Motley Fool Money - Buffett, Bromance, and Behavioral Economics

Episode Date: June 30, 2017

On this week's show, we revisit two of our favorite interviews from 2017. Award-winning director Peter Kunhardt talks about his documentary, Becoming Warren Buffett. And best-selling author Michael Lewis talks about his new book, The Undoing Project: A Friendship That Changed Our Minds. Thanks to Harry's for supporting The Motley Fool. Get your Free Trial set - go to Harrys.com/fool. Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Full Money radio show. I'm Chris Hell. Thanks for joining us this week. As we hit the midway point of the year and as Independence Day is just around the corner, something a little different this week. We are revisiting a couple of our favorite interviews of 2017 so far. A little bit later in the show. show, author Michael Lewis has been called the best nonfiction writer in America, and for good reason, with classics like Liars Poker, Moneyball, the Blind Side, and the Big Short under his

belt, seems like pretty much everything Lewis produces turns into a bestseller. His latest is The Undoing Project, a friendship that changed our minds. But up first is Peter Coonhart, who tackled a well-known subject and somehow managed to surprise audiences with what he learned about Warren Buffett. Peter Coonhart is an Emmy Award-winning director. His latest documentary premieres on HBO on Monday, January 30th. It's entitled, Becoming Warren Buffett. Peter joins me now from New York. Thank you so much for being here. Thanks, Chris. I'm glad to be here. I have to thank the nice people at HBO because of their efforts, I was able to watch an advanced screening of your documentary last night, and I was, I have to say, I was surprised at how personal this film is. It's

includes home movies of Warren Buffett and his children and his wife. And that leads to my first question, which is, how did you get this level of access to someone like Warren Buffett who has to have been in huge demand over the last 25 years in terms of people wanting to tell his story? He gave me an hour to come in and speak with him. But I then asked him for a follow-up, and he granted me that. And over two years, we ended up going to be. going to Omaha five times. And so the trust and the relationship grew over that time. And about halfway through, I told him that we just didn't have the visuals to tell his full story.

And he said, I'm going to give you everything I've got. And his daughter, Susie, is the keeper of the family archives. So we took two cars over to her house, and she pointed to the closets and the drawers, and we just emptied everything and scanned everything they had, all the albums, all the pictures, all the headlines, and transferred all the home movies, which hadn't been seen before. And there was no, to Warren's credit, there was no filtering. There was no saying, let me look at this first,

to make sure this is okay for you to see. He just said, whatever you want, you can use. And we spent a week scanning it all, and I think that's what brings kind of that visual difference to this film that people have not seen before. There are a couple of key influences in this film that are really brought to light, one on the personal side and one on the investing side. And let's start with his late wife, Susie, because she is as much at the center of this film

as Warren Buffett is. And I was thinking about the, you hear often that, well, you can't really change who people are, but after watching your film, it's clear. that she changed Warren Buffett. I'm curious if you could share a couple of thoughts on the ways in which she changed him. 21 when they married, she was 19, and he was totally fixated on his work, and he was all brain and no social skills. He had a very hard time getting along with kind of the regular things in life.

she was all heart and I think she said Warren was my first patient and I wanted to help him become kind of a more well-rounded human being and she just molded him and helped him and taught him how to respond to people and how to trust people by the end of the film after we've heard the story of Susie Buffett and Warren he says that he never would have been able to be as successful as he was without Susie, that she was the reason Berkshire Hathaway has become what it's become. So he gives her as much credit as he gives himself. And I think that's one of the reasons Warren is pleased with the film is I don't think that's really come out before. I think people have loaded him with credit and he's always known that Susie deserves a good part of it. The other person on the investing

side is Charlie Munger. Yeah. And I guess I had never really clued into the way. ways in which Charlie Munger has not only been an amazing business partner for Warren Buffett over the decades, but the way in which he appears to have changed Buffett's investing approach. When they meet, Buffett is really a guy as an investor who's going after the so-called cigar butt stocks, the companies that are on their last legs, but they've got one more tiny bit of value out of them. And Munger comes along and really seems to open his eyes to a larger world of investing. So for years, Warren made a lot of money on these small companies that weren't very interesting or glamorous or even profitable. But as you say, they had a few more toks of

smoke out of these little cigar butts. What Charlie did was open his eyes to good companies at decent prices instead of medium companies at gray prices. And he taught him that over time, by investing in franchises and brands that were trusted and part of the culture, that Warren could do much better. And Warren credits Charlie with opening those eyes. And if you look at the spike in Berkshire value, it really, it's a, it's a, it's an upward movement, and then suddenly, when they shift philosophies investing, it just spikes upward. So Charlie was right, and Warren is, that's now what he does and what

he's famous for. One of the things that Buffett is famous for in investing circles is his temperament. He has said before that when he mastered his temperament, that was a huge turning point for him as an investor. And yet, I was struck by something that is illustrated wonderfully in your documentary about his acquisition of Berkshire Hathaway. And it appears, if I'm understanding correctly, it appears to be based on a very emotional moment in his life where he's a shareholder of the company.

