Chit Chat Stocks - The JRo Show: Interview with Bill Nygren

Episode Date: October 2, 2023

Bill Nygren, Chief Investment Officer at Harris Associates, joins The JRo Show to discuss his team's research process. If you’ve ever wanted to know what it’s like to work at Harris Associates, this is the podcast for you! What is the JRo Show? The JRo Show interviews experts in and outside the field of investing to explore the themes of achieving mastery, sustained performance, and longevity. Does it really take 10,000 hours of deliberate practice to become a master? Listen in on Thursdays to find out. You can listen to the JRo Show wherever you get your podcasts: Apple -> https://podcasts.apple.com/gb/podcast/the-jro-show/id1709504113 Spotify -> https://open.spotify.com/show/05MjGNpyEwvjqpX1jmDrgq YouTube -> https://www.youtube.com/@TheJRoShowPodcast 2 min 15 seconds – Bill’s background and career. 9 min 20 seconds – Advice for new analysts 19 min 50 seconds – The research process at Harris Associates 26 min 20 seconds – The stock pitching process at Harris 47 min – What it takes to be a good portfolio manager. 59 min 50 seconds – Bill’s personal life and expectations for the rest of his career. 1 hour 12 min - How he talks with management teams. 1 hour 16 min – Why he reads ValueLine every week 1 hour 23 min, 49 seconds – Lessons from his career Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome in. This is the Chit Chat Money podcast feed. But if you are listening to this episode, this is a special podcast that is actually not a Chit Chat Money episode, but the first episode of the JRO show that is spelled J-R-O and then show. It is a new podcast from our friend John Rotante, who has been on the podcast multiple times. He is a hit among our listeners, and he is a fantastic interviewer himself. He has launched the first episode of the podcast. It is an interview show focused on talking with experts and masters in their craft. So the first episode is with Bill Nygren, a legendary value investor. They go through tons of stuff over an hour plus long conversation. Some highlights for me for the episode is one,

There was a quote here that said, I thought that was fantastic. He said, compounders don't have to have high sales growth. There's also some talk about portfolio managers talking with management teams, how to manage that with a larger fund, how capital deployment can make or break an investment thesis, just tons of fantastic insights. Again, this is the J-Row Show. It is going to be on any podcast player that you listen to. So whether it's Spotify, Apple, YouTube, wherever, we'll have links in the show notes for this episode and we'll be posting a couple other interviews on our feed over the next month or two. We think if you love Chitchat Money, if you like listening to our podcast, you're going to like this one as well.

So without further ado, here is the inaugural episode of the J-Row Show. Welcome to The J. Rowe Show. On this podcast, your host, John Rotonti, interviews experts in and outside the world of investing. The J. Rowe Show dives deep into what it takes to achieve mastery and sustain top-level performance. As a quick reminder, this podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. All opinions expressed by John or any of his podcast guests are solely their own and do not constitute formal advice or a recommendation. Now, please enjoy this episode. Hi, y'all. I'm John Rotonti, and this is The J-Row Show, a podcast that explores what it

takes to achieve mastery, sustained performance, and longevity. The show hopes to uncover the processes, structures, frameworks, and mindsets that masters put in place to maintain winning performance in their respective fields. Today, for my first show, I am joined by Bill Nygren. Bill is Partner, Portfolio Manager, and Chief Investment Officer for the U.S. at Harris Associates. He is the Portfolio Manager of the Oakmark Fund, the Oakmark Select Fund, and the Oakmark Global Select Fund. He was named Morningstar's Domestic Stock Manager of the Year in 2001. And Oakmark Funds was named Lipper's Best Equity Large Fund Group in both 2015 and 2016. And Harris Associates, the investment advisor to the Oakmark Funds, won the same award in 2014.

Most importantly, Bill is my favorite stock investor. He's the investor I admire most and the one I've learned the most from through my friendship with him and through his great writings over the years, and he is the only investor I wanted to be the inaugural guest on my new show. Bill Nygren, welcome to The J. Rowe Show. John, thank you for such an incredibly kind introduction. I think one of the fringe benefits of working in this industry that we all take for granted too often is the wonderful connections that we can make with other people in the industry.

And that's the people we work with, the people that are clients, as well as people like yourself that help to communicate our point of view and help us broadcast that to a broader audience. So I am humbled and thrilled, John, that you wanted me to be your first guest. Bill, thank you for those kind words. Let's jump right in. You've been investing professionally for 40 years. Please briefly walk us through your career at Harris Associates. What roles and responsibilities have you had?

So as usual, John, you're better prepped for your interview than almost anyone I talk to. I have indeed been at Harris for 40 years. Prior to that, I got an accounting degree from the University of Minnesota and a master's degree in finance at the University of Wisconsin and spent two years as a generalist equity analyst at Northwestern Mutual Life in Milwaukee. So I joined Harris 40 years ago. Kind of a funny story on how that started. One of our current partners, Clyde McGregor, who runs the Equity and Income Fund, came from the same program at the University of Wisconsin that I did. And after I had called the professor of that program telling him that I'd be interested in finding a firm that had a better match with my personal investment style,

uh the professor called me back a couple days later and said uh we can't talk i just spoke to clyde mcgregor an alumni you probably don't know he works at a firm in chicago you've probably never heard of harris associates they're going they're looking for a person that fits your skills and uh you should take the job we have to hang up now because i told clyde to call you As soon as he hung up, Clyde called. And that was 40 years ago. I joined Harris in 1983 as a generalist analyst. In 1989, became the director of research. Started the Oakmark Select Fund in 96. Added the responsibility of the Oakmark portfolio in 2000. And then about a decade later, the Oakmark Global Select Fund with David Harrow. That is a good story. And I'll just quickly mention for our listeners that Clyde McGregor is still at Harris. He's running, like you said, the Equity Income Fund and David Harrow is there as well. um bill you are a a master investor uh did you arrive at harris a good talented investor what skill sets did you arrive with in your first year and what skill sets did you develop along the

way so i thank you for for that of course master investor comment that's a term that scares me a little bit, though. I don't really think anyone ever achieves that level. This is an industry that you have to consistently get better at because everybody's catching up all the time. So I think something that we have done well at Harris is evolve and get better every year so that we can maintain our advantage. So I went through my brief resume on the prior question. I got to Harris two years out of business school. So I would say, no, I was not a talented investor when I got here. But what I did know was that my personality was best suited for value investing and making investment decisions that weren't necessarily popular, having a basis for that

decision, and then having the patience to stay with it, even when most of the world thought that what I was suggesting doing was not necessarily the best idea. I think like most young analysts, I came to Harris with very good quantitative skills. And I think that's still the way things work today. Our new analysts come here with quantitative skills that can run circles around people my age. They know how to do things on the computer that I've never learned how to do. It allows them to analyze information faster than I'm capable of doing. But I had those same advantages 40 years ago when most of the people that I was working with weren't proficient with computers at all. I think I was a decent writer.

