage and so that can that can work out
Otherother other questions
Questioneryeah how do you think your background hasn't with digging throughout either entrepreneurship or technology how do you think that's the best investor you're your boss statement well
QuestionerI think what what really helped me a lot was kind of accidental it's kind of what I ended up as experiences during my childhood so the the human brain so first of all when when when we are born and you know the baby's coming out through the birth canal which is very narrow the brain is the most underdeveloped organ that a human infant has because the birth canal is just not wide enough so the the brain goes through it's one of the fastest growing organs in the first five years of life so massive amounts of growth in the brain and a long infancy for human kids after the age of 10 or 11 till about 19 or 20
Otheror 20or 20 the brain is actually culling neuronthe brain is actually culling neuronthe brain is actually culling neuron connections so it goes through a rapidconnections so it goes through a rapidconnections so it goes through a rapid increase in Connections in the firstincrease in Connections in the firstincrease in Connections in the first five years then it slows down and thenfive years then it slows down and thenfive years then it slows down and then after that it starts culling collectionafter that it starts culling collectionafter that it starts culling collection connection connections and it's actuallyconnection connections and it's actuallyconnection connections and it's actually optimally set up at that window of timeoptimally set up at that window of timeoptimally set up at that window of time that's the only window of time in ourthat's the only window of time in ourthat's the only window of time in our entire lives to specializeentire lives to specializeentire lives to specialize and so if you are able toand so if you are able toand so if you are able to put a lot of time and energy into whatput a lot of time and energy into whatput a lot of time and energy into what eventually becomes your calling in lifeeventually becomes your calling in lifeeventually becomes your calling in life you be you get a huge Head Startyou be you get a huge Head Startyou be you get a huge Head Start and one of the problems we have is kindand one of the problems we have is kindand one of the problems we have is kind of modern humans is that in that periodof modern humans is that in that periodof modern humans is that in that period of timeof timeof time our education system and Society expectsour education system and Society expectsour education system and Society expects us to be generalistsus to be generalistsus to be generalists so you are you know sent to school andso you are you know sent to school andso you are you know sent to school and you have a set of subjects and you haveyou have a set of subjects and you haveyou have a set of subjects and you have a set of things you do and really thea set of things you do and really thea set of things you do and really the ability to specialize is for the mostability to specialize is for the mostability to specialize is for the most part non-existent it may happen a littlepart non-existent it may happen a littlepart non-existent it may happen a little bit when you're 17 or 18 and may have a
Otherbit when you're 17 or 18 and may have abit when you're 17 or 18 and may have a little bit when you enter college butlittle bit when you enter college butlittle bit when you enter college but basically the window closesbasically the window closesbasically the window closes by the time the specialization startsby the time the specialization startsby the time the specialization starts and we end up with some quirks like youand we end up with some quirks like youand we end up with some quirks like you end up with people like Bill Gatesend up with people like Bill Gatesend up with people like Bill Gates who like from the age of 11 or so wentwho like from the age of 11 or so wentwho like from the age of 11 or so went all in on computers and programming soall in on computers and programming soall in on computers and programming so by the time it was 18 or 19by the time it was 18 or 19by the time it was 18 or 19 he had spent more than 10 000 hourshe had spent more than 10 000 hourshe had spent more than 10 000 hours codingcodingcoding andandand a 40 year old could not compete with aa 40 year old could not compete with aa 40 year old could not compete with a 25 year old Bill Gates25 year old Bill Gates25 year old Bill Gates just because of that period of timejust because of that period of timejust because of that period of time where he completely specialized withwhere he completely specialized withwhere he completely specialized with Warren Buffett he bought his first talkWarren Buffett he bought his first talkWarren Buffett he bought his first talk when he was 11 or 12. he read everywhen he was 11 or 12. he read everywhen he was 11 or 12. he read every Finance book in the Omaha Public LibraryFinance book in the Omaha Public LibraryFinance book in the Omaha Public Library even by before he was like 14 or 15. soeven by before he was like 14 or 15. soeven by before he was like 14 or 15. so and his father was a stock broker he'dand his father was a stock broker he'dand his father was a stock broker he'd go to the office every weekend so Warrengo to the office every weekend so Warrengo to the office every weekend so Warren got a lot of kind of expertisegot a lot of kind of expertisegot a lot of kind of expertise in investing very early in in thatin investing very early in in thatin investing very early in in that window of time and we look at peoplewindow of time and we look at people
