Founders - #101 Warren Buffett (The Tao of Warren Buffett)

Episode Date: December 8, 2019

What I learned from reading The Tao of Warren Buffett by David Clark and Mary Buffett. ----Come see a live show with me and Patrick O'Shaughnessy from Invest Like The Best on October 19th in New York City. Get your tickets here! ----Subscribe to listen to Founders Premium — Subscribers can listen to Ask Me Anything (AMA) episodes and every bonus episode. ---[0:01]The more I heard Warren speak, the more I learned. Not only about investing, but about business and life. [4:02] The great personal fortunes in this country weren’t built on a portfolio of fifty companies. They were built by someone who identified one wonderful business. [5:45] It is impossible to unsign a contract, so do all your thinking before you sign. [8:35] I don’t try to jump over seven-foot bars; I look around for one-foot bars that I can step over. [14:27] The chains of habit are too light to be felt until they are too heavy to be broken. [19:00] My idea of a group decision is to look in the mirror. [22:14] When management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact. [23:07] Managing your career is like investing—the degree of difficulty does not count. So you can save yourself money and pain by getting on the right train. [24:55] There is a huge difference between the business that grows and requires lots of capital to do so and the business that grows and doesn’t require capital. [27:00] I look for businesses in which I think I can predict what they’re going to look like in ten or fifteen year; time. Take Wrigley’s chewing gum. I don’t think the Internet is going to change how people chew gum [28:50] You want to learn from experience, but you want to learn from other’s people’s experience when you can. [29:20] The really good business manager doesn’t wake up in the morning and say, ‘This is the day that I am going to cut costs,’ any more than he wakes up and decides to practice breathing. [30:07] A public-opinion poll is no substitute for thought / A story from a young Steve Jobs [31:55] The business schools reward difficult, complex behavior more than simple behavior, but simple behavior is more effective. [32:42] If you let yourself be undisciplined on the small things, you will probably be undisciplined on the large things as well. [35:15] George Lucas unapologetically invested in what he believed in the most: Himself. [41:15] No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

David Clark kept notebooks filled with Warren's wisdom on investing, which were meticulous and endlessly fascinating to read. Out of all of David's notebooks, my favorite was filled with many of Warren's most profound aphorisms, which were great fun to read because they had a way of really making you think. These aphorisms were akin to the teachings of a Taoist master, in that the more the student contemplates them, the more they reveal. And the more I heard Warren speak, the more I learned. Not only about investing, but about business and life. His aphorisms have a way of staying with you. I often find myself quoting them to make a point, or thinking back on them to warn myself not to make a mistake.

David and I thought it would be fun to create the Tao of Warren Buffett, filling it with what we think are Warren's most enlightening aphorisms on investing, business management, choosing a career, and pursuing a successful life. These words have been true friends to us over the years as we've navigated our ways through life and business. Alright, so that is from the introduction of the book that I read this week and the one I'm going to talk to you about today, which is The Tao of Warren Buffett, Warren Buffett's Words of Wisdoms, Quotations, and Interpretations

to Help Guide You to Billionaire Wealth and Enlightened Business Management. I don't know if that's a great subtitle or not. And it was written by Mary Buffett and David Clark. Mary Buffett is Warren's former daughter-in-law. And you actually might recognize the name David Clark because David also wrote the book that I covered on Founders Number 78, which is The Tao of Charlie Munger. And ever since I read The Tao of Charlie Munger, I knew I was going to read The Tao of Warren Buffett. I just didn't know when. And I think this week is a good week to read it because I need to come off for air for a little bit because the last three weeks, I've read some of the longest books I've read for the podcast. The biography of Enzo Ferrari is the longest

single book I've read for the podcast outside of the book that contains 54 years of Warren Buffett's shareholder letters. The biography by Carol Shelby, it's also huge. It takes hours and hours. You're talking 10 to 20 hours to read. Same thing for Snowball, which was Warren Buffett's biography last week. This book is just what Mary said in the introduction. It's a short little book of aphorisms. And I actually think there's a lot of –

I would like to see a lot more books written in this length. It is, she takes 125 of her favorite, of their favorite aphorisms and then expounds on them, you know, but every single aphorism, they cover in less than a page. And I really like the idea of having like a book, you know, you could sit down and read it in one sitting in like two hours, something like that. And I would like to idea of having a book, you could sit down and read it in one sitting in like two hours, something like that. And I would like to see more books condensed down to that. I don't know if you could do that for biographies

because you're usually working with decades and decades of somebody's life and as such, there's gonna be a lot of detail. But if you're trying to get a, if you have an idea that is maybe longer than a blog post and shorter than a traditional book, I'd love to see other people write these short little books because I think they have a lot of value.