Something Warren Buffett says is you have to be a clear thinker to be a good writer. And I think for the age I got to Harris at, it was a positive in my skill set. But again, that's something that over time and with practice, you get so much better at. I'd like to think I'm a much better writer today than I was when I got to Harris. And that might be a skill that you don't normally think about somebody discussing when they say what makes them a good investor. But I don't think you can be a good investor unless you can communicate your investment beliefs, both with the people you work with and the people you're asking to invest with you.

So having good written and verbal communication skills is definitely necessary. And I would say I got to hear us a better writer than I was verbal communicator. And that that's a skill that has more been developed over time. And even though I got here with strong quantitative skills, again, I think the typical roadmap for a young investor is you start with good quantitative skills and then you develop the qualitative. And I was definitely not an exception to that. I remember one story.

I was an analyst my first year at Harris and my boss had asked me to go to a due diligence lunch for a company that was coming public. And I came back from lunch and he asked what I thought of the company. And I said, it's a really strong management. And he took a long drag on his cigar and said, I don't want to hear you ever talk about management again until you've seen a hundred of them. And only then will you have an ability to tell who's good and who's not good. And as disappointed as I was to hear that at the time, it's a lesson that stuck with me and one that I try to also impart to our younger analysts is judging management is a really important part of our job. You only get good at that by practice. Any major company CEO, part of the reason they

get to that position is they have really good communication skills. Until you've seen 100 of them, it's really hard to tell which ones are in the top decile. Yeah. Bill, you talk about maybe the traditional path of an analyst starting off at Harris with strong quantitative skills and then building off more qualitative skills over time. So, I would like to dive deep into the equity analyst role at Harris. Does Harris hire new analysts and put them through a training program? Or do you hire new analysts that are already trained up and ready to go? And if you do have a training program, what does the curriculum look like and how long does it last?

We definitely do not have a specific curriculum. I would say it's mostly on-the-job training. And when we hire analysts, it can be from either one of two paths. probably half of our analyst team joined Harris for an internship, perhaps going back as far as after their sophomore year of college. And in that role, they would be doing a lot of work with spreadsheets, working with a number of our analysts, learning how we analyze companies. And if they thrive in that role, then we'll ask them to come back after their junior year. And if that goes well, they'll get hired here as a research assistant.

And in that role, they're largely doing the behind-the-scenes work for our senior analyst team. The other half of our analysts will come here after having started their career at another firm. It's important to us that they have established that value investing is the way they think and that they believe they want to spend their career working at a value investing firm. For those analysts, they're generally given an office, a computer, resources, other resources that they need. and they're told, go find us good ideas, and then they'll present those ideas for us to consider investing in. I think you largely touched on this when you mentioned spreadsheet skills,

some quantitative skills, but what are the table stakes skills that a new analyst at Harris must have on day one? Well, I would say most important, John, we think we've got a really good corporate culture and a fantastic team rapport in our investment team. And because of that, the one risk we don't ever want to take when we bring a new analyst in is that they would be a personality type that would upset that rapport. So someone that is a team player is absolute table stakes. I say if somebody's got an athletic background, I'm always going to lean toward somebody who played baseball, football, soccer, team sport, as opposed to somebody that's been more involved in an individual sport. Not that they can't be successful coming from an individual

background, but when you're trying to sort through a bunch of candidates that all look like they could be qualified, something in the background that suggests they understand what it's like to be part of a team is definitely a big plus. Certainly high IQ is important. We want people that have tremendous intellectual curiosity. And even at an early stage, I think to have some inkling that value investing is the style that resonates with them is important. I I mean, that would be absolutely required if we're hiring an experienced analyst, but even somebody that's halfway through their journey in college, to have something in their background that suggests that value resonates with them as a consumer and therefore might

also resonate as an investor would be important. We want to have above-average communication skills. We don't expect them to be orators on day one or to be able to write pieces for our website, but we need them to be able to communicate well. Uh, and again, I think that's one of the most, uh, underappreciated required skills for good investing is you have to be able to, to communicate your ideas, why you believe in them, why they're likely to be successful. And, you know, we don't, we don't want to be teaching somebody how to write. Yeah. You've mentioned communication skills twice now, so I'm definitely making a note of that. How does an experienced analyst at Harris spend their day? So, not a research assistant or a

research associate, but an experienced analyst. What are they doing with their time? How many stocks does the typical analyst cover? And how do they split that time between maintenance coverage and looking for new ideas. Yeah, I think it's kind of funny. Whenever an investment firm is portrayed in the movies, it's always people screaming at each other and they've got multiple phone lines open at the same time. And people who haven't seen anything different than that are surprised when they walk into our office and it's almost like coming into a library. It's quiet. People are generally working on their own. I would say our average analyst covers about a dozen stocks. They're producing new ideas about one per quarter,

so something on the order of four per year, and probably about an even split between time spent maintaining their existing holdings and looking for new investment ideas. Our analysts also work on what we call devil's advocate reviews. Those are done both at the time we present new ideas and then also after something's become a large holding, where their job becomes to present the counter arguments against the person who's making the recommendation that we either purchase or maintain a holding, an existing holding. And then lastly, our experienced analysts do some client communication. We try to protect them from that becoming a major use of their time. But learning how to communicate investment ideas

not only is an important skill if they want to make the jump to portfolio manager, But we think learning how to talk about investment ideas helps make them better analysts. For sure. Bill, do the analysts nominate themselves to be a devil's advocate, or is that assigned to them typically? Kind of yes and yes. Our favorites are when someone is so passionately negative about an idea that someone else thinks we should be purchasing that, you know, you just can't stop them from volunteering for the devil

role. Sometimes though, nobody is really excited about the negative case. And when that happens, then that position is assigned. I think you alluded to this in your prior answer, but how long does an analyst typically research a business at Harris before they are comfortable pitching the stock. So assuming the valuation is attractive enough and they don't have to wait for the stock price to fall before pitching it to the team, does that research typically take a couple weeks, month, or even longer than a month? It's probably going to be an unsatisfying answer to you, but I would say they work on an idea until they're confident they're right. And so the more undervalued the idea is and the more obvious that undervaluation is the faster the turnaround time