Otherwindow of time and we look at people like Michelangelo and Leonardo da Vinci and so on to go back you will see that a lot of the greats were able to through I mean it used to be I mean we still have that situation in Germany where they start separating out the kids when they're like 13 or 14 where if you're going to go work in a factory you actually start doing apprenticeships and all of that in factories in Germany when you're 13 or 14. and so Germany is interesting where it's a manufacturing Powerhouse with some of the highest labor costs in the world so China hasn't been able to uproot German Manufacturing because of the quality of the workforce and the quality of the workforce is that high in Germany because they specialize that early and so in my case what happened is my father was a entrepreneur but he kind of like clockwork every like
Questionerbut he kind of like clockwork every like three or four years he went out of business whatever he was doing he was always really good at starting businesses identifying opportunities but he was always under capitalized didn't have enough money and when the business was doing well he just you know pushed on all cylinders Max leverage maxed everything he could and then the first headwinds that showed up would destroy the company and and then and then my parents were just they didn't save so we would go from Feast to famine quite regularly so when I was around after I was 11 or 12 my brother and I my father would sit down with us in the evening and we'd have to figure out how to make the business last for one more day you know all the wall the caving in all the creditors are coming in it's just you know it's collapsing and it's a very kind of intense time and all of that is
Otherkind of intense time and all of that is affecting like we don't have money for rent we don't have money for groceries all of that so we'd make it through one day and then the next night was how do you make it survive one more day and when I was like 15 or 16 I used to go on sales calls with my dad and I never realized that any of these things with my you know the neurons and all of that that I think I finished several mbas before I was 18. and and so I I can actually look at businesses and figure them out pretty quickly probably because of a lot of experience and thinking about business in those years so even though I was run working you know going to General schools and all of that there was a decent amount of time that went into all of these things so later when I actually heard about Buffett and started reading a lot of things actually
Otherthings actually came to me pretty easily because I had looked at so many issues with these companies and businesses that also looked I also learned from my dad how to start businesses with nothing and so I I got that was a great gift I got from him which helped me get my first business off the ground because I didn't have any money when I was doing that and so so I think that that's that experience helped me a lot then when I started running my business obviously there was more direct experience I got and then when I you know actually got a proper framework from Buffett and Munger and so on then that just overlaid everything else and it worked out so actually for me I'm just accidentally right place at the right time and pretty lucky I would say so it worked out well
Questioneryeah people get your thoughts on knowing how much you understand about Charlie manga and one
Questionerunderstand about Charlie manga and one look at the side of investing aboutlook at the side of investing aboutlook at the side of investing about their Fourier into Occidental becausetheir Fourier into Occidental becausetheir Fourier into Occidental because for the longest time they had avoidedfor the longest time they had avoidedfor the longest time they had avoided materials and very cyclical Commoditiesmaterials and very cyclical Commoditiesmaterials and very cyclical Commodities and then entering into oxidative andand then entering into oxidative andand then entering into oxidative and they keep wrapping up their Stakesthey keep wrapping up their Stakesthey keep wrapping up their Stakes what do you think of that as anwhat do you think of that as anwhat do you think of that as an investmentinvestmentinvestment
Warrenyeah so I think both of them have beenyeah so I think both of them have beenyeah so I think both of them have been investorsinvestorsinvestors in in oil and gas for very long time youin in oil and gas for very long time youin in oil and gas for very long time you know but Monger made a investment inknow but Monger made a investment inknow but Monger made a investment in what was eventually one of his biggestwhat was eventually one of his biggestwhat was eventually one of his biggest mistakes because he didn't buy enoughmistakes because he didn't buy enoughmistakes because he didn't buy enough beverage oilbeverage oilbeverage oil in 1977 so you know that's like you knowin 1977 so you know that's like you knowin 1977 so you know that's like you know 46 years back so they've they've and you46 years back so they've they've and you46 years back so they've they've and you know Charlie will tell me things youknow Charlie will tell me things youknow Charlie will tell me things you know I I have a good friendship withknow I I have a good friendship withknow I I have a good friendship with Charlie ICharlie ICharlie I usually see him four or five times ausually see him four or five times ausually see him four or five times a year for dinner and I used to play a lotyear for dinner and I used to play a lotyear for dinner and I used to play a lot of bridge with him you know sometimesof bridge with him you know sometimesof bridge with him you know sometimes I'll be at his place and he'd tell meI'll be at his place and he'd tell meI'll be at his place and he'd tell me and he's living in you know Hancock Park
