Good Investing Talks - Tom Gayner, how are you building Markel? A CEO interview

Episode Date: July 19, 2023

It was great to welcome Tom Gayner of Markel back on the podcast. Here we discuss how he is building Markel('s reputation)

A warm welcome to the Good Investing Talks podcast. I'm your host, Tillman Fersh, and I'm very happy that you're discovering underfollowed investors and underfollowed companies together with me. Before we jump into this conversation, I want to thank my supporters. They help me to keep this channel free and public for everyone. Thank you very much. If you also want to join the Good Investing Supporters Club, please click on the link below. You're very welcome.

And now, one last step. Here's the disclaimer for you. All we are doing here is no advice and no recommendation. Please always do your own work. And now enjoy the video. The audience of Good Investing Talks, it's great to have Tom Gainer back. We just released the video with him with an invite for the Mikel Omaha branch. But we also took the opportunity to do a follow-up video with him after we did our first video, I think, two years ago.

It's great to have you back, Tom. Thank you so much. Good to be here. Tom, one interesting thing we started our last video is songs. And I ask you before we are recording here to bring a song that describes like the last two years in the market. Like my guess would be because it was a rough time, maybe BG is staying alive, but I might be totally wrong. That's a good one. And I hadn't thought of that.

And I did have some advanced signal that you might want to talk about this. And I think it's a great topic to pick up. I do love music. And when you try to think about, okay, well, what is your favorite song? My goodness, I have a million songs in my head, and I don't think I'm even exaggerating that much. But I was thinking a little bit about how I would distill it. And if you'll permit me, I'll distill it down to three thoughts

that I thought were worth talking about in the realm of music and songs. And the first one is the Paul Simon autobiography slash biography Miracle and Wonder, which has Paul Simon and Malcolm Gladwell. It's an audiobook only, and when you listen to it, you'll see why it needed to be an audiobook. So it's an absolutely spectacular history of music, history of the way the world has developed, what music means, how sounds work, its effect on our emotions, on our politics, on the way we feel and think and process things. And the title in and of itself, Miracle and Wonder, there's so much of life that is indeed both a miracle and a wonder. So I cannot recommend that

strongly enough. It's about five and a half hours, and from time to time I find myself either on a train ride or a car ride and I'm by myself, and it's just a wonderful extended the listening time. And at this point, that five and a half hour audiobook, I've listened to it three times already. And I'm sure there's a fourth in my future when I have a car trip or two coming up. So I recommend that very strongly. The second thing, and this also ties to the investment world and the idea of perhaps recency bias, I just read Bono's book, Surrender. And it's the 40 songs and 40 chapters about each of those songs and the historical setting of how those songs came to be. And I think that's a good book and worth reading as well. And the one takeaway that I

would have from there is apparently Bono was a great fan of David Bowie. And he talks about a conversation that he had with Bowie at one point. And Bowie said, there are really only two languages in the world. One is love and the other is fear. And I think about it. And I think about about that and I think of the universal applicability of that statement and in any given setting or situation you find yourself in I think you're involved in either a love-based conversation and relationship or a fear-based conversation and relationship and it's not zero to 100 some are 70-30 or 6040 or 52 48 but I just think framing things in that polar opposite way was an

interesting construct that struck me from reading the Bono book. And then the third single song I would mention, and again, a classic rock band that stands the test of time and speaks a little bit to perhaps the sideways motion of Markhill Stock for the last couple of years and some of the things that are going on is the stones, you can't always get what you want. But if you try, try, you get what you need. So that soundtrack plays in my sense. my head sometimes because it's important to keep try, try, trying, as is suggesting the song. And if you do, you do get what you need. And I do feel pretty optimistic about, A, both that we are getting what we need and the future is pretty good as well.

So those are the three musical thoughts I had when you mentioned that you might want to talk about that sort of thing a little bit today. Yeah, it was more like looking back in the last two years, but you answered it in a wider way, which I find also super interesting because it also shows like what I find what I learned from music and I easily discovered Ramstein which is not the typical band for investors or like because they have this dark touch