In fact, if you were to ask me the question, what is the book that you gave away most as a gift? It's actually Nassim Taleb's book of aphorisms called The Bed of Procrustes. That book sits out in my living room and I just pick it up every once in a while. You just read a bunch of aphorisms. Maybe you read for two or three minutes and you just let your brain do these in a while, you just read a bunch of aphorisms. Maybe you read, you know, for two or three minutes and you just let your brain do these computations because like what Mary was saying,

like you find yourself thinking deeper. Like there's so much interesting information contained in such short sentences that you wind up thinking about it, you know, many hours, even days or weeks after you put the book down. So anyways, let me go ahead and jump right into the book. I just pulled out, you know, a bunch of the days or weeks after you put the book down. So anyways, let me go ahead and jump right into the book. I just pulled out, you know, some, a bunch of the aphorisms that I,

that I found that I want to remember personally. So we're going to start with, how the format of the book works is I'm going to read the quote, and then sometimes I'm going to read like how they expound on that quote. So this is the first one. This is a quote from Warren. It says, the great personal fortunes in this country weren't built on a portfolio of 50 companies. They were built by someone who identified one wonderful business.

And now this is the author's expounding on that. It says, If you do a survey of the super rich families in America, you will find that almost without exception, their fortunes were built on one exceptional business. The Hearst family made their money in publishing, the Walton family in retailing, the Wrigley family in chewing gum, the Mars family in candy, the Gates family in software, and the Coors and Bush families in brewing.

The list goes on and on, and almost without exception, any time they strayed from that one wonderful business that made them so amazingly rich, they ended up losing money, as when Coca-Cola got into the movie business. The key to Warren's success is that he's been able to identify exactly what the economic characteristics of a wonderful business are, a business that has a durable competitive advantage. Warren's company, Berkshire Hathaway, is a collection of some of the finest businesses in America, all of which are super profitable and were bought when Wall Street was ignoring them." And this

idea that Warren is telling us there is really just an echo that we've seen from people like Andrew Carnegie. One of his most famous quotes is, put all your eggs in one basket and watch that basket. We found out last week that Warren would read biographies of people like Carnegie, Vanderbilt, Rockefeller. He'd read them over and over again. He did this throughout his entire life, but he even started really early. He'd read these biographies of business people when he was still a kid. Okay, so let me move to the next one. This quote, he says, it is impossible to unsign a contract, so do all of your thinking before you sign. Now here's how Mary and David are going to expound on that.

They said the road of good intentions is paved with what were foreseeable troubles. Thinking long and hard before you take the leap will save you from having to think long and hard about all the troubles you just signed on for. Warren forgot to put a non-compete clause in his contract with 89-year-old Rose Blumkin when he bought her Nebraska Furniture Mart. A few years later, Mrs. B got angry at the way things were being done at the store, so she quit and started up a new store across the street, stealing tons of business from Nebraska Furniture Mart. After a few years of suffering the stiff competition, Warren caved in and agreed to buy her new store for $5 million.

She might be the only founder ever that Warren bought two businesses from. It says the second time around he had her sign a non-compete agreement, and it is lucky for him that he did since she continued on in the business until she was 103 years old. So the reason I wanted to include this is because it's really a personal note to myself. When I read that quote, it made me think of the quote, I think it was Abraham Lincoln, it might be George Washington, I can't remember who the quote is attributed to. But they said, listen, if you give me six hours to cut down a tree, I'm going to spend the first four sharpening the ax. So essentially what they're telling you is like, think they give a problem to solve. Don't just rush into trying to solve the problem. Like think about the best way to do it. That might be the best use of your time. And the reason I include

this is because I don't do this enough. So this is really a reminder to myself that like sometimes the best use of your time is sitting down and thinking through the problem first. Here's another one. Quote, happiness does not buy you money. The explanation, Warren never confused being rich with happy, excuse me, being rich with happiness. When asked by college students to define success he said it is being loved by the people who you hope love you you could be the richest man in the world but without the love of family and friends you would also be the poorest so this is just a reminder

uh to me that money solves money problems and it's uh there is one caveat it doesn't like solve like personal happiness issues right the one caveat i would add is that money buys freedom and freedom may actually increase your happiness, especially for the type of like, if you have entrepreneurial tendencies, like you have that kind of personality type, you're going to want, like Warren, you know, says over and over again, he just didn't want to work for anybody else. He didn't want other people dictating how he spent his time. And I think there's a lot of people that feel that way. So if you're one of those people, I'm definitely one of those people, then you need money not to buy a bunch of useless crap, but to literally buy freedom,