The company's management is trying to squeeze just a tiny, like an eighth of a share extra out of him. And he reacts pretty emotionally and decides, you know what, I'm just going to acquire more shares and get these guys out of here. Exactly. He was uncharacteristically Buffett at that time. He did what he preached is not to do,

which is to bring a motion into his business dealings. And Charlie Munger comments that it was just, he couldn't understand what he was doing, and that eighth of a point didn't make any difference. But Warren, during his interview, said, you know, I think back to that moment, I realize it was five days after my father died, and that must have had an impact on me. He was very, very close to his father. He's still very close to this day. He sits at his father's desk. He hangs his father's portrait behind his desk. He lives and

breathes the principles and ethics and morals that his father taught him. So he's extremely closely to his father, and I can imagine the impact his death had on him. So when I asked him if he could talk about the last conversation he had with his father, he just said, no, I can't. What that illustrates to me is that Warren Buffett is hugely emotional right beneath the surface. He's able to keep his emotions out of business, but just beneath the surface, he's a very human, very emotional guy and I think showed some of that in this film. The documentaries you've made before this have largely focused on political figures in U.S. politics. What got you interested in making a documentary about Warren Buffett?

Well, the same largest that many presidents have or social activists have that we've covered in the past. I was just struck by the human story, and I'm not a finance guy. I don't know much about finance, but I was intrigued. How could he grow up to become who he became? So we really based this film on exploring his childhood and the changes he forced himself to undergo to become who he became. And, you know, like these other characters we've covered in the past, you know, he has an heroic story in a way. It's a, I find it very moving when somebody can change who they are. And Warren has changed who he is a few times, and it's really grown with the times.

He's a very different man now. Carol Loomis from Fortune actually said, you know, she was lucky enough to be with Warren when he was becoming Warren Buffett. that's where we got the title from. And she said he's just a much bigger and better man than he was before. Coming up, Peter Coonhardt talks about why Warren Buffett decided to give away his vast fortune. Stay right here. You're listening to Motley Full Money. All right, got to say thanks to our friends at Rocket Mortgage by Quicken Loans.

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for or against, so don't buy ourselves stocks based solely on what you hear. Welcome back to Motley Fool Money. I'm Chris Hill. Let's get back to my conversation from earlier this year with Peter Kuhnhart. We're talking about his latest documentary, Becoming Warren Buffett. Well, one of the ways that it seems like he has not changed, though, is his attraction to numbers, which right out of the gate, just as a kid, he was drawn to numbers. and as a businessman in his 20s and 30s and really finding his footing as an investor, he was a numbers geek when it was a lot harder to be a numbers geek. You had to do a lot more work.

There's a lot more reading. There's a lot more work just with a pencil and a pad of paper. It's much easier now when you can get an Excel spreadsheet and let the computer do the work. But it appears as though that attraction to numbers and literally shutting the door. to his office so he can just sit and read and focus, that appears to have not changed at all. That's not changed a bit. You know, his son, Howie said to me, my father's like a computer, his mind's like a computer, but the hard drive never runs out.

And Warren reads constantly and keeps adding data to his brain. And I asked him what, I said, I know you kind of think in terms of numbers. What does it look like to you in your brain? What are you seeing? What are you visualizing that the rest of us aren't? And he didn't have an answer for that. But clearly he's seeing something very clear. And shortly before we aired in the film at the premiere in New York last week,

I sent it to Warren to look at beforehand. And he spotted that on one of the charts, I had left three zeros off of the total value of Berkshire Hathaway. So we had this typo. And there were a lot of zeros in it. It looked pretty zeroed out to me. But Warren's, you know, his eye went right to that, and that was the only comment he made. So he's skilled at looking at numbers.

What leads him to decide I'm giving away my money, 99% of it, and I'm going to give it to the Gates Foundation. It's going to some other foundations as well, but largely it is going to Bill and Melinda Gates for them to spread out across the world. What leads to that decision? I think it was, for many, many years, it was a rational planning process that he went to. He formed a foundation in the 60s. He always intended to have his money go back to society. He fought with his wife, Susie, about when to do that. She wanted to give it away sooner.