Tillman here as you can see from longer here the comment with Ramstein was made a while ago and this was way before the allegations against the band came out at the moment I'm quite shocked by what was told on these allegations and I have changed my view on the band but we

still have to wait what the legal system decides on this thank you we discovered ramstein which is not the typical band for investors or like because they have this dark touch but they have this unlikelyhood of success they are a german-speaking band from berlin from eastern berlin they made success and they filled the medicine square garden and uh yeah this thing of touring there's also documentary on it is super fascinating you can also learn a lot of about business from this you learn a lot about life through music and i just think music is a wonderful way to keep different inputs coming into your mind when we talk about the idea of diversity and diversification in so many ways well one of the things to keep your keep your mind

limber as the as the as the dude and the big lobowski would say is to have different forms of input coming into your thought process. And I find music is one of those valuable streams of input that inspires and creates thought. Yeah, and with one comparison might be also the idea of touring that you have to play in many different smaller cities to build a reputation with a band. You tour through a country like the U.S. You go to smaller towns and play your music there before you conquer the big cities. and become like superstars international that's also a bit comparable to the investing world i think you also started touring with mckelly in 1990 and since then you're one of the great concerts so uh

talk about the concept of touring and and uh you know willie out there on the on the road willy nelson there was one time i saw him performing in richmond and it was a tuesday night and at that particular time He was probably in his 70s, and it was very clear that he really didn't want to be here. He was going through his catalog, but he was playing it at sort of an up-tempo. I think he might have had a tax problem or a tax bill that he needed to deal with, so he was out there on the road. But his song on the road again, and the love he expresses for being on the road, and the history that you see from demonstrated 40, 50, 60, 70 years on the road,

Well, this past summer he was playing in Charlottesville, and I happened to see him, and I think he was 89 years old. He was playing with one of his sons, and it was an absolutely magic evening, and there was a very different spirit and electric feeling in the air. And you could tell that as compared to that concert 15 years earlier when he was in his 70s, here he was in his 80s, and you just had this sensation that he knew that this was not going to go on forever. and he felt the love of the crowd and the joy and the happiness they had from the fact that he was there and he offered that back in return and it was one of the most magical concerts I've ever seen but it speaks to some of those nuances and complexities

and process of what it means to be out there on the road and the different venues you're playing, the different times that you're doing it in your life, different seasons, different stages and the understanding and the meaning that you can draw from each one. so if you think about concert there's also a certain storytelling involved in it so you have this catalog you have to play your favorite songs everybody is expecting you but you have to also add new things

it's also like maybe this this comes a bit down to to michel i think when i read your press releases or your reason talks there's also just talking about the free engines you have that you're repeating and repeating again and again but there's also some kind of new things you add to this How do you create this kind of storytelling as a... Well, it's an interesting concept because you're exactly right to draw the analogy. That again, so if you bought tickets to a show and you wanted to hear an artist, and in fact, the artist even sometimes joke back and forth about this, because what the audience tends to want to hear is indeed the existing catalog.

And what the artist, being an artist wants to do, is share their new work with you. And what they're thinking about now, There's a little bit of tension sometimes between the two. So I suppose to some degree, the conversations that we've had about Markell and the way we describe it could be viewed as the old catalog and it's done over and over and over again. But those are the pillars. Those are the foundations for what we do that's new. And for instance, if I look back over the course of the first quarter, you know, which just ended and I think about some of the investment actions that we took during the first quarter, some of those are different.

actions than what we've taken in the past in terms of some new names and some new companies and some some new situations, but if I think about why those came about or why they sprung to the front of mind, it's because there was the firm foundation and the base and the pillars and the way in which the filtering process worked that certain things jump out of you. So both aspects are very important, both the having the fundamental pillars and the fundamental disciplines and the four levels. lenses, as we call it, or the three engines there that help filter and screen what seems like it would be a good fit or not for Mark. And at the same time, going to work every day with a fresh set of eyes and a fresh sensation of the fact that the world has spun. We've gone completely around the axis. We've covered 26,000 miles between the time we got to work today compared to where we were yesterday. And something might have changed. So, So how do you stay sensitive to that? How do you stay aware of it without being overwhelmed by it, but also comforted that we're

going to travel 26,000 miles tomorrow as well. And we successfully executed it yesterday and the day before that and the day before that. And we'll successfully execute it again tomorrow. But there's some different tactical things that might need to be done in the process of doing that. So that's sort of the joy of living and the joy of life and the fun it is to go to work, to talk to people, to read things, to experience things, to listen to. new music or old songs again to think about what you should do right now like your conference halls

are like capital market conferences conference calls and like also the event in omaha we've just chatted about like how does it how do you make sure that the participants get what they want to come back to the song but also let you implement new communication things. For instance, if you go to the free engines, you have this, I think the venture is the newest engine. You have, how did you go in your communication to implement this, that the capital market gets to notice when you started talking about and how long does it take that this also can become a hit? So you have to do the fundamental performance, but you also have to do the communication on what it brings as in success to the company.

