OtherTyler Wisecupp here.
OtherIf you're a long-time listener, you know we're a Berkshire Hathaway company.So today, in honor of the annual meeting, we're dropping a bonus replay of one of ourfavorite interviews with Ted Weschler.Ted is one of Berkshire Hathaway's investment managers and doesn't do many interviews, butwe were lucky enough to have him on to talk all about his career in the investments industry,what it's like to meet Warren Buffett twice, and so much more.If you haven't heard this interview before, you're going to love it.And even if you have, it is such a great lesson.One last thing, make sure to check out our regular episodes on Wednesdays.We've got a whole series of episodes this month about investments for your home.Maybe you're sensing a theme here.Okay, without further fanfare, enjoy this episode with Ted Weschler.
OtherTyler Wisecupp here from NFM headquarters with Becca Sudbeck.
OtherHi, Tyler.
OtherHey, Becca.And Hilary Waltermath, Visual Display General Manager.
OtherHey.
OtherHey, Hilary.
OtherToday, we're thrilled to bring you a Thought Leadership episode featuring Ted Weschlerof Berkshire Hathaway fame.Very exciting.So we had to bring back our special Thought Leadership host, Amy Myers, Chief MarketingOfficer.
OtherThanks, Tyler.
OtherHey, Amy.
OtherSo exciting.It's going to be an awesome episode.But before we get to that, let me tell you why we're even doing this podcast, and that'sbecause NFM is more than just your everything home store.We're in the business of improving lifestyles because your home life should be your bestlife.Learn more at nfm.com.And we're on with Ted Weschler.Thank you so much for joining us today.
Ted WeschlerThank you, Tyler.Happy to be here.It's going to be so fun.
OtherAt this point, Amy, I'd love to hand the moderator duties off to you.Would you like to introduce Ted to our audience?
OtherI will.And thank you for joining us.We really appreciate you coming and giving us your time.Ted Weschler is one of Berkshire Hathaway's top two investment managers.You got started at W.R. Grayson Company as a junior financial analyst and then helpedstart the private equity firm, Quad C Management, where you were a partner for 10 years.Then in 1999, he went out on his own founding Peninsula Capital Advisors, which was a hedgefund you launched in 2000 above a bookstore in Charlottesville Mall.And before that shuttered in 2011, you joined Berkshire Hathaway and the $2 billion fundhas returned 1,236% for investors.
[2:50]
QuestionerTed and his wife, Sheila, live in Charlottesville with your two daughters.
Ted WeschlerThat's right.
QuestionerHow old are your daughters?
Ted Weschler20.
QuestionerWell, one will turn 21 in just a few weeks and the other is 23.
Ted WeschlerOkay.
QuestionerClose to mine.
QuestionerSo I know that life.
QuestionerThey should meet.
QuestionerSuper excited to have you talk to us.
QuestionerI know that this particular time of year going into the Berkshire Hathaway meetingactually being live and not virtual, it's been a couple of years.
QuestionerFor us, it's just a super exciting time and high energy and tens of thousands of peoplethat come through.
QuestionerBut what's it like for you being on the inside of Berkshire Hathaway and it's exciting?
Ted WeschlerIt's terrific because it's something that I think we all draw energy from and the closerwe get, the more energy we get.
Ted WeschlerIn the last two years, they were fine.
Ted WeschlerWe did the remote thing, but there's something about bringing tens of thousands of peopletogether.
Ted WeschlerAnd I kind of describe it as a big wedding because you've got this common link of oneway or another you're connected to Berkshire Hathaway.
Ted WeschlerSo anybody that you meet during that weekend that's wearing the credentials, whether it'sup here at the mark or anywhere in town, you got something to talk about.
Ted WeschlerIt's just like at a wedding where you know that you're somehow connected to the brideor groom, you're somehow connected to Berkshire.
Ted WeschlerAnd so it's always fun to meet those people.
Ted WeschlerAnd then just the energy that builds at the office.
Ted WeschlerI mean, I'm always amazed at the amount of paper and phone calls and emails and all therest that we've got a very small snap, but it just flies out of there in a really, reallyefficient way.
Ted WeschlerAnd it's fun.
Ted WeschlerAnd Warren gets progressively excited as well, you know, because he really, he both addsenergy to it and he draws energy from it.
Ted WeschlerAnd you know, that's just, that's something that's just contagious for everybody.
QuestionerOh, I like the way you said that, draws energy from it too.
QuestionerYes, I think we feel the same way for us as it's, you know, we have to bring a level of energy, but yeah, you definitely come out of it feeling energized and excited.
QuestionerYeah.
QuestionerI got my credentials this weekend.
QuestionerI'm excited wearing them already.
QuestionerIt's real.
QuestionerYeah.
QuestionerI was going to wear mine here today.
QuestionerSo I'm going to jump to one of my favorite, and it's a famous story, you know, for you and the, how you had your first lunch meeting with Warren Buffett and your donation to the charity organization that was raising funds to have lunch with Warren Buffett.