freedom to how you spend your time and what you work on. Here's another one. I don't try to jump over seven-foot bars. I look around for one-foot bars that I could step over. And here's an example of this application, which I found interesting. It is also going to reference somebody I've covered on the podcast twice, and one who I think is maybe one of the best writers I've ever come across. And that's David Ogilvie. So it says, in the stock market crash of 1973 to 1974, you could buy Ogilvie and Mather, one of the strongest advertising agencies

in the world, for $4 a share against per share earnings of 76 cents. Warren bought a ton of it during the crash and cashed out many years later after an annual rate of return of better than 20%. Some investments are just that simple. So he wasn't overthinking. He was just waiting. He's like, I'm not going to try to jump over a seven foot bar. I'll just wait till the opportunity happens where it's one foot. I can easily step over. He uses the example a lot in not only his writings, but he talks about what he learned from Ted Williams.

Ted Williams is like one of the best hitters in baseball. He wrote a book. It might be like The Science of Hitting. I can't remember the exact title. But what Williams would do is he would uh he'd divide like the the pitches he would he would um he would swing at into like let's say i can't remember exact number let's say 70 different you know uh one inch squares whatever the case is and he would just he would identify where he was most likely to have success and only swing at those pitches

even if that meant striking out because he understood that he wasn't the more he would swing at bad pitches and There are the metaphor here is the more you swing at bad opportunities the lower his overall hitting percentage is gonna be actually You know what? I want to bring something up I haven't took notes this in between the time I read snowball and I read this book. I watch this documentary on HBO it's called um, it's called becoming Warren Buffett and This he actually talks about the reason I just thought about this, because he talks about what he learned from Ted Williams in there. And they do this great illustration of this concept with this graphic overlay in the documentary.

And actually, the documentary is really good. It's an hour and a half long. And I was surprised that a lot of things that I learned from reading the biography that I thought was important, they actually highlight in the documentary. But there's a few things before I jump back into the book that I just want to share with you that he said that I thought was interesting. Just two things, actually. He talked about the lessons that his father would learn or that his father taught him, right? He had a really, really good relationship with his father, had a lot of admiration for his father, looked up to his father,

learned from his father's mistakes. No doubt he wasn't the same person as his father, but he admired them greatly, right? Can't say the same with his mom. His mom, you know, was really hard on him. They had a, you know, she wasn't really a loving mom. She's really hypercritical. Now, he said something that I found surprising. So at the time in this, Warren's reflecting back on his life,

is the time he's, you know, let's say 14, 15. He's acting like a juvenile delinquent. He's stealing stuff from stores. He's hitchhiking. He got in trouble. He got picked up by the police. He got picked up, I think he got picked up by the police. I don't remember exactly. But essentially, he did something where his father was made aware that his son was doing things he shouldn't have done. And this is now Warren talking about what he remembers from the conversation. And he says, his dad saying, he says, you could do better than this. He was teaching me, but he never taught by telling me. He just taught by example.

And he had unlimited confidence in me. Even when I screwed up, that takes you a long way and then this sentence which was fascinating to me he says the best gift i was ever given was to have the father i had when i was born and so just like the author says in the in the introduction i don't think we can we should limit uh what we learned from warren buffett just to his ideas on business even though i think his ideas on business are some of the best in history um i that is something like i have a daughter now like i want my daughter my future children to to say that about me like i want to be worthy i want to do the work necessary to make my show my

to make myself worthy so that towards the end of my life or towards the end of my children's life, they say the same thing about me. So that stuck out. And I just want to share that with you. And another thing I thought was fascinating, he's in the middle of this discussion. They're in the corporate headquarters of Berkshire Hathaway. And he talks about how he, he's building a a business you know he uses that idea that metaphor like he's building a business that's a complete um like it just it's like a creative exercise for him it's like a way to express who he is right and so they're going around the office and you see like the stuff that's important to warren based on what he has out but i found something he said was

fascinating he's like listen if you go to my office you're not going to see the degrees that i have from university of nebraska or the one i got from columbia fascinating. He's like, listen, if you go to my office, you're not going to see the degrees that I have from University of Nebraska or the one I got from Columbia Business School. He's like, you're going to see the successful certificate of completion for the course I took from Dale Carnegie. Dale Carnegie, of course, is the person that wrote How to Win Friends and Influence People. But what Warren's talking about there is that he was terrified of public speaking, which was really shocking to me to know that because, you know, he does interviews. He's got, like, fills up arenas of people that travel all over the world just to hear him speak. And he just seems, I've watched a bunch of these videos, take notes on them. Like, he just seems completely relaxed in his element.

