Other[Music][Music][Music][Music][Music][Music] series of our weekly webinar uh veryseries of our weekly webinar uh veryseries of our weekly webinar uh very excited to have Mr Monash pabri join usexcited to have Mr Monash pabri join usexcited to have Mr Monash pabri join us todaytodaytoday monish is one of the legendary valuemonish is one of the legendary valuemonish is one of the legendary value investors of our time having startedinvestors of our time having startedinvestors of our time having started funds back in 1999 with just about afunds back in 1999 with just about afunds back in 1999 with just about a million dollars and and grew it tomillion dollars and and grew it tomillion dollars and and grew it to nearly a billion at its peak over thenearly a billion at its peak over thenearly a billion at its peak over the yearsyearsyears prior to that monish moved to the Unitedprior to that monish moved to the Unitedprior to that monish moved to the United States from Delhi India in 1983 where heStates from Delhi India in 1983 where heStates from Delhi India in 1983 where he attended Clemson and ultimatelyattended Clemson and ultimatelyattended Clemson and ultimately graduated uh with a computer engineeringgraduated uh with a computer engineeringgraduated uh with a computer engineering degree monish has been a long timedegree monish has been a long timedegree monish has been a long time friend and mentor of minefriend and mentor of minefriend and mentor of mine he is a disciple of the Warren Buffetthe is a disciple of the Warren Buffetthe is a disciple of the Warren Buffett Benjamin Graham Charlie MungerBenjamin Graham Charlie MungerBenjamin Graham Charlie Munger investment value investment philosophiesinvestment value investment philosophiesinvestment value investment philosophies and has just great insight into alland has just great insight into alland has just great insight into all things not only investing but verythings not only investing but verythings not only investing but very worldly and has his touch on on a lot ofworldly and has his touch on on a lot ofworldly and has his touch on on a lot of different things so monish thank you fordifferent things so monish thank you fordifferent things so monish thank you for for taking time out of your data to joinfor taking time out of your data to joinfor taking time out of your data to join us
Questionerum and share some of your thoughts
OtherJeff it's a pleasure to be here with you and looking forward to the session
Otherhey look I uh I notice you don't have a mask on um and neither do I I know it's a webinar although I've seen some people wear masks at webinars and I see them driving around in their cars by themselves with uh with masks on but uh I know you also took a recent trip on a plane uh this week what was that alike I'm I'm curious because I haven't been on a plane I've been in an airport in months you know what was it like traveling
Otheryes yes yeah yesterday unfortunately I had to I went to attend a funeral in Northern California so I flew Southwest and the airport was a ghost town John way in Santa Ana airport that we're familiar with for all three terminals there was just one person from TSA checking people's IDs and such for the
Questionerchecking people's IDs and such for the entire airport and there was no line for that person like four people standing there and so there was and then once I got to the gate basically there's I think most of these flights are going with less than 10 or 20 people I was trying to stand by on a flight which had one passenger I really felt sad I think it's just we've taken this what I would call Rockstar economy the best economy the planet's ever seen and we've basically taken it didn't get derailed we deliberately took the train off the rails and it's really quite unprecedented and and I think it'll take a while it'll take a while to come back and I don't think people have thought through all the second and third order effects here it's you know there's been a lot of discussion around that where you know the past downturns that we've
Questioneryou know the past downturns that we've experienced as a country or or within the world there's been some sort of financial Catalyst to it um you know the most recent one being the GFC and it was definitely a financial um you know driver of that you know recession and there's been a lot of discussion and you know it's in the news where it it almost feels like the current situation while tragic uh because the the virus is a real thing but it's almost being driven out of political means now versus you know the overall health of you know a nation over the world
Questioneryeah I think what we what we are seeing is unprecedented and also a lot of the the policy decisions taking place around the world my general view is I think that if we had a shutdown which had lasted maybe three weeks or so I think and then after that the contact racing social social distancing and then
Otherracing social social distancing and then the United States has never been cleanerthe United States has never been cleanerthe United States has never been cleaner than it's ever in its history than rightthan it's ever in its history than rightthan it's ever in its history than right now so I think that I think we wouldnow so I think that I think we wouldnow so I think that I think we would have been fine I think history will lookhave been fine I think history will lookhave been fine I think history will look backbackback at many of the decisions we have made asat many of the decisions we have made asat many of the decisions we have made as a society in this environment as nota society in this environment as nota society in this environment as not being the right ones I think we've mybeing the right ones I think we've mybeing the right ones I think we've my not so popular view is that we'venot so popular view is that we'venot so popular view is that we've overreacted and I think that when youoverreacted and I think that when youoverreacted and I think that when you look at nearly 40 million people filinglook at nearly 40 million people filinglook at nearly 40 million people filing claims within the last couple of monthsclaims within the last couple of monthsclaims within the last couple of months for unemployment no one talks about thefor unemployment no one talks about thefor unemployment no one talks about the increase of suicides amongst that 40increase of suicides amongst that 40increase of suicides amongst that 40 million the increase in depression themillion the increase in depression themillion the increase in depression the increase in the divorce rate theincrease in the divorce rate theincrease in the divorce rate the increase in child abuse domesticincrease in child abuse domesticincrease in child abuse domestic violence all the other impacts we seeviolence all the other impacts we seeviolence all the other impacts we see when you start taking these Draconianwhen you start taking these Draconianwhen you start taking these Draconian actions simply and purely measuring theactions simply and purely measuring theactions simply and purely measuring the covet debt rates while even ignoringcovet debt rates while even ignoringcovet debt rates while even ignoring other underlying conditions people hadother underlying conditions people hadother underlying conditions people had is overstating the damage the virus is
Questioneris overstating the damage the virus is causing so I'm in the minority camp that I think we should open up the country even when you open up Orange County a lot of people will still not to come out and participate which is fine I think that's an individual choice and that should be fully respected but I think that the medicine is the far worse than the disease and I'm hoping we have a lot of natural experiments going on in the world we have Sweden we have that one town in Northern Italy and if we even have a New York where they did the testing and they found more than 20 percent have already had the virus so I think that the evidence is overwhelmingly against keeping the country locked up and to that point you know you you do have this worldly view from not only your Investments that that you're constantly uh analyzing and looking for you know
Questioneruh analyzing and looking for you know gold uh as you do um but it also gives you great sort of insight and a view of of what you know other countries that may be a little bit further ahead of the US in terms of opening back up and seeing what those results are if we were to look into the future to see how maybe a South Korea or some of these other countries that have started opening up earlier um you know what what the results are are coming out of there I think that we will take a long time to get back to where we were in January and we may not get back to where we were in January even five years from now so capitalism and businesses are very fragile Creations we know this as entrepreneurs that when you start a business and you grow a business the only reason it's able to survive and thrive is because it's got some product and service offerings that are superior
Otherand service offerings that are superior to the others and it has to be a better to the others and it has to be a better to the others and it has to be a better end others will try to come and take end others will try to come and take end others will try to come and take that away from you that's the classic that away from you that's the classic that away from you that's the classic creative destruction and capitalism most creative destruction and capitalism most creative destruction and capitalism most businesses will not survive businesses will not survive businesses will not survive if you take away 60 days of revenues or if you take away 60 days of revenues or if you take away 60 days of revenues or 90 days of revenues very few businesses 90 days of revenues very few businesses 90 days of revenues very few businesses can survive that we will see a very can survive that we will see a very can survive that we will see a very large number of businesses there are I large number of businesses there are I large number of businesses there are I think there's something like 1600 think there's something like 1600 think there's something like 1600 businesses a week in the United States businesses a week in the United States businesses a week in the United States in normal times that go out of business in normal times that go out of business in normal times that go out of business that's just a normal creative that's just a normal creative that's just a normal creative destruction that goes on the economy and destruction that goes on the economy and destruction that goes on the economy and that is very healthy even in the best that is very healthy even in the best that is very healthy even in the best job because those 1600 get replaced by job because those 1600 get replaced by job because those 1600 get replaced by another 1600 or 1700 businesses that are another 1600 or 1700 businesses that are another 1600 or 1700 businesses that are better than the ones that went away they better than the ones that went away they better than the ones that went away they are more resilient and that's how our are more resilient and that's how our are more resilient and that's how our economy becomes better and better and economy becomes better and better and economy becomes better and better and eventually we end up from the 18th eventually we end up from the 18th eventually we end up from the 18th century to today where we are when we