[5:18]
QuestionerBecause what I was thinking about when I was, I was thinking about that story is you were already, you had your own firm, you were already running a super successful firm. So when you went into that meeting, it ended up being life-changing. It was life-changing for your career, you know, and life-changing for you. And that was my question, I thought, was this like your goal when you're going into it thinking, man, I'm going to make this happen, or did it end up going a whole different direction than you thought?
Ted WeschlerOh boy. Yeah. It's kind of an involved thing because first, you know, I went to school in Philadelphia College and in 1979 when I started, there was a good friend of mine who, we were both in the business school there, and he said, you know, if you're really interested in business, there's this guy Warren Buffett who you just read anything that he writes. I had never heard of Warren Buffett in 1979, but I respected this guy. And I started reading this stuff and I was like, wow, there's tremendous clarity to what he says and it makes sense. And between taking, you know, the corporate finance classes and accounting and all that, you had this, it was kind of practical applied experience. So here's a guy who really was a hero of mine from, you know, an investing standpoint. From back when you were in college? Yeah. From 1979. So I'm reading all this stuff and then I experienced, you know, some decent success in investing and my fund had a good track record. And I knew that Warren did this auction and it benefits Glide Foundation in San Francisco, wonderful charity. Sure. And I happened to be a chair of a trust that met twice a year, once in San Francisco and once in Shanghai every year. And it gave me a good reason to kind of travel the world and got to know some folks. But I wanted to understand more about Glide before I did anything that, you know, was a big ticket that I was going to write if I was going to do something like this. And so I was out at a trust meeting and my assistant had reminded me that I wanted to come and visit the people at Glide and understand the thing. And she set the thing up, I finished my trust work, I spent half a day with the folks at Glide and it just happened to be the last day of the auction that year. So it was going on while I was there and I went down to – they invited me down to the closing thing. They didn't know I was registered to bid on it and, you know, I actually ended up winning
[7:45]
Ted Weschlerthe thing.And it was like, wow, you know, this is something.And it really, you know, after I had spent half a day with the folks at Glide, I mean,just again, great, great operation there.So that was terrific.What is the organization?What's that?Glide or something?Yeah, Glide.They give hope to the otherwise hopeless.I mean, it's a wonderful organization, hundreds of volunteers that run both a soup kitchenand a, you know, a healthcare clinic in the toughest part of San Francisco and it's,you know, known to everybody in the city, very efficiently run and, you know, touchesa lot of lives.And Warren's wife Susie had been very active in the thing and so that was where the interestcame from.Yeah.But I ended up winning this thing and I wasn't sure, you know, what was going to happen.But I'm back at my office and I get this phone call on a Tuesday morning and I pick up myphone and it's Warren on the other end and it's like, geez, this is something, you know,this is a hero.Yeah.And, yeah, it was, he was terrific and I had said the one thing that I wanted, I had wantedit to be anonymous and I wanted my name attached to it.And I also wanted to do it in Omaha instead of New York.It was set up to be a New York lunch at Smith and Walensky's, a great steakhouse in NewYork.So very public.And, yeah, and he said that's fine and then he said, when would you like to do it?And I said, well, you know, your schedule will dictate, you know, Mr. Buffett.And he really was unbelievable because then he says, well, I could do tomorrow night,I could do Wednesday, I could do Thursday, and he rattles off four days in a row.And I'm like, ah, and I think it was, I picked the day two days later.And so I flew out to Omaha and I met him in his office and it clicked, I mean, it reallyclicked.And it was kind of interesting because I think there's a bookends to my career.My first job at W.R. Grace, I was an analyst and then I happened to have a job as the aidto the CEO there.It was a guy by the name of Peter Grace and I, he and I, Peter and I had a great relationshipbut I viewed him more as a, almost a monarch than a CEO.And he had all the trappings of being the, you know, high and mighty CEO of a Fortune50 company.He had to go through six doors to get to his office and, you know, everything was maximumintimidation and all the rest of that.And then, you know, Warren's just like, I show up at headquarters and he bounces out
[10:32]
Ted Weschlerin the hallway and says, you know, great to meet you, Ted. Come on in, you know, grab a seat on the couch and, you know, immediately put me at ease. And it was just, you know, great. We visited at the office for, you know, maybe 45 minutes, an hour, a number of connections. He'd actually met Peter Grace a couple of times, so we had some Peter Grace stories that we connected over. And then we ended up having like a three-hour dinner at Piccolo's and it really, really clicked. And then I actually bid on it the following year and won it again for $1 more. And this time, I had a little bit more time to think about questions and like, yeah.
QuestionerHow did you do that? That's my first time, because you only have a few days, you didn't expect to win.