Right. Well, I think that's a very interesting question in the sense that, I think if I hear, I'm hearing you correctly, you're asking me, what do I need to do to make sure that the audience understands and gets and appreciates what it is we're talking about? And while I want the audience, whether it's through a conference call or a one-on-one meeting or at the Omaha brunch, while I truly hope and pray and wish that the audience will come out understanding what it is that I said and what it is we're trying to communicate. I've lived long enough to know that that's an imprecise, imperfect process at best. So what I really have to do is get back to my own sense of what do I believe the truth to be? What is the important thing

to communicate? Try to be as good at that as possible. And then I have to let go of the outcome. So to open up another realm, there's an absolutely wonderful book called Thinking in Betts by Annie Duke. And I think any serious student of investing should read that book. And what it's about, it's not necessarily about investing. It's about playing poker and about both the underlying math that's involved in a poker hand and probabilities and statistics. And I'm not a PhD statistician. or probability theory guy, but I know a little,

and I did indeed study them as required courses and topics in college for which I'm very grateful. So I know a bit about that. And the point she makes in that book is you have to be concerned with your own process and the quality and fidelity that you bring to that process. You cannot judge how good you are at what you're doing by the outcomes.

She calls that resulting. where, you know, if you have a good result, you sort of just assume that your process was good. Well, it's likely that if you have a good result, that your process is good, and the likelihood that you have a good process when you have consistently good results over long periods of time goes up. But it's never 100%. And to some degree, it's frustrating as a human being when you're trying to connect and communicate with someone that they don't, you know, to say you don't understand me or you're not hearing what I say, that that's a mark of frustration and that happens but that's real that's just human being stuff

you can't you can't fundamentally change what you are doing in response to the notion that it's it's not going to land with uh with somebody all the time I'm reading a new book right now that I mean there have been hundreds if not thousands of books about Abraham Lincoln but I'm reading one right now by John Meacham and I'm just reminded of the Lincoln quote about you know you can fool all of the people some of the time and you can fool some of the of the people all the time, but you cannot fool all of the people all of the time. So there's an inherent transmission decay between communication and understanding. So what do you do to try to bridge that gap or minimize the decay or minimize the latency

as the word is used in today's world? Well, try to make your message as simple and as clear and as concise as possible. And say it over and over again. And don't be embarrassed to go back to the same fundamental principles and fundamental vision and understanding as you had before and say it again and again and again. So a rough bet, how often have you talked about the three engines or the four lenses in your life already? I have lost count. More than a few thousand times maybe. than three more than four more than three times four probably even more than three to the fourth power or four to the third power the question behind this is like if you have a success or build something new it's also hard to understand but then you have the fundamental success you can measure but there's also the way you have to communicate success and you have the successful growth of mackle like your sock prize was when you joined somewhere in the tense

maybe what was the stock price when probably about eight or nine bucks yeah and now it's what is the stock price today or yeah so yes it's compounded at about 15 percent for for 37 years so going back to annie duke can we conclude that we have a perfect process no but with 32 33 years of doing that i think we can draw a reasonable sense that our process is pretty good but still like on the way up, you also have to communicate that you can have a reproducible process and you also had to go out to communicate about success because I'm asking this question because I'm like sometimes fascinating by investing industry. You have good investors who have good returns, but nobody knows about them and they don't

go out to promote it or market it or just tell people about it. like how much of your time is spent on telling your story? Well, a fair amount of my time is spent in communication story because not only am I responsible for the investment record. And so, for instance, some of the people that you're speaking of that might have very good investment records, perhaps somehow or another, they have some pool of capital that they're managing,

a good chunk of which may be their own personal capital, not too late a period in their life. And so their primary task is to take that pool and make it bigger and bigger and bigger. Now, while I have that responsibility as well, we also have 27,000 employees and associates of the Markell Corporation. So for the people of this company to have a good conception of what it is we're trying to do and how we think about what a good thing is and what a not so good thing is, it's important for me as the CEO to be comfortable in being in front of them and writing the annual report in communicating our disciplines and our values, which have overlap and commonality to how we invest the money, to make sure that we got 20,000 plus ores all pulling in the same direction. So it would be a mistake and it would not work in the context of being the CEO

of a company with 20,000 people to operate in a closed or isolated chamber and not be actively communicating both through the spoken word, the written word, and physical presence. And how much, like, if you have a rough estimate of your day is communication at this point? Well, I joke because I'm very fortunate to have a couple of different sort of official things on my title and responsibility. I'm a director of a couple other companies as well as my responsibilities here at Markell, and I joked that if I were a lawyer and I were trying to fill out a time card to direct where that particular 15-minute chunk of my life should be built, I don't know how I would fill that out because so much of what I do in any given situation informs and influences

what I do in other situations as well. So my time might be 150 percent. of the 24 hours in the day because no matter what I'm doing, typically that applies to other things as well. So communication in and of itself is not something that happens in isolation. It's part of thinking. It's part of a lot of communication is listening and a lot of communication is nonverbal. So all of those things go into the process of how it is my own thoughts and actions are formed. It's time for a quick Advert Tillman. Here we go. Are you looking for a beautiful and efficient way to analyze stocks?

