The Compound and Friends - Warren Buffett’s Margin of Safety

Episode Date: March 1, 2024

On episode 132 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Larry Cunningham! They discuss the greatness of Charlie Munger, how Warren Buffett found his voice, the 3 most important words in investing, corporate governance, ESG, and much more! Thanks to Public for sponsoring this episode. Go to https://public.com/ and activate options trading by March 31st to lock in your lifetime rebate. See disclosure below for more details. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Options are not suitable for all investors and carry significant risk. Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the Characteristics and Risks of Standardized Options to learn more. For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the Fee Schedule. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See https://public.com/#disclosures-main for more information. Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

What do you think of the fact that one of the reasons why Bitcoin has been as successful as it has is, I want to say lack of corporate governance, it's probably the opposite, but you can't f*** with it. It's fantasy. Part of it's fantasy. People think they can get rich quick doing something new and exciting. So there's just, there's a lot of coolie around. Of course, that's true. But the fact that it is immutable, that it can't be messed with, that the code is what it is, like probably – not probably something they thought about a lot. They thought a lot about that at the beginning.

That was like sort of the whole point of it was the anti-Wall Street thing. We needed a different answer that the banks can't do this. The Fed can't print more money. Like this just is what it is. I think it's a huge part of the Bitcoin story. And I'm not like a Bitcoin psycho, by the way. Yeah. is what it is.

I think it's a huge part of the Bitcoin story. And I'm not like a Bitcoin psycho, by the way. Yeah. No, that's certainly a big part of the engineering and the appeal. But there are a lot of challenges in that space. You know, security is one thing, right? You also have to have some actual value. There has to be some utility.

And it's not always obvious. It's early. And then the other it's early the other another few decades we might find a use for it maybe beyond speculation the other real danger there guys is uh the um state actors and terrorists and extortionists you know who are doing cyber invasion um you know that's their market. You never know who they are. You never know where that money is going. Everything is traded on some sort of cyber type of coin. And it's extremely dangerous.

Those guys, I don't know if you've encountered any of these guys. Who? What do you mean? The hackers? Yeah. I've never met one. So we advise companies who get into situations with these people. And so I've participated in some of the incidents and resolutions.

Like ransom type stuff? Yeah. These guys are the most dangerous human beings on earth. I mean, sometimes it's state actors, but even the civilians. They extract some payment and put your business on hold until they get it. And usually if you pay a ransom, you have something like a standstill agreement in corporate life. You'd have some assurance that the guy will walk away. Well, there's no particular assurance with these threat actors because you can't sue them for breaching the standstill agreement. Honor amongst thieves is like what you have to count on.

Exactly. And they take that to a high level. First, they tell you two things. First, look, we'll show you exactly how we got in to your system so you can fix it. And we will make a blood representation that if any of our people come back to you, we'll kill them. How do they just say it and you have to trust them?

They have evidence of having done that too. Okay. to you will kill them. How do they just say it and you have to trust them? They have evidence of having done that too. Okay. It's a dangerous place. So these are amongst the most sophisticated criminals of all time. These are not like... That's a word for it.

So they're sophisticated enough to know that there's a better chance they'll get the payment if they make it seem as though they're civilized. It's like, look, we got you this time. So it's interesting. They're not lunatics. There's a methodology behind what they're doing. Oh, yeah. That's what you mean by sophisticated for sure.

That's what I mean. I would just call them dangerous. Yeah. They're just evil. Well, the Bitcoin people would say that this went on prior to Bitcoin. Maybe Bitcoin makes it easier to do it in an untraceable way. Yeah. But there have been kidnappings for 100,000 years.

It's not – Yeah, yeah. You know, it's – And if Bitcoin went away tomorrow, there would be a hack the next day. Yeah. So yeah, I'm not recommending banning crypto. I don't really have a strong position one way or the other, but I think it's interesting. It was a spontaneous market that developed and, you know, to the point about governance, you know, yeah, maybe if there was some governance around it, it would improve, but I don't have any great insights onto it um there's an sec requirement now for public

companies within a certain amount of hours to report any breach that they judge to be i guess what's the word they use what is it material okay so sony said uh well what constitutes material my answer is how about just f***ing report it? That's a good point, Josh. Are you kidding me? Materiality has a technical definition that it's important to a reasonable investor. You can proxy that by saying some percentage of net income or assets. But it's a blurry, vague line.

And so, our advice always is, if you have doubt, disclose it. It's probably material. And you can also say in that filing, you have to file it within four business days after you decide it's material. But lots of companies are deciding, we don't know if it's material yet, so we haven't made that determination. But we should file anyway and say, we've had this invasion. And then come back and say, actually, it turns out it wasn't material. Exactly. Or the opposite.

United Health is going through that now. And that obviously is material. But this is now just a permanent part of the landscape. So United Health called in Palo Alto to help them with remediation. So this is now a standard thing, which is what's so bullish for cybersecurity stocks, is that there's no way this is going to lessen in intensity and there's no way it's going to get easier to deal with, which means more profits. So it's, I called it, I wrote a post about this last month. I call it a guaranteed bull market. Doesn't mean all the stocks will keep going up, but is a guaranteed amount of work that needs to be done. First, these companies

send in their SWAT team, let's stop the breach. And then, I mean, you probably know more about this than I do, but then it's like, all right, we stopped the breach. Now let's assess the damage. Okay. Now let's plan for how we make sure this never happens again. And of course the hackers are already working on the new version of what they're going to do anyway. So it's almost like a nonstop guarantee that you're going to have to keep paying these companies to stay involved in your tech situation. Yeah. I mean, it's all hands on deck when the CISO or the security department detects some

unauthorized actor. They got to probe it and see what's really going on, see if they can stop it, fix it, see if it's worse, and then start reporting it up the chain. And if it's encrypting significant amount of data, personal data, customer data, and that kind of thing, they might have to take some serious actions like taking systems off the internet and things like that. I feel like credit card companies have gotten a lot better

at protecting consumers. I was at the Apple store yesterday. I swiped my card. Nope. Chase called me right away. Is this you? Yes, it's me. Yeah.