you know just take a wild extreme you know if a company has got no assets at all other than a hundred dollars a share in cash and the stock sells at 50 it doesn't take very long to get comfortable that that's a cheap stock uh you don't need to run lots of models on it uh so that that that would be a quick turnaround time. You get a large company that's got important divisions in four or five different industries, management team you're not as familiar with, or maybe doesn't have prior background at other public companies. Instead of selling at 50 cents on the dollar, it's more like 65. So it's kind of on the bubble of something we would purchase or not. And that kind of name might sit on somebody's project list for a year before something clicks

and they say, this is the missing piece of information that I needed to get comfortable recommending it. Or maybe the stock price falls another 10% and that makes it easier to argue that it's selling at a price that's way too cheap relative to what it's worth. and you said that on average that usually works out to about four new ideas a year per analyst is that right yeah that's right and again i don't want it to be misleading it's not like jan one somebody starts working on a new idea they work on it solid for three months and then march 31st they're ready to recommend it i think most analysts are going down parallel paths on

multiple ideas at any point in time. Most of them don't come to fruition. So it's not so much that a good idea takes three months as maybe finding a good idea means sifting through eight or 10 that aren't good before you find the one that you do want to recommend. And the process involves going to industry conferences, multiple meetings with management teams, meeting with sell-side research analysts, reading what other people have written about the companies, maybe reading industry publications. Our analysts are all generalists, so trying to get our knowledge level up to what we need to get confident in a specific industry that we know enough to know a company is competitively advantaged. So all of that is kind of constantly going on.

And then every once in a while, an idea falls out of that. And I would say rather than three months, once somebody thinks they're onto a good idea, that process is probably like four to six weeks. Yeah. Yeah. And thank you for sharing some of the typical steps of that due diligence process, whether it's traveling to industry conferences, reading industry-specific journals, speaking to sell-side analysts, et cetera. So, thank you for sharing some of that. Bill, let's talk about the Tuesday morning meetings. So, how often does the Tuesday meeting involve a new stock pitch? And if there is not a new stock pitch on a particular Tuesday agenda, then what takes place in that Tuesday meeting? What topics are discussed on a non-stock

pitch day? So I would guess a lot of listeners probably don't know the format of our meeting. So once a week, and yes, it is Tuesday morning, our entire investment team meets and we all sit around a large table. And at that meeting, we handle our new stock pitches. I would say about two-thirds of the meetings have new ideas presented. We probably average about 40 ideas a year that would get vetted in front of that group. There may be a few more than 12 of the meetings that there would be zero, because some of the meetings we might have two on the same agenda. And in addition to discussing our new ideas at that meeting, we also do our maintenance work, have ballpark 100 names on our approved list. And we want to talk about every one of them at

least once a year. So a typical meeting would have on average about two names that we have already discussed, we've already cleared for the portfolio managers to purchase. And the analyst is bringing us up to date on those names. We ask the analyst to try to time those to when they are action oriented. So either a stock has fallen enough that they think we should be purchasing it, risen enough in price that we might want to be trimming, or there's enough new information that we're really looking at, you know, thesis altering changes in the business and kind of re-litigating what we think the business is worth. So that is also going on pretty much every Tuesday meeting. And then last, I mentioned we do devil's advocate reviews.

So whenever a new idea is presented, somebody is arguing the other side of that idea. So why we shouldn't purchase it. Again, the goal is not to start fights amongst our analyst team. It's to find as many of our mistakes as we can before we lose real money on them. And in addition to doing that on every new idea, our 25 largest holdings, we also try to do about once a year, where an analyst will present what they think is the best negative case they've been able to find on the company. And those discussions, they tend to go almost as long as a new idea discussion does. And very rarely is the outcome that we say, you know what,

we made a mistake, we should run out of this meeting and sell all our stock. But what happens much more often is it helps us refine where our thesis differs from what consensus is expecting and helps us set the signposts over the next year that will help us determine if the market's view of the company is right or if our view is right. So every meeting can be a mixture of those three things. And when there isn't a new idea pitch, it tends to be more biased toward the reviews and devil's advocates. Well, that's a lot because you've got two thirds of those meetings

maybe have a new idea pitch. You've got a hundred names on your approved list that need maintenance coverage. You've got devil's advocate ideas. It's a devil's advocate analyst arguing, especially for your 25 largest holdings. So my question is, who sets that agenda? Is that done by the director of research, Alex Fitch?

Like who is making the schedule for each Tuesday meeting? So it's largely done bottom up by the analysts. Alex definitely reviews it and tries to, let's say, even it out a little bit. So like if four analysts come to Alex and say they've got reviews that they'd have ready to present next Tuesday, Alex might look at it and say, these two look really timely. Let's get those on this agenda and the others we can push back a week. Because, I mean, we've found after about an hour and a half of the intensity that these meetings ask you to bring to the table, the people get kind of worn out. So, you know, a typical new idea might be a half hour, maybe a little bit longer. Same for a devil's advocate. A review about 15 minutes.

And Alex will try to massage what the analysts give him to give us an agenda that fully occupies the hour and a half, but isn't challenging us to try to stay interested long after everybody's spent their energy. Yeah, no, that makes sense. And I like how you used the word energy and intensity of the meeting. Um, for a Tuesday meeting with a new stock pitch, what type of deliverable does the analyst provide? How long is that deliverable in page length? And does it include a model? So about noon on Monday, so close to 24 hours before our meeting, all of us get a hard copy of everything that's going to be presented at the meeting. A new idea might be three or four pages of written material largely oriented toward proving that this idea meets our three criteria, which buying stocks at less than two-thirds of what they're worth, buying stocks where we expect business value to grow as fast as the market,

and buying stocks where management is not only high quality, but behaves in the owner's interest. So we're not asking them to put a 25-page basic report together that is good to stick in the file. This is action-oriented to the point why they think this idea makes sense for us now. We also have a standard sheet that tries to put like every new idea kind of on the same page as the ideas that are already on our approved list. So it makes the portfolio manager task of rank ordering ideas a little bit easier. The analyst will include charts and graphs that help to make their points. um and yes they absolutely will include a model and our modeling is all three financial statements out two years into the future and then an expected per share growth rate for the five years following

that um so you said that the text of the deliverable speaks mainly to your three criteria which was a stock selling at two-thirds of what you think it's worth, a business that you think can grow per share value at least as fast as the market, and a quality management team that acts in a very shareholder-friendly way. Does the text of the deliverable also speak to the model and the assumptions in the model? Does it speak to the tables, in other words? Yeah, absolutely. Um, but the, the main focus would be trying, trying to show backup for the valuation case