Then please check out what my friends at Stratosphere are building. They have built a great tool to visualize data, to get ideas about ownership of stocks, and many more information that's helpful in the analysis process. You can find that tool where the link below, and feel free to sign up, it's free. Thank you for your attention. and now advertilman and we mentioned the 10 and the 1,400 and you already mentioned like

that your growth overgrowth you have new roles in different companies you have more money to manage it adds complexity but you also have this idea of telling it simple telling it precise turning it that maybe people get an idea in their head if you tell this story so how do you make it how do you make this art of boiling things down to digestible yeah thinkable things when it's super complex in what kind of framework you're operating one of the ways to figure out what to do is to figure out as charlie munger would say invert always invert what would be the wrong thing to do well the wrong thing to do would be to have some thousand page disposition or exposition or endless lecture

on how this all works. So I know that you just can't beat somebody into understanding with thousands and thousands and thousands of pages and hours and minutes of talking. So the art of distilling it down to a smaller bit in many ways comes from the concept of workshopping, of being involved in individual conversations, of being involved in town hall meetings and reflecting upon well what worked and what didn't work

and the stuff that didn't work, let's do less of that and the stuff that worked, let's do more of that. And I've been doing that my whole life. So I don't know how to answer your question well other than sort of frame the process a little bit by which I've landed where I've landed now. So it's touring and A, B testing.

Yeah, it's exactly right. And, you know, think about a comedian. And recently, this has been a little while, but I heard a comedian, this is a pretty well-known comedian. He was touring through Richmond, and I had not seen this before. I mean, I'd heard about it, and I'm not a regular at small comedy clubs, but to go into the show itself, you had to surrender your phone. And you had to turn it over, and, you know, people grip their phone like it's an oxygen tube these days. So it was funny to me just to even watch people physically have to let go of their phone. You can see the anxiety.

But the reason he did that is because when he's on the road in the tertiary market like Richmond, Virginia, he's figuring things out. He's working that kind of stuff out. So by the time you see him in a Madison Square Gardner on a Netflix special, he has worked at his craft almost like a diamond cutter, cutting away the bits of the diamond that take away. from the true beauty that's inherent in the diamond itself to get to that very polished gemstone of a performance that you see when you're looking at the NetFix special or the New York City performance. So, yeah, to your point, all of these exercises, all of the interactions to some degree are chances for me to practice cutting those gemstones to be better at presenting the things that are really good.

at Michael. On the one side, you're a listed entity. On the other side, you're investing at your position, especially in other listed entities. So you're, so to say, buy side and sell side in one thing. And I think if I'm not totally wrong, please correct me. You've worked in sales and selling before you joined, Michael. What has helped you? What you learned in this phase? It was, I think, two years if I'm not wrong. And that helped you communicating with the stock market and what it's a thing that, yeah, you had to let go from this experience. That's an interesting question. Let me think about that.

So, yes, I did live four years of my life as a salesman and an investment firm here in Richmond called Davenport and Company of Virginia. And also as a parent, I was thinking about my own children and some of their career paths. And sometimes people seem a little bit uncomfortable with the label of salesman. And there's a stereotype that is thought of or perhaps conjured into mind when you think about a salesman. Well, I don't see it that way. And I think about my own time as a salesman and the sales slash communication role that I have right now. A great salesman is marked by immense empathy.

So what the best salesman could do, it's not that they can. can talk and they can sell you something that you wouldn't otherwise need or want. It's that they take the time and effort and they try to find out what it is that you need and what it is that you want and what it is that would make your life better. And they do their best to grab into their kit bag or tool bag or awareness to come up with products or services or solutions to your problem. And the best salesman in the world oftentimes can be very introverted, very quiet. listen way more than they talk, which is not the stereotype that comes up from salesmen,

but through that process and through that act, they demonstrate empathy. And they build longstanding relationships of trust and of being a problem solver for people. And as such, they get repeat business from the people whose problems they've solved, and they get referral business from the friends and colleagues of people whose problems they've solved. So I love being a salesman, and I think that's really the definition of what a really good salesman should be. From the context of the buy side in the investment world, you know, where you're looking at the people who actually make the decisions of what to buy and hold on to, yeah, I mean, we have a public equity portfolio of $8 billion or so at this point. We have a fixed income portfolio, $27 billion of what we're buying. So yes, I'm responsible for running those portfolios and buying things.