Questionerand he's living in you know Hancock Park in L.A he says that we are sitting on top of an oil field you know and so so then he explained to me how that whole area actually was an oil field but then because so many humans moved in and the real estate prices became more it became more attractive to build homes and sell the real estate that way than to you know drill for oil that La basically developed Without Really extracting the oil so to speak so it still sits there it still sits there one time I was talking to him and he mentioned that he would love to like have a investment in Exxon and be able to get a commitment from the management that they would do no more capex and they would simply run all the fields with the cash flows going to the shareholders and he had calculated it'd be a tremendous investment and and of course oil companies don't think that way
Warrenthink that way and but oxy thinks that way so I think and but oxy thinks that way so I think and but oxy thinks that way so I think the oxy investment the oxy investment the oxy investment if you study Occidental what you'll find if you study Occidental what you'll find if you study Occidental what you'll find is is is they don't really have exploration going on on on so if we look at the whole fracking so if we look at the whole fracking so if we look at the whole fracking business and you know the Permian Basin business and you know the Permian Basin business and you know the Permian Basin and all of that basically when you drill and all of that basically when you drill and all of that basically when you drill a well you've got a 90 plus percent shot a well you've got a 90 plus percent shot a well you've got a 90 plus percent shot of what's going to come out I mean the of what's going to come out I mean the of what's going to come out I mean the probabilities are really high probabilities are really high probabilities are really high and it's not like what used to be and it's not like what used to be and it's not like what used to be conventional oil so here you've got very conventional oil so here you've got very conventional oil so here you've got very definitive metrics going on and so oxy definitive metrics going on and so oxy definitive metrics going on and so oxy basically has no almost no speculative basically has no almost no speculative basically has no almost no speculative drilling going on drilling going on drilling going on and so and so and so in effect in effect in effect it looks like a it looks like a it looks like a CD CD CD they're clipping the coupons and what they're clipping the coupons and what they're clipping the coupons and what oxy is doing is they have a huge gusher oxy is doing is they have a huge gusher oxy is doing is they have a huge gusher of cash flows coming out of cash flows coming out of cash flows coming out and that huge gusher of cash flows is and that huge gusher of cash flows is and that huge gusher of cash flows is only going into BuyBacks and dividends only going into BuyBacks and dividends only going into BuyBacks and dividends so it's all being pumped out to so it's all being pumped out to so it's all being pumped out to shareholders and he loves that and then shareholders and he loves that and then
Questionershareholders and he loves that and then they've made an investment in Chevron Ithey've made an investment in Chevron Ithey've made an investment in Chevron I think the reason they made thethink the reason they made thethink the reason they made the investment in Chevron is also Chevroninvestment in Chevron is also Chevroninvestment in Chevron is also Chevron has a very large position in the Permianhas a very large position in the Permianhas a very large position in the Permian Basin and if oxy was large enoughBasin and if oxy was large enoughBasin and if oxy was large enough they wouldn't have gone to Chevron justthey wouldn't have gone to Chevron justthey wouldn't have gone to Chevron just like he bought all the U.S airlines youlike he bought all the U.S airlines youlike he bought all the U.S airlines you know a while back he bought only becauseknow a while back he bought only becauseknow a while back he bought only because he couldn't make one bet because thehe couldn't make one bet because thehe couldn't make one bet because the size of the capital is so large he wassize of the capital is so large he wassize of the capital is so large he was forced kind of like you guys are forcedforced kind of like you guys are forcedforced kind of like you guys are forced you know when you find one Airline youyou know when you find one Airline youyou know when you find one Airline you got to buy all of them because you havegot to buy all of them because you havegot to buy all of them because you have 30 positions you know to put to work so30 positions you know to put to work so30 positions you know to put to work so I think the Chevron bet is a heavily aI think the Chevron bet is a heavily aI think the Chevron bet is a heavily a bet based on this non-exploration riskbet based on this non-exploration riskbet based on this non-exploration risk and you know the oil business lately andand you know the oil business lately andand you know the oil business lately and of course UT Austin knows this reallyof course UT Austin knows this reallyof course UT Austin knows this really well with thewell with thewell with the 8 billion that's coming out every year8 billion that's coming out every year8 billion that's coming out every year into the endowment you know people thinkinto the endowment you know people thinkinto the endowment you know people think Harvard has a biggest endowment but they