Ted WeschlerYeah. How do you plan questions for Warren Buffett? Yeah, you know, my mind was kind of racing. But again, he's got this wonderful way of putting you at ease, you know, and it was just conversational. And I had a lot of questions about, you know, investing and, you know, lessons learned and, you know, philanthropic dispositions, that kind of thing. And there's a lot of natural topics that came out. I wish I would have had more time to buff and polish, but that's okay. But another year later, you know, and I got it again. And then that one, I did have a few weeks to think about and I put together a legal pad of, you know, dozens and dozens of things that I wanted to hit on. And we did the same deal, we went to Piccolo's and it was terrific. But I had probably three pages of questions. And toward the end of the dinner, I think I've hit everything just naturally off of my checklist. I just want to look at my notes, do you mind? And you can ask me anything if you want, Warren. And as I'm looking down at my notes, checking stuff off, he says, I think you'd be a pretty good fit out here. Do you have any interest in working at Berkshire? And I just absolutely panicked, you know, this was like, this was absolutely not what I was thinking.
QuestionerSo it didn't come up the first year?
Ted WeschlerOh, no. No, not at all. And my immediate reaction was, there's no way this works, you know, I got this good gig back in Charlottesville, Virginia, I'm running a $2 billion fund, it's just me and two other people. But you can't just dismiss it, I mean, this is your hero. And so I was like, wow, that's not what I expected, but thank you. And I got to think about that. So he drives me to the airport right after dinner and drops me off and he gets out, we
[13:16]
Ted Weschlerboth get out.And he says, you know, that thing I mentioned at dinner, you don't have to decide now, butI mean, if you feel it in like two, three, five years, you know, just let me know.And I'm like, wow, you know, at the time he was, he had just turned 80.And I'm like, that's really something to have that.And I really was still like, there's no way this just does not make sense.And I got back to Charlottesville and I gave a lot of thought to it.And I sent him a note that basically said, it just doesn't work because my kids at thetime were in grade school and my family, they had roots in Charlottesville.And I was running a large bankruptcy actually for W.R. Grace, it was one of my investmentsin Peninsula and it was a bankruptcy that I worked on for 10 years.And so I said, I really need to see this through.It was probably another three years.And so I sent him a carefully worded letter, sent it off.And within an hour, I've got this response from him that's, you know, email letter onhis letterhead that says, you know, thanks for the note.And something to the effect of, you know, you can manage money from the moon as faras I'm concerned.So you can stay in Charlottesville.And I like the fact that you want to finish up this bankruptcy.You can do that, you know, on our watch, you know, that's not a problem.And he's like, oh, yeah, so it's like, oh, and then I started thinking more and moreand, you know, and he, a day later, he sent me, you know, a proposal that kind of laidout how the mechanics would work and all the rest.And then I thought, you know, I've been doing this fund at Peninsula for 12 years and oncein a while, you just want to scrape the plate clean and do something new.And so I decided, yeah, that'll work.The only thing I asked was that, you know, I wanted to commit that I would come out toOmaha two days a week and, you know, be part of the team in Omaha.So I'd commute from Charlottesville, but Charlottesville would still be my team, my home and it's workedout beautifully.So I've been doing that for, you know, a little over 10 years now.
QuestionerSo you still, you come out two days a week?
Ted WeschlerYeah, yeah.Two, three sometimes.Yeah.Place here.Yeah, I've got a condo in Midtown Crossing that's fully outfitted by NFL.Yeah, absolutely.It was perfect.
QuestionerDid you agonize, agonize over what to wear going into this?
Ted WeschlerI did.I did.Yeah.Yeah.No.And that's one of those.It's funny.I absolutely did.
[15:59]
QuestionerAnd then I and then I decided that I should go in and remember that.Well, I decided I should go in with a suit coat and open shirt.And of course, he's wearing a tie.I was like, oh, I fumbled it right out of the right out of the block, but it's OK.Obviously, it worked out.
QuestionerYeah.Yeah.Was it dessert at Dairy Queen afterwards?Or is that not?
OtherWe had the root beer floats.
QuestionerOK.Yeah.Which was terrific.Yeah.Both times.Yeah.Absolutely.Yeah.Both times.So how fast was that in between like the second meeting?Because it sounds like it was pretty quickly.
OtherYeah.It was it was no more than three weeks after that second dinner that I I said, yeah.And then I had to send a letter to all my investors that, you know, I was going to shutdown shop and send them their capital back.And and yeah, that came together came together very quickly.
QuestionerYeah.Yeah.Interesting.So can we jump back a little?
OtherOh, yeah.We can go anywhere you want.We're going to we're going to kind of flip back to your first job.So yeah.Coming right out of school and you were a junior financial analyst was indeed what mytitle was.But what kind of caught my eye on that is that.I mean, you're you're starting entry level into the company and then like within sevenyears you're leaving with the vice chair to start a company.And you know, when you talk to people about good research, they talk about career path.I mean, to give to have that sort of visibility and trajectory to your career and that quickly.I'm just kind of fascinated by what do you look back and say?How did how did you prove yourself that quickly?How did you what would you recommend?