Like that used to not exist. Yeah, I think it is a cat and mouse game. I think both sides are getting more sophisticated. Two-factor authentication was a huge, that adopting two-factor authentication is a huge deal. It's a big step. It doesn't stop everything, but it's- It doesn't stop everything, but it's-

It's all hands on deck because in addition to the calls that you said you got to make, you got to call your insurance company. You got to call the FBI. And the FBI is very helpful, incidentally. They get involved, especially if it's a state actor. Yeah. And so – and, you know, it's – everybody at the company has to be involved. And as you said, you got the Palo Alto or Microsoft, vendors who participate in doing a damage assessment and a remediation program. So it is a huge industry.

When you sit in board meetings, that must be every meeting, there must be some discussion about something that's taking place to prevent. I think it's best practice these days for the CISO to provide the board with a quarterly data security report. Chief information security officer. Thanks. Sorry, I'm already. No, no, no.

None of these terms are second nature to me. Yeah, yeah. But that's right. Because there are threats and infiltrations all the time. Some are material, some are isolated, some are at little subsidiaries. But the board is well advised to have a sense of what's going on, trends, lessons, learnings. And then every year, maybe more frequently, have that person, the CISO or something, come in and give us an update where we are, where we're vulnerable, what we've patched. And the company that is hit in some big way.

We'll obviously want more periodic updates on that. Yeah. And then, of course, it goes beyond just like the data security gets into reputational security. The Sony hack was just like this incredible milestone where all of a sudden emails are just released to the public as punishment. So I think that was North Korea, right? Yeah. Microsoft had something like that too just recently, right? Where senior emails.

And this goes back to your materiality point because it's simplistic to say, well, it's 5% of assets are earnings. But wait a second. If it's about reputation, what's going to happen to your customers or your employees? That is much harder to measure. North Korea did that in response to the Sony movie with Joe Rogan and what's his name? They warned Sony. Yeah, don't release it.

Do not allow this movie to come out where they ridicule Kim Jong-un. Oh, it's called The Dictator. Kim Jong-un. No, not The Dictator. Yes, it was called The Dictator. The Interview. The Interview. No, The Dictator was with Sacha Baron Cohen.

The Interview, that's right. The Interview. So that was James Franco and Seth Rogen. And I never ended up seeing it. It wasn't good. I was afraid of North Korea. No, I just never. Are we rock and rolling?

All right. All right. All right. All right. 131? Hey, John, what show is it? It can't still be 131. I honestly thought that was last week.

No, it's okay. I knew it. I knew that looked familiar. I knew it. It's Groundhog's Day. There we go, John. We're back. Hey, John, what episode is it?

Well, Josh, your line mic will tell you in this episode 132. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Redholz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Redholz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Today's show is brought to you by Public. Most of the time when we're talking about Public, we're talking about how unbelievably,

incredibly easy and joyous, is that a word? Joyful is to buy U.S. Treasuries. Just boom, click, click, click, done. Now they've unleashed, rolled out options trading to the world with a twist. What's the twist? The twist is that they are sharing literally 50% of the options revenue directly with you, the customer. That's pretty cool. So you know exactly how much they're making because you're getting half of it. Public is literally giving you half of it. So it's a more transparent approach to options with no fees.

And you get something back on every single trade. Go to public.com and activate options trading by March 31st to lock in your lifetime rebate. This is paid for by public investing. Must activate options account by March 31st for revenue share. Options not suitable for all investors and carry significant risk. Full disclosures and podcast description, U.S. members only. All right, ladies and gentlemen, welcome to the Hottest Investing Podcast on Planet Earth. My name is downtown Josh Brown. I'm here, as always, with my co-host, Michael Batnick.

Michael, say hello to the folks. Hello, folks. With us today, John is in the house, Duncan, Nicole, Sean is here, Rob is here. Everybody's here. Thank you guys so much for being here. We have a very special guest, impeccably timed guest. And this was not done deliberately. It's just one of those signs that I get from the universe that I am on the right track. The frequencies are right because this just worked out so

perfectly. Lawrence Cunningham, I call you Larry, but Lawrence Cunningham officially. Lawrence Cunningham has written several books, including the Essays of Warren Buffett, Lessons for Corporate America, a collection of Warren's famous shareholder letters. Larry is also a director and board member on several boards, including Markel and Constellation

Software. He's also a prolific commentator on shareholder issues, corporate governance, boards of directors, all of, in my view, some of the more interesting topics that we don't cover enough on shows like these, but that affect all shareholders and all people involved in the financial markets. Larry's work has been featured on the covers of Financial History. You wrote something about Munger recently, which we're going to talk about. Directors and boards about ESG. You've got a story on the top page at MarketWatch this week about Warren Buffett's latest letter.

How many books have you published in total? Six? It's embarrassing, Josh. 21. No, you didn't. Yeah. Six good ones. The other 15.

Only six worth reading, guys. I will give you those six later in the show. I want to start with this. I want to have you react to this. This is one of the coolest things that I've seen in a very long time on PlayZone. that I've seen in a very long time on PlaySign. I'm happy to share with you that starting in August this year, the Albert Einstein College of Medicine will be tuition free.

Okay, that's that. If you watch that video on Instagram, people are crying. They're going crazy. So this is the Albert Einstein College of Medicine is in the Bronx. And if you're going to medical school in the Bronx and you're going to serve that community or you come from that community, this is a really big deal. Tell us a little bit about what Ruth did and how we got here. Where did she get the money from? And what's the backstory? Ruth is the widow of Sandy Gottesman, who was an early partner of Warren Buffett's in Berkshire Hathaway. And he passed away last year after amassing a fortune worth at least $3 billion, mostly in Berkshire stock, which he acquired very early for the family and never sold. He also ran an investment firm called First Manhattan.