that the, that the analyst is making. Yeah. So there's a lot on comparable companies that, uh, trade in the stock market, comparable companies that have been acquired, who the buyers were, what the prices were on a bunch of various metrics. there'll be an attempt by the analyst to demonstrate why the company is comparatively advantaged relative to its peer group because I mean generally we're expecting our companies to earn you know pretty good returns on the capital that they employ and you need to have an

understanding of why you and I couldn't start up a business that would immediately be competitive with them. It'll also talk about management's capital allocation philosophy. One of the things being a value manager, it's unusual that something growing 20% a year is selling as cheaply as we'd like it to. So more of our ideas start with a market or below market growth rate in sales, but companies that are at a stage in their lives where they're generating a lot of excess capital and how that capital gets redeployed can really make or break the investment thesis. So an analyst will spend time on what management incentives are, how they would act with this capital if they're attempting to maximize their own economics, where they may

have competitively advantaged opportunities to invest for organic growth, how they think about share repurchase, what their philosophy is on dividends. And yes, the three pages will also address the model. But I would say it's rare that our ideas come down to an analyst saying this company can earn a 10% margin and the street thinks it's going to be nine and a half. It's much more that this is a higher quality of business than we think the market is giving it credit for. Yeah. So earlier in our discussion, you mentioned table stakes skills are communications, both written and verbal. We've just spoken about the written deliverable that is presented to the investing team. I'm curious about the verbal stock pitch. So the analyst

is pitching a new idea in this Tuesday morning meeting, what does that pitch look like from the time the analyst starts until the time the Q&A begins? What is the analyst trying to communicate to you and the rest of the investing team in those first three to five minutes? And then how does the pitch typically flow from there? So, you know, I mentioned that Monday at lunchtime, we all get the material. So it's safe for the analyst to assume not only have we read everything that they wrote in their pitch, but that we've tried to check on some of the most important arguments that the analyst has, maybe with contacts that we have outside of the investment industry, maybe by checking what the analyst is projecting relative to what some sell side

reports have. So what we don't want is for the analyst to come in and do a three to five minute summary of the idea like I might be able to give to you if you'd never read about the report that the analyst had. We want the analyst to come in and really hit the key points of what makes me think this is cheap? Why do I believe this is a management we want to invest with? Why am I comfortable the business is going to grow? The pitch might go something like, you saw last week that XYZ was acquired at 12 times EBIT. This is a very similar company that's selling in the market at seven times. It's run by someone who has a history at three prior companies, two of which were sold to synergistic buyers. And this is an industry that is growing at a GDP rate. And I

believe they can take share because they have a low cost structure. So those are the kinds of things that are typically in the analyst's initial presentation, you know, just very much like bullet point highlights of why this is a stock we should be interested in buying. And then it's opened up to questions. The initial questions are usually left for the most senior investment people, I would say the partners of our firm on the investment team. And, you know, well, Well, you might think that they might zero in on questions about the model right away. Most of the questions in at least the initial discussion, it's not, is the growth rate going to be 2% or 2.5% or the last 20 basis points of the margin?

It's, what evidence do we have this is a management team we want to invest with? How can you demonstrate this stock is selling it at a discount to its industry peers, to acquisitions in the industry, to other companies in different industries? One of the things about being generalist is you're always making cross-industry comparisons. You're not just trying to find which specialty chemical company is the best value, but why should you buy this specialty chemical company instead of another bank? Yeah. So a lot of the questions are are wide ranging and qualitative, especially in the first half of the discussion. As we move on, getting confident that it's it's the type of business and management team that we would be comfortable investing with. Then the questions might go more toward the model and like, you know, how two years out, how much higher sales than they currently are, than they are, you know, what's the projected rate of increase, how much margin increases is anticipated. And I would say the larger the gap between what the analyst is expecting and what consensus is expecting, the more those types of quantitative questions would dominate the discussion.

But lots of times, our analyst doesn't have wildly different forecasts than consensus, but the real thesis is the business quality is different than the market is paying for. And those discussions then tend to be very, very qualitative discussions. Bill, if that's the case, are at least some of your thesis, are they based on PE multiple expansion? Absolutely. Okay. Yeah, I would say most of our investment ideas are that the company isn't trading at the right multiple today. There are definitely some where we think the business is going to grow more rapidly than the market thinks it is, and our assumption is that they will maintain the P.E. multiple. But more often than not, the analyst is presenting evidence to back a thesis that the multiple needs to be higher to fully reflect value.

what's the mood in the room i think earlier you said you know it's it can be an intense meeting um what's the mood in the room um i i find it a a pretty energizing exciting mood in the room um you know you think about it you know you're sitting around a table with 20 professionals who are passionate about investing who love nothing more than finding a thesis for an investment that we think is dramatically undervalued and debating the merits of that thesis. So I guess to a young analyst, maybe the first few of these meetings they see, it can look like an intimidating mood, But that's not the intent at all. We're never trying to embarrass somebody in that discussion. As I said, our goal is to thoroughly vet our ideas, question everything, and try to find as many of our mistakes in the meeting before a client has lost dollar one on that idea.

And it's a very collegial meeting. This was a firm that we got driven crazy really quickly in the COVID lockdowns because we're so used to spending time in each other's offices discussing our favorite investment ideas and debating merits of ideas with each other. uh the the tuesday meeting is just you know it's a more formal version of that of 20 20 people that that hope you're right on the idea because if you are that's going to be a really exciting opportunity for us but who are deeply skeptical of the idea that the market has really seriously mispriced any individual investment so you know there's there's part of it that's kind of academic There's part of it that's like a high school debate. And then there's just the excitement level of identifying opportunities that we weren't aware of that might be really attractively priced. Yeah, I will say I've had the great fortune and luxury to speak to four analysts on your team over the years.