Othercentury to today where we are when we deliver the kind of shock that we've delivered to the system where it's not 1600 businesses going out of business in a week it's multiples of that going out of business permanently so there is a silver lining in the sense that for example we will have a large number of restaurants never open up again they will get replaced eventually but they will get replaced I think with better restaurants different restaurants more interesting restaurants so that's good but the thing is that for the restaurant business to do well and to be where it was we need a three percent unemployment economy and we will not have in my opinion a three percent unemployment economy even in 2025 because this damage that has been inflicted on the greatest economy on the planet is not going to be undone for a very long time so the I think we
Otherfor a very long time so the I think we will get back to maybe seven eight nine percent unemployment typically yours but I think then from there getting to three or four where we were maybe a really long haul that's my best crystal ball that I can think of and it's really unfortunate and I think um kind of my series of next thoughts that I'm really interested to get in your opinion on um but I also wanted to mention to the audience which I fell to at the beginning is this is a little bit of an interactive um you know webinar and if you have a question to the audience we do have a a q a button um down at the bottom of your screen that you can just click on and type up your question uh for monish and and we'll we'll try to get to that uh you know at the end of the of the webinar um so my next thought that you provoked as you were describing in a natural course of an economy of
Questionerin a natural course of an economy of these businesses that come and go and more entrepreneurs and it creates you know entrepreneurism and that's been one of the great things of of our country is if we look back to when you started to buy funds uh you were already an entrepreneur um you know you're this guy from Delhi who came to the U.S like many do from around the world uh got a degree and and went to work um and became a you know a tax paying citizen uh and then you switch gears into your own businesses that you were owning and running uh what ultimately though made you switch gears and hit the reset button and and focus your all of your time on on value investing which you've been doing now for 20 plus years
OtherJeff that's a wonderful question it was actually an accidental history that I became a value investor I have never gone to school and and my my training as
Questionergone to school and and my my training as an investor basically really came from reading and studying Warren Buffett and Charlie Munger and Ben Graham and I accidentally happened to read a book maybe around 25 26 years ago by Peter Lynch the guy who ran Magellan one up on Wall Street and that really intrigued me in terms of how investing in stocks is not really buying piece of paper you're really buying fractions of a business and that's how you should think about it is buying a fraction of a business and approach it as if you were buying the whole business and then of course that exposed me to Warren Buffett and I got really intrigued with that whole framework I was blown away when I understood compounding is the eighth wonder of the world that's what Einstein used to say and and I realized that that I could analyze businesses really well
QuestionerI could analyze businesses really well and really quickly and that was aand really quickly and that was aand really quickly and that was a critical skill to doing well as ancritical skill to doing well as ancritical skill to doing well as an investors I started to invest on my owninvestors I started to invest on my owninvestors I started to invest on my own using just the same analytics we useusing just the same analytics we useusing just the same analytics we use when we run businesses and figure outwhen we run businesses and figure outwhen we run businesses and figure out what works and what doesn't and that didwhat works and what doesn't and that didwhat works and what doesn't and that did well and then a few friends asked me towell and then a few friends asked me towell and then a few friends asked me to set up a fundset up a fundset up a fund to manage funds for them which is soto manage funds for them which is soto manage funds for them which is so popular iPhones actually started in 99popular iPhones actually started in 99popular iPhones actually started in 99 with a million dollars just as a hobbywith a million dollars just as a hobbywith a million dollars just as a hobby and for me and my friends and then thatand for me and my friends and then thatand for me and my friends and then that morphed into a real business and here wemorphed into a real business and here wemorphed into a real business and here we are
Questioneryeah it's an amazing story and I'veare yeah it's an amazing story and I'veare yeah it's an amazing story and I've heard youheard youheard you um many times uh describe your hobbiesum many times uh describe your hobbiesum many times uh describe your hobbies akin to playing games and uh you know aakin to playing games and uh you know aakin to playing games and uh you know a million bucks is no small amount ofmillion bucks is no small amount ofmillion bucks is no small amount of money and what you've grown it into withmoney and what you've grown it into withmoney and what you've grown it into with a lot of other investors is isa lot of other investors is isa lot of other investors is is definitely no small amount of moneydefinitely no small amount of moneydefinitely no small amount of money um but but some of the games you youum but but some of the games you youum but but some of the games you you really enjoy are like bridge and andreally enjoy are like bridge and and
Questionerreally enjoy are like bridge and and blackjack which you know require a lot of strategy uh managing of emotions you know similar uh components which make people successful or not successful investors um but you've become quite the successful blackjack player and uh you know what's this I hear about you getting kicked out of some casinos in Vegas what's going on there man
Questioneryeah last year actually on New Year Eve I got my first lifetime ban from playing from playing Blackjack at a Vegas casino and they were very nice and polite about it they told me listen you can enter a property at any time and you can use the facilities and but you cannot ever sit down at a blackjack table and so they were very nice and polite to me and they said they had been observing my play for every time I visited for the last more than a year and they came to the conclusion that they would lose to me
Charlieconclusion that they would lose to me consistently and they were not so I tried to explain to them that they normally have problems with card counters and I don't count cards and they said yeah that's what took us a while because we realized you weren't counting cards and it took us a while to figure out that a system which doesn't rely on card counting can still beat them
Questionerhow does that work you say they're very nice I mean I'm picturing like these old mob movies where you know you got you know Al Pacino or Charlie Pesci coming in with the guys and grabbing you and taking you to the back alley
Charlieit wasn't like that I mean they ran the Vegas of the 60s with mob run and the wages of this era is a bunch of listed corporations and I think the mob is relegating to running the taxis in Vegas and they're quickly dwindling down so yeah I think Vegas has been corporatized
Questioneryeah I think Vegas has been corporatized for a while and and they have more to lose than we gain if they pursue those types of tactics and they don't really need to because the to beat the casinos at blackjack or the other games is not easy and and they know that and they just need to take out the small sliver of people that figure it out and their business is a great business so you're even more worried if they're very polite but they ushered you to this taxi cab they had waiting for you actually they were very nice and actually a few weeks after they they banned me my my daughter who knows my system was playing at the same Casino and the general manager came and sat down with her just he came and sat down with me and she said to him you're not going to ban me Are you seriously he told her she's playing very small stakes in 45 a hand so he just told her not yet
Questionerin 45 a hand so he just told her not yet and and then the guy told her something and and then the guy told her something and and then the guy told her something she never told me he said look I watched she never told me he said look I watched she never told me he said look I watched all your dad's videos and I'm a huge fan all your dad's videos and I'm a huge fan all your dad's videos and I'm a huge fan just looking forward to have him play just looking forward to have him play just looking forward to have him play Blackjack here so that was all very nice Blackjack here so that was all very nice Blackjack here so that was all very nice how long were you playing there and can how long were you playing there and can how long were you playing there and can you share what size of stakes you were you share what size of stakes you were you share what size of stakes you were playing before you got the tap on the playing before you got the tap on the playing before you got the tap on the shoulder