So it's not his entire net worth, but a huge part of it. And Sandy passed away, and Sandy told Ruth, do whatever you want with the money. I don't have any restrictions. But she didn't know that the money existed, right? Or how much there was? Oh, I think Ruth has known. Oh, she did? Ruth's very sophisticated.

She used to be a professor of medicine there. I'm friends with Ruth and Sandy. She's very sophisticated. And her kids said, mom, do it as soon as you can. Just get rid of this money. And so they took a billion dollars and gave it. That's Yeshiva University is the parent of Albert Einstein. And that's where I went to law school, by the way. And I taught there for many years. And in fact, when I did the essays of Warren Buffett, one of the reasons Warren said yes was because of Sandy. We were mutual friends. He was the chair of Yeshiva University at that time. Oh, Sandy said like to give you the access to do the book.

He vouched for me as a good guy, you know, someone Warren could trust. Oh, that's cool. Very cool. That was an important part of it. So I was friends with Sandy for that 30-plus – and Ruth for 30 30 plus years. So it made me cry too, Josh. I mean, she's just a lovely lady and to, you know, she had a range of opportunities that she could deploy that, that capital. And I think the one she chose is just, she was a professor at that school, but what is it about that school that she felt because a billion dollars to any institution is like a crazy

amount of, unless you're talking about Harvard, it's a crazy amount of money. I was reading Felix Salmon, who writes a lot about philanthropy. One of the things this donation does is it's like a halo effect where now other donors look at this school that they otherwise maybe would not have. And they say, all right, this is now a serious institution. We want to donate there too. So this is going to lead to like much bigger things than just the billion dollars. That's a huge part of it, Josh. You're absolutely right. And I think also the Gottesman family has a grand tradition of philanthropy. You look around town, they've got their name on universities and libraries, and we've got a campus in Israel.

But I think three other things about Yeshiva University. First, she believes in education. She believes in medicine, and she believes in the Jewish tradition. Yeshiva University is a Jewish, an institution under Jewish auspices. And so those three things, I think, are a trifecta for her and the family. Okay. This is going to enable a lot of people to become doctors and to stay and practice medicine in that community.

You're absolutely right. I mean, Sheva University, Albert Einstein, is a very good medical school. This will, you know, put it, catapult it right to the top. So when people give money to Harvard, I roll my eyes. This is from the New York Times. This donation is notable not only for its staggering size, but also it's going to a medical institution in the Bronx, the city's poorest borough. The

Bronx has a high rate of premature deaths and ranks as the unhealthiest county in New York. So that's like, it's game changing for a lot of reasons. and that's really special. I want to get into the book and why you thought that the book would be something worth spending time on. There have been a lot of books about Warren Buffett, but just tell us a little bit about how you came to write it and what the idea was behind it and then how you feel about how it's been received, which obviously it's a huge book. Thanks, Josh. How You Feel About How It's Been Received, which obviously it's a huge book. Thanks, Josh. I was running the corporate governance program at Yeshiva University's law school. And part of that job was to conduct high-powered research with high impact and great visibility. And so I had done some things of modest significance.

And then I began reading Warren Buffett's letters, which most people probably think about as investment knowledge, and surely it is. But he had blinding insights on governance, on CEOs, incentives, board structures, conflicts, and M&A, accounting, just on and on and on. I thought, that's a conference. And he was certainly famous and certain. He's not the household name he is today, but he's still pretty well known. So it would be a big splash. And when I told my colleagues and friends about it, they said, sounds great. How are you going to get Warren to come? It would only really work if he came. I said, I don't know. I'll just ask a few friends. So Sandy was one of the people I asked. And I also asked my dean, who had another friend who knew Warren well. What year was this?

95, 1995. And so through that network of friends, I outlined a proposal, made it to Warren's desk. And then just a quick joke here, Josh. This is in the old days. This is for cell phones and emails and stuff like that. So he used to communicate using a telephone and an answering machine. So I was at work all day. I came home at 6 o'clock. I put my answering machine on. I get a message saying, oh, hey, Larry, this is Warren Buffett. I got your proposal. I was like, is this Dave? Is this some friend making fun of me? And, oh, it was him. He gave me his number, and I called him. He said, I like this idea. He had a couple of questions. He said, well, let's figure out how to do this. I said, great. And the idea was to gather smart people from different points of view around investment topics like efficient market theory, portfolio mix and construction, but also governance, M&A and accounting and board service. So I brought 20 experts, a bunch of professors, some practitioners, and we filled the moot courtroom at the law school,

about 200 people. Who was in the audience? Oh, man. Well, Warren, Charlie Munger, Warren's wife, Susan, Ajit Jain, who's a big insurance master. Was this 1995? 90. The conference was in 1996. Was Oasis there? Oh, Oasis. You know, I mean, you couldn't do this conference in that room today. You'd have to get Madison Square Garden. You'd have paparazzi. It'd be crazy. And so it was that kind of person.

Carol Loomis was in the audience. George Gillespie, who was his estate's lawyer. Other people from his world and mine. And then another one that's funny because he was my age and not that famous then, Bill Ackman was in that audience. He was one of the smart 200 who got a ticket. So it was a riveting conversation. I mean, people really engage. Sometimes people just talk past each other. But this was really probing, what's the significance of indexing? What have everybody indexed? How do you pick stocks? Why do you do that? How do you pick CEOs? So it was just riveting.

So we published the – the basis for the conference was a rearrangement of his letters that I put together by theme. Stocks, bonds, other assets, M&A, accounting, tax. You had 30 letters by then. Yeah, exactly. You started in 1965? Yeah. So I had about 30 letters. It was 230 pages. Why were the first three letters pseudonymous or not pseudonymous?

He wrote it, but the other CEO had it. What's the story behind that? Sam, I think his name was Chase. Warren took control of Berkshire Hathaway. It was somewhat of a slow transition. He didn't get the whole thing first. He had to kind of work. And the business itself was struggling.