QuestionerHarvard has a biggest endowment but they don't really understand you know we are the biggest endowment here you know and you've got I mean I haven't seen a business school building as good as this one you know long live the oil fields so
QuestionerI think the the bet the BET which Ron and oxy is a coupon clipping bet and so I think Buffett looked at what U.S treasuries are paying him and he doesn't want downside so he looked at oxy as U.S treasuries on steroids and I think that's why he went with that bet so
Questionerother questions so he talked about the three-legged stool and one of those legs being impeachment and I'm just curious what's like every process I didn't go about analyzing like the quality of management Buffett and Munger have spoken quite a bit about this they say that what you should do is don't listen to what they're saying just look at the track record
Questionerjust look at the track recordjust look at the track record so if you have a long enough history ofso if you have a long enough history ofso if you have a long enough history of the businesswith the same managerwith the same managerwith the same manager you will be able to tellyou will be able to tellyou will be able to tell whether they under promise neverwhether they under promise neverwhether they under promise never delivereddelivereddelivered or whether they over promise andor whether they over promise andor whether they over promise and under-delivered whether they have skinunder-delivered whether they have skinunder-delivered whether they have skin in the game or they don't have skin inin the game or they don't have skin inin the game or they don't have skin in the game whether they're interests arethe game whether they're interests arethe game whether they're interests are aligned with yours or notaligned with yours or notaligned with yours or not andandand and how they think about it andand how they think about it andand how they think about it and you can come to some judgmentyou can come to some judgmentyou can come to some judgment about humans based on the track recordabout humans based on the track recordabout humans based on the track record and you should completely ignore theand you should completely ignore theand you should completely ignore the projections and what they're saying willprojections and what they're saying willprojections and what they're saying will happen in the future you know CEO Thehappen in the future you know CEO Thehappen in the future you know CEO The Optimist so they'll always they're notOptimist so they'll always they're notOptimist so they'll always they're not trying to be deceitful in most casestrying to be deceitful in most casestrying to be deceitful in most cases they just see things from rose-coloredthey just see things from rose-coloredthey just see things from rose-colored glasses and but I think if you just lookglasses and but I think if you just lookglasses and but I think if you just look at the history of the business then Iat the history of the business then Iat the history of the business then I think that can tell you a lot like thethink that can tell you a lot like thethink that can tell you a lot like the the business in in Turkey races you knowthe business in in Turkey races you knowthe business in in Turkey races you know when they IPO they took in 40 million of
Questionerwhen they IPO they took in 40 million of capital and then recently did a rights issue and they picked up another 10 million so 50 million is the total amount that went into that company they've never issued dividends because they've been reinvesting and we have something like a billion and a half or more of value in not that many years probably less than 15 years or something and so that's a remarkable record you know that's I can look at that history and when I look at you know the last few years when I look at the decisions they've made I can't point to anything that I would disagree with you know they've been very sound decisions so so I just look at the past and I think that's the past is very easy to look at because we've got a lot of data so I had I had made an investment in 2012 and I think this is one of the larger mistakes I made just because I
Ted Weschlerlarger mistakes I made just because I should have held on and I didn't hold on long enough so in 2012 I invested in Fiat Chrysler automobiles you know I always hated the auto business the auto business just badly sucks you know you have very high capex you have unions you have finicky customer taste you have like four years it takes to engineer and bring a car to Market and then people may not like the shape or may not like various things about it and that could fail it would cost you you know hundreds of millions of billions to engineer a car and may or may not work so just on every front it's just terrible and and especially in North America Detroit used to be one of the worst places to build a car you had very high labor costs and unions and all these different things going on very kind of calcified management but what I what I had noticed was that