And they all, they just love working at Harris. They love the team. They love what y'all do. So I can definitely speak to that. What happens after a stock pitch? Does the stock selection group vote right then and there in the meeting? Do you send the analysts back to do additional work? What are the next steps after the stock pitch?

so at the end of the discussion after everybody's gotten all their questions answered the devil at the meeting has had a chance to put everything out on the table that they could find that might be more negative than the analyst had presented it then we have three people all partners on our investment team that will vote. And you're voting yes or no. Does adding this stock to our approved list of stocks make that approved list better? If two of the voters say that it should go on the list, then it's on the list. We don't require unanimity because we think sometimes the best ideas are the ones that don't quite convince everybody. And that waiting for that unicorn that everybody who hears the idea thinks it's the absolute best idea they've ever heard would make us pass on too many good opportunities.

um i would say about two-thirds of the stocks that are presented are approved at the end of the first presentation if i'm voting no that i don't think the stock belongs on our approved list then i'm expected to be able to give the reasons for that and what steps the analyst could take that could potentially make me change my mind so i might i might say that i don't think there is enough evidence presented that the stock is truly cheap, and I'd like to see more work done on comparables. I might say that I don't think we know enough about the management team, and I'm going to reserve the right to say no on this until after I've had a chance or the team has had a chance for a one-on-one meeting. I might say no, that I just disagree with the analyst on business

quality and I think they're way too optimistic on what might lie ahead for that business and that it's going to be really difficult to convince me otherwise on that specific stock. But the goal of the vote is either it's on the list or we've given the analyst a path to repair whatever wasn't presented strongly enough to convince us, or we've told them it's a non-starter and we don't really need any more time wasted on it. Yeah. As you know, I study a lot of different investing firms, and I feel like Harris places more emphasis on really trying to get to the heart of what is normalized mid-cycle earnings for a business. And I do plan to invite Alex Fitch and Michael Nicholas onto the show at some point

to go into details about how Harris goes about calculating mid-cycle earnings. And hopefully, maybe even they can show me an example or two. But can you briefly talk about how you think about estimating mid-cycle earnings, are you starting with estimating revenue growth out and then using an average EBIT margin? Is that sort of your 30,000-foot view of how you go about it? Well, first, I'm thrilled that you're planning on interviewing Mike and Alex. I know they will do an incredible job explaining all details of our research department, including how we think about normalized. I think the goal here, John, is you just want to make real sure that you are capitalizing earnings that are sustainable. You don't want to take a cyclical company that

has just had three years of an upswing and then extrapolate that as the next decade for that business yeah so the goal is to understand how the income statement works how volatile sales are what incremental and decremental margins look like so you can make a guess of kind of what the company is likely to do in a normal year we joke you know when people ask what our macro overlay is you know you've got some companies that spend a lot of time trying to guess if you know are we we going to be in a soft landing? Are we going to be in a recession six months from now? What will the shape of the recovery look like? We joke our macro overlay is always that seven years from now, the economy will be normal. And what we want is for the analyst to present an earnings level

that's achievable in a normal year. And for some companies, it might be as easy as saying, And look at what they do in a peak year, look at what they do in a trough year, and make sure you're somewhere around the middle for that number that you're trying to capitalize. Then you've got industries like maybe the insurance industry or banking, where wildly different earnings levels based on whether we're in a really good economy or a bad economy, but that the bad economy only comes around like once every seven years. So you don't want to average good and bad if six of the seven years are good. So like in the banking industry, we try to make sure we're modeling in that over a seven-year period, there's probably going to be

one year that's a pretty serious recession and the bank is going to perform quite poorly. And you want to make sure that's averaged in with the earnings that they are, that they achieve in the other six years. If you're looking at an industry like the auto industry, serious recessions often drive them into negative territory for earnings. The cash, cash on the balance sheet is wildly different in good times and bad times. You know, you want to make sure that if you're putting a PE multiple or an EBIT multiple on some level of earnings, that it's about an average level. And that's all we're really trying to do when we talk about normalizing earnings. Well, we've spent close to 45 minutes talking about what being a good analyst at Harris looks

like. I'm curious, what makes a great portfolio manager like yourself? What additional skill sets are needed above and beyond being a great business analyst? Well, I think first, I think a strong portfolio manager needs all the skills that a strong analyst needs. I guess when I say that, I'm talking about the way our portfolio managers function. There are firms where an analyst is doing almost all the investment thinking and a portfolio manager is primarily doing client communication. And if that's the setup, then I think you're talking a whole different set of skills. And the idea there that a good analyst makes a good portfolio manager probably isn't even true. But in our setup, where analyst is the training ground for portfolio management, I think the

skills that you have to add before you can become a great portfolio manager, one, you have to step up your communication game, not only being able to communicate your ideas to other investment professionals, but being able to kind of have a spectrum of ways of describing an idea so that it can make sense to someone who's educated but not in finance, to someone who's an investment advisor, a wealthy client, successful business person that maybe doesn't spend much time thinking about investing, advisors who spend all day on investing just like we do. So you need to be able to simplify ideas and be able to share your ideas without really talking down to your audience, even as you try to simplify to a level that matches their background.

I think in our setup, the other big difference is our analysts are primarily focused on the dozen or so stocks that they personally cover. They know how to rank order those names so that they can tell the portfolio managers which ones they'd be most excited about seeing purchased or which ones they'd rather see sold. but in the portfolio management role, you have to have that ability to rank order an approved list with a hundred names on it, not just the dozen you cover. And you have to be able to do that without giving undue preference to the names that you did the analytic work on.

When we're working with portfolio managers who that's a new position for them, like we've got the co-managers on the funds, but then most of the funds will also have one of the younger analysts who sit in on meetings with them kind of to learn by watching. And my rule for those meetings is you don't get to talk about a stock you cover. My door is always open. You want to talk about something you cover. You come talk to me anytime other than when we're meeting to talk about the portfolio. And when you're commenting on the portfolio or the approved list, I only want to hear about names that you don't have personal responsibility for. Yeah. And, you know, I think the way we do this highlights one of the advantages of our structure,

which is we have generalist analysts. That's a little different than most of our competitors, most specialized by industry. Our analysts, they come in, they know what we want. We want ideas that are cheap, that are growing, that are well-managed and, you know, go, go have at it, find that in any industry that, that you think you can find something that we haven't already uncovered. That type of background of making cross-industry analysis is really good training for learning how to be a portfolio manager. Cause like my, my job isn't, isn't just should capital one or wells fargo be our biggest bank position it's is capital one more or less attractive than alphabet yeah and when you take somebody who's been an industry specialist their

whole career i mean that that question gets a deer in headlights response typically our analysts from the day they were an analyst at harris associates have had to think about that question of not just is this the best steel stock or the best bank stock, but how does this compare to our entire approved list? And is our fourth best banking idea better than our best industrial idea? And our analysts are really good at that. They have to be even better once they're in the portfolio management seat. Speaking with portfolio management, why is tax awareness important to you and how do you apply tax awareness to the portfolios? Yeah, I think when I think about my favorite managers in corporate America,

they are very tax sensitive and they realize how much of the money that they're making in the business is getting lost to taxes, and they take steps to mitigate that. Now, at Oakmark, we're not tax-managed funds. Our goals are to maximize long-term returns, but we focus on after-tax because a large percentage of our client base is taxable. And there are lots of things that we can do to minimize the tax hit to our taxable investors without hurting the tax-free investors. I think a typical mutual fund manager, they come back from the beach after Labor Day and somebody in their accounting department comes to them and says, whoa, you've got a real