And he was young. And so there was a little bit of a process. And I think he co-authored those or got into the seat slowly. But his voice emerged fairly soon. So reading your book, like after the first three or four letters, it's like, oh, this guy's feeling himself now. He's feeling himself now. But I love,

I love going back. Cause I think about my own writing. It's unreadable. My first four years as a blogger, like I can't read any of it now, but then I see where I started to hit my own stride. I think that happens for every writer. I'm sure you agree. Absolutely.

So it happened for Warren Buffett. It even happened for Warren. It happened for Warren and Josh Brown. I see a history of 30 letters. Yeah, so it was an instant hit. I didn't expect this either, but also in the audience was a reporter from Forbes magazine, which at that time was the premier finance business magazine. And its office happened to be right across the street from me.

Was it Jason's wife? That's what I was going to say. It wasn't Jason, although I met Jason through this too. I'm forgetting his name. He's not a super famous fellow. Sorry. But he came across the street. And what's going on here? I saw, well, here's what we're doing. So he sat in. And about a month later, they did a profile of the event, the book, and a picture of me, not Warren. And the title of the piece was Three Little Words. And the point of that was that Ben Graham said those are the three most important words in investing are margin of safety. And Warren says those are still the three words.

So that gave it a lot of attention. It got a lot of lift. Warren sent me a little note on that piece in Forbes saying, you say it better than I do, which I rolled out of my chair. When did the book come out? 97. Okay. Yeah. So it's been an eight edition. So it's now almost- So the success of the conference, somebody said, this is a book. And you were like, of course it's a book.

Warren actually said it because I just put it together. I still have the, you know, a black, black heat tape document that I put, and that was 120 pages. I put it on the table and he said, you know, Larry, I think it was after the conference was over, but I think he knew it the whole time. He said, Larry, you know, you ought to consider publishing this as a book. I said, well, that's, that's a really good idea. And now after the Forbes piece ran, I started getting, again, this is in the old days. So I got faxes and phone calls. There was no emails. I got blinded by,, including big-time book publishers who said, we want to publish that book. And I think it's OK for me to say that one of those publishers was Wiley, John Wiley and Sons, the gorilla in that field. And with an editor who I became friends with and is still a very good friend, Miles Thompson, still a big-time editor in the field.

And he wanted the book and was wooing me. And I met Mrs. Wiley. It was a family company back then. He really, really wanted the book. And he offered a, I won't tell you the amount, but an advance that made me fall out of my chair. And I called Warren and I said, told him what happened. And he said, I don't recommend that. I recommend – I think you ought to publish it yourself. Why? Two or three reasons. One was he had personally had a bad experience with book publishing. There had been a book.

I think it was called The Money Masters by John Train that had treatment of Berkshire and Buffett. It wasn't cleared with Warren and wasn't accurate and caused him some trouble. And he just didn't, he got a bad feeling about publishing. And the second two or three reasons was he said, look, you will have much, if you do it yourself, you'll have much more control. If you turn it over to a publisher, you basically see it all control. And the other reason was you'll probably make more money. I said, okay, well, that was a pretty clear no. So I broke the bad news to Miles and I went and published it myself. Now, again, this is before emails. It was also before Amazon. So I printed copies of this book, printed them in Nebraska and had them shipped to my apartment in New York City.

And then I promoted it to store back in the old days, these were print stores like Dalton. Like B. Dalton. B. Dalton. Borders and No-Borders. So you walk into a retail store and talk to the manager? I'd send letters to the sales and distribution teams. So Warren – all right, wait, hold on. Yeah.

So when Warren says, I don't recommend that, is that him saying like, actually don't do that? That's how I took it. And I do think, having studied over the past 30 years, leadership by delegation, people often say, well, just go ahead and do whatever you want. But you have a sense of the person's intention. And I think he's signaling to you, don't do that. Yeah. And it was fine with me. It was challenging, because Miles would have made my life easy. But Warren was absolutely right that I had a seed of control and probably made less money. But right. So I had to do shoe leather, sweat equity to get it into all those stores. And I got it into firms, too. I sent letters to all the big firms around town. And in New York, then there were hundreds. And so I just sent letters to the chief investment officer, said, I've done this. Here's a copy of the Forbes article. Let me know

if you want to buy from your copy. And they'd buy 25 or 50 or 100. And so I started getting the word out. And it was funny. I mean, I had thousands of boxes or hundreds of boxes of thousands of books in my apartment. So every day I'd go to work and I'd come home from work. I'd get all my orders and type up the labels and print them and call UPS and have them down with my doorman. Oh, my God. And I did that for nine years. I mean, I did it all by myself. How many editions have been printed by now?

We just came out with the eighth edition, so about on average. Do you know how many books you've sold? Nearly a million. Wow. Yeah. Wow. Larry, when you wrote the book that's very nice. Congratulations. When you wrote the book, were you—because these are all Berkshire letters.

Were you aware of his partnership letters from the 50s? Yeah. I examined them, and someone else has gone and published them. That was a great one. Really nice. Yeah. My judgment was the era was different. The style was different.

The purpose was different. His audience, his position was a little bit different. They weren't shareholder letters. Yeah, there weren't shareholders. For his limited partners. Exactly. And to Josh's earlier point, I think the stride came later, in my humble opinion. I think there were great letters.