And to know that, like, he couldn't even, when he was younger, he couldn't even give a presentation, like, in front of in front of a small group of classmates without wanting to throw up. So I just found that fascinating. And I wanted to let you know if you want to learn more about Warren, I'd watch the documentary if you have access to HBO. It's worth the 90 minutes. Okay, let's go back to the book. Oh, this is something that I've heard. I thought Charlie Munger said it, but they have it in the warren buffett book it's something i want to remind myself too this is the chains of habit

are too light to be felt until they are too heavy to be broken and it says this is warren quoting the english philosopher bertrand russell because his words so aptly describe the insidious nature of bad business habits that don't become apparent until it's too late such as cost-cutting after your business is in trouble which should have been done long before you even got to the doorsteps of danger the business that becomes bloated with unnecessary expenses in times of plenty is the business that will sink when things turn for the worse so you you see this example like I'm gonna keep reading I'm not done in this section but I just want to stop here for a second. Because over and over again, when you

get around people that don't understand the magic of compounding, so the magic of compounding investments works in your favor. And it's amazing. It's literally the shrine in which the career of Warren Buffett is dedicated to, right? For some reason, most people don't realize that expense is compound too, and it works against you in the same exact, the opposite but the same mechanism as compound interest works for you, right? So I saw this week where, who was it? I forgot. I think it might be the LA Times.

They published like all the houses in Los Angeles County, I think, that are paying more than a million dollars a year in property taxes, right? And one of those happened to be Jay-Z and Beyonce. And I just read through quickly like some of the responses like, oh, he's got it. It doesn't matter. That's nothing to him. And you see the variations of that same thing. That doesn't matter. It's insignificant. And it's just like, no, it no it's not insignificant because yeah you could be wealthy now but getting rich and staying rich are two different skills and if you let your expenses compound it doesn't matter how much money you have eventually you will run out of money um and again that's just something people don't think like that at all they're like oh this he's rich he could

spend money like that no because anybody that's rich and spends money like that eventually goes broke. It's so bizarre, if you understand that, to have conversations with people that don't. You are sensibly looking at the exact same thing, but seeing two completely different things. It's okay to waste money. It's not okay to waste money. All right. So it says, it is best to consciously check where all your habits are taking you long before you get there. If you don't like the direction in which you are headed, the time to change course is before you find your ship sinking in a sea of troubles. This is what happened to Warren with the Benjamin Grant-inspired investment strategy of buying bargain stocks that were selling below book value

regardless of the nature of the company's long-term economics. This was something Warren was able to do with great success during the 1950s and early 1960s but he stayed with this approach long after it was via it wasn't viable anymore the chains of habit were too felt too light to be felt when he finally woke up in the late 1970s to the fact that the grand bargain ride was over he shifted over to a strategy of buying exceptional businesses at reasonable prices and then holding them for long periods thereby letting the the business grow in value another way to say this is letting the business compound with the old strategy he made millions but with the new one he made billions so going back to this to that documentary i just said

again i think like one of the main core thesis behind this podcast is like okay let's find the people we admire and let's find those people who they admired because everybody learns from somebody. So who does Steve Jobs learn from? Who did Warren Buffett learn from? Well, who did Warren Buffett learn from in that documentary and in his writings? He talks about Charlie Munger had a huge influence on my thinking is what he says. This is the greatest example of that. He credits Charlie Munger, which is the person that gently and consistently pushed him away from Graham and to this idea, like, let's just buy exceptional businesses at fair prices instead of the cigar butt business that you're doing. And Warren says in the documentary, he also says in the writing, that one insight

that Charlie had and slowly convinced Warren to adopt is the reason that Berkshire was able to scale. And he says, without that insight, without Charlie teaching the reason that Berkshire was able to scale. And he says, without that insight, without Charlie teaching me that, Berkshire would have never scaled. It's also why I have a little bit of, you know, it's pretty obvious I have a big crush on Munger. That, I just like his wise-ass attitude. What I love about Warren, he talks about, I hope to remember it as a teacher more than an investor.