OtherYeah.Lucky, lucky, lucky.I mean, it was just it's like so funny in that stuff because I I joke about the juniorfinancial analyst, but that was a big deal because I was hired in as a test case intothis department that did mergers and acquisitions at W.R. Grace and and I was the first undergraduatethat they hired.It was otherwise just MBAs and they were all called financial analysts.And so I had the business card that said junior financial analyst.And got the graduate degree.Yeah.Yeah.And so it was and that's fine.But you know, it was a it was a good gig that I didn't make much money.But if you stayed until eight o'clock working, you got a free taxi home and free dinner.And that that made a big difference.So, you know, I was there till, you know, at least eight every night.And it was fun.
[18:35]
Ted WeschlerI like I like working a lot more than than studying.And and through through really happenstance, I worked there for two years, had never evenseen Peter Grace, the CEO of the company.And I got a phone call two years into it.And I had been working on a transaction, a leverage buyout of a medical company.And I've been working on it for probably two months.I get this phone call and it's one of Mr. Grace's assistants saying that Mr. Grace wantsto be briefed on the National Medical Care acquisition.And your boss, boss, boss is not in the building.Your boss, boss isn't in the building.And your boss isn't in the building.And I'm like, oh, no.What does that mean?And he said, we'd like you to come up to the 48th floor, the top floor.And in brief, Mr. Grace on this project and I'm like, no, I mean, I am 23.I look like I'm 12.This is not what I signed up for.And I go up there.I had no choice.And they again, I get ushered through door after door after door and then into this conferenceroom that's this enormous horseshoe that could sit probably 55, 60 people.And there's a dozen other people there and I get ushered into the center of the horseshoe.All the senior leaders.Senior leaders.All the top people at the company.And then once we're all seated, this door opens and His Holiness comes through and hesmoked a pipe.And he looks down and he looks at me and he says, who are you?And I said, I'm Ted Weschler.I'm here to brief you on national medical care.And you could see him getting a little bit agitated.He had never met me.He didn't know anything about this.And he said, so where do you go to school?I said, I went to the University of Pennsylvania, Wharton undergraduate.He said, you don't have an MBA?And he says in a really biting way.And I'm like, oh, this is not starting out well.I'm the junior there.Yeah, exactly.And his pipe starts to shake a little bit.And he really was working up, getting quite worked up.And he starts going off about, it's the biggest acquisition we've ever done.My grandfather founded this company.You're sending this kid up to brief me on this thing.And then he starts going down the line.Chuck, where did you go to graduate school?Yale, Peter.And then it's like, I'm going to join the Peace Corps.It's just horrible.Absolutely horrible.And then actually it was this guy, Chuck, who was the vice chairman.He said, Peter, just let the young man at least answer some of your questions.
[21:21]
Ted WeschlerAnd Peter listened to him, Mr. Grace.And he starts asking me questions.And yeah, I've been doing 100-hour weeks on this deal.And I knew the deal well.And it ended up being like an hour and a half meeting.And it was painful to start.But once it got rolling, I felt like I did okay.You were prepared.I felt like I did okay.And then at the end of it, Mr. Grace looks over and he says,you know, there's two people in this room that don't have an MBA.You and me.And it's like, huh.I still felt like hell, but that's okay.And then literally the next day, I got a phone call saying thatPeter always had three assistants that traveled the world with him,either as advanced people or, you know,financial types to do analysis while we were traveling.And she said he let one of his assistants go this morningand he'd like you to join him in Boston tonight and pack for three weeks.So it was like, you know, let me talk to my boss.And he said, no, you don't have to talk to your boss.Just be in Boston.And so in the next two years, I was a traveling aid to Mr.Grace, which was really fascinating.And, you know, it was just – and he was one of these guys,you really couldn't say much when you're in the room with him inbusiness meetings, but you were the proverbial fly on the wall.He'd let you sit in on anything.So you could learn by learning.Really powerful, yeah.And just very interesting.And his management style was a little bit different,but it was interesting.And a ton of fun.And, you know, I guess I did a decent job on that.And then in 1987 came along and there was this crash in October.And I actually had, at that point, just before the crash,I had accepted a job with an arbitrage shop that did investmentand takeovers.And Mr. Grace was very upset that I was leaving, but he,you know, whatever, he accepted it until the crash happened.And then he called me and he said, you know,you're basically an idiot.He used much rougher language than that for leaving.And, you know, there's got to be some way that,you know, you'd like to stick around here.So he starts, you know, sending in these senior folks withdifferent ideas for me and what have you.And I ended up becoming the aid to the next heir apparent to Peter.Peter was, at that time, maybe 75.And this was probably heir apparent number four or five.You know, there had been several people who looked like they mighttake over for him.And so he did that because it was a guy that I had a great
[24:18]
Ted Weschlerrelationship with and I worked with and we'd done some leverage buyouts.And that was another great experience.But that's the gentleman that I started the private equity firm with.And he and I set up a completely new company.And I was going to leave Grace and start a money management firm.He wasn't sure what he was going to do.And, you know, over a dinner we hatched this idea of setting up ourown private equity firm.And he was a gray-haired guy with Gravitas and I was the maniacin the back room who knew the tax code and knew how to use a computer.And it worked.And that firm is still very successful in Charlottesville.It's got, you know, 30 professionals, manages several billion dollars.And that was a good thing.But then I wanted to set up truly my own shop.And that's what took me to setting up my hedge fund.So there was the bit of luck with getting the exposure, but thenthere was a lot more preparation.