I just detected a different tenor, different vibe and everything. So different culture for the book. different culture for the book. And so what was the, what was the first thing that he did that really let him feel in your opinion that he, that he was like really good at this? I know him, he'll never say I'm really good at this, but you know, we, we all love him for the, the aw shucks, like that's fine. But like you could tell in his writing, he does turn a corner at one point and he just, you feel that he really has a confidence that maybe he didn't start out with what investment do you think or what what move that he made do you think led to that i'd say geico if i had to fix it yeah a little earlier but amex geico was almost

bankrupt right yeah he rescued it and his discovery discovery, I mean, even early, you know, his very early encounters with that, when he wrote that, he wrote a little article on economics of insurance. I forget the title, but it was sort of a case study of Geico that his mentor, Ben Graham, had introduced him to, introduced him to. And I think, I think as he wrote that, he began to discover that he had the analytical inclination to study a balance sheet and think about things like moats. And so I think it was that. But in another version of the answer, Josh, I think he kept discovering and kept learning. Like there are hundreds of corners. Was the IMAX early 70s?

Yeah, yeah. And that was an opportunistic purchase. They had been embroiled in some bit of a scandal. I think it's called the salad oil scandal. And so it's a great brand, and it's got a huge runway, and there's nothing – the economics are solid. But because of that hiccup – But it was a governance issue.

It was a governance issue, yeah. But there wasn't doubt about the trustworthiness of the leadership. It was an interior kind of problem, but it was punished by the stock market. And Warren noticed this disconnect between the value of that company and the price it was trading at. So he seized upon it. And that was notable, too, because that was really almost a pure Warren play. The Geico bit had a lot to do with Ben Graham. Another turning point a lot of people like to point to is the Seas Candies investment in 1972 that Charlie Munger had a lot to do with. So all those guys deserve credit.

But Buffett is an exemplar, and I think the Amex is a very good example of that. It's so funny when you read Warren in recent years how nostalgic he seems to be for deals like Seas. He's still writing about Seas 50 years later like it was the greatest thing he ever did. Meanwhile, he's sitting on – he's sitting like a $300 billion position at Apple or more. I don't even know what the number is. Because it's time though. So like the earnings – Or the furniture mart. He loves to retell the story of doing a deal with the old lady

and then keeping the family involved. And it's like, what? I'm reading two pages on wood and furniture? But don't you think it's because the compounding nature of these investments. So whenever he invested in season in the 70s, the earnings from the company are now making this up 300 times what he

paid for the company 60-something years ago. Yeah, it's the gift that keeps on giving. And I think he points to these because of the value of the retained earnings and also the value of the lessons. I mean, I think with C's in particular, it was the insight that it's okay to pay up for value. He had been a thrifty cigar butt investor. Ben Graham had told him, you know, look for stocks on the cheap. And that's what he was doing. And Munger actually nudged him to say, look, if you're going to be in this for the long term and you're going to start buying lots of big companies, that's not going to work. You need to look for brand power, franchise, and boy, do I have something for you, this chocolate company. People love it.

Well, also those pieces of shit that Graham was able to buy in the 30s where there was more – the company was worth more alive than dead or more dead than alive said differently. Those disappeared. Those disappeared. Yeah, it was much harder. Because these companies were not a going concern. Yeah, it was much harder to do. So I think that's why he points to See's and even Nebraska Furniture Mart because that family had a special culture that they put onto that shop and they had a sense of growth. So – and to flip it around, Josh, the other company that he always talks about was the opposite.

It was Dexter Shoe. It was a shoe manufacturer and he paid up for it. You wrote about that. Yeah. I wrote a book called Big Mistakes. That's right. And that was the example that I used in that book. It's an excellent example. And he points to it all the time, like as like a scab because he didn't foresee shipping

containers and cheap labor. And manufacturing going abroad. Yeah. And so just devastated. And he talks about that. It wasn't a huge amount of money, right? But the lesson. I also think he knows if the family, like the jewelry company, Borsheim's or Nebraska Furniture Mart, he could never do those deals now.

Even if he met the family under the same circumstances because they're so tiny, they're not even worth the paperwork. He could do it like as a favor if he wanted to like change someone's life. But like for economic reasons, there would be no reason to be in the room talking about a deal like that. And maybe that's a part of the nostalgia is that kind of thing is so out of reach now. Yeah. Yeah. The most recent is the flying pilot, you know, the Haslam family. Which turned into a pain in the ass for him.

Which was a lot of trouble. Give us the clips. What is it called? Flying J or what is it? I think it's Flying J. It's a big company. It's a truck stop chain. Truck stop chain, and they have a lot of other interests too.

It's based in Knoxville, Tennessee. It's a family business built up by Jim Haslam, founded it in the 50s, I guess. His whole family, his sons and daughters grew it. Jimmy Haslam was the ultimate CEO and chair. And they had family reasons why they were interested in pivoting out of that, but not immediately because of the heritage and all that. So another Knoxville-based Berkshire subsidiary called Clayton Homes. Clayton's knew the Haslam's and they got to talking and the Clayton's figured, look, I can introduce you to Buffett and Berkshire.

And so they did. And that's a common way for Buffett to get opportunities through this sort of existing network. And they seemed to hit it off. And it was the kind of business Berkshire would like to have. The problem is they bought it in pieces, not the whole thing. Yeah. I think they bought 60% with an option to go higher, and then they got to 80%. And most recently, we're going to 20%. Larry, when you said the kind of business, what do you think the kind of business is that he likes to buy? Yeah. This was family-built, family-owned. It had a culture of loyalty, of internal identity.

Employees liked to work there. It had a franchise. I mean, it's, as Josh said, the big part of the business are truck stops along the southern highways. So there's a little bit of pricing power. They're tollbooths. Predictability. Yeah, there you go. Two and two. And so – and then also I think the other piece too is that when Warren met Jimmy, Warren's big thing is to size people up and see – they see eye to eye.

And the impression I had – I wasn't in the room. I don't have firsthand knowledge. But the impression was Warren said this is a guy I can do business with. So that's an important part of it. I do know Warren says no hundreds of times to saying yes. Often it's just because I don't like the cut of your jib. He doesn't have a mental checklist either. He probably just like – it's probably just obvious to him in a second because he's a genius.

And he's probably almost always right. Yeah, I think so. And that's been my observation. Although in this letter, it's an amazing talent. But in this year's letter last week, one of the passages was, rascals, that's the word he used, are everywhere. You got to be really careful. I think he said it's been one of the biggest challenges in my business life.