And again, a lot of that comes through interaction and thoughtful relationships with intelligent people and looking at companies, looking at our own business and seeing what's going on out there in the world, being involved in other businesses through some boards, things of that nature, which are wonderful insights into the economy and who's doing what and who's better at things and who's worse at things. just a constant sifting and sorting process that changes a little bit some days, changes a lot some days, and it's a fun process and a joyful process just to be part of that. What kind of problem-solving definition do we have at the moment for Markle shareholders? So what kind of problems or top three problems are you trying to solve?

Well, I think for Markle shareholders to get back to that notion of the, you know, that song, You know, you can't always get what you want, but if you try, try, try, you get what you need. If I look back at the last five years, I'm not unaware of the fact that the stock has not moved forward at the same pace that it did in the, you know, most of the years before that, and certainly when you get to the five-year time frames, what I tried to lay out in the annual report were some pretty good statistics and hard quantifiable numbers, both of top-line revenue, bottom-line profitability in each of the segments. whether it's insurance, whether it's investing, whether it's in Markell Ventures. And that five-year luck bucket looks pretty good. So despite whatever challenges and missteps and external factors that we faced and through some real headwinds at us and whatever mistakes and missteps we made internally, and we've made some,

I think the evidence is pretty clear at this point that the ship is sailing in the right direction. And in general, I don't think the perception of that matches the, economic reality of what seems to be happening. So I mean, that's a little bit frustrating, but it, I've been in the investment business for close to 40 years now, and I have never seen a company that had consistently good fundamentals where it was becoming more and more profitable over time that the stock market didn't figure that out eventually. So as Ben Graham said, in the short term, the market is a voting machine, and the long term, it's a weighing machine. So, when I look at the last couple of years of Markle stock, I think the market has been a bit more of a voting machine, but I'm very confident that in the long run, it will return to its function of being a weighing machine.

And when it does, the frustration that Markle shareholders might feel at the moment might be assuaged. You have this interesting, I call it. It's not correct, but I make it an autonomy here between buy and sell side and your. somehow on both. And you also have some friends where you exchange ideas on the portfolio with like Josh Terracev was already named, I think with Amazon. He brought to you. So through this, this position you have in between both worlds, what do you might, might you be able to see different than the typical hedge fund friends you have? Well, I do think that as the old tang goes, what you see depends on where you stand.

So, for instance, to use the classic definitions of sell side and by side, well, if you're on the sell side, to take that one first, that's typically been a brokerage firm from the investment world. So as a brokerage firm, typically they get paid through commission or underwriting income, which are transactions. So if you get paid that way and transactions need to take place, well, then it's going to be kind of in your interest somehow or another, it'll filter into your being. It seeps into your consciousness that you tend not to be content with things remaining static because you can't get paid if that's the case. So for me to be aware of the cell side and aware of the dynamics.

forces that act upon them, but not be part of it, sort of enables me probably to have an outsider's point of view about information that would come from the sell side and the way they would see and think about things. Similarly, from the buy side, those tend to be mutual funds, hedge funds, endowments, pensions, things of that nature, where the assets are. And so when a decision is made, typically that person has some responsibility for the asset itself and how well things go. Well, there's another layer on the buy side that's very important is that at some point, there are people on the by side who would be principles, and it really is their money and their capital, and they would think about it as true owners

of that, and there are some people who are agents. So you might work for a long-only hedge fund, or a long-term mutual fund or a pension fund or an endowment. And you might think of that as very, very long-term capital. But you yourself are perhaps an employee who's only been there two years or three years. And you have supervisors and bosses and managers that are judging you. And the time frame and the data they have about you are much shorter term. And they in turn probably have bosses or clients or customers who are judging them. So even though the time frame of a pension fund for some large entity should be generational,

the people who are actually making the decisions oftentimes have much shorter timeframes than what the principle of the account really, really should. So to have some awareness of who it is you're dealing with and what their agenda might be and what the forces and pressures on them personally might be, that can create principal agency differences that come from the by side. So again, to have a bit of an outsider's view of seeing and observing that, I think is helpful. And then the last thing I would do to link that all together,

I think the great thing that has happened at Markell, and it's part of the reason to engage in communication like this and to be so thoughtful and so determined to cultivate a good group of shareholders is what I'm trying to do is minimize the differences that exist between what is in the best interest of Markell and the Markell Corporation over time and the shareholders of Markell. I want the shareholders of this company to want the same thing as the company itself, which means being very successful for an indefinite period of time. We talk about the two time horizons. We talk about around here forever and right now.