Charlie says the same thing. He's like, I want to be remembered as a teacher, but i'm pretty sure i'm going to remember it as a wise ass all right um what is this sometimes i leave notes for myself and i don't remember a lesson from the proto buff oh henry okay all right so let me read the quote first uh my idea of a group of my idea of a group decision is to look in the mirror. So it says, Warren is not one to seek affirmation of his own ideas from others because so many of his ideas are the opposite of what the herd is thinking. You have to learn to think independently. To think independently, you need to be comfortable standing alone. And what I'd add there is you need to

do the work necessary to trust your own judgment. So The No, I Left Myself was a lesson for Proto Buffett. If you've been listening to all the podcasts I've been making, you know who Proto Buffett is. It's Henry Singleton. A lot of the ideas that we credit, that everybody quotes as like this is Buffett's idea. Their ideas Buffett learned from Henry Singleton. And so one lesson I learned from the proto-Buffett from Henry Singleton is like, he did the work necessary to trust his own judgment, right? And so when he needed, like, not that you don't have, you know,

you don't learn from other people, you don't have mentors, you don't have people to help you, but he would ignore most advice. He would purposely isolate himself. So he'd give himself his brain time to work and figure out what the actual correct idea was. In fact, there's a quote, the last interview Henry gave before he died, he talks about, I think it was on the issue of shared buybacks, I can't recall, but essentially the person interviewing him was saying, Hey, all these companies are doing X and Singleton's response, even he's probably 80 years old,

close to 80 years old at the time, seven years old, whatever it was, but he's like, Oh, so if everybody's doing X, it must be wrong. So that's like the,

the, the lesson, one of the lessons he learned from, you know, six decades of having these, these life experiences. And he's got a crazy life experience. If you haven't listened to that podcast,

I definitely go back and listen to it. He didn't start, Warren says he has the best, the single best record in American business history. Maybe, I guess, you would say Warren does now. But he didn't start his first company until he was like 46 or 44 years old, something like that. He was like a seed investor in Apple. The guy's just had a crazy, crazy life.

And so anyways, there's another thing. I learned a lot from um and i've referenced this many times on the podcast but like i try to learn from every single like i think there's there's knowledge everywhere and one of the places i found a lot of actually knowledge that i don't i think most people kind of chuckle at is like i've listened to hip-hop for like ever and this whole idea warren says my idea of a group decision is to look in the mirror i'm going to quote from kanye west and it's one of it's not like the kanye of today this is like when he was making some of his best music it was like 15 years ago but he says uh he has a quote this is kanye sounding like warren buffett he says i'm gonna look in the mirror if i need some help and And so Kanye and Warren are essentially saying the same thing. Like they've done the work

necessary to trust their own judgment. And maybe at the time, you know, Kanye's talking about making music. Now I'm not condoning other stuff the guy says, but when it comes to making music, like, yeah, he's undeniable genius at making music um just like warren buffett i feel is an undeniable genius at investing entrepreneurship all right moving on when management with a reputation this is this is so good when management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics it is a reputation of the business that remains intact. Meaning, like it doesn't matter how great you are,

if you're trying to turn around a business or if you're managing a business that has poor fundamental economics, your reputation is gonna be destroyed because that business is gonna win. There are mediocre businesses with poor underlying economics that are impossible to save regardless of the brilliance of managers.

A great business is usually a wash in cash, carries little or no debt, and is in a great position to ride out any downturn in the economy. No matter how brilliantly a mediocre business is run, its poor inherent economics will keep it forever anchored to poor results. And here's another quote from Warren warren managing your career is like investing the degree of difficulty does not count so you can save yourself money and pain by getting on the right train okay this is gonna be very weird i don't know why wait when i read this i thought of squatty potty you know squatty potty is squatty potty is like it's like

a stool that you put in your bathroom that makes it easier to be in like a more natural position to defecate okay and so the reason i said i thought about that is because it's like the degree of difficulty doesn't count right everybody in the developed world has a toilet and none of them seem to be designed like for optimal usage. So I listened to this podcast a long time ago and I took notes on squatty potty is just a stool that fixes that. Right. And this is a quote from the podcast with $35,000. We started a business that does over $30 million a year. I like that is hilarious to me. Like it is, that's not a super challenging business. It's just like making people aware of that, the problem, and then convincing them that you've

solved that problem for them. And realizing that, that, that once you solve that problem, the market is huge. The idea that you could start, and that's the magic of entrepreneurship too. I think, I don't know if it's a him and his friend or him and his mother. I can't remember who, who there's like two people in the business, but this is like, I listened to this a long time ago. But anyways, the idea that you can start a business with $35,000 and it can make $30 million a year at healthy profit margins, like that's amazing. I think that to me is like, you don't need to try to solve a huge problem. It's just a problem that a lot of people have that are willing to hand money over to.