Questionerbut what I what I had noticed was that in during the financial crisis in during the financial crisis in during the financial crisis GM and Chrysler went through near that GM and Chrysler went through near that GM and Chrysler went through near that experiences experiences experiences and the auto task force that was headed and the auto task force that was headed and the auto task force that was headed by Steve Ratner basically were put in by Steve Ratner basically were put in by Steve Ratner basically were put in place in Washington DC to re-engineer place in Washington DC to re-engineer place in Washington DC to re-engineer these companies and bring them back to these companies and bring them back to these companies and bring them back to life life life and I was reading I was reading when I and I was reading I was reading when I and I was reading I was reading when I was studying fiatrical I was reading was studying fiatrical I was reading was studying fiatrical I was reading Steve ratner's book about the whole Steve ratner's book about the whole Steve ratner's book about the whole experience of of doing that experience of of doing that experience of of doing that and he was talking about one time that and he was talking about one time that and he was talking about one time that the like four or five members of the the like four or five members of the the like four or five members of the task force that had come up with what task force that had come up with what task force that had come up with what they wanted the new Union contract to be they wanted the new Union contract to be they wanted the new Union contract to be so they had in without talking to the so they had in without talking to the so they had in without talking to the union they had come up with a new set of union they had come up with a new set of union they had come up with a new set of you know what workers would get paid and you know what workers would get paid and you know what workers would get paid and all of that which was very widely off all of that which was very widely off all of that which was very widely off from the way it was from the way it was from the way it was so they had a they had a meeting so they had a they had a meeting so they had a they had a meeting with the UAW with the UAW with the UAW and they they sat down to the uow you and they they sat down to the uow you and they they sat down to the uow you know two in the afternoon or something
Warrenknow two in the afternoon or something and they they told the UAW and they they told the UAW and they they told the UAW this is your new contract this is your new contract this is your new contract and please sign on the last page and please sign on the last page and please sign on the last page and give it back to us and give it back to us and give it back to us so the UAW said you don't understand how so the UAW said you don't understand how so the UAW said you don't understand how this works you are giving up something this works you are giving up something this works you are giving up something that's fine we'll take it in a few weeks that's fine we'll take it in a few weeks that's fine we'll take it in a few weeks we'll come back to you and we can just we'll come back to you and we can just we'll come back to you and we can just see from page one we're not going to see from page one we're not going to see from page one we're not going to accept 90 of this accept 90 of this accept 90 of this so we're not going to deal with this and so we're not going to deal with this and so we're not going to deal with this and you don't really understand how unions you don't really understand how unions you don't really understand how unions worked so Street Radner tells them that worked so Street Radner tells them that worked so Street Radner tells them that our plane leaves at five o'clock our plane leaves at five o'clock our plane leaves at five o'clock he said that if I don't have a signed he said that if I don't have a signed he said that if I don't have a signed contract without a comma change by five contract without a comma change by five contract without a comma change by five o'clock I shut all the lights down in o'clock I shut all the lights down in o'clock I shut all the lights down in the city tomorrow the city tomorrow the city tomorrow and all your jobs are gone and all your jobs are gone and all your jobs are gone I don't particularly care if they're the I don't particularly care if they're the I don't particularly care if they're the business or not you're not dealing with business or not you're not dealing with business or not you're not dealing with some GM or Chrysler management some GM or Chrysler management some GM or Chrysler management the UAW signed at 4 45. with no changes the UAW signed at 4 45. with no changes the UAW signed at 4 45. with no changes never ever in the history of Detroit did
Questionernever ever in the history of Detroit did that happen so then I went to God Google and pulled up the contract that they signed which was available and I read it and I looked at the previous contract they had knocked something like you know 70 80 off the labor cost and they took out you know ability to fire anyone at will all these things they just took out all kinds of things that had been bargained by the uow over decades because they could always strike they would strike in one plant that made transmissions and that would shut down the whole you know your whole supply chain and everything it would you couldn't produce a single car and so I realized when I was looking at this thing in 2012 that Detroit had actually gone so the reason auto manufacturing went to Detroit to begin with you know the going back to the time of Henry Ford