problem. You took a lot of gains this year, and investors don't tend to like it when you make big distributions. So maybe there's something you can do in the next month to mitigate that a little bit. Well, there are a lot of times that your best opportunities for tax gain mitigation are already in the rearview mirror by September. You know, we went through a year, maybe it was just last year, where I think the market bottomed in March and then it rallied going into the end of the year. By the fourth quarter, your best tax harvesting opportunities were gone. We, every week, are thinking about, do we have tax lots that we have at a loss that we should be harvesting the loss? We'll substitute that position with either another security that kind of mimics the same

economic exposure or different security from the same company that isn't substantially identical so that we can keep kind of the same portfolio exposure that we'd wanted during the 30-day period that you have to have lapsed before you can repurchase stock that you sell to tax harvest. And I really think the only way to be tax aware as a manager is to make it a year-round process like that. We're also thinking about different tax rates that our clients have to pay on short-term versus long-term. And even though Oakmark tends to hold things typically for four or five years, if not longer, sometimes we get lucky. And something we bought six months ago or nine months ago went up quickly. If we take that gain immediately, the tax hit is almost

double what it would be if we wait for a year to pass. So we might, again, take steps in other parts of the portfolio to protect against the risk of that stock, retracing some of its gains, but we'll typically wait for that to go to 12 months and a day before we would sell it. I think because of our year-round awareness, if you think of the pre-tax returns we generate as a donut, we've been able to cut down the size of the hole. I think unlike a lot of tax-managed funds that are focused on just how far down can we drive the tax law, the loss of those gains to taxes, our focus at Oakmark is how big can we make the donut that's left after the taxes are gone? And I love how you say it's a year-round

awareness at Oakmark, but that turns into a weekly exercise for you and your team. You're thinking about it every week. Let me ask you as a follow-up, just in general, do you think mutual funds could become as tax-efficient as separately managed accounts? I think if you look at the industry today, most people would say mutual funds are not very tax-efficient vehicles. But I would argue the reason for that is because most of the managers don't make tax awareness a year-round project. Most of the people that recommend funds are focused on pre-tax returns. And because of that, I think most managers themselves are focused on pre-tax returns. One of the things that's different about us at Oakmark is the managers tend to have

the overwhelming majority of their personal equity assets invested in the funds that they manage. And we're taxable investors. So this isn't some difficult to understand concept that might affect some investors whose names we don't even know. When we make tax distributions, we're paying taxes in our own accounts. So it hits home. And I think the fact that we own so much of the products that we manage also makes us much more conscious of the steps we're taking to minimize taxes. But yes, I think a tax-aware manager can help close the gap between open-end funds and ETFs, which are generally recognized as quite tax-efficient. And one of the simple things that I think most people don't think about, if you have a separate account, your management fee

is only deductible if it meets the threshold for you itemizing deductions. And I think it's something like 3% of adjusted gross. And if your fee isn't higher than that, it's not deductible. Inside of a mutual fund, the management fee is a reduction of your dividend income or interest income. And so effectively, you pay the management fee in pre-tax dollars. So I think that's kind of a hidden advantage that mutual funds have over separately managed accounts. And yes, I think we can run a mutual fund every bit as tax efficiently as a separate account can be run. Now, what we can't do is take some stock that's way up and let the client select that stock to make a charitable donation with, you know, those, those donations are the most highly appreciated securities. If a client is looking to do that, and that's an important part of their long term financial goals, then that person probably is better off in a separate account. Yeah. Bill, I think you're 65 years old.

You did your work again. Thank you, Bill. How are you thinking about the rest of your career? I'm going to go back to three years ago, a little more than three years ago, when we all went through that horrible COVID lockdown period. And, you know, that got termed as, you know, creating the great resignation. And I think, you know, having that time that we all spent at home without interaction with many people other than our own family members created a great chance to reflect on what the role of work is in our lives. And a lot of people came out of that thinking that they were spending too much time working. Maybe it was time to retire. Maybe it was time to pursue

a different career. I was back in the office after 10 weeks as soon as our mayor said that the financial industry was an essential service and we wouldn't be arrested for trying to come into the office. I think you told me you were one of the first people back in your building. That's absolutely true. I got to know the security guards here pretty well. Right. But what I learned about myself during those three months of reflecting was that I thrive on day-to-day interaction with the smart people I'm lucky enough to get to work with on a day-to-day basis. And I really, really missed that when I didn't have it. And to me, that's a really strong indication that the right thing for me to do is to keep working.

A lot of my friends who have decided to retire talk about some moment where they realized they had become completely disconnected with the next generation. The kids that are getting hired were younger than their own children. They had trouble relating to them as peers. And to them, that was a sign that it was time to retire. To me, that's one of the best parts of my job is I get to work with the next generation, that we have mutual respect for each other, that they can help teach me things that will make me a better investor, that they're interested in learning about my experiences because they think I can help them become better. So to me, what I learned was I want to keep doing this. I mean, obviously, at some point, I am 65. The time will come that I

can't do this as well as the younger peers. It's already catching up with me on the softball team. hopefully it's a few years away yet on the professional side but as I think really long term one of the people I admire most in this industry is Howard Marks from Oak Tree Capital and I really like the way Howard has structured kind of the next act in his career where he's focused on being an external spokesperson and more of an internal mentor and leaving day-to-day decision-making to the rest of the team. I'm not there yet, but to me, that seems like somewhere down the road, that would be a very desirable way to move toward exiting the business. that was just it was beautiful to hear that and and you know i i it feels good to know that you

love your job so much and that you feel lucky to work with the people that you do every day so that was really really nice to hear and i do think that peter lynch for a while after he retired he stayed on as a mentor at fidelity as well so that that is a a nice second act for some investors like Howard Marks and Peter Lynch and maybe yourself one day. Why do you think many firms fail at succession planning? And how do you plan to transition your responsibilities? And that's a great question, because I think it's a nut that most firms haven't cracked. My personal view is if you look at really successful investment firms, they tend to have a passionate leader who started the firm because they were uniquely skilled at

both investing and communicating about investing. And therefore, they were able to generate a good book a business, people wanted to give them assets to manage, and they managed well. And I think a lot of firms never really moved on from that model, where you have this strong, charismatic leader that wants a monopoly on decision-making and tends to work with a lower level of employees that will really never rise to a level of potential successors. I heard a podcast recently from a very famous hedge fund investor who was talking about succession planning. And I was listening to it, nodding my head to everything he was saying until the last comment was, but of course I'll make all the decisions until, until I step out

the door. And I'm like, wait, you just contradicted everything else you just said. Cause nobody talented enough to replace that person wants to work in an environment where they have no part in, in decision-making. So I think the trick is to amass as much talent as you can in an investment organization and to gradually give more and more responsibility as it is earned, even if those are responsibilities that the founding generation could have handled on their own. I think most people think of succession as it's only fair to the client that they know there's a plan, that if I got hit by the proverbial bus on the way home from work tonight, That they know that there's somebody who's taking care of their investments the next day, that there's somebody that's been trained in the same philosophy who will be able to step right in.