OtherI used to go to Vegas maybe every two three months for a day or two weekend or something and you know the stakes weren't I wasn't playing high stakes I was just proving out my system stakes I was just proving out my system stakes I was just proving out my system I would play like up to a few hundred I would play like up to a few hundred I would play like up to a few hundred dollars a hand type thing and the dollars a hand type thing and the dollars a hand type thing and the winnings can be a can get up there so I winnings can be a can get up there so I winnings can be a can get up there so I ended up making a solid six figures from ended up making a solid six figures from ended up making a solid six figures from them and and but I think that the them and and but I think that the them and and but I think that the concern they had is where that concern they had is where that concern they had is where that trajectory was going so they didn't want trajectory was going so they didn't want trajectory was going so they didn't want to to I think Google he they said to me when
QuestionerI think Google he they said to me when they banned me this look we realizedthey banned me this look we realizedthey banned me this look we realized that your system works we realizethat your system works we realizethat your system works we realize there's plenty of money behind you andthere's plenty of money behind you andthere's plenty of money behind you and and the whole equation doesn't boardand the whole equation doesn't boardand the whole equation doesn't board well for usthat's finethat's finethat's fine I was bummed out about being banned butI was bummed out about being banned butI was bummed out about being banned but also I was I would say I was happy thatalso I was I would say I was happy thatalso I was I would say I was happy that it was kind of validation that theit was kind of validation that theit was kind of validation that the theory I had actually worked and it'stheory I had actually worked and it'stheory I had actually worked and it's just one Casino it's not all of themjust one Casino it's not all of themjust one Casino it's not all of them right yeah so far it's just one but Iright yeah so far it's just one but Iright yeah so far it's just one but I can do that other so that's it's acan do that other so that's it's acan do that other so that's it's a matter of time but the one thing aboutmatter of time but the one thing aboutmatter of time but the one thing about Blackjack is and I've studied thatBlackjack is and I've studied thatBlackjack is and I've studied that Thorpe actually met head Thorpe forThorpe actually met head Thorpe forThorpe actually met head Thorpe for lunch he wrote to beat the dealer andlunch he wrote to beat the dealer andlunch he wrote to beat the dealer and more recently Nano beats or markets amore recently Nano beats or markets amore recently Nano beats or markets a great book and so Blackjack has alwaysgreat book and so Blackjack has alwaysgreat book and so Blackjack has always been a game of cat and mouse peoplebeen a game of cat and mouse peoplebeen a game of cat and mouse people figure out how to beat the casinos thenfigure out how to beat the casinos thenfigure out how to beat the casinos then the casinos change the rules then peoplethe casinos change the rules then peoplethe casinos change the rules then people figure out how to beat the new rules andfigure out how to beat the new rules andfigure out how to beat the new rules and they again change the rules so the game
Otherthey again change the rules so the game has evolved quite a bit in the last 60 years so if you go and study 60 70 years of blackjack history in Vegas you can see the kind of the evolution and transitions that have happened and and because Vegas is such a competitive market with so many casinos some casinos have to choose the offerings to bring the people in so the first I think the first basic thing is which blackjack game do you play and where do you play it that's the first rule so that's the first thing to put in the orange in your favor and and there's a I'll just digress for a second but there's a website called bj21.com and they actually publish the odds on every blackjack table in North America and they update that once a month and that's like a hundred dollars a year for a subscription which I have and so that this makes it really easy to figure
Questionerthat this makes it really easy to figure out which which table to sit down at and out which which table to sit down at and out which which table to sit down at and then go from there I think that's a then go from there I think that's a then go from there I think that's a really interesting thing what you're really interesting thing what you're really interesting thing what you're just describing there because I don't just describing there because I don't just describing there because I don't think most people go to Las Vegas armed think most people go to Las Vegas armed think most people go to Las Vegas armed with with with the information before they invest but the information before they invest but the information before they invest but you've actually done quite a bit of you've actually done quite a bit of you've actually done quite a bit of research on what is simple in a fun game research on what is simple in a fun game research on what is simple in a fun game is Blackjack which probably also ties is Blackjack which probably also ties is Blackjack which probably also ties into some of your investment into some of your investment into some of your investment philosophies and why you've done success philosophies and why you've done success philosophies and why you've done success
Warrenit's not I would I would have zero it's not I would I would have zero it's not I would I would have zero interest in playing Blackjack if the interest in playing Blackjack if the interest in playing Blackjack if the casinos took my money I would have zero casinos took my money I would have zero casinos took my money I would have zero interest in playing any game which interest in playing any game which interest in playing any game which involves betting where I don't have the involves betting where I don't have the involves betting where I don't have the odds to win so it's in investing it's odds to win so it's in investing it's odds to win so it's in investing it's the same way and actually Blackjack is the same way and actually Blackjack is the same way and actually Blackjack is terrible compared to investing because terrible compared to investing because terrible compared to investing because I'm fighting to get a 50.1 odd versus I'm fighting to get a 50.1 odd versus I'm fighting to get a 50.1 odd versus 49.9 and in the equity markets I can 49.9 and in the equity markets I can 49.9 and in the equity markets I can make bets where the odds are 80 in my
Questionermake bets where the odds are 80 in my favor which I can never do in Vegas so I favor which I can never do in Vegas so I favor which I can never do in Vegas so I think Vegas is again fun but the way I think Vegas is again fun but the way I think Vegas is again fun but the way I play Blackjack what most of my friends play Blackjack what most of my friends play Blackjack what most of my friends say they find it extremely boring and I explained to them you can either and I explained to them you can either and I explained to them you can either optimize fun or you can optimize dollars optimize fun or you can optimize dollars optimize fun or you can optimize dollars but you cannot optimize both but you cannot optimize both but you cannot optimize both in Vegas is usually optimizing fun in Vegas is usually optimizing fun in Vegas is usually optimizing fun versus dollars versus dollars versus dollars I'm all about optimizing dollars I'm all about optimizing dollars I'm all about optimizing dollars so you know I'm curious about your so you know I'm curious about your so you know I'm curious about your opinion of Vegas if we go off strip for opinion of Vegas if we go off strip for opinion of Vegas if we go off strip for a minute a minute a minute um I know we have a lot of people in the um I know we have a lot of people in the um I know we have a lot of people in the audience that are that are investors of audience that are that are investors of audience that are that are investors of Real Estate Real Estate Real Estate in Las Vegas and and you'd mentioned in Las Vegas and and you'd mentioned in Las Vegas and and you'd mentioned earlier you kind of threw out some earlier you kind of threw out some earlier you kind of threw out some projections about you know the projections about you know the projections about you know the unemployment rate unemployment rate unemployment rate um my guess is that's kind of an annual um my guess is that's kind of an annual um my guess is that's kind of an annual or a national number and is this coming or a national number and is this coming or a national number and is this coming from kind of gut feel or is it empirical from kind of gut feel or is it empirical from kind of gut feel or is it empirical data and and so that's kind of a data and and so that's kind of a data and and so that's kind of a two-part question of you know where your two-part question of you know where your
Questionertwo-part question of you know where your kind of numbers came from from that kind of numbers came from from that kind of numbers came from from that standpoint and then Las Vegas standpoint and then Las Vegas standpoint and then Las Vegas specifically which has been completely shut down shut down shut down um but prior to that it was a very um but prior to that it was a very um but prior to that it was a very robust and becoming a diverse economy uh robust and becoming a diverse economy uh robust and becoming a diverse economy uh do you think a market do you think Vegas do you think a market do you think Vegas do you think a market do you think Vegas comes back and so I guess first thing comes back and so I guess first thing comes back and so I guess first thing first where did you kind of get the first where did you kind of get the first where did you kind of get the unemployment data numbers that you were unemployment data numbers that you were unemployment data numbers that you were talking about is that the gut feel or is talking about is that the gut feel or is talking about is that the gut feel or is that