So to find a tribe of forever oriented owners of the business whose time horizons, whether they be from the sell side, even with the pressures that sell side people have or from the by side and pressures that sometimes people from the by side would have, and to sift and sort and cultivate and nurture an investor group who really does have as much as possible that long-term time horizon, well, that's worth doing. necessary for us to be able to run the business with a truly long-term time horizon as well. How do you invest into finding these group? What is by your strategies? Like, forming a group like this, they don't fall out of the blue sky. It's hard work and also some monetary investment

sometimes. How do you invest to find these people? Well, it goes back to the original statement about when, you know, when I came to work here and observed that the number one example of somebody who had it really well for a long period of time already was Buffett with Berkshire Hathaway and that was in 1990 so that was that was 33 years ago now and he'd already been doing it for 20 or 30 years but by the time you you got to 1990 so I just was aware of it and decided to start going to Omaha and meeting people and forming those relationships one at a time the financial expense of doing that's not very much. That's not a marketing campaign that needs to buy Super Bowl commercials

or have a top shelf advertising agency involved. That's just a matter of sort of following your notes. And again, tie that back to that miracle and wonder book that Paul Simon that I was talking about. And the Graceland album is sort of a subtext, sub idea that gets followed through the whole book. And one of the fascinating things about Paul Simon is that, He grew up in Queens, New York, at a time when Queens would have had, and probably still does, a lot of communities and people from different parts of the world who had different musical heritages and traditions and sounds and cultures that went around with. And what Paul Simon was able to do was really walk around his neighborhood and go to school with people in his neighborhood who had these different cultures and these different musical genres all there. he just followed his ear. That's exactly the way he would describe what he did.

He followed his ear. So to some degree, what I'm doing, and the way we find this, is I follow my ear. So I go to Omaha, I meet six people. I know all six of those people, and they introduced me to their friends over time. And it's just been a 30-some-year effort of meeting people, listening to people, learning from them, reading things they recommend to me, watching movies they recommend. And you just build this cumulative database of relationships that help you stay current, help you learn things, help you filter things, and it's fun.

But you also decided to invest into building these relationships with the event you host. Like I've heard one podcast with William Green where you said it just didn't pay for the Gourkemole extra when you went to the Mexican. place and like you're really a cheap guy and now you're hosting a free lunch or branch for 2,000 or 1,200 people like how became you willing to do this? A, I prefer the term frugal to cheap. I think the connotative meaning of frugal is just a just a little bit better than that. B, I think the concept of inherent frugality tends to lend itself to the investing mindset pretty well. But to your point, so when Markell first went out there and our stock was $8 or $10 a share, probably the total market cap of the, of Markell at the time was $35,40 million,

something like that. So we were a tiny company. And we bought coffee and bagels for six people. So even if my expense accounts were examined scrupulously, I don't think that the idea of buying coffee and bagels for six people would have been extravagant for a company. that the market cap would have been $35, $40 million. So today... No guacamole. No bar comoli, just coffee and bagels. That was it.

So today, the market capitalization of Markell is on the order of $17 or $18 billion. So when I look at what it would cost us to buy a cup of coffee and a sausage biscuit or a ham biscuit or whatever it is we have on the menu at Omaha relative to the market cap of Markell, even a frugal guy like myself think that that's money well spent. because both in Omaha and in Richmond and the tradition we're building with our own annual meeting coming up on May 17th, and I invite your listeners to join us in Richmond on May 17th. We'll be at the University of Richmond, Robbins Center at 2 o'clock in the afternoon. And I think we're building the tradition here of that same notion of the worldwide convention where you have investors who are looking for management teams that run their business in a truly long-term way. And there's not thousands and thousands of companies and investments that really are run this way.

So I think what we do is different. It's differentiated. It's not common. And people who are looking for something distinctive and not like everything else, when they find that community, they like it and they come again and again and again. So even for a frugal guy like myself who avoided spending the extra money for the guacamole in my early years, we can afford the guacamole now. it's money well spent. Great. Then I know what's on the menu for the annual meeting enrichment.