And that can make you fabulously wealthy. I think that's, I don't know, I thought that was humorous too. Another quote from, all right, there's two quotes here.

So first is, there's a huge difference between the business that grows and requires a lot of capital to do so and the business that grows and doesn't require capital. And then number two, in a difficult business, no sooner is one problem solved So I think those two quotes are kind of related. And it reminded me of this quote I heard this week.

It comes from Andy Ratchliff, I think is how you pronounce his name. He's the co-founder of Wealthfront and the co-founder of Benchmark Capital. And he talked about that there's – let me actually read it to you. Why am I going to butcher the quote when I just have it here? Let me just pull it up real quick. So in the quote, do you have a background? He's talking about how companies can fool themselves into having product market fit and then they have to keep reinvesting money into growth because they don't,

they don't actually have a product that people, let me just read it to you. I'm running over the quote. People kid themselves into thinking they have product market fit because they bought it. The only way to know that you have product market fit is if you have word of mouth growth. The only way you can get exponential organic growth is through word of mouth. So what he was talking about there is like, there's a lot of tech,

especially technology companies nowadays that are spending a ton of money on uh like finding new customers whether it's through advertising through sales or whatever the case is um and what andy's point is echoing there is like if you have word of mouth that is essentially a sign that one you built a product so good that other people tell their friends about it and over over time, that growth is going to compound. So that's what he's talking about. You get this organic and exponential growth. That also leads to what Warren is saying here. There's a huge difference between the business that grows

and requires lots of capital to do so, meaning you need money to fund that growth, and the business that grows and doesn't require capital. So he wants to invest in the first one. And I think the second quote is just really interesting. It's a symbol of like you might have a worse business than you might think because the problems never stop. You solve one problem, another one surfaces. There's never just one cockroach in the kitchen. I look for another quote from Warren.

I look for businesses in which I think I can predict what they're going to look like in 10 to 15 years' time. Take Wrigley's chewing gum. I don't think the Internet is going to change how people chew gum. Now that, when I read that, I immediately thought of one of my favorite Jeff Bezos quotes, which he talks about that you should be investing. Your long-term investments in your business and what you're focused on should be investing in things that don't change. So let me go ahead and read this

whole quote. This is Jeff talking. He says, I very frequently get the question, what's going to change in the next 10 years? And that is a very interesting question. It's a very common one, but I almost never get the question, what's not going to change in the next 10 years? And I submit to you that the second question is actually more important of the two. Because you can build a business strategy around the things that are stable in time. In our retail business, we know what customers want. We know that customers want low prices, and I know that's going to be true 10 years from now. They want fast delivery.

They want vast selection. It is impossible to imagine a future 10 years from now where a customer comes up and says, Jeff, I love Amazon. I just wish the prices were a little higher. Or I love Amazon. I just wish you delivered things a little more slowly. Impossible. impossible. And so the effort we put into those things, spinning those two things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it. I think that's one of the most important things I've ever heard Jeff say. And I think Warren is obviously, they're of like minds on that issue. Another one. You want to learn from experience, but you want to learn from other people's experiences when you can. And again, I think that's just a reminder, both Warren Buffett and Charlie Munger talk a lot about why they read,

Charlie calls himself a biography nut. He wants to do that because he wants to learn not only from the best ideas of people's lives, but also what mistakes they've made so he can avoid them. Another one from Warren Buffett. The really good business manager doesn't wake up in the morning and say, this is the day that I'm going to cut costs, any more than he wakes up and decides to practice breathing. That's a hell of a quote. What is he really telling us there?

He's saying that that should be your default mode of operation permanently. That's just like you want to breathe all the time. You should be always cutting costs. And why is he telling that? Because he understands that cost compound. So this is the explanation from the authors. You keep costs low from the start, which creates more profits. This is not brain science.

It's not rocket science. If you read that a company is instigating a cost-cutting program, then you know that management has been slacking keeping costs low from the start. Another quote from Warren. He says, a public opinion poll is no substitute for thought. I love this. Read that quote. Immediately thought of another quote that comes from a interview with Steve Jobs. He's around 29 years old at the time. This happened in 1985. Let me read this to you. And he's talking about the Macintosh. We didn't build a Mac for anybody else. We built it for ourselves.