Todd Combsthe going back to the time of Henry Ford and so onand so onand so on is that area of the planet hasis that area of the planet hasis that area of the planet has tremendous iron ore depositstremendous iron ore depositstremendous iron ore deposits it has tremendous coal deposits we haveit has tremendous coal deposits we haveit has tremendous coal deposits we have a huge Iron and steel industry and wea huge Iron and steel industry and wea huge Iron and steel industry and we have the Great Lakes which allowhave the Great Lakes which allowhave the Great Lakes which allow movement of all those goods by water andmovement of all those goods by water andmovement of all those goods by water and the Erie Canal and so on so basicallythe Erie Canal and so on so basicallythe Erie Canal and so on so basically you had that entire footprint around theyou had that entire footprint around theyou had that entire footprint around the Great Lakes where you could bring in allGreat Lakes where you could bring in allGreat Lakes where you could bring in all the different factors of production youthe different factors of production youthe different factors of production you could ship out it was very efficient andcould ship out it was very efficient andcould ship out it was very efficient and that's why Detroit Rose because it hadthat's why Detroit Rose because it hadthat's why Detroit Rose because it had all those advantages and basically thoseall those advantages and basically thoseall those advantages and basically those advantages have come backadvantages have come backadvantages have come back but the but the market did not recognizebut the but the market did not recognizebut the but the market did not recognize the market thought Autos are terriblethe market thought Autos are terriblethe market thought Autos are terrible and unions are terrible and nobodyand unions are terrible and nobodyand unions are terrible and nobody really was paying attention thatreally was paying attention thatreally was paying attention that everything had changed and then when Ieverything had changed and then when Ieverything had changed and then when I was looking at Fiat Chrysler in 2012was looking at Fiat Chrysler in 2012was looking at Fiat Chrysler in 2012 they had hired a superstar managerthey had hired a superstar managerthey had hired a superstar manager Sergio marchioni and so SergioSergio marchioni and so Sergio
QuestionerSergio marchioni and so Sergio architected the acquisition of Chrysler by Fiat which was a minnow swallowing a whale and did that acquisition and when I was looking at it in 2012 the market cap of Fiat Chrysler was 5 billion the revenues were 140 billion so we were back in Istanbul man in North America we were back in Istanbul it was the bazaar the Grand Bazaar and nobody was interested we were at four percent of sales but not only we were at four percent of sales just two of their franchises so if I just you know they had a lot of Assets in the company but if I just looked at two of their franchises their Ram franchise and their Jeep franchise just looking to throw on the ram franchise side they have this law in the U.S where imported trucks cannot come in light duty trucks cannot come in I forget it's a chicken tax or something there's some very old
Questionertax or something there's some very old law so basically even when Toyota wanted to enter the truck Market in the U.S they had to start building trucks in Texas otherwise they could so basically the the light truck Market in Texas is the you know truck capital of the US I think 50 sales are trucks is basically three players all North American players and even Toyota has not been able to make much of a dent because the brand loyalties with those trucks is very high and they make ten thousand dollars a truck it's a very profitable so if you just extrapolated you know the number of trucks sold every year and the 10 000 per truck you would make like you know three four billion a year just in trucks at at and then the Jeep franchise which was the other one there were three franchises the truck franchise the G franchise and the minivans
Questionerminivansminivans these three were dominant for Chryslerthese three were dominant for Chryslerthese three were dominant for Chrysler and the three of them together wereand the three of them together wereand the three of them together were coming up to like 10 billion in cashcoming up to like 10 billion in cashcoming up to like 10 billion in cash flows now they had a bunch of otherflows now they had a bunch of otherflows now they had a bunch of other stuff that was pleading which these newstuff that was pleading which these newstuff that was pleading which these new contracts allowed them to kabashcontracts allowed them to kabashcontracts allowed them to kabash right so but but besides this they hadright so but but besides this they hadright so but but besides this they had Alfa Romeo Maserati and most importantlyAlfa Romeo Maserati and most importantlyAlfa Romeo Maserati and most importantly which I didn't pay much attention to 80which I didn't pay much attention to 80which I didn't pay much attention to 80 percent of Ferrari was sitting insidepercent of Ferrari was sitting insidepercent of Ferrari was sitting inside Fiat ChryslerFiat ChryslerFiat Chrysler and so I put I put 60 million dollarsand so I put I put 60 million dollarsand so I put I put 60 million dollars into Fiat Chrysler 10 of the fund in ininto Fiat Chrysler 10 of the fund in ininto Fiat Chrysler 10 of the fund in in 201220122012 and I thought thatand I thought thatand I thought that we'd probably have about four or fivewe'd probably have about four or fivewe'd probably have about four or five hundred millionhundred millionhundred million in a few years because it was just thein a few years because it was just thein a few years because it was just the economics we I thought that the five sixeconomics we I thought that the five sixeconomics we I thought that the five six billion market cap the after-taxbillion market cap the after-taxbillion market cap the after-tax earnings would be more than five sixearnings would be more than five sixearnings would be more than five six billion just based on what was going onbillion just based on what was going onbillion just based on what was going on here and we had a star manager who washere and we had a star manager who washere and we had a star manager who was really good and we had these differentreally good and we had these differentreally good and we had these different franchises