Otheryeah I mean I I just think that that yeah I mean I I just think that that yeah I mean I I just think that that when you take this train and take it off when you take this train and take it off when you take this train and take it off the tracks and then one day you decide the tracks and then one day you decide the tracks and then one day you decide that you're gonna put it back on the that you're gonna put it back on the that you're gonna put it back on the tracks it's not going to get back to the tracks it's not going to get back to the tracks it's not going to get back to the same speed that that takes a while and I same speed that that takes a while and I same speed that that takes a while and I don't know how long it takes we have don't know how long it takes we have don't know how long it takes we have some examples we have examples like some examples we have examples like some examples we have examples like Japan for example which has been in Japan for example which has been in Japan for example which has been in spaces for decades different issues it's spaces for decades different issues it's spaces for decades different issues it's not Apples to Apples but I think the not Apples to Apples but I think the not Apples to Apples but I think the United States is an incredible robust
WarrenUnited States is an incredible robust unbelievable economy and it will come back and I would never bet against America and I would also never bet against Vegas I personally once in a while bet against Vegas but there's a town I would not bet against so Las Vegas has always has always won up itself and gotten to higher highs so for example I remember after the financial Vegas was a ghost town and the now it's a real ghost town compared to what happened what I mean what happened last time was Mickey Mouse compared to what's going on right now but I think that man is a social animal and man loves the Las Vegas is California's adult playground it's where the adults go to play yeah and that will not change it will take some time I think like for example now when they open the casinos you're going to have three people to a blackjack table intro six and you're
Otherblackjack table intro six and you're gonna have six people around a craps table intro 15 for example so they'll they will control it but if you fast forward to a point in time when everyone's vaccinated and such I would say that Vegas will probably not get back to January levels even then because some people will not come out of bomb shelter even after vaccination but I think that in a few years Vegas will be back absolutely and I think the trajectory that the pace at which it'll start coming back once they open will be quite significant but it'll take a while I don't think we should expect it to look anything like normal for at least a couple of years
Otherinteresting and so you know as as a One-Stop or one shop Pony you know I'm calling myself that as a real estate investor you know it was at hindsight gives us you know a lot of clarity of
Questionergives us you know a lot of clarity of buying dollars for 50 cents in the lastbuying dollars for 50 cents in the lastbuying dollars for 50 cents in the last downturndownturndownturn um but in the time and it was it wasum but in the time and it was it wasum but in the time and it was it was um you know not so clear and as a valueum you know not so clear and as a valueum you know not so clear and as a value investor uh the equity markets changeinvestor uh the equity markets changeinvestor uh the equity markets change very rapidly right and and you hear andvery rapidly right and and you hear andvery rapidly right and and you hear and I've heard you talk about it timing theI've heard you talk about it timing theI've heard you talk about it timing the market is is is you know akin to being amarket is is is you know akin to being amarket is is is you know akin to being a fool uh it's very difficult unlessfool uh it's very difficult unlessfool uh it's very difficult unless you're armed with that informationyou're armed with that informationyou're armed with that information uh and as you've been doing this now foruh and as you've been doing this now foruh and as you've been doing this now for 20 some odd years and you've been20 some odd years and you've been20 some odd years and you've been through some dips and you've ridden thethrough some dips and you've ridden thethrough some dips and you've ridden the downs and and the Opsdowns and and the Opsdowns and and the Ops um how do you viewum how do you viewum how do you view you know this derailing of the economyyou know this derailing of the economyyou know this derailing of the economy uh as an opportunistic buyinguh as an opportunistic buyinguh as an opportunistic buying opportunity for you know value investorsopportunity for you know value investorsopportunity for you know value investors
Questioneryeah so actually the equity marketsyeah so actually the equity marketsyeah so actually the equity markets don't reflect the reality of the economydon't reflect the reality of the economydon't reflect the reality of the economy so the NASDAQ is pretty much where itso the NASDAQ is pretty much where itso the NASDAQ is pretty much where it was at the start of the year no changewas at the start of the year no changewas at the start of the year no change and the Don the s p are off less than 15and the Don the s p are off less than 15and the Don the s p are off less than 15 from from the beginning of the year and
Questionerfrom from the beginning of the year andfrom from the beginning of the year and the NASDAQ you can argue you can justifythe NASDAQ you can argue you can justifythe NASDAQ you can argue you can justify it by saying that it's loaded withit by saying that it's loaded withit by saying that it's loaded with companies that have that get a lot ofcompanies that have that get a lot ofcompanies that have that get a lot of Tailwinds from what's going on Amazon isTailwinds from what's going on Amazon isTailwinds from what's going on Amazon is a beneficiary what's happening manya beneficiary what's happening manya beneficiary what's happening many companies even Facebook Etc long termcompanies even Facebook Etc long termcompanies even Facebook Etc long term they're beneficiaries of what's going onthey're beneficiaries of what's going onthey're beneficiaries of what's going on so our transition to digital lives isso our transition to digital lives isso our transition to digital lives is being accelerated right now onlinebeing accelerated right now onlinebeing accelerated right now online shopping is going through very fastshopping is going through very fastshopping is going through very fast growth right now so I would say that asgrowth right now so I would say that asgrowth right now so I would say that as a as an investor in the equity marketsa as an investor in the equity marketsa as an investor in the equity markets it is not it has not been easy to findit is not it has not been easy to findit is not it has not been easy to find Bargains because part of it is which IBargains because part of it is which IBargains because part of it is which I think is a good thing the FED has pumpedthink is a good thing the FED has pumpedthink is a good thing the FED has pumped so much money and the US has comeso much money and the US has comeso much money and the US has come through in a big way and those havethrough in a big way and those havethrough in a big way and those have really helped and those are the rightreally helped and those are the rightreally helped and those are the right actions those have really helped Mainactions those have really helped Mainactions those have really helped Main Street and they have really helped WallStreet and they have really helped WallStreet and they have really helped Wall Street as well so of an equity investorStreet as well so of an equity investor
QuestionerStreet as well so of an equity investor point of view for the prices we saw on March 23rd when markets at a low we are so far off from there at this point uh that I find it very hard to find Bargains in this environment we may see Equity markets it's hard to predict what the market does but it's possible they could go down as different kinds of news comes up in the next few months and such I mean it's naive is it naive to think uh the balance we've had in a very little time with zero you know but I I mean I wouldn't say zero but close to zero uh positive news that will be you know greatly impactful to derail this economy at least prior to an election where at least one house one one side's going to get in office and then you know take us whichever direction they have uh but it seems like this battle is becoming more more political uh and it's difficult to
Questionermore political uh and it's difficult to determine what's real and what's not um but you know I guess the discussion around you know the market bouncing back is it a dead cat bounce is it will we test the lows again will the lows go farther there's been a lot of discussion in yeah I guess comparison to previous times where the equity markets have fallen as as far as they have and I'm just curious if you have an opinion on that
Questioneryeah I think we saw some semblance of this in 99 and 2000 with the.com bubble so at that time what happened is a lot of money went into one small sliver off the market and it really drove valuations and multiples ridiculous levels in the dot-coms and Tech area and the NASDAQ went March 2000 hit 5000 and a couple years later was at 1200 and at that time in March 2000 we didn't have a bubble across the board in equity markets we had a bubble in a
Questionerequity markets we had a bubble in a sliver of the equity markets what I find today is that I do think there is a bubble in equity markets and I think the bubble isn't even a smaller sliver of the market that was there in 99 2000 so when you look at the Fang stocks and such everything in equity markets is around the kernel of three and so yeah those businesses are incredible businesses but everything has a price and I think those those prices are disconnected from reality so I'll give you an example in early 2000 I visited Microsoft headquarters in Seattle and some of the very early investors in my fund were from Microsoft in fact there was one guy who was very early in Microsoft he's and then he invested and then he he told me Hey listen if you have a visit in Seattle I can just introduce you to a bunch of folks who might be interested I said what a