We were the group of people who were going to judge whether it was great or not. We weren't going to go out and do market research. So he's using the words market research. Warren's using the word public opinion poll. We just wanted to build the best thing we could build. When you're a carpenter making a beautiful chest of drawers, you're not going to use a piece of plywood on the back, even though it faces the wall and nobody will ever see it. You know it's there, so you're going to use a beautiful piece

of wood on the back for you to sleep well at night. The aesthetic, the quality has to be carried all the way through. So he's describing this. And so the person interviewing was like, he's saying, are you saying that the people who made the PC Junior didn't have that kind of pride in the product, right? So he's talking about first, what's the source of the product or the source of the pride in the product? The fact that I wanted to build the best thing possible, the most beautiful way, right? And now he's going to compare and contrast to the people that build products by taking public opinion polls or market research. So he says, are you saying the people who made the PC Jr. don't have that kind of pride in the product? This is Steve at his like sharpest tongue here if they

did they wouldn't have turned out the pc jr it seems clear to me that they were designing that on the basis of market research for a specific market segment for a specific demographic type of customer and they hoped that if they built this lots of people would buy them and they'd make lots of money those are different motivations the people in the Mac group wanted to build the greatest computer that has ever been seen. Another quote from Warren. The business schools reward difficult, complex behavior more than simple behavior, but simple behavior is more effective.

And this is related to his very next quote. There seems to be some perverse human characteristic that likes to make easy things difficult. Another quote, I can't be involved in 50 or 75 things. That's a Noah's Ark way of investing. You end up with a zoo that way. I like to put meaningful amounts of money in a few things. The author's explanation, it's like being a juggler with too many balls in the air. You don't just drop one. You end up dropping them all. I think this is really them telling us

that we should be focused more than we are. Another quote, if you let yourself be undisciplined on the small things, you will probably be undisciplined on the small things you will be you will probably be undisciplined on the large things as well so there's no i'm not going to read anything from the author's ex uh explanation i actually think uh it's credited bruce lee but it's probably not but um one of my favorite quotes is and where i need to check myself when i'm making a mistake how you do one things is how you do all things. Inevitably, when I find myself being sloppy or slipping on something,

I'm like, okay, there's zero chance, David, that that's the only area in which you need to analyze everything you're doing. Because if you're this sloppy on this, you're inevitably sloppy on something else. Another quote from Warren. There's nothing like writing to force you to think and get your thoughts straight. That's the explanation from the author. This is why every year Warren sits down and writes a long letter to his shareholders explaining the past year's events. This exercise has helped him immensely to fine-tune his thoughts.

It's also why the podcast I did on his shareholder letters is the longest Founders episode that will probably ever be. I think it's three hours long. I don't think I'll ever do that again. Another quote, I've never swung at a ball while it's still in the pitcher's glove. Okay, so this is what I was referencing earlier about Ted Williams. So it says, Warren has long been a student and fan of baseball, and he took an important ingredient for his investing strategy from a book that Ted Williams wrote entitled The Science of Hitting. Ted argues that to become a great hitter, you have to keep yourself

from swinging at bad pitches. What you are looking for is the perfect pitch. Warren took it as an analogy to investing. To be a great investor, he only had to wait for the right opportunity. This also applies to entrepreneurs in regards to opportunity costs. Patrick Collison, which is one of my favorite. I try to spend most of my time learning from dead entrepreneurs or close to dead entrepreneurs. But there is a handful of people that are alive today that I think are just like fountain of good ideas. Patrick Collison is one of them. The founder of Shopify, Toby Lukey, is another one.

Patrick said this on opportunity costs. He says, if something is making you happy, if something doesn't seem promising, or if it's just not working, well, your time has relatively high opportunity costs. You don't get to start that many startups in your life. Knowing when to call it quits is valuable. Sometimes you should quit, and sometimes you should quit, and sometimes you shouldn't even pursue, or even before you quit, don't even start. And I think that's what Warren Buffett learned from Ted Williams.

Another quote. Imagine you had a car, and that was your only car you'd have for your entire lifetime. Of course you'd care for it, changing the oil more frequently than necessary, driving more carefully, etc. Now consider that you only have one mind and one body. Prepare them for life. Care for them. You can enhance your mind over time. What he's saying there, essentially, knowledge compounds. So you better get busy seeking out knowledge, is what he's telling me, essentially. A person's main asset is themselves, so preserve and enhance yourself uh way back on i think

founders number 35 i did the uh biography of george lucas and there's something that uh was in that book that i think about all the time it says george lucas unapologetically invested in what he believed in uh the most himself and i think that's the point of like again spending the time to learn from these people like it's not a waste of time it's you're investing in what what you should believe in most yourself why else would you care what warren buffett has to say or charlie munger anybody else it's because you're hoping that they had that through their decades of experience they've picked up insights that you can then use in your life. That's an investment in yourself.