Maybe. Maybe. Maybe. I don't want to give too much away. Yeah. To come from this 8 to 1,400, it's a bit of a marathon. You have to run. Like with a marathon runner, you have to be in the right pace.

because like also coming back to Warren Buffett and Charlie Manga they deliver and I think they found their pace and the way they are yeah they feel right the right heartbeat maybe there's also an explanation that they are that old

how do you think about building such a system that you're in the right pace at Markell that he can consistency deliver and in the like not over tune not under tune right well I think that's that's a incredibly important point. And it is the temptation. And again, getting back to this conversation we were having about the sell side and the buy side. So the sell side, the pace and the tempo and the

cadence is set by the fact that if the customers buy something and then they are so happy that they never sell it, well, the sell side can't make a living at that kind of pace. So by definition, the cell side is going to have a cadence, which is oriented towards activity because that's how they get paid. And the by side, while the underlying principle may be at a very measured and long-term pace, some of the people within it may have more of an agent's mentality than a principal mentality, and they cause their pace to be quicker than it otherwise would naturally be. So, for instance, one of the ways in which we try to get the pace right is, again, talking about those dual time horizons that we talk about around here, the forever and right now.

Well, I think it's important to talk about both, not just one at the exclusion of the other. Because if you talk about forever without referencing right now, it's easy to become complacent and comfortable and not act with the sense of urgency that is required sometimes. If you talk about the right now all the time, without the context of forever, you can get too short. short-term in your focus, and you can push, push, push, push in ways that, I mean, if you're a good farmer, a good farmer knows you have to rotate your crops, that sometimes you need to let land lie fallow for a season or two in order for the soil to regenerate itself. And a good farmer is to say, doesn't farm for himself, he farms for his children and his grandchildren. There's just an inherent sense of stewardship that goes along with the ability to understand those dual time

horizons and the tensions that exist between the two of them. One of the other ways that, again, this would come about is that, for instance, it's pretty common that somewhere along the line, when we have bought a Markell Ventures company, and these people are relatively new to Markell, a situation will come up where they have some tough decision to make, and they'll come to me and sort of ask what I want them to do. And 99 times out of 100, what I say is, well, let me ask you this. If this was your business and it was the only business you and your family were ever going to have, what would you do? And then I stopped talking.

I sit back and I wait for them to answer that question. And it's been my experience that 90 times of 100, when the question is framed that way, these reasonable, thoughtful, intelligent, honest people, they answer it in a way that makes sense to me. And so I say, well, I think you should do that. And then they do. And that has worked out very well. So it's just this constant reminder. It's a liturgy.

It is the notion of sort of having these touchstones, these principles, the four lenses of investment, the three engines of Markout, that we say over and over and over and over again. And what all of those serve to do is to provide context for any individual decision or any individual action that you need to take it at any one point in time. You don't have to take your actions in isolation, either intellectually, behaviorally, or collegially with your colleagues, because you can sort of close your eyes and imagine if the person who sits in the office next to me was faced with this decision, what would they do? And it's comforting. And, you know, as individuals, again, psychological stuff, being alone is an uncomfortable thing. And you can drive somebody nuts by isolating them.

Solitary confinement has been ruled cruel and unusual punishment. Well, because of the isolation. So the fact that we would have such well-defined principles and ideas that undergird the organization, That gives people psychological comfort that they know that if their colleague was faced with this decision, they were probably doing something similar to what I'm doing. And if I had to make a decision on behalf of my colleague, I could sort of be comfortable having sort of a modified power of attorney or proxy to do that because these ideas have become the system of Markell.

maybe before the end the question also about the system of mackle and also in comparison to berkshire heatherway which is a bit of role model but if you compare the public equities portfolio of berkshire and yours we're coming back to the topic of concentration we covered also in our last interview a bit if you look at berkshire's portfolio i have the feeling it's more concentrated if you think about the big bats apple for instance which takes a super large stake of the portfolio but for you, it's like less concentration plays a role there. Why is that so? And like, why aren't you like into going big for Apple, for instance?

Well, first, the most important answer to that question is, I am not as smart as Warren Buffett. I hate to break the news to you. But again, that guy is world-class. You're looking at a Michelangelo of his era. So, while he has incredible lessons to teach us, and is worthy of study, there's a difference between studying somebody and trying to learn from them and making this leap of faith that you can do exactly what they do.

Because the fact of matters, we know his name, we know his record because he's been extraordinary at what he has done. So concentration in and of itself creates, in finance or idiosyncratic risk that if you're wrong, that can leave a big gaping hole. I know myself well enough, and I think it's important to have humility enough to recognize that to take as concentrated a position on things as what Buffett and Berkshire do is probably not appropriate or wise for Markell, both given my limitations and our own relative size of balance sheet and size of our insurance business relative to our equity capital, all kinds of reasons. That said, in the world of institutional equity investing, I would say we are pretty concentrated.

Our largest position is indeed Berkshire, which is 11% or so of the portfolio. Apple, just to recognize the name you're talking about, is one of our top 10 holdings, and it would represent, I'm guessing, three or four percent or something like that, but don't hold me to that particular number. If you take the top 20 names that we have, you're more than two-thirds of the entire portfolio. So while there are a lot of names, there's actually a reasonable concentration at the upper end and concentrating on your best ideas, which I think is in keeping with the lesson that Buffett would have taught and it's being executed in the way that I myself can do it.