Othermight be interested I said what a coincidence I'm going to be in Seattle day after tomorrow and so I went to Microsoft headquarters and I went and the guy took me to a bunch of different offices of the senior execs at Microsoft and many of them invested in public fund and I told them at that time and they thought I was some cheesy salesman I said look something like 80 90 of your net worth is in Microsoft stock and your livelihood comes from Microsoft and I look at the company and it's a great company that time Microsoft had a 600 billion dollar market cap and I think it produced less than 10 billion in cash flow and I told them that this is going nowhere but down and they had never seen Microsoft go down just like we had never seen housing prices go down so they dismissed what I was saying the good news was I don't understand take your Microsoft Holdings
Warrenunderstand take your Microsoft Holdings and move it to provide funds and of course they were very dismissive of that but they did give me some money to invest and what we saw that 600 billion market cap went down to a third of what it was less than a third of what it was and it took about 13 14 years to get back to the 600 billion and in fact if you look at it from 99 to now even going 21 years or 20 years it's gone from 600 billion to 1.3 trillion it's doubled right so if you held on for the last 21 years you got a double a double in 21 years is like a three percent annual rate of return yeah three percent is not without volatility with a very rough roller coaster ride so many times in many ways when I look at some of these businesses today I see those businesses at Great businesses I saw Microsoft as a great business in 2000 but every great business no matter
Questioner2000 but every great business no matter how great it is has a finite price and you have to look at the future cash flows the company will generate and discount those back that formula will not change a thousand years from now on how you value a business and when you try to run the future cash flow that many of these businesses you have to make a lot of heroic assumptions very interesting in in a question just came in from from the audience which I think is in line with this current discussion umumum the the it says given the current economic challenges the economy faces and the relatively High valuation we're seeing today is a Buy and Hold approach still valid
Warrenyeah I mean I think I think one of the things to keep in mind about today kind of caveat what I just said is long-term interest rates have a direct impact on Equity markets so if we had a crystal ball which told
Questionerso if we had a crystal ball which told us that the 10-year treasury is going to be less than two percent five years from now in that scenario Equity markets are not expensive okay so if we knew what interest rates would be five years or ten years from now and if we knew that those interest rates would be one or two percent for the long Bond the markets are not expensive then even the Fang valuations can be justified but I don't know how to handicap that and I don't know how to handicap that when we have the printing presses running Fuller and that has confounded economists during the last financial crisis when we again ran the pretty person but those printing presses are nothing like the printing presses that we are currently running the way the fed and the treasury is pumping money into the economy which I think is the right thing to do makes 0809
Questionerthing to do makes 0809thing to do makes 0809 looklooklook look like nothing yeah which islook like nothing yeah which islook like nothing yeah which is interesting so that last question cameinteresting so that last question cameinteresting so that last question came from uh uh you know a self-describedfrom uh uh you know a self-describedfrom uh uh you know a self-described kind of Buffett fan because I know youkind of Buffett fan because I know youkind of Buffett fan because I know you are uh is as well and you've had uhare uh is as well and you've had uhare uh is as well and you've had uh times over the years uh to to get andtimes over the years uh to to get andtimes over the years uh to to get and develop close relationships with bothdevelop close relationships with bothdevelop close relationships with both Warren and Charlie MungerWarren and Charlie MungerWarren and Charlie Munger um is is there anything you can share orum is is there anything you can share orum is is there anything you can share or if you had any recent sort ofif you had any recent sort ofif you had any recent sort of interaction that you could share thatinteraction that you could share thatinteraction that you could share that wouldn't you know put in violation yourwouldn't you know put in violation yourwouldn't you know put in violation your your relationships with them on some ofyour relationships with them on some ofyour relationships with them on some of their insights with us during thistheir insights with us during thistheir insights with us during this current timeline foreign
Otherbooks and I think if you just look atbooks and I think if you just look atbooks and I think if you just look at what's in the public domain about them Iwhat's in the public domain about them Iwhat's in the public domain about them I think that will give you a lot ofthink that will give you a lot ofthink that will give you a lot of insight so I think one thing that isinsight so I think one thing that isinsight so I think one thing that is very telling about Berkshire and Buffettvery telling about Berkshire and Buffettvery telling about Berkshire and Buffett is and even with Charlie Munger is theyis and even with Charlie Munger is theyis and even with Charlie Munger is they have the net sellers of equities throughhave the net sellers of equities throughhave the net sellers of equities through this entire we were sitting on 130
Questionerthis entire we were sitting on 130 billion in cash they got rid of all the airlines which is not a surprise because I think the airlines are in for a very rough sled for a long time they sold Goldman Sachs completely which was a surprise one hit to sell stuff and that is a very high quality business that he almost completely exited and they haven't bought anything and I am sure they've been approached I'm sure they've been approached by many people for different kinds of deals and they haven't pulled the trigger and and Charlie actually made some comments publicly where he said that they're like the captain of a ship in a tempest and we just want to ride out the storm we don't want to buy a bunch of businesses and roll the dice if you will so I think their their perspective if you just read or read them to their actions they seem
Questioneror read them to their actions they seem to be quite bearish and they seem to notto be quite bearish and they seem to notto be quite bearish and they seem to not thinkthinkthink that we will get anywhere close to wherethat we will get anywhere close to wherethat we will get anywhere close to where we werewe werewe were in any limited time frame that's thein any limited time frame that's thein any limited time frame that's the only thing I can read from what I'monly thing I can read from what I'monly thing I can read from what I'm seeing with them
Questioneryeah so like you know aseeing with them yeah so like you know aseeing with them yeah so like you know a way to to observe their actions isway to to observe their actions isway to to observe their actions is they're highly cashed upthey're highly cashed upthey're highly cashed up um doesn't sound like they've beenum doesn't sound like they've beenum doesn't sound like they've been making any major Investments even whenmaking any major Investments even whenmaking any major Investments even when the markets fell 30 some odd percentthe markets fell 30 some odd percentthe markets fell 30 some odd percent which probably talks to their Testamentwhich probably talks to their Testamentwhich probably talks to their Testament of discipline and and I think one of theof discipline and and I think one of theof discipline and and I think one of the famous quotesfamous quotesfamous quotes um I don't know if it was Charlie orum I don't know if it was Charlie orum I don't know if it was Charlie or WarrenWarrenWarren but it resonates with me is I think thebut it resonates with me is I think thebut it resonates with me is I think the comment was around you know a lot ofcomment was around you know a lot ofcomment was around you know a lot of people confuse where you make your moneypeople confuse where you make your moneypeople confuse where you make your money It Ain't So you make it into buying orIt Ain't So you make it into buying orIt Ain't So you make it into buying or the selling of an investment and theythe selling of an investment and theythe selling of an investment and they said that's not entirely true it'ssaid that's not entirely true it'ssaid that's not entirely true it's actually made in waiting for the rightactually made in waiting for the rightactually made in waiting for the right investment and then backing up the truck
Questionerinvestment and then backing up the truck and loading up yeah and I think what is well we're very instructive of this period is that Berkshires own in the market cap has gotten close to book value Warren has been willing to buy at 1.2 and even higher than that and he's bought it higher than that in the past they haven't been buying books his talk and he said that he doesn't think that the 130 plus billion cash file that Berkshire has is that big in this environment he doesn't think it's that big he always until now said that we're drowning in cash and recently in the annual meeting he said we really don't have that much cash
Questionerwow you know I don't know I think it's a data point I don't I no one has a crystal ball but I would say that I think that what I've always focused on as an investor is forget the macro the macro is too hard to figure out okay