He wanted to keep hold of it longer so it could compound and make an even bigger impact. And when Susie died unexpectedly, all his plans were extinguished. And he thought, what am I going to do now? And he came up with what he thinks is the perfect solution, which is to turn to his great close friend Bill Gates, who thinks a lot like he does, and is one of the best people alive who knows how to give away money. So Warren wanted to continue to make money and turn to somebody who he could trust to give it away. And I think the catalyst was the death of Susie because one year afterwards he made the announcement.

It really does seem like their partnership, even though they remained married for many years, they were living apart for decades. But there was something connecting the two of them that enables him to continue to grow emotional. it really seems like that is the catalyst that leads him to Bill Gates. Completely. And, you know, when Susie got mouth cancer in San Francisco, and Warren, who doesn't, you know, he, for the most part, he sticks to his routine, but he got out of the plane and every week spent the weekends with her as she recuperated. he he he he he learned how to how to be there for her and how to just kind of sit and hold her hand and and comfort her

so that that that that will same warren wouldn't have done that 40 years ago he did that that that's a new and very different warren and so she she was she I think it's a it's a sweet end to a to a love story and I and I do see this film as a love story more than a business film. It's just a sweet way to see how much he had changed and how much he had grown. Last question, then I'll let you go. One of the things that his daughter, Susie, mentions about her father, and she's the oldest of the three kids. Yes. One of the things that she mentions is him singing to her and singing, in particular the song, somewhere over the rainbow. The closing credits of your documentary include Warren Bollinger. singing somewhere over the rainbow. Where did that recording come from? Because that couldn't have

been stuck in a closet somewhere. Well, actually, it was. So Susie told that story to us, and when we got into the editing process, I told her we were going to use the story, and by any chance, had Warren ever recorded it. And she said, you know, he once sang it to me in a karaoke bar. and we had and we did we did make an audio tape but it was decades ago and I'd have to look for it and I said that would be very important to us if you could find that so she dug through her stuff one weekend and came upon it and once we heard it we knew it was the way to end the film now we know what his karaoke song is that's right the new documentary becoming Warren Buffett premieres on HBO on Monday January 30th at 10 p.m.

It's fantastic. So watch it. Peter Coonhart. Thank you so much. Thank you. I enjoyed it. Peter Coonhardt has earned five Emmy Award nominations. His first coming in 1993. His most recent win was in 2016 for directing the documentary Jim, the James Foley story. You can find Becoming Warren Buffett amid HBO's collection of documentaries on HBO Go. They do great stuff over there at HBO, so definitely worth checking out. Hey, a couple of quick housekeeping notes before we get to our next interview. If you want to keep the conversation going, there are a few ways you can do that.

You can follow us on Twitter. Our handle is at Motley Fool Money. If you're on Facebook, you can join our Facebook group. It's simply called Motley Fool Podcasts. You can connect with other listeners like you. You can share your investing experiences, fire off any questions, and a lot more. It's Motley Fool Podcasts on Facebook. And as always, you can drop us an email. Radio at Fool.com. We love questions about stocks, industries,

trends, and whenever possible, we like to dip into the full mailbag and try to answer your questions during the show. So drop us a note, Radio at Fool.com. Coming up, we'll talk with best-selling author Michael Lewis about bromance and behavioral economics. Stay right here. You're listening to Motley Fool Money. I see my word. Quick word of thanks to Harries for sponsoring this episode of Motley Fool Money. I love Harries. I've been a customer of Harries for years. I love their products.

That's why I'm a customer, because I love what they do. And Harries is so confident that you're going to love their blades, they're giving you their trial set for free. Free! You just cover $3 in shipping, and you get a free trial set that includes a weighted ergonomic razor handle, five precision-engineered blades with a lubricating strip and tremor blade, rich lathering shave gel, and a travel blade cover.

Stop messing around and get started shaving with Harries today by claiming your free trial offer. That's a $13 value for free. You just cover the shipping to get your free trial set, including a razor handle, five-blade cartridge, and shave gel. Go to Harries.com slash fool right now. That's harries.com slash fool. Welcome back to Motley Fool Money. I'm Chris Hill. Michael Lewis is the author of such bestsellers as Liars Poker, Moneyball, and the Big Short.