QuestionerI'm curious your reputation in the company because I think that would beinteresting watching someone take that move.It was an odd time.And I wasn't, you know, big corporations tend to be very political.And I wasn't political because I didn't know anything about, you know,corporate life.I didn't know that it wasn't right to CC this person or CC that person.And I think I got a lot of buys because of that.You know, people didn't view me as some kind of clever villain.You weren't maneuvering.
Ted WeschlerYeah.Yeah.I was just like, I'm here to do a job.I want to make this company better if I can.And it worked out.
QuestionerYeah.That's a good story.I love that.
Ted WeschlerYeah.So then I'm going to kind of skip.We sort of started talking about this, but you were at Quad C.It still exists to this day.Yeah.You were there 10 years.Yeah.Built it.What was the impetus for doing your own thing?Yeah.Was that always the ultimate goal?No.It's interesting because when we first set up Quad C, it was thisamalgamation of my partner's idea that we wanted to have controlinvestments where we actually bought companies.My preference was I wanted to do investing in publicly traded securities.Are those two typically different worlds?Yeah.Buying things listed on the stock exchange and just where in effect youown a small percentage of the business.Whereas the other stuff that he was good at was actually owning thebusinesses and making the operational decisions.So we created this hybrid where we said, okay, we're going to set up a
[27:09]
Ted Weschlervehicle where we'll ask folks that we know that have some money to put money in and I would invest it in public securities while we were looking for control investments. I kind of wore both hats. When you're studying, if somebody shows you a business that's in furniture manufacturing, the first thing you're going to do is look at everybody in furniture manufacturing and how they're valued in the marketplace. Once in a while, you'll see something and say, boy, this just doesn't make sense. This is really cheap. There might be an opportunity to invest a little bit in this publicly traded company and maybe we'll do the acquisition as well or not. That was fun. I liked that.
QuestionerHe likes to find?
Ted WeschlerYeah. I could look at it from both angles. There's a pretty high bar for doing something in the public securities. It wasn't like I was a trader. It was like, is there something really compelling? There's a great quote of Warren's about we'd all be better investors if we had a punch card that every time we made an investment, we had to click it and that punch card had only 20 punches available to you. So you really had to have this high bar to make an investment. Well, lo and behold, in the six years that we did this, I made exactly 20. Exactly. It's just really weird how that worked out. But 19 of the 20 worked out really well and I had a nice track record because of that. But we had reached this at the six-year mark at Quad C. We reached this point where we wanted to raise money not just from individuals but from institutions. So like the Harvard Endowment and Brown University and what have you. They're wonderful investors but they tend to have checklists that they want to see and they want you to be exactly this slot or that slot. They don't want you to be a hybrid that does both control investments and little things off to the side. I worked on setting up the private placement memorandum and working with the investment bank on how to put this thing together. I concluded that, boy, I've got this nice track record but it's not going to fit in this institutional model. So I said, okay, fine. We'll just take that out and we'll raise this institutional fund, which we did and it was a successful raise. We got a ton of money. But then I realized it wasn't exactly what I loved. The firm had grown a bit. I was doing more people management than investing in businesses. I'm an analyst. I still want to have a business card. I wanted to say analyst.
[29:58]
QuestionerNot junior financial but analyst.
QuestionerI was getting away from that.
QuestionerHow many employment agreements can you negotiate?
QuestionerThat's what it came down to.
QuestionerIt's like the learning curve had just flattened out.
QuestionerI saw a window of opportunity that if I could take the private equity mindset where you're buying the business and you expect to own it for five to ten years and do that with publicly traded securities where I'd buy 3% or 4% of a business but I'd have a very long-term view, I thought that might be something that would work and would be appealing to some investors.
OtherIs that a little bit different in the model because the turnover is typically quicker?
QuestionerYeah.
QuestionerThe average holding period for a share of stock in the New York Stock Exchange is less than a year.
OtherOkay.
QuestionerYeah.
QuestionerSo there's a market.
QuestionerThere's far more people that are trading than are actually buying a piece of the business and holding it for the long-term.
QuestionerI wanted to do it in a way that I wasn't in any way hostile or negative toward management but if you're in something with a five to ten-year view, you've got a better chance to build a relationship with the management team and have credibility.
QuestionerSo there were several of these things.
QuestionerThere were small companies but they didn't necessarily have a great connection to Wall Street or to capital markets and not that I necessarily did but I at least knew the way around and I would never go in and say, I know this stuff better than you.
QuestionerI'd just say here's some ideas and it may be helpful to you.