And he's always understating himself. I think he's been amazingly good at discerning. You think that's in reference to the lawsuit with the Flying J thing? I can't say. But obviously, that relationship deteriorated. What was the problem? The family doesn't like the final price for the rest of the business? It seemed to be. I mean, the surface disagreement was about interpreting the contract's accounting valuation provision. It's just whether Berkshire was allowed to use push-down accounting.

So it would reduce earnings or leave the depreciation rates the way they are so they'd be higher. And they had a big tussle about that. I assume people fight about accounting all the time. So to have this land up in court and on the front pages, I think something else was going on. It's interesting because so famously he hates all that accounting jargon, right? Like what are the operating earnings? Enough of the nonsense.

Cutting through. This is the problem though with buying a majority in a business with the option to buy the rest. Probably you're going to want to buy the rest because you have the majority. And it's annoying, like even like paying out the earnings to another entity. Minority interests are, that's a great point, Josh. Minority interests are always, always tricky. Berkshire prefers not to do it. I think they've done it seven times out of 70 acquisitions. The other six, I think, went reasonably well. And the family needed to do that for estate planning or tax or transition. So he kind of went along with it. Dairy Queen was one. Shaw Industries was one. The Israeli metal company was another. I think all those went

reasonably well. So this was an odd one. Yeah. Because what ends up happening is, by virtue of Berkshire's involvement, they probably are growing the value of the business that they're then going to have to buy the rest out. Yeah, that's a nice problem. Well, I just think about like I think about Smith Barney, Morgan Stanley, which was a joint venture. Citigroup basically needed to be bailed out. So they threw Smith Barney into a joint venture with Morgan Stanley. Morgan Stanley had, I think, the majority from the beginning, and then this understanding that they could buy another tranche,

and then they could buy the whole thing. And it was an amazing deal for Morgan Stanley, which means it was a terrible deal for Citi. But Morgan Stanley probably was working against its own interest, building the value of that joint venture before they would have to buy the rest of it. Yeah. So that's always tricky.

Can we pivot to Munger? Yeah, sure. Okay. So I mentioned before that this was a fortuitous podcast having you on as a guest, but I didn't mean it in the sense that, oh, Charlie just passed away. I really meant it more in terms of

all of the governance issues that are happening right now. This is like one of those things where I think he was one of the most extraordinary Americans who has ever lived, but you would know better than I would. That's my impression. I'm like a massive Munger fan. I've

read everything. Overrated. I'm just kidding. Yeah. I think he was right up there with Ben Franklin. You do, right? Okay. It's not an accident that Poor Charlie's Almanac was an homage to Ben Franklin's – Peter Kaufman, the editor, deliberately chose that, and I think Charlie appreciated it, and that was one of the reasons he supported it. So absolutely.

I mean in several different ways, Charlie is like Ben. And Ben Franklin was Charlie's idol. He had a bust statue of him. And what do they have in common? One of the things is they were super smart and better. They were super interested in all kinds of subjects. Curiosity. They were super interested in all kinds of subjects. Curiosity. Curiosity and passionate learners, lifelong learners. And so Ben Franklin, he's an advisor to all those founding fathers and the presidents and stuff.

He's a diplomat. He's an inventor. He's a translator. He's a publisher. Phenomenal interest in science. And Munger was a little like that. He read deeply philosophy, economics. Architect.

He was an architect, designed buildings. And he was a philanthropist, was interested in science. Lawyer. He was a very good lawyer. Founded a law firm that is one of the, other than mine, top law firm. Decent investor. Great investor. Yeah.

I mean, just a minute. Right. So there you go. Polymaths, right? They were really good at lots of different things. Polymath. Polymath is a really good word for it. There aren't that many of them, especially today. I think there might've been more.

They're the best writers. If they're decipherable, like Umberto Eco. If you're reading a decipherable polymath it's a it's such a pleasure because how many things they reference and pull into all the analogies and metaphors munger didn't write a lot did he i don't i don't know if i've ever read it he didn't write maybe spoke more spoke more than he wrote i think but yes he did uh he gave 11 lectures that's a poor charlie's almanac has 11 lectures that he gave at university commencements. Did he write partnership letters?

He did. And I – I don't think I've ever read those. He had put a few of them in that collection of essays of Warren Buffett. I put in three. They were letters to the shareholders of Wesco Financial, of which he was the CEO from 2000-ish to 2014 when it became a wholly owned subsidiary of Berkshire. And so he'd write thoughtful letters. It was a very different style from Buffett. Daily Journal. Did he write?

Yeah. Daily Journal? He didn't write anything. But they had those annual meetings out there where he'd sit there all day long and talk to his shareholders. But in terms of his writing style, and he also wrote a letter in the 50th anniversary annual report. So right next to Warren's as they were doing reflections. So when did we learn? How did we do this? And I swear, I mean, the style is totally different from Buffett's.

I mean, you can tell immediately. But the brains, I mean, you could just see that intellect in the logic, the diction, the sequence, the strength. I mean, it's really powerful. He's so matter of fact and so economical with words. I just – one of my favorite things about the Berkshire meeting since they started putting him on the internet because I never got to go, which I'm not thrilled with myself.

But Warren will do an eight-minute answer to a question. I have nothing to add. And Charles has nothing to add. I want to ask question. I have nothing to add. And Sean's sad, nothing to add. I want to ask you, do you think that the meeting, the annual meeting in Omaha will outlive Warren? I do. My wife and I wrote a book about that.

Our prediction was called- Berkshire Beyond Buffett? Yeah, yeah. And then the one I did, I did that one. The one I did with her is called the Warren Buffett Shareholder. And it's all about that meeting. Why people go?