Warrenfranchises and they took you know one of my big regrets they took you know one of my big regrets they took you know one of my big regrets is I owned is I owned is I owned about close to one percent around one about close to one percent around one about close to one percent around one percent of Fiat Chrysler when we made percent of Fiat Chrysler when we made percent of Fiat Chrysler when we made that investment about 60 million over that investment about 60 million over that investment about 60 million over five six billion it was about one five six billion it was about one five six billion it was about one percent percent percent we owned about 0.7 or 0.8 percent of we owned about 0.7 or 0.8 percent of we owned about 0.7 or 0.8 percent of Ferrari they owned 80 of Ferrari so Ferrari they owned 80 of Ferrari so Ferrari they owned 80 of Ferrari so about close to one percent of Ferrari about close to one percent of Ferrari about close to one percent of Ferrari was owned by me was owned by me was owned by me Ferrari's uh market cap now Ferrari's uh market cap now Ferrari's uh market cap now is about 50 billion is about 50 billion is about 50 billion and you know and you know and you know they went public I think in 2017 or they went public I think in 2017 or they went public I think in 2017 or something 2017 2018 they iPod Ferrari something 2017 2018 they iPod Ferrari something 2017 2018 they iPod Ferrari and you know in effect out of the 60 and you know in effect out of the 60 and you know in effect out of the 60 million 20 million have been invested in million 20 million have been invested in million 20 million have been invested in Ferrari so Ferrari so Ferrari so I collected around 150 million from that I collected around 150 million from that I collected around 150 million from that but what I should have done which I but what I should have done which I but what I should have done which I never realized is I didn't realize the never realized is I didn't realize the never realized is I didn't realize the quality of the business is that should quality of the business is that should quality of the business is that should never have been sold never have been sold never have been sold and I got to know the chairman the and I got to know the chairman the and I got to know the chairman the owners of Ferrari I went and visited the owners of Ferrari I went and visited the owners of Ferrari I went and visited the factory and they also gave me let me
Questionerfactory and they also gave me let me bump the queue and I got a 488 in 2018 which was great and that's when I really really realized there was a tremendous mode but anyway so just just Ferrari alone out of that 60 million 20 million as Ferrari is about 400 million that's a 20x and the 40 million that went into Fiat would today be sitting at around 200 million or so so basically they I don't have a position in any of these things now collectively I collected about 250 million on this which was still okay but it was stupid the whole thing was stupid you know the the sell decision was sloppy so all too soon and why is too late and so what I realized is that do not be quick to sell like I I told myself that race us in the 2040s we look at what to do with it you know with tab airports you know maybe into the 2050s if I'm still around we'll see what we want to do with it
Questionerwe'll see what we want to do with it they'll probably keep adding an airport every year or two and they'll keep the passenger accounts keep going up and all of that is just a great business so we are at 5 30.
Othergo ahead
Questionerwith your annual report is much better than this and that is your charitable Foundation we should not believe everything Buffett says sometimes he just makes us feel good
Otherbut but Warren actually what has surprised me is he's he reads the dakshana annual report every year when I send it to him sometimes he'll tell me send me 20 copies and he'll send it to his kids and his board members and his friends and so on so there have been two or three things that I think have been so I'll take a step back I think you guys have heard of Peter Thiel some of you may have heard of or read his book zero to one which is a great book on you know
Questionerone which is a great book on you know entrepreneurship and startups and so onentrepreneurship and startups and so onentrepreneurship and startups and so on one of the questions Peter Thiel askedone of the questions Peter Thiel askedone of the questions Peter Thiel asked in interviews he saysin interviews he saysin interviews he says what is the one truth that you know towhat is the one truth that you know towhat is the one truth that you know to be true that most of the world disagreesbe true that most of the world disagreesbe true that most of the world disagrees with you onwith you onwith you on right and so this is you know if youright and so this is you know if youright and so this is you know if you ever go in front of Peter Thiel now youever go in front of Peter Thiel now youever go in front of Peter Thiel now you already know the question so pleasealready know the question so pleasealready know the question so please prepare so you don't like blow theprepare so you don't like blow theprepare so you don't like blow the question okay and this is a greatquestion okay and this is a greatquestion okay and this is a great question right and uh if if he asked mequestion right and uh if if he asked mequestion right and uh if if he asked me that question I would say the mentalthat question I would say the mentalthat question I would say the mental model of cloning so people think cloningmodel of cloning so people think cloningmodel of cloning so people think cloning is somehow like copying and it's beneathis somehow