QuestionerAnd over time, I call it mad investing, make a difference investing.
QuestionerIf you can potentially change the outcome by being actively involved in some part of the process and that's where this WR Grace bankruptcy came along where it's like, wow, I know this company well.
QuestionerIt was in bankruptcy because it had over 100,000 lawsuits against it relating to asbestos exposure of some of their products.
QuestionerAnd I've done a lot of work in bankruptcy for whatever reason and I just thought it was something that I might be able to make a difference there by getting involved and I bought about 15% of the business and again, it took 13 years but it ended up being a very successful restructuring that I was involved in.
QuestionerBut the short answer to your question is I wanted to get back into just investing in public securities because that's something in private equity where you're looking at control investments, you're relying on investment bankers coming to you and giving you a book and that
[32:41]
Ted Weschlerbook is 120 pages of all this wonderful stuff about these businesses.But you open it up on the first page, it says book number 132 orsomething and so it's like they're sending everything and then youend up feeling bad if you don't at least bid on it because guess what?They stop sending you books and you got to keep the books coming inif you're going to do it.But on public securities, if you don't buy something, guess what?The Wall Street Journal still shows up at your doorstep every day oryour computer as the case may be.You don't have that in effect moral obligation to move on anything.You can just wait for the right opportunity to come along.That was always appealing to me.
QuestionerAll right.I have to ask you this.You got 19 out of 20.What was the one you missed?I'm too curious.I know you know it.
Ted WeschlerI do.It's funny because it went by the name of TW Holdings at the time andmy initials are TW so it's like, of course, I should have stayed awayfrom there.It was a big restaurant operator.At the time, it owned Denny's and several other things.Sometimes things don't work out but it did not work out.It had to be something you thought in your original assumption.Yeah.It was the initials.Vanity took me.
QuestionerI saw an interview of Warren Buffett and he said that you are one of thefew people he's met that reads as much as he does.Oh, I didn't see that.I read something else where you said that your job really is reading.We just love to hear kind of what you read and how that kind of informsbecause a lot of times you think people are reading the same thing, right?You're reading the trade journals.Is your success more about that you're able to interpret it or that you'rereading more so you're pulling more information?
Ted WeschlerNo, you hit on it.It's a great question.The way you ask it is just right because I think one of the great mistakesof investing is that people do end up reading the same thing.The only way you're going to have success in the stock market is if you'vegot what's referred to as a variant perception, something that's differentfrom the masses because if everybody says, wow, this Facebook is hot,well, everybody jumps in.Do you really have that?I'm speaking 10 years ago, not right now.One of the things that Warren and I have this in common, we both lovenewspapers and I really enjoy newspapers and I grew up with them in the houseand there's kind of always the morning, almost a competition with my mother
[35:40]
Todd Combsbecause she always read it before I did.It was like who picked up more from the newspaper?It's like all in good fun but it's one of those habits that you get into.What's really great about newspapers though is there's a randomness about them.Just by definition, there's different sections to it and I read a bunchof different ones but it's a random set of stories that come togetherbecause an editor says Jesus might be interesting or what have youor it is top of mind.It's very interesting to see how a given political story is portrayedin USA Today versus the New York Times.What will be front page above the fold in the New York Times,maybe on page 3 of USA Today, much deeper reporting in the New York Timesbut you really want to understand where it's positionedand then how's the Financial Times in London going to play the thingbecause you do need to keep all the different perspectives,take them into account but it is random.If I can come up with one decent investment idea a year, boy, that is great.It is a game of connect the dots where you want to build up a terrific data setand maybe you'll be able to say, oh, I read this here, I read this here,I read this here and make a connection such that you got a little bitdifferent perception of where a business is going to be 5 years from nowthan where the market does.A game I always like to play is do a work on a company and saywithout knowing what the price is in the stock market.You study and say, this is where I think it will be and then you do the uncoverand you say, I think this should trade at $82 a share.It's like, oh, it's at $40, oh, this is interesting.It usually means I missed something really big.It's always been a game that I've played and it keeps it interesting.But then trade journals, they're really powerfuland there's a lot of investors that don't subscribe to those.Actually, Furniture Today, I've been a Furniture Today subscriberfor over 30 years now and it's interesting because it is one of those thingsthat it's a 10-minute read once a week.But if you read it with regularity, you do see the different namesand how they're evolving and who's doing what.That's where I got to know a Nebraska furniture market.I actually didn't even make that connection with Berkshirebut I used to always read about that.I've been involved with furniture in a bunch of different ways over the years.But I always do want to be able to look myself in the mirror and say that
[38:32]
Ted WeschlerI'm reading enough weird stuff that nobody else is reading the same stuff that I am. And if you're just reading the New York Times and the Wall Street Journal, there's no way you're going to beat other people. You're just reading the same thing. So there's other just peripheral stuff. I read Furniture Today and Uranium Weekly. I'm not sure there's a lot of people that subscribe to both of those.