Questionerthe macro is too hard to figure out okay focus on individual businesses and infocus on individual businesses and infocus on individual businesses and in your business for example it's reallyyour business for example it's reallyyour business for example it's really simple if there is a house for salesimple if there is a house for salesimple if there is a house for sale and you look at the unloaded leveredand you look at the unloaded leveredand you look at the unloaded levered return from the rent you know what thereturn from the rent you know what thereturn from the rent you know what the rent is and you know what the cost ofrent is and you know what the cost ofrent is and you know what the cost of that house isthat house isthat house is and both of those are current situationsand both of those are current situationsand both of those are current situations and you can make a judgment call heyand you can make a judgment call heyand you can make a judgment call hey this isn't a great area I know the areathis isn't a great area I know the areathis isn't a great area I know the area I know whatever so the micro inI know whatever so the micro inI know whatever so the micro in investing always trumps the man and soinvesting always trumps the man and soinvesting always trumps the man and so as investorsas investorsas investors our jobs are not to figure out what theour jobs are not to figure out what theour jobs are not to figure out what the unemployment rate is going to be whatunemployment rate is going to be whatunemployment rate is going to be what the interest rates are going to be whatthe interest rates are going to be whatthe interest rates are going to be what all those things are going to do our joball those things are going to do our joball those things are going to do our job is tois tois to say Hey listen if I can get a homesay Hey listen if I can get a homesay Hey listen if I can get a home for a quarter millionfor a quarter millionfor a quarter million and the rent is going to be 250 or 25and the rent is going to be 250 or 25and the rent is going to be 250 or 25 000 a year or 30 000 a year my noi in000 a year or 30 000 a year my noi in000 a year or 30 000 a year my noi in real estate terms you do that all dayreal estate terms you do that all dayreal estate terms you do that all day long and and so I think it's the microlong and and so I think it's the micro
Otherlong and and so I think it's the micro that one should focus on forget themthat one should focus on forget themthat one should focus on forget them yeah ouryeah ouryeah our business and I think that's why guysbusiness and I think that's why guysbusiness and I think that's why guys like me you know bumpkins from Tigardlike me you know bumpkins from Tigardlike me you know bumpkins from Tigard Oregon can can stumble our way throughOregon can can stumble our way throughOregon can can stumble our way through it and still find some success uh youit and still find some success uh youit and still find some success uh you know with the long-term uh you knowknow with the long-term uh you knowknow with the long-term uh you know vision of things you know I I think yourvision of things you know I I think yourvision of things you know I I think your your comment about understanding beingyour comment about understanding beingyour comment about understanding being understanding the macro environment andunderstanding the macro environment andunderstanding the macro environment and andandand articulating aroundarticulating aroundarticulating around um that and making projections is nearlyum that and making projections is nearlyum that and making projections is nearly impossible and soimpossible and soimpossible and so in a time like this is there is therein a time like this is there is therein a time like this is there is there any industry orany industry orany industry or umumum you know things that you're particularlyyou know things that you're particularlyyou know things that you're particularly interested or fearful of uh that youinterested or fearful of uh that youinterested or fearful of uh that you could share with us I know you don'tcould share with us I know you don'tcould share with us I know you don't like talking about specific stocks so Ilike talking about specific stocks so Ilike talking about specific stocks so I won't ask you about that butwon't ask you about that butwon't ask you about that but um you know is there anything you canum you know is there anything you canum you know is there anything you can share with us uh and the listeners uh toshare with us uh and the listeners uh toshare with us uh and the listeners uh to to get inside of your brain you know weto get inside of your brain you know weto get inside of your brain you know we are we are what I would call anomaly
Questionerare we are what I would call anomaly based investors and I think even you are based investors and I think even you are based investors and I think even you are in anomaly based investor looking for in anomaly based investor looking for in anomaly based investor looking for the diamond in the rough you're looking the diamond in the rough you're looking the diamond in the rough you're looking for that mispriced house or maybe the for that mispriced house or maybe the for that mispriced house or maybe the house that needs a little bit of work house that needs a little bit of work house that needs a little bit of work and then it it becomes a great asset and and then it it becomes a great asset and and then it it becomes a great asset and and that's what we're doing in this and that's what we're doing in this and that's what we're doing in this environment in all environments okay and environment in all environments okay and environment in all environments okay and all I can say is that yeah we've found all I can say is that yeah we've found all I can say is that yeah we've found some stuff to invest in but it's not by some stuff to invest in but it's not by some stuff to invest in but it's not by looking top down I never invest top down looking top down I never invest top down looking top down I never invest top down I don't say I want to be in a particular I don't say I want to be in a particular I don't say I want to be in a particular sector and now let me find the best play sector and now let me find the best play sector and now let me find the best play in the sector that's usually not how I in the sector that's usually not how I in the sector that's usually not how I approach investing I always look at it approach investing I always look at it approach investing I always look at it from a individual business point of view from a individual business point of view from a individual business point of view and what can that business do so for and what can that business do so for and what can that business do so for example if I take an example of a example if I take an example of a example if I take an example of a company like let's say Live Nation a company like let's say Live Nation a company like let's say Live Nation a Live Nation owns Ticketmaster it's a Live Nation owns Ticketmaster it's a Live Nation owns Ticketmaster it's a public company it's a phenomenal it's a
Questionerpublic company it's a phenomenal it's apublic company it's a phenomenal it's a phenomenal business they have their handphenomenal business they have their handphenomenal business they have their hand in 35 000 concertsin 35 000 concertsin 35 000 concerts around the worldaround the worldaround the world which have gone to zerowhich have gone to zerowhich have gone to zero okay 35 000 concerts have gone to zerookay 35 000 concerts have gone to zerookay 35 000 concerts have gone to zero and the stockand the stockand the stock has hardly corrected it's maybe downhas hardly corrected it's maybe downhas hardly corrected it's maybe down forty percent of that business is goneforty percent of that business is goneforty percent of that business is gone okay the top line is gone it's gone forokay the top line is gone it's gone forokay the top line is gone it's gone for 2020. it's probably gone for most of2020. it's probably gone for most of2020. it's probably gone for most of 2021 and2021 and2021 and after that who knows what the new normalafter that who knows what the new normalafter that who knows what the new normal is because even when you open everythingis because even when you open everythingis because even when you open everything up do all humans want to be cheek toup do all humans want to be cheek toup do all humans want to be cheek to cheek with other humans right two yearscheek with other humans right two yearscheek with other humans right two years from now after the vaccine and in a tenfrom now after the vaccine and in a tenfrom now after the vaccine and in a ten percent or nine percent or eight percentpercent or nine percent or eight percentpercent or nine percent or eight percent unemployment economy what does theirunemployment economy what does theirunemployment economy what does their business look like so I think Livebusiness look like so I think Livebusiness look like so I think Live Nation will come back but whether itNation will come back but whether itNation will come back but whether it comes back to where it was and how longcomes back to where it was and how longcomes back to where it was and how long that takes is a different question so Ithat takes is a different question so Ithat takes is a different question so I looked at something live nature I saidlooked at something live nature I saidlooked at something live nature I said yeah this is a business under stress