But I think it's just as important to the people that we're asking to dedicate their careers to our firm, that they know there's a path to succession. so they know that there are meaningful seats at the table, even while someone like myself is still here. We have co-managers on all of our mutual funds now. When we did that 30 years ago, it was more like we had a primary manager and an assistant manager where I could go on vacation and know that somebody would take care of inflows and outflows. What we have today is very different than that. It's joint decision making. I'm part of a three-person team on funds that I manage. And if the two other people disagree with me, they win the day and they can overrule me. And that's something that shouldn't scare anybody who's investing with us. These are people that we've worked together for over a decade. It's part of slowly transitioning decision making so that when that day does come, when the most senior people aren't in the office anymore, that you aren't asking people to do anything different than what they've been doing for the last few years. So I am passionate about succession planning. I would not want to stay here after 65 if the younger generation thought I was blocking their career paths.

Sure. I view it more as I'm helping them get into the position where they can make the decisions. And someday down the road, I'm going to be an observer and and mentor at sharing my history of where I'd made bad decisions rather than somebody who's voting side by side with them. bill you know that i think you're one of the most respected and sought out stock pickers uh in the u.s and in a lot of ways you're the face of the u.s funds at harris today um thank you yeah you're welcome i believe i really believe that and and i know that you have a lot of client facing and media facing responsibilities but when you're not meeting with clients when you're not doing media interviews or podcasts or traveling for work, how do you spend your time in your office, your quiet time? Specifically, what administrative duties are you working on or what are you reading? So I'm going to broaden the question a little

because there's a lot of my day that's not spent in the office. I tend to be in the office pretty normal hours. I'm usually in, uh, we're, we're in Chicago. So central time zone, usually in at seven 30 out at four 30. And it's, it's not quite as regular as someone who's punching a clock, but it's not that different. But what is different is I'm up at five 30 before I'm in the office. Uh, I've read news on our companies, the wall street journal, New York times, Chicago tribune, my local newspaper. I've been listening to CNBC in the background, so I know what the important stories of the day are going to be. And after I get home, I'm typically getting home with a briefcase that includes reading. I think reading is one of the things that

is probably easier to do by yourself than in an office that's so oriented toward collaboration. so Fridays and evenings I tend to save long-form reading and writing to do on those days and I will oftentimes do a Friday work from home if I'm trying to write a quarterly letter or some other piece for our website something else for a client or if there's you know a longer piece that I want to read, something written by another investor, something about an industry that we're relatively new to, that I want a few hours uninterrupted to be able to look at. While I'm in the office, I tend to do shorter form reading, maybe sell side analyst reports on companies that we own or on things we're thinking of purchasing. I do a lot of reading

of investment industry professionals that I respect. Mentioned Howard Marks earlier. I think he's one of the best writers in our industry today. I'm always anxious to read what he has written, but there are a lot of others. And I like to spend a lot of time reading what they're thinking about. I think one of the things you quickly learn

in this business is not invented here syndrome is a quick path to failure. You're not going to be the first one. Most of the ideas you end up investing in. And there are a lot of other people out there that do high quality work that have a similar thought process to what we do. And we might as well take advantage of the work

that they've done anytime that we can. I spend a lot of time meeting with management teams. Most of the managements that come through our office, I will sit in on the meeting. I can be the one sometimes to be the bad cop to ask the question that the analyst fears asking because they don't want to ruin their relationship. I can ask the questions that throw management teams off of their canned presentations because we really want to just hear them talk about how they think, not necessarily from their pitch book. So I sit in on a lot of those meetings, obviously spend a lot of time with our analyst team. We've got probably 15 analysts or so.

I have lunch with most all of them every day. And it would be a rare day that I don't have something to talk about with at least a handful of those analysts. either news on one of their companies that I'm asking how they're interpreting or that I might have seen something that tangentially related to a name that they cover. So it's all of those things. Importantly, I'm not doing much administratively. I'm not doing much in governance of our firm. I'm a big believer in thinking about the long term. And just like I think it's important that our investors think very long-term and our analysts think long-term. I think it's appropriate that the people who are making the important long-term decisions for our

company are the ones who are going to be there to bear the fruit of those decisions. So I was an advocate of people stepping off our governance board when they were no longer confident that they would be working 10 years from now. At 55, I wasn't sure that I would want to keep working at 65. Now I am. But at 55, I thought it was appropriate for me to step back from our governance. And for me, it was a great relief, actually, to turn those responsibilities over to the next generation. And it freed up more of my time to think about day-to-day investing, to work with our younger analysts, to think about how to better communicate, how we think at Oak Mark, and allowed me to take on the additional role of chief investment officer, which I was not

at the time I was serving on our internal board. So it sounds like a busy day and it is, but there's nothing I'd rather be doing. We're getting close to the end. Maybe if I could just sneak in one or two more really quickly, what is on your screen? Do you have the stocks in your portfolio on your screen all day when you're in your office to see those daily moves? I mean, yes, they are on my screen all day, but that's far from the same as saying that I'm looking at them all day. I do have an Excel spreadsheet that shows how the portfolio is performing relative to benchmarks that we use, relative to peer groups that we monitor. I get much more interested in what's happening when we get big divergences, and then we'll kind

of dig in more to the individual names. But I'm not somebody who stares at the screen all day long. I'm not a manager that thinks he can trade better than the traders can. I'm rarely giving them advice on how to execute our buy and sell orders. So for me, it's more that the screen is just there to look at occasionally so that I'm not out of touch with what's happening day to day. Of course, yeah. you mentioned you do a lot of your quiet reading at home, even on Fridays, on the weekends. And you've told me in the past that when you're watching college football

or watching baseball games, I know you're a huge fan of baseball. When you're watching them on TV at home, you may also be reading through a value line. What are you looking for specifically in value line? What jumps off the page and catches your Yep. I was doing that last night, watching the miserable Cubs game when we got beat by the Pirates. Well, I think there are a couple of things I'm trying to accomplish when I'm looking at value line. And I mean, maybe you can argue that that's kind of an archaic way to look at the investment universe, but I love the cadence of value line. And it's something that I've looked at my whole 40-year investing career. ValueLine divides the large cap universe into 13 sections