What do they learn? And a big part of what happens now is relationship building, meeting other people, creating opportunities, networking. And so some of that will retreat. But there are enough participants and, I don't know, just fellow thinkers. Yeah, it's there. It's Lollapalooza. It's a pilgrimage. It's Lollapalooza. It's a pilgrimage.

It's a pilgrimage. So I think it'll be different. We were going to go pandemic here. Remember that? I was supposed to go and – yeah. Well, I don't want to get into it. My wife found out it was on the weekend. We were supposed to be home.

She's like, you don't work on weekends also now, right? It's not the next thing that you're doing. It's a family thing. Next time're doing. It's a family thing. Next time, tell her it's a family thing. She ain't doing that. It's all families. They have a Waldorf Astoria there. All right. So I wanted to – I mentioned to you earlier Vitaly Katzenelson goes every year and he wrote about you.

And there are these recurring meetings. And our friend Ed Borgato goes. He's like – you know him? Yeah. And our friend Ed Borgato goes. He's like, you know him? Yeah, no, Ed. And Vitaly. Vitaly wrote that book, The Warren Buffett Shareholder, is a collection of 45 essays that we solicited. He's in there. And he wrote one of the pieces. So that's what he – It's a beautiful piece.

He's a very good writer. So who sits on the dais then in the absence of Warren and Charlie? Is it Greg and Ajit? Yeah, I think so. Warren's last paragraph in this year's letter was, come see the three of us on the stage. The three of us who are now running things on the stage. And Greg Abel. Greg Abel and Ajit Jain.

Okay. And Warren. Okay. And so it's been interesting. The evolution, Greg and Ajit have sat on that stage the past six or eight years or so, but they have not had a high visibility. It's been mostly the Charlie Munger. Yeah, they do like one song and then –

One song. So they might do more this year. I mean I think that would be, frankly, not that anyone's looking for my advice, but I think it would be a good idea to try to begin to give them a little more airtime. I guess one question I have is do – should anything else be done, any other kind of tribute, an empty chair or something? Again, they don't need my advice. But I think they'll have something to recognize. I'm sticking Munger impersonator.

Oh, my God. Holograms? Can you have one? I don't like the empty chair. I feel like the emptiness will be felt by everyone because of just like what a stalwart presence he was in that seat. I think it almost doesn't need to be said that he's not there. But I'm sure they're going to do something really nice. That was certainly the flavor of the letter, right?

He says, look, here's the tribute. And there's Warren in the letter has a nice tribute to Charlie and then says, look, I'm going to get right down to business because that's what Munger, what Charlie would want me to do. And that's it. That was a bit of a softball question for you. But what is it about corporate governance that is so important to Buffett and should be so important to all investors?

Corporate governance is the system that protects shareholder investments. Or it doesn't. Or it can fail. Yes, it's a hidden pivot. It can either be very valuable or value-destroying. And that was one of the reasons I got to do that conference and I did that book, because I was a governance guy with some interest

in investing. And I found this investor who really cared about governance, so it was a neat match. And I think directors are stewards of investor capital, or they're supposed to be. That's one conception. Not all directors are like that. So for an investor, for a shareholder, understanding who's on the board, what their incentives are, what their relationships are, whether they own the stock, whether they bought the stock with their own money, is much more important than I think a lot of people think, right? Obviously, the economics, the finance, the competitive situation, the economic prognosis, and all of that may be more important, may be vital, certainly vital. But the stewards is a critical aspect of it.

It seems to me that it's not an issue that anyone cares about until the stock goes down. And then that's when the activists come in. And then that's when there are board seats up for grabs and proxy battles and the like. I guess it kind of needs to be that way because if you had a company that was constantly entertaining fights for board seats, it would probably be very distracting. So it just kind of worked out that that's when we hear about board seats when the stock is down 30%. And an activist comes in. Very rare. I mean you have activist campaigns when a stock's not in a 30% drawdown.

But as the activist, you're probably behind the eight ball because the institutional shareholders are like, everything's fine. What's your problem? Is that your experience for the most part? Is that what you've seen? I think you've captured the essence of the system, and it's quite favorable. It's nice not to see the governance, and there's no need for the directors to be front and center.

Right. And if a problem arises, we have a system through which activist shareholders can take a position, apply pressure, and throw the weak directors or worse out. So I think it's a pretty good system. And I agree with the other point you made, Josh, that it would be bad to have a system where directors are running for office and trying to get the seats. Yeah, because that's politics and it sucks. It's politics and it sucks. And I'm a little concerned.

I don't have a crystal ball, but I'm a little concerned that the current landscape is leaning towards that direction as we see. Which direction? Towards directors running for office and being more political. Because then you need a wartime CEO in there at all times. Yeah, well, as you know, the talk in corporate governance these days is often leaning towards social and environmental and other topics rather than fundamental shareholder value. And you see more and more expectations being put on boards, not just to be stewards of shareholder capital, but to advance various agendas within the organization. I think the pendulum is swinging away from that. I'm glad to hear that you guys think that.

That's my own observation. I have another article out this quarter in Directors and Boards that tries to assess the landscape. And that's where I come out. So you agree. We swung too far. Yeah. And now it's coming back a little bit.

That's what I say in the piece. The tipping point was probably engine number nine, and companies winning board seats explicitly saying that what they were going to be pursuing had nothing to do with the profits, and in fact would run counter to the profitability of the company. That might have been like a peak. I think it might have been a peak, and since that involves Exxon,

it's interesting to update because this proxy season, a couple of environmental activists filed a shareholder proposal at Exxon that would essentially require the company to begin a process of eliminating its oil and gas business. There's no concern there for shareholders. Is that going to be a popular vote? Right. And they had similar proposals the last two years, and it was voted down. So Exxon said, we're not going to include that because it's been voted down.

And usually what a company like that would do is call the SEC, the Securities Exchange Commission, which has rules about excluding proposals that have been voted down. And usually just the SEC would say, yeah, that's right. So we agree with you. So, you know, you can turn them down. Exxon was concerned that it wouldn't get a fair hearing at the SEC today because it's sensing that the current – It's the Biden SEC. There you go. You could say it.