His newest book is The Undoing Project, A Friendship That Changed Our Minds. Michael Lewis, welcome back to Motley Fool Money. Thank you, Chris. The Undoing Project focuses on the relationship between two Israeli psychologists, Daniel Conneman and Amos Tversky, who created the field of behavioral economics. What should investors know about the work of Connman and Tiverski? You know, it's indexing. These are two very different people. Amos Tversky is an extrovert, very self-confident, very comfortable being the center of attention.

Danny Kahneman is not just an introvert. He is, as you go through this book, he is plagued with self-doubt. I'm sort of tempted to ask, how in the world did these people deal with one another? They're just so different. Their colleagues when they met at... You have visited full headquarters here in Alexandria a few times. One of those times was after the book Moneyball was published, and you said that one of the central lessons of Moneyball went largely ignored, and the lesson was that essentially be

careful what you measure because it can become fetishized. Do you think there's a lesson from Conneman and Tversky's work that is being ignored or misinterpreted in some way? Did your work on this book change the way that you think or the way that you make decisions? Because part of my reaction to this book is it's a little unsettling just to think of how, as you said, how the brain is wired and how there are just far more mental traps out there that we have inadvertently set for ourselves. So when you look through the lens of Kahneman and Tversky and. at the presidency of Donald Trump. What do you see?

The election afterwards had very detailed explanations about why he won the election. You never know what he's going to do next and what's possible. I mentioned Moneyball before. And one of the things that comes up in Moneyball and other books of yours, including this one, including the big short, there's this theme of the role that confidence plays for better and for worse. what separates people who are able to successfully harness their confidence from those who are just blinded by overconfidence and end up paying the price? The deadliness of overconfidence is making decisions you don't need to make.

Coming up, Michael Lewis talks about the business of writing. Stay right here. This is Motley Fool Money. Welcome back to Motley Full Money. I'm Chris Hill. Let's get back to my recent conversation with Michael Lewis about his latest book, The Undoing Project, a friend. friendship that changed our minds. I want to ask you a couple of questions about writing before we wrap up with a round of buy-seller hold. When you pitch this book, the relationship between Danny Kahneman and Amos Diverski, to your literary agent, to your publisher, was there any pushback at all? Because sort of on the surface, other than the fact that you're

the one writing it, on the surface, this doesn't seem like a book that a publisher is one. rubbing their hands together with Glead. It seemed like a little bit of Danny Connman's self-doubt creeped in... Yes, that's also the problem. This is absolutely true. And I'm a bit of a chameleon. And Dany Connolly... Well, and, you know, not to give too much away from the book, but there's a part where he's trying to get friends of his to convince him not to publish a book. So that's the...

So I think this question is not so much about your writing, but maybe about your emotions around your writing. A number of your books have been optioned for movies, The Big Short, the Blindside, Moneyball. And I know that you are largely not involved once that happens. Once the book gets optioned, you get your money, and then the studio does what it does. I am curious, though, does it affect your emotions when you start to hear news of who's involved in a movie? When you hear that Brad Pitt is the one who's championing money. running ball or that, you know, Aaron Sorkin's going to write the script, or that Adam McKay is the one who is at the helm of the big short. Do you get more excited or are you detached from the moment you get the check?

All right. We'll wrap up with a buy-seller hold. This is a private company with embattled leadership. Buy-seller Hold, the future of Uber. Why? I mean... Next week, the SEC is expected to decide on a proposed rule change that would clear the way for a first of its kind. ETF, buy-seller-hold Bitcoin.

Yes. I guess. This is the next big thing, unless, of course, it isn't. Buy-seller-hold driverless cars. They read a million people die every year in automobile. And finally, Las Vegas bookies give them the second worst odds to win the American League pennant, buy-seller-hold, the Oakland A's going to the World Series in 2017. You don't.

You sell that. Come on. I think the Cubs last year. I think if you gave me the bookie's odds, I take them. Right now they're going off. Because I think they always underestimate the. Right now, I think the odds are about 90 to 1. I take them.

Absolutely. I take that. The New York Times calls the undoing project one hell of a love story. It is available everywhere, and it is a bestseller because it's written by the best nonfiction writer in America. Michael Lewis, always great to talk to you. What is Michael Lewis working on next? Well, all indications are the next topic he tackles is going to be President Donald Trump.

You can check out past episodes of Motley Fool Money and all of our podcasts simply by going to Podcast.com. You can also test drive our investing services like Stock Advisor, Hidden Gems, Rule Breakers, inside value and income investor. Just scroll down to the bottom of the page of our podcast center. That's podcast.com. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido.

Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.