and you get a new issue of ValueLine comes in the mail each week. And it's hard copy. And at that cadence, you're looking at each company four times a year. I'm a big believer that nobody is smart enough to know a good investment idea unless you're looking at a broad enough group of ideas that you can tell when one's different. And one of the things in paging through ValueLine is just looking through what industry am I in? What's the company name? How large is the company? What kind of multiple is it selling at relative to sales and earnings? And just kind of trying to store that knowledge so that when you see one that's a markedly different multiples, it jumps off the page. I'm looking at big price changes. Again, I try to do

this on a quarterly cadence for each company. It's looking at how has the stock performed over the past three months, looking for a divergence between how the stock's performed and how the business has performed, looking for all kinds of changes. Is it a new management team? Is there a new CFO? Did a management announce, a CEO announced they're retiring? A big share issuance, a big share repurchase, anything to give a clue maybe that the insiders of the company might be seeing something different than is reflected in the stock price. So, I mean, there's nothing magical about it. And there are probably a dozen other services that I'm not even aware of that would provide that same repetitive look at a broad universe that allows you to recognize

the ones that are different. But to me, that's really what I'm shooting for. Bill, as you know, I speak to a lot of investors. I think you're the only one that has told me they don't use the word compounder. I hate that word. Why don't you use the word compounder to describe a business? Well, there are a couple of reasons, John. The first one is I think it elevates sales growth to a way more important level than it deserves relative to business value growth that can come from other means. So as I said earlier, as a value investor, you don't usually find the 20% grower selling at a below market multiple. I mean, it would be, if that's how stocks were priced, I would love those kinds of compounders. But usually you're looking at the company that's

got pretty predictable, slightly above average growth that you think is going to last for a long time. And I don't see any reason to elevate the importance of that over, say, a company that's only growing with GDP, but is highly cash generative. And maybe they're growing by reducing the denominator, share repurchase, or maybe they're returning a lot of capital via dividend so that it's not that business that's growing, but I've got the capital then to add to my investments in other businesses. So I reject the idea that a 7% organic grower is any better than a 7% dividend payer, or a 2% grower that's buying back 5% of its shares every year. And you would never call those other businesses compounders. Wow, you're right. Yeah. And then the other reason

is, I think it encourages you to think beyond the timeframe that your crystal ball has enough clarity to be of any value. Most of the time I hear the words compounder, it's applied to a business that an analyst thinks they can see 10 to 20 years in the future that nothing could possibly disrupt this company. And as you know, I've been doing this a while. So I've heard that term applied to newspapers, cable TV networks, mainframe computers, television stations, radio stations, landline phones. It's a long list of industries that 20 years ago, 30 years ago, investors thought they could see far enough into the future to justify paying for very long-term growth. I mentioned earlier, our analysts look out two years for financial statement projections,

and then a five year growth rate on top of that. I think crystal balls in general are so murky after seven years that you're doing yourself a disservice to buy a company where you have to be right on years seven through 15 to justify the price you pay for it today. So you're absolutely right. The term compounder to me is fingernails on a chalkboard. And it's a fast way for an analyst to get in a fight with me. I, I, I, I agree with, with all of the rationale that you just shared. There were some companies, in my opinion, this is just my opinion. You know, you had, you had to know what it was going to look like 30 years down the road to justify the valuation. So, but that's just my opinion. And then you have hindsight bias. So, you know,

I can say everything I just said to you, and then somebody will say, well, yeah, but 20 years ago, you knew Nike was going to be good. Well, yeah, you did. But the same person who thought Nike was going to be good for the next 20 years thought that ESPN was the best asset that Disney held. The hindsight bias to remember which one succeeded is quite a hurdle. It is. Last question, I promise, Bill. 40 years in this industry, you're one of the best. you've achieved what I consider to be master level. What is a lesson you have learned about investing over those 40 years? So the first thing I'll say is I think it's incredibly dangerous to ever let yourself think that you are a master. In this business especially, competitive edge

is something that dies quickly and you need to continue improving just to maintain the same advantage that you have today. So I think one of the most important lessons is you can't ever stop learning. Your competition isn't standing still and you need to continue getting better just to maintain the advantage that you might have today. I think a second quick answer is the importance of people. And I said at the start of this, how lucky we are that we get to work with such wonderful individuals and the relationships that form inside and outside the company you work for in this industry can create lifelong friendships. I think those lessons also apply to the companies you invest in. We all know, the ones of us who have done this long enough, as my former boss

would have said, we all know how, if we've done it long enough, we know how to say top decile people differ from bottom decile people. If you want to succeed in this business long term, align yourself with as many top decile people as you can, because it takes so much work to try and take a bottom decile person and turn them into a top decile. And then the last thing I would say, you mentioned the screens and we all have them, we all look at them. And I think the screens can kind of taint your view on the business toward one of thinking it's a game and it's a basis points of outperformance game. And did I do better or worse today than the S&P 500? And well, if you accumulate enough of those days, that does matter. I think that really takes the focus

off what we do in this job that makes it a socially rewarding job. Now, I'm not going to say that, you know, to college students who are really focused on doing social good that you need to go into the investment business. But this business does a lot more social good than most people recognize. And to me, one of the most rewarding things is that occasional email we get from a shareholder who says they purchased the fund 30 years ago, and the work we have done helped them put kids through school, helped with retirement planning, maybe helped buy a vacation home. This job has real impacts on real people, and when you really remember how, to an extent, life-changing a good financial manager can be versus a poor manager in this industry, uh, I, I think you start to see how big the non-financial rewards are that can come from

pursuing an investment career. So if, if anybody in the, in your audience is college age or considering a new career and is thinking about social good, don't rule out the investment industry. Uh, we, we, we can do a lot of good for people in this industry. Yeah, there is some good nobility in it. That was beautiful, Bill. And I hope you write a book one day. I truly do. Thanks so much for coming on the show and for sharing in detail your investing process and that of your team at Harris Associates. Bill Nygren, I am forever grateful. John, thank you so much for the interview. And as usual, you didn't let me down. You got into a lot of the nitpicky areas about what has made Harris a good investment firm.

And hopefully the lessons can be a benefit to your audience as well. Thanks so much for having me. Thank you, Bill, for those kind words. It really warmed my heart. And now just for a quick disclaimer, listeners, before I sign off, I'd like to provide this disclaimer. Anything discussed on the J. Rose Show by myself or my guest is solely our own opinions and does not constitute formal investment advice or a recommendation. The Jay Rose Show is for

entertainment purposes only. So please do your own research on any security discussed in this podcast. Thanks for tuning in, and we will see you next time.