QuestionerYou look at one of them. And the investments you do at Berkshire are different than what you were doing? Or maybe I should ask that.
Ted WeschlerWell, yes and no. It's different in that it's just a much bigger pool of capital. And that's a not insignificant factor because we do have a very large pool of capital. And when I was running Peninsula, at its largest it was $2 billion. And I typically would have that invested in 10 different ideas which would be about $200 million per idea. And there's thousands of companies out there that would let you deploy $200 million in them that are big enough to do that. But when you get up into the Berkshire size, I essentially need ideas that I can deploy at least $1 billion into. Which narrows. Narrows it because I generally, in exceptional cases, I generally don't want to own more than 10% of a business because once you go over 10%, you have additional filing requirements with the SEC. In effect, every trade you do, you need to publicly declare within 72 hours of making the trade. And that's just, it's a hassle. And so, you know, you work into the math and if you've got to put a billion dollars to work and you don't want to be more than 10%, it means you've got to only invest in companies that have at least a $10 billion market capitalization. So that cuts out a big chunk of the market. But, you know, my primary job is looking for ideas like that, public securities. But I also work on acquisitions, you know, so if deals come along that might be interesting to buy 100% of, similar to what I did in my Quad C days or W.R. Grace. You know, it's something I'm very comfortable with. I've been doing those kind of analysis for a lot of years. And again, I'm just here to help out wherever I can.
QuestionerAny books that you have read recently that you'd say, recommend highly?
Ted WeschlerWow. Yeah, let's think about that. I must say, the vast majority of stuff I read are the periodicals. I'm in the middle of one that is quite good. It's called Trillion Dollar Triage. That is the detailing the, in effect, the bailout of the system from COVID in March of 2020.
[41:38]
QuestionerAnd it's a gripping read because it really goes through, you know,how quickly COVID became a global issueand the ramifications for the global economy and the U.S. economyand how interdependent the U.S. economy is with the rest of the world.And what, you know, very brave people like Jay Powell had to do on a moment's noticeto make sure, you know, the wheels didn't fly off the train.And it's quite the read, quite the read.How did COVID affect your day-to-day Berkshire Hathaway's, you know,from investment and strategy?
Ted WeschlerWell, there's the kind of the humanistic side where all of a sudden everybody's like at home.And I think Warren and I had in common, we were like, this was not going to work.You know, it's like I like sitting at my desk.It's space that I'm comfortable with, whether it's Charlottesville or Omaha.I think Warren worked out of his house for maybe a week or two.And it's like, yeah, this ain't going to work.And so we, there's only 26 people at headquarters.And most of the folks went remote.We went, you know, very careful with the masking.And, you know, I started, I did come out pretty much every week though.And I took a test every time I came out.I didn't want to be the one who's bringing a nasty bug from Virginia to Omaha.So that was a big impact.But then, you know, it was a tough one from an investing standpointbecause, you know, all of us.I mean, it's Warren, Todd Combs is the other investment manager.You know, we looked at each other and it's like, wow, just not seen anything like this.You know, not sure how this is going to play out.And we had a lot of very good information, but we didn't have a relative edge.
QuestionerDid you have those conversations just like what you just said there,like how is this going to even play out?
Ted WeschlerI was, you know, sitting there over, you know, quarter pounds with cheese saying like,what do we think?And then it was like, geez, you know, I just don't know.And it was brilliant work on the part of the Fed and J-PAL in, you know, fixing everything.But the moment they came in, I think it was March 20th of 2020,that the Fed effectively put a floor under everything.And the moment they did that, the opportunities that would have been therefor Berkshire, they weren't there anymore.
QuestionerWhat does that mean?
Ted WeschlerWell, it means that, you know, historically the best times for Berkshire have beenwhen there's been difficulties out there, where people needed capital
[44:27]
Greg Abeland banks weren't lending because there's a banking crisis going on. And so we'd say, wow, we like your business. You know, we'll effectively lend you money or we'll buy 15% of your business in a negotiated transaction. Good for you. Good for us. And, you know, in 2000, we did several of those, you know, Warren did several of those kind of trades that were very, very good. You know, they built on Berkshire's reputation. They helped the companies involved. Done one with General Electric, one with Harley Davidson Motorcycles, one with Tiffany's. I mean, just a bunch of these, but they all were very good transactions, you know, relatively low risk. And we thought like, oh, you know, maybe we can do this this time around. But the window closed very quickly and with all of a sudden the view was the banking system was going to effectively shut down and there wasn't going to be lending available for institutions. But in actual fact, there was plenty of money available. The Fed came and said, you know, open the vault, whatever you need. And even Berkshire can't compete with that.
QuestionerYeah. Okay. Okay. And then so how was that kind of transitioned versus where we are now?