So, for instance, if you think about it in baseball terms, Buffett's a slugger. I mean, he's a home run hitter and has jack some balls out of the ballpark. I might be the number six or seven hitter in the lineup, not the number four hitter. So my job is to get the ball in play, get a single, get a base head, get hit by a pitch, draw a walk, and get on base and keep the game intact and keep our team at the bat. And if we do that, the compound effects of that are very good. And again, if you look at the long-term compounding record of Markell, it's been pretty good so far. And despite a little bit of a lull in that action between-innings stretch in the last couple of years, I think the process by which that record has been created is intact.

I know that the values by which it has been created are intact. And that's why I feel pretty good about the next inning, two innings, three innings, next game, next season. Maybe for the closing, a quick question on the valuation of your stock. Like from what I heard in this conversation, you think McHale is undervalued? Is that so? That would be my sense. I'm reluctant to say that too much because oftentimes CEOs, it's almost an article of faith that they would never say their stock is overvalued.

So if you're never saying your stock is overvalued, well, then your credibility when you say it's undervalued is diminished. So I tend not to speak about whether Markell would be over or undervalued. I have laid out in the last couple of years annual report the way in which I would go about the discipline of trying to think about what Markell is worth. And I talk about, you know, the investments per share and the fact that I do think those accrete and stick and provide a hundred cent on the dollar value to the shareholders given the structure of Markell and given the float where that money comes. comes from. I talk about Markell Ventures and the non-insurance underwriting parts of the of the business and what a reasonable multiple of that would be. And we talk about that over time. So it's calculated in a consistent way because I don't think GAAP accounting does a particularly good job of capturing that number. I wrote about it in this year's annual report when you take a

financial business and a non-financial business and you mix it together. I talked about that was like mixing a chocolate milk and motor oil. Those are both liquids that can be measured in fluid ounces, but I wouldn't combine the both of them, and I wouldn't drink the combination, nor what I put it in my car's engine. So gap accounting is limited at its ability to capture valuation of a business like ours. I think you do have to break into segments when you're doing that valuation. And when you do, and you do so consistently, there is a number, and I compare that number to the trading price. And if you then get to the, sensation of, okay, well, actions speak louder than words. In the last year and a half, two years,

we have repurchased more Markle stock than we ever have before. So that is a manifestation of my personal belief of what Markle stock is worth and what it's selling for. And I'll just continue to let actions speak louder than words. You also have this situation by side and sell side already mentioned a bit, like that you're in between these worlds. What has helped you this experience of maybe a continuous undervaluation of the stock to really understand also like interesting thesis on catalysts that the value get built close? What do you see in other companies that there's a valuation gap where you think the fair value, how long it takes, what drives this?

What has this generally taught you? Well, I know that the word catalyst is one that's thrown about both in the cell side and the buy us how do we tend not to use that word here, which is an advantage and a benefit from the fact that we have a longer term time horizon to work with. And if you look at the pace at which we have repurchased our own stock in the course of the last year, year and a half, it's up, well, in 35 or 40 years, we'll be down to one share. And I suspect we won't get that far. But if we do, I'll be the last, last shareholder. And I suspect that it would be selling for a lot more than what it is right now. Now, at what point the rest of the world seems to agree with that notion? I don't

know. There's nothing I can do to force that. All we can do is run the business with as much rationality and professionalism and care and sense of durability and sustainability and doing things the right way and taking care of our customers and taking care of our people. And if we keep doing that, well, there's really never, in the 33 years that I've been here, there's never been a catalyst. There's never been in any moment where you would say, oh, this is what's going to make Markell stock move from X to 2X to 4X. But in the course of time that I've been here, it's up, you know, 175X.

But there was never a catalyst. So it seems to me that a catalyst is not what we're lacking or what we need. for it to go from 175x to 200x or 250x or 400x. I think if we keep doing the sorts of things that we've been doing with the same values and the same processes and the same discipline and the same rationality, we'll get there. And that's good enough for me. Try, try, try.

Try, try. You get what you want. Yeah, what you need. Yeah, what you need. Maybe both someday. Before the end, I always give the chance to add something we haven't discussed. So is there anything you want to add to the interview? No, I like the direction we took, which is non-traditional, but that fits Markell. We do things in different ways.

Yeah. Thank you. Then we see us in Omaha and wish you a great day. Perfect. Thanks, gentlemen. Bye-bye to the audience. Bye-bye.