Questioneryeah this is a business under stress yeah this is a business under stress but the valuation is still not that but the valuation is still not that but the valuation is still not that compelling right and I look at another compelling right and I look at another compelling right and I look at another business Carriage services business Carriage services business Carriage services they bury dead people they bury dead people they bury dead people okay it's a publicly traded funeral okay it's a publicly traded funeral okay it's a publicly traded funeral services operator right and they're two services operator right and they're two services operator right and they're two or three okay their business as morbid or three okay their business as morbid or three okay their business as morbid as it sounds has gone up you know as it sounds has gone up you know as it sounds has gone up you know whatever Delta you have in increased whatever Delta you have in increased whatever Delta you have in increased debts they're down 30 as well debts they're down 30 as well debts they're down 30 as well so you explain that to me and the only so you explain that to me and the only so you explain that to me and the only way to explain all of this is equity way to explain all of this is equity way to explain all of this is equity markets are auction driven markets are auction driven markets are auction driven garage Services should not have dropped garage Services should not have dropped garage Services should not have dropped in value in value in value through the entire virus scenario through the entire virus scenario through the entire virus scenario because no matter what happens we want because no matter what happens we want because no matter what happens we want the last rights of our dear ones done the last rights of our dear ones done the last rights of our dear ones done properly we don't go shopping to get the properly we don't go shopping to get the properly we don't go shopping to get the low bid and it's a great business and low bid and it's a great business and low bid and it's a great business and there it's no one aspires to go into there it's no one aspires to go into there it's no one aspires to go into that business so there are very few that business so there are very few that business so there are very few operators it's just a wonderful mode and operators it's just a wonderful mode and operators it's just a wonderful mode and there the consistency of cash flows in a
Questionerthere the consistency of cash flows in a funeral services business is like no other business you would see it has the lowest rate it's the SIC core with the lowest rate of business failure of any SIC code in the U.S so if you want a business where you clip coupons please go into the funeral services business it's a great business but the thing is because we are in auction driven markets you get strange pricing on Carriage services and you get strange pricing on Live Nation now if Carriage Services were a private company okay and let's say they were worth a billion dollars in January and someone came to them in April and wanted to buy them or in June and offered them 700 million saying hey by the way Corona is going on they would laugh at them they would say what do you mean Corona's going on our revenues are the same our cash flows the same they
Otherthe same our cash flows the same they actually gone up a bit and and all these humans in this country are eventually gonna die and they're all going to come to us and we don't when we give a quote we don't get people shopping at four other funeral services places to figure out where they want the last rights done that is not how humans operate okay you will do that when you're buying a mattress you will not do that when you're burying your grandma okay so what I'm saying is that auction driven markets give us strange pricing which is what enables us to actually make hay and normal buying and selling of so I think Jeff in your business you are not feeling many times with irrational sellers for the most part because you're buying and selling assets where the seller can see the value and the buyer can see the value and a price gets arrived at but when you
Questionerand a price gets arrived at but when you look at the equity market so when a single Funeral Home comes on the market for sale the way that transaction takes place versus the stock of the funeral home on the New York Stock Exchange being bought and sold the two are completely different and that's why we can make money in the equity markets it's because of that Distortion that is why Microsoft got priced where it got priced in 99 and that's also why it got priced that way differently in 2002 and so on so forth so let me ask you this and and thank you for sharing those those two very different businesses in in different trajectories that they've taken um as as an expert of studying business models that you are that's what you do for a living um you started your business with a certain business model copying and mimicking and cloning you know the early
Questionermimicking and cloning you know the early Buffett uh Partnerships and I had the opportunity of being with you at the daily um Journal annual meeting where where Charlie Munger was there and there were I don't know 10 000 people stuffed into this hotel ballroom and people were coming up to you and I'm just like this is bonish you know but people were like loving you but Charlie singled you out in the middle of it basically Basu and had the audience applaud you for the business structure that you've created and and when you look at you know the longevity of that business structure that you adopted and and you know are doing yourself what made you believe that was the best structure uh for your funds and Investments for your industry his Partnerships he charged no management fees to his investors so he had zero percent management fees and
Warrenhad zero percent management fees and then he took one-fourth of the gains then he took one-fourth of the gains then he took one-fourth of the gains above six percent as his fee for example above six percent as his fee for example above six percent as his fee for example if his funds were up 20 in a year he if his funds were up 20 in a year he if his funds were up 20 in a year he would get three and a half percent the would get three and a half percent the would get three and a half percent the investors were at six percent and then investors were at six percent and then investors were at six percent and then the remaining 14 he would get one fourth the remaining 14 he would get one fourth the remaining 14 he would get one fourth of that so he'd get three and a half of that so he'd get three and a half of that so he'd get three and a half percent and the investors will get six percent and the investors will get six percent and the investors will get six and a half percent and they both were and a half percent and they both were and a half percent and they both were happy happy happy with that outcome and I thought that was with that outcome and I thought that was with that outcome and I thought that was a very fair structure in Buffett terms I a very fair structure in Buffett terms I a very fair structure in Buffett terms I don't I didn't think I should get paid don't I didn't think I should get paid don't I didn't think I should get paid for breathing which is what most funds for breathing which is what most funds for breathing which is what most funds do they have a five billion dollar fund do they have a five billion dollar fund do they have a five billion dollar fund charging a two percent annual fee that's charging a two percent annual fee that's charging a two percent annual fee that's a hundred million dollars a year in fees a hundred million dollars a year in fees a hundred million dollars a year in fees for doing nothing now you can be down 10 for doing nothing now you can be down 10 for doing nothing now you can be down 10 you still collect the 100 million and you still collect the 100 million and you still collect the 100 million and that is just a very unfair in my opinion that is just a very unfair in my opinion that is just a very unfair in my opinion very unfair structure and so when I saw very unfair structure and so when I saw very unfair structure and so when I saw the Buffett partnership structures of
Questionerthe Buffett partnership structures of zero six twenty five I thought that was a great structure and at probably fund it worked out really well in fact in in 2007 I don't know I must have collected 30 plus million dollars in fees which was perfectly fine with me and then from 2007 to 2009 the funds went down almost two-thirds like 65 67 percent and for us to earn a fee we had to get back to the high water mark and six percent a year annualized every year from there and from it took me from 2007 in one of my funds from 2007 to 2017 before I earned a fee again so I did not shut the funds and start over I didn't ask my investors to hey can we reset this or anything I felt that it was a fair Arrangement that until they got six percent a year from the previous High why should I collect a fee because that's what they put in and we got to
Questionerthat's what they put in and we got to that point in 2017 where we got past thethat point in 2017 where we got past thethat point in 2017 where we got past the previous highs and in 2017 and 2018 Iprevious highs and in 2017 and 2018 Iprevious highs and in 2017 and 2018 I collected more than 50 million in feescollected more than 50 million in feescollected more than 50 million in fees so don't share any tears for monishso don't share any tears for monishso don't share any tears for monish monish is doing just fine and I thoughtmonish is doing just fine and I thoughtmonish is doing just fine and I thought that was a win-win it was a win-win forthat was a win-win it was a win-win forthat was a win-win it was a win-win for them and a win-win for me and it was athem and a win-win for me and it was athem and a win-win for me and it was a fair Arrangement and I think Charliefair Arrangement and I think Charliefair Arrangement and I think Charlie appreciated the fairness of thatappreciated the fairness of thatappreciated the fairness of that Arrangement and that's why sort of aArrangement and that's why sort of aArrangement and that's why sort of a very flattering to be to be singled outvery flattering to be to be singled outvery flattering to be to be singled out in that Gathering and it's it'sin that Gathering and it's it'sin that Gathering and it's it's wonderful yeah you know I have I've hadwonderful yeah you know I have I've hadwonderful yeah you know I have I've had the opportunity to play not blackjackthe opportunity to play not blackjackthe opportunity to play not blackjack but Bridge with both Warren and Charliebut Bridge with both Warren and Charliebut Bridge with both Warren and Charlie and I paid a lot of bridge with Charlieand I paid a lot of bridge with Charlieand I paid a lot of bridge with Charlie it's a blessed life when you can you canit's a blessed life when you can you canit's a blessed life when you can you can actually meet and interact with youractually meet and interact with youractually meet and interact with your Heroes so it's been great but I thinkHeroes so it's been great but I thinkHeroes so it's been great but I think that I wish the investment communitythat I wish the investment communitythat I wish the investment community followed that fee structure because 80followed that fee structure because 80followed that fee structure because 80 of the industry would disappear