like copying and it's beneathis somehow like copying and it's beneath them and whatever and they want to comethem and whatever and they want to comethem and whatever and they want to come up with things on their own it's veryup with things on their own it's veryup with things on their own it's very dumbdumbdumb you know I would say that let's Leverageyou know I would say that let's Leverageyou know I would say that let's Leverage all the great Giants who have comeall the great Giants who have comeall the great Giants who have come before us that stand on their shouldersbefore us that stand on their shouldersbefore us that stand on their shoulders and let's go as far as we can by beingand let's go as far as we can by beingand let's go as far as we can by being on their shoulders let's not try to riseon their shoulders let's not try to riseon their shoulders let's not try to rise on our own because that's really hard
Otheron our own because that's really hard so what I have noticed through the decades that I've tried to do this is that humans have I don't know why but humans have an aversion to cloning and what I once I realized that humans have an aversion to cloning just like they have an aversion to buying Turkish stocks I realize that you get irrational behavior when you have these aversions so go all in on those because you're going to have some good advantages and cloning has helped me a lot in in many different areas so dakshana has done well because it is a cloned model so in 2006 I was reading an article on business week there's a guy in India who runs an organization called super 30. and he takes 30 really poor kids who are like 18 years old and he's a gifted mathematician and he preps them for about 10 months so he he basically operates
Questionerbasically operates out of a slum in Patna in Bihar which is a pretty desolate place I visited him there in 2007. and he would take this so he had a kind of a coaching tutoring business and he would take some of the proceeds from that to fund these 30 kids so his mother would cook for them and then he'd rent a few rooms in that slum for the for the kids so they lived there and then after about 10 months of prep they would take the IIT entrance exam which has a like a 1.3 percent admission rate and between 90 and 100 of the kids would get into IIT which is a stunning statistic and these kids came from really poor background they had illiterate parents Farmers laborers so on they were very poor and so when I looked at that model I said wow that says this is this he was spending about 800 per kid and I said that's tremendous bang for the buck because once you get
Otherbang for the buck because once you get out of IIT Microsoft's willing to hire you you know you pretty much can join a global Workforce so I contacted him went and met him and I said happy to fund you can we take 30 to 300. and he said I have no interest in scaling I don't want any outside money I like it the way it is so then I knew that cloning works well I said do you mind if I copy your model he said no that'll be a really good thing I'll help you and so I said okay I know what his model is I know that there's a large need and so now dakshana takes about a thousand kids a year and we've got we're not doing 90 percent we're probably in kind of 60 to 80 percent admit rates and it's worked out really well and our costs are not 800 it's about 3 000 because you know we're not operating with my mom cooking or whatever so we've got a little more industrial scale to it
Othergot a little more industrial scale to it and Warren actually has seen that Journey because when I met him for for lunch the first dakshana annual report had just come out and I had sent it to him and so the input output ratio we have on dakshana is really kind of infinite like recently I was just there's a there's a girl who was with us from 2010 to 2012 and then she joined IIT guwahati in 2012 math major she finished in 2016 Goldman Sachs recruited her their Bangalore office she worked little 2019 as an analyst and then she started PhD program at Stony Brook University which is where all the Quant mathematicians are and like the Stony Brook is kind of the epicenter of the Quant funds you know Renaissance is there and all of these things so it's and she has been interning at a Quant fund there for the last three years he's going to graduate
Questionergoing to graduate in May and I think she'll be heavily recruited and you know she was she came from a family making like you know 75 dollars eighty dollars a month and she may be seven figures when she starts so it's just a huge Delta and so we only invested less than three thousand in her you know and and if you take us out of the picture because she came from such a remote rural area these things wouldn't happen you know and so it's worked out really well so the reason dakshana has done well and why I look good is we cloned a great model and I lucked out I got a great team in India so I don't actually spend a lot of time on the foundation I I enjoy my visits but I usually just spend time with the kids and I still enjoy the Istanbul visits you know so I have to balance the two so but thank you for having me the pleasure
Otherbut thank you for having me the pleasure to be with all of you good luck with your stock picking and try to focus on the cloning you know look at data Aroma look at Value investors Club look at what other smart people are saying and try to find some anomalies and go from there
Questionerthank you thank you very much
Otherthat was very inspiring thank you so much thank you we hope to continue the collaboration in the future yeah I'm right in your backyard okay so it's easy to do so thank you very much thank you so much
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