Greg AbelYeah. Well, then you get to kind of watch the cards play out. And it really was quite interesting because, you know, one of the indirect beneficiaries was NFM, you know, the nesting phenomenon that all of a sudden people are spending a lot more time at their house and they're like, wow. Didn't like their cell phone. It's like time for a new one. And it's played out very differently in the different businesses. But on balance, it's actually played out very, very well. And we've got, you know, just a great mix of operating businesses that make up Berkshire. And, you know, it was rocky for that, you know, March, April. But all of a sudden then it was like, wow, this could work out. And people got into the cadence of, you know, a different way of doing business and – but it's been – it really has been all good. And we found some ideas in the public marketplace. This last go around, you know, the tragedy of Russia-Ukraine, you know, that really did rattle the markets. And that's the sort of thing that I think we're in a better position to assess because there has been similar things that have happened in the last 125 years that you can say, you know, how does this play out? And what are the probability adjusted – what sort of outcomes could you have? And we've made some public announcements in the last 30 days of things
[47:20]
Ted Weschlerthat we're investing in.So we've moved some money in the last couple of months.
QuestionerWhat are you thinking a lot about right now?
Ted WeschlerOh, wow.Besides uranium today.Yeah.I let that lapse now.I'm feeling bad.I've got to re-subscribe.You know, the things I think a lot about but I don't have any influenceover is, you know, inflation.You know, it's real.How long is it going to last?How does it impact different businesses?You know, the strength of the U.S. dollar or the weakness on any given month.You know, China-U.S. relations.These are all big picture things that are going to impact the long term.And they shape our thinking but they're all background things.But again, what's interesting about this business is you kind of have to havea little bit of background knowledge on all this stuff to have the right lensto look at investment opportunities.
QuestionerYou're feeling positive.
Ted WeschlerOh, yeah.I'm feeling positive.I always feel positive.I mean, it's a system that works and there's always going to be somenegativity out there.But, you know, again, the world of investing, as long as you take a longterm view, we've got the right incentives particularly in the United Stateswhere, you know, entrepreneurs are, you know, encouraged,new technologies develop.New things and new and positive things happen every day, every week,every year.And so, yeah, I can't help but be optimistic.
QuestionerThinking about your point earlier about reading and consuming all thisinformation, I imagine that's the best way to kind of stay informed on all of that.
Ted WeschlerYeah, because it's not just one specific thing.It's all these different flows of information.And it's also where it's important to read, you know, a paper from Europeand a paper from Canada and, you know, a bunch of stuff in between becauseit does give you a little bit different perspective.
QuestionerYeah.Certainly and rather than being like, you know, overwhelmed by all of theinformation, just view it as another opinion or perspective on it.And variant perception.
Ted WeschlerThere you go.I like that.Don't use that term.All coming together.
QuestionerWell, we always like to come back and talk about home.Yeah.To kind of recenter on what we do.So, a couple of questions for you about just home.You've moved a few times and you've got your place here in Charlottesville.
Ted WeschlerYeah.What makes the house feel like home to you?Are there key pieces or things you have to have?Oh, it's interesting.You know, growing up, my father was with A&P Food Stores.
[50:30]
OtherAnd we moved pretty much every three or four years from, you know,when I was, you know, zero, four, eight, twelve.So, your parents had to build.Yeah.Yeah.And, you know, there's those pieces that I always moved house to housethat, you know, to find the house.And I have a, you know, my…I don't know.Do they still sell Nagahide?The name Nagahide?Does that ring a bell?I don't think so.It's for me, though.Why?Yeah.The name sounds familiar, but…It was one of the first faux leathers.These are too young.It was very, very popular.Okay.I was like, I've heard that before.Very popular in the 40s, 50s, and 60s.Okay.It was all, like, branded faux leathers.Yeah.It was.And it was called…Polyurethane.Yeah.It was called Nagahide.And, actually, in the 60s, they had a very successful…I thought it was funny as a kid.It was an advertising campaign about how Nagahide came from the naga, which is this, you know,mythical animal.And they said that the nice thing about the naga is it shed its skin and they didn'thave to, you know…We need to file that away.Yeah.That is a marketing thing.Yeah.But it was…Basically, it's vinyl on top of fabric.Yeah.Yeah.And it cleaned up nice and was great in the house with kids.I've got my…I call it my father's Nagahide Archie Bunker chair.You still have it?Oh, absolutely.It's still the same Nagahide and it's just…It's beautiful.I mean, this stuff will last forever.And, you know, but that…That's great.I mean, it's…I'm sure if an interior designer came in, they'd say, you've got to get rid of thatchair.And I'm like, no, I'm not going to get rid of that chair.No.That's a home.Yeah.That's my dad's chair.And…But then there's…You know, there's just…We always did get something new growing up.You know, each time we got something new, we got something new.Yeah.I think one of the things it…And this is kind of interesting because I'm always kind of a student of inflation andproducts and what have you.And furniture has gotten relatively much less expensive over the last 50 years.And, you know, the example I use is, you know, the couch that my mom and dad boughtin 1965 when I was four years old, you know, they would have bought the same couch threeor four years later.And I think that's…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…It's a…Not even…
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