Questionerwell there was Stan the downtime theywell there was Stan the downtime theywell there was Stan the downtime they have so much they have so much thishave so much they have so much thishave so much they have so much this industry has a lot of waste you have 100industry has a lot of waste you have 100industry has a lot of waste you have 100 million coming in you can imagine thatmillion coming in you can imagine thatmillion coming in you can imagine that your offices are going to be overlookingyour offices are going to be overlookingyour offices are going to be overlooking Central ParkCentral ParkCentral Park and your rent's going to be north of 100and your rent's going to be north of 100and your rent's going to be north of 100 a square foot and all that good stuffa square foot and all that good stuffa square foot and all that good stuff which which is uh it leads me to anotherwhich which is uh it leads me to anotherwhich which is uh it leads me to another thoughtthoughtthought um that I've always found interestingum that I've always found interestingum that I've always found interesting um you know some of the greatestum you know some of the greatestum you know some of the greatest investorsinvestorsinvestors in the world you know you think ohin the world you know you think ohin the world you know you think oh they're all in New York or San Franciscothey're all in New York or San Franciscothey're all in New York or San Francisco or Tokyo or Hong Kong or you know theor Tokyo or Hong Kong or you know theor Tokyo or Hong Kong or you know the London these majorLondon these majorLondon these major you know Metro areasyou know Metro areasyou know Metro areas umumum but that's not necessarily the case isbut that's not necessarily the case isbut that's not necessarily the case is it you know it's an advantageit you know it's an advantageit you know it's an advantage yeah Warren in in Omaha and Charlie inyeah Warren in in Omaha and Charlie inyeah Warren in in Omaha and Charlie in fact is is not with Warren and so Ifact is is not with Warren and so Ifact is is not with Warren and so I think the more removed you arethink the more removed you arethink the more removed you are from these epicenters of action let'sfrom these epicenters of action let'sfrom these epicenters of action let's call them the better you're going to docall them the better you're going to docall them the better you're going to do I think that there's less noise
QuestionerI think that there's less noise and uh less clutter in your brain
Questionerinvesting is really an activity it's a it's in a in in many ways a solitary activity we get paid to read and think and you'll have a better chance of reading and thinking when you're not with a several million humans around you
Questioneryeah so don't don't confuse you know activity or busyness with productivity um I mean action of of trades or things like that with productivity in fact Charlie Munger once told Chris Davis runs the Davis funds in New York several billion under management and he told Chris Davis listen if you moved just moved your operation from New York to Santa Barbara just that move alone would increase your annualized returns by probably half a percent a year Chris actually seriously considered that but then he for whatever reason stayed in New York Santa Barbara's not bad not a
QuestionerNew York Santa Barbara's not bad not a bad place it's a good place to think yeah hey so um we're nearing the last few minutes and uh I really in what we've covered has been amazing and thank you for your your insights but I'd like to spend the last few minutes on something I know is near and dear to your heart and and personally uh I find it one of the greatest um Gifts of humanity uh you've created the doctrina foundation which is educating the hearts and minds of you know underprivileged but very bright intelligent students in your native India can you tell us a little bit about that for a minute if you were to give us a pitch I'd really love you know the audience to hear about it um because I just think it's an amazing organization and the team's doing Jeff you have a first-hand view of it you've visited the induction on campus in Pune
Questionervisited the induction on campus in Pune in India and your daughter's spent or ain India and your daughter's spent or ain India and your daughter's spent or a few weeks there and I hear rumors thatfew weeks there and I hear rumors thatfew weeks there and I hear rumors that the second one is getting ready to spendthe second one is getting ready to spendthe second one is getting ready to spend a few weeks there yes which is wonderfula few weeks there yes which is wonderfula few weeks there yes which is wonderful yeah so I think I think that from Warrenyeah so I think I think that from Warrenyeah so I think I think that from Warren and Charlie because I've overdosed onand Charlie because I've overdosed onand Charlie because I've overdosed on them so much it became obvious to me athem so much it became obvious to me athem so much it became obvious to me a long time ago that large inheritanceslong time ago that large inheritanceslong time ago that large inheritances are actually a disservice to our kidsare actually a disservice to our kidsare actually a disservice to our kids and grandkids I think we take away fromand grandkids I think we take away fromand grandkids I think we take away from them more than we give them and so so Ithem more than we give them and so so Ithem more than we give them and so so I think it's problematic to plan to justthink it's problematic to plan to justthink it's problematic to plan to just hand over large inheritances we havehand over large inheritances we havehand over large inheritances we have enjoyed the journey they should enjoyenjoyed the journey they should enjoyenjoyed the journey they should enjoy the journey just beingthe journey just beingthe journey just being in effect trust fund kids and Welfarein effect trust fund kids and Welfarein effect trust fund kids and Welfare kids they're both in the same boatkids they're both in the same boatkids they're both in the same boat they've got an IV drip and we drips arethey've got an IV drip and we drips arethey've got an IV drip and we drips are not good so I knew thatnot good so I knew thatnot good so I knew that pushing the money to my gene pool wasn'tpushing the money to my gene pool wasn'tpushing the money to my gene pool wasn't the answer so the only real answer wasthe answer so the only real answer wasthe answer so the only real answer was then that you give it back to society
Otherthen that you give it back to society and I am competitive and I want to make sure that when we give our money back to society we do it in a efficient optimized Manner and so social return on invested Capital was important to me I also did not want to start thinking about that when I was in my 70s so we set up the dakshana foundation about 10 years ago and and it's actually I I thought we would have a lot of headwinds in India because there's so much corruption and problems with me trying to do something remotely but I ended up and we got traction right away and we are we are able to identify very bright kids or very poor and we use the future trajectory of those families forever and we've been able to do it at scale so now the foundation I think spends about and it's a very robust Financial footing and it's got a wonderful 110 acre campus in India and
Questionerwonderful 110 acre campus in India and everyone on the podcast that when things return to normal and you go to India you should visit the campus I think you'll really enjoy that but for Journey and I think if you go on the dakshana website you'll be AKA s-h-a-n-a.org I think that can help you understand a lot about can you just share with us a little bit you know how many students has doctrina educated um
Otheroh really
Questionerand what's the current class size on the different campuses
Otheryeah we've we've taken on several thousand kids five thousand kids over the years and and basically we typically spend around three thousand dollars per kid at any one time now in our program there's about 800 or so kids in our program and they're with us for one or two years and we prep them for the key and medical entrance exams which are very hard but once they get in this heavily government
Questioneronce they get in this heavily government subsidized so you get a MIT or Stanford level education with almost nothing out of pocket and when you finish those degrees global companies are willing to hire you we've got people who work at Google and Mountain View at Amazon in Seattle Microsoft and then pretty much your Samsung and Korea and all over the world and and these are kids whose parents for the most part are illiterate they are laborers or Farm Workers and most of them come from families where the annual income is less than 100 a month so we have like for example one kid at Google probably makes over a quarter million a year and his father used to kill her making less than 50 60 a month so it's a massive transformation in terms of what happened before and after of removing the Next Generation out of you know what we call poverty into Highly Educated productive citizens of
OtherHighly Educated productive citizens of the world um you fast forward you know 100 years in and really start to see the remarkable change that can have on society so applaud you and your family and your team adoption of for taking on that challenge because I do know like you like challenges and you are competitive um um get to the next uh next space so thank you thank you Jeff and this was wonderful I really enjoyed the interaction and the pintar bar behind you from your life in the next next few weeks as you open up we we roll and a lot of others and um you know it's it's been a little Dusty so yeah we got to get it back in shape but uh thank you so much uh today and sharing insights of of past present and future of provide funds and it's always a joy to catch up with you and to our audience um you know this is uh second in our series of webinars we have our next
Otherseries of webinars we have our next webinar coming up next Thursday where we'll have a gynicio of wines accounting firm uh give us an update an overview of opportunity Zone investing is kind of some updated new rules and and regulations have come out and so please join us again and keep your eye out for that and uh in the meantime uh I thank everybody for stay healthy all right thank you Jeff thank you