And I think, again, that should be your – I want that to be my standard. I shouldn't say that should be your life. You do whatever you want. Let me speak for myself. I want my default – the default way I go about my life is making sure that I invest in myself constantly because it's the thing I believe in the most

and the one in which we have the most control over right we really can't control the behavior of other people we can't control our own all right the most important thing to do is if you find yourself in a hole stop digging here's the explanation if you find yourself in a bad investment this kind of echoes what what patrick was just telling us right the worst thing in the world to do is to continue to throw money at it but more important than money it's like time what patrick's saying like you you you your time here on this earth is limited you can only therefore you can only pursue a small set of opportunities so you've no one ever because opportunity cost is like an abstraction and i always say humans going the abstract like people don't think like this you know they'll sit in a job they hate just

because they don't know what else to do it It's like, well, that time, that decade, you just did that. You'll never get back. And there's that time that that decade is literally priceless. So it says, though it's painful to pull out in the end, it is far more profitable to leave the party and cut your losses before things go to zero. In the early 80s, Warren invested heavily in the aluminum industry. It was a mistake. And when he realized it, he stopped digging and got out. Have the courage to admit you were wrong and do it before you go broke. Another quote. That which is not worth doing at all is not worth doing well.

These quotes are all related to opportunity costs, aren't they? Many people spend years working hard for businesses with poor inherent economics, which means the prospects for making money are equally poor. So why get good at something that is not going to benefit you? Why learn to be good at business, why learn to be good at a business that is inherently poor economics

and is never gonna make you any money? If you find yourself sailing on a business ship that is going nowhere, you should jump ship and find one that is headed to the seas of good fortune, instead of trying to become the captain of a slow boat to financial nowhere. This was Warren's experience with Berkshire's textile business. No matter how good it became or how many innovations it implemented or how much capital was thrown at it, the results were always the same. Its competitors could produce textiles cheaper overseas than they could in

America. Another quote from Warren, a good managerial record is far more of a function of what business boat you got into. Another, this is, this is all kind of like expounding on the same theme here. A good managerial record is far more of a function of what business boat you got into than it is how effectively you row. Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks. So that's the end of Warren Buffett's quote. This is the beginning of the explanation. The best jockey in the world is never going to win races riding a lame horse. But even a mediocre jockey can win races riding

a champion. This reminds me of Marc Andreessen's idea. It's not just his idea, but he talks about it like the most single important factor in an entrepreneur's success is the market in which they're operating in. If you're already working in a business with great economics, be very careful if you decide to leave the fold. So that's the other side to that, right? It's the other side of you need to quit a bad opportunity, but you also don't want to make the mistake of quitting a great opportunity. Another quote from warren um i'm going to read this one and number and another one together a pin lies in the weight for every bubble and when the two eventually meet a new wave of investors learn some very old lessons this goes with what we learn from history is that people don't learn from history

It's also probably one of the reasons he spent so much time studying history So what he's saying is like you're the people that ignore it's interesting David Ogilvie talks about If you fail to study history like he would hate people in his industry. They wouldn't study the history of Advertising industry he called them ignorant amateurs Think about that That's it.'s, I mean, that's a hell of an indictment. I think Warren and Charlie would stay the same because what Warren's saying there is like, you act like this bubble's new. He's like, let me go back a

couple of pages to that quote. So I don't mess it up. But he's like a new wave of investors learned some very old lessons. This is happening today. a new wave of entrepreneurs are going to fail to learn some very old lessons um the so we're going to this is the author's explanation to that people make the same mistakes over and over again this is an example of human nature a history doesn't repeat human nature does uh they overpay for a business in the hope of making money on the short-term price movements of a company shares this is one example warren has made his career out of exploiting this inherent short-sightedness and the pricing mistakes it causes in relation to a company's long-term economic value. And the final quote, just what it means to me is that everything worthwhile takes time. This is Warren. He says,

no matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant. And the explanation here is it takes time for business value to build up. It doesn't happen overnight. Just as children take time to grow into adults, businesses take time to grow in value. This was true for Geico, which took 15 years for the underlying value of the business to increase Warren's initial investment of $45 million into $2.3 billion. Great businesses over time really do grow up to make their shareholders rich. It just takes a little longer than a month. So that's where I'll leave this book. It's a shorter podcast today because

it's a shorter book. And if you're interested in reading the book, if you want to buy the book, please buy it using the link in the show notes that are located in your podcast player or at founderspodcast.com. This helps support the podcast. And I'll be back next week with another biography of an entrepreneur.