I said it. Thank you. And so what Exxon did instead is filed a lawsuit in federal district court in Texas, where they're headquartered, asking a judge to declare that they could exclude this.

Well, that's the right state. As soon as they did that, the two proponents withdrew their proposal. Yeah. Saying- Don't mess with Texas. I took that to be a tacit admission. There you go.

I took that to be a tacit admission that Exxon was right, that they agreed. Then those proponents asked the court to dismiss the lawsuit as moot since the fight is over. And Exxon refused to go along with that, saying, oh, no, this is going to happen again and again and again. So we'd like to put an end to it now. So that's a pending fight. So I think you guys are right that the pendulum, we had a tipping point and the pendulum is going the other way, but there's still a lot of strength and momentum to contend with. Do you think that – I'm sure there's been quantitative analysis of companies where a lack of turnover in the

directors has led to either a premium or outperformance of the stock price. Do you think that companies with a steady corporate governance or good corporate governance trade at a premium? Yeah, there are a lot of studies. It's hard. It's a somewhat intractable topic, econometric studies. There's so many different variables, not just tenure, age, or history with the company, prior position. So there's work around this. And I think my own opinion is that every director should be evaluated individually. And there are some directors who are great at 60, 70, 80, and 90 years old, including Charlie Munger or Warren Buffett. And others start to falter and lose touch and become just not relevant to their industry or their company.

They can't contribute value anymore. And that might even happen at 60. So there's a tradeoff. You have to look at each individual and evaluate their strengths. In terms of tenure or duration, I think there's a lot of value to the experience of serving on a board and seeing a company go through lots of cycles and lots of growth. So the directors who have been around for 15, 20, 25 years add enormous value. On the other hand, it's good to get fresh perspectives on things and younger people in there. So I think they have a balance.

I'm curious to hear your take on this. So the board of directors serves the shareholders, right? So it's the shareholders ultimately that are judging the board members and the directors. With the growth of indexing, now it's such a large portion of the assets. How has that impacted the dynamic of board members? It's an excellent question. You're absolutely right. The shareholders elect the directors. Directors own fiduciary duties to the company and its shareholders. And usually, if shareholders are picking those directors, I'd defer to whatever they have to say. With index funds, the basic business model is to buy every stock in the index without incurring any costs. And so you charge very low fees.

You don't have the resources to evaluate every director or every board. And so instead of looking to see how good this fellow is, how long he's been there, how old he is, they have guidelines, generic general principles that say things like we vote against people who are over 80, or we vote against people who've been there 10 years or we vote in favor of people who have diversity or we vote against the chairs of nomination committees who don't have – whose boards don't have 30 percent women or – and on and on. They've got lists of things. So it's quantitative. Yeah, and generic. Yeah.

And algorithmic or – Without judgment. But do they also rely to some extent on Glass-Lewis and the proxy advisories? Yes. And I think when those two firms, Institutional and Shareholder Services, ISS and Glass-Lewis, when they came on the scene, their value proposition was, we'll do that homework for the indexing community. And I think for many years they did. But they faced the same problem, that they can't charge large fees either. Their clients

are index funds, but don't have large fees. And they're a top 10 shareholder at every company at this point. Yeah, BlackRock, State Street, Vanguard, 6%, 8% each. And so 20% for a company. They have a lot of power. It's extraordinary. I mean, this is another challenge, I think, that we're going to face in corporate governance, just how much weight those firms ought to have. And they're starting to recognize that, too. Instead of voting for everyone, they're trying to pass through the vote to their beneficiaries,

to their investors. But it's a great challenge. And so I do think you're right that the system is designed so that people can look at a person and a position and a performance in a very specific way. But when you're managing trillions of dollars for very little fee, you just don't have the resources to do that. So the default has been these guidelines and they're error prone. Well, not all of the indexers act the same. And Larry Fink was very vocal on ESG issues, specifically with regard to climate. I think on the ESG front, I don't think anyone would say it's a negative that we've gotten the representation of women on boards significantly higher. I think

that's one thing that's been accomplished that doesn't get enough attention. And, you know, there are people that if it's 48% women, we'll just never be happy until, you know, but like, I think for the most part, there's been huge progress and ESG as a theme has been part of that progress. But then I think that too is kind of like in reverse now or on the run along with a lot of other identity political things. And now it appears that the indexers are walking back, not just indexers, the asset managers are walking back some of the climate commitments that they made during the pandemic

when everyone was home and in a rage about everything. So they made promises. And now there's – for different reasons, they're saying, all right, maybe we didn't mean what we said or we meant it in a different way. What are we to make of what's happening there, do you think? That's a great outline, Josh. to outline, Josh. And I do think you're right that a lot of progress on gender diversification of boards and racial and ethnic diversity of boards has occurred, and it's still going on. I mean, before 2000, there were not that many boards of S&P 500 companies that had a woman on it. And today, every S&P- Which, by the way, is not good for the company.

If the ESG folks never came along, half the population is female. What are we doing? It was an impoverished civilization at that period. And likewise with minorities, ethnic and racial minorities. Today, the Russell 3, I think every – half of the companies in the Russell 3000 have at least three women on the board. So now whether somebody would be happy at 40 percent or not, we're still a long way from there. It's sort of typical. It's around 30-ish percent.

So we're making progress. No question about it. It's trending in the right direction. The same thing with Rachel and Etham Canary. Is it too slow? Exactly. That's the debate. But directionally, it's going in the right place.

And to your point, so I think when the ESG concept was minted by the United Nations in 2004, it had a series of incontestable virtues that would be impossible to disagree with, including the representation of females on boards and conservation of water and protection of wildlife and assuring a governance system that would recognize these values. All good and wonderful and made a lot of great progress. Wasn't even controversial. Wasn't controversial. Right. What happened in the last seven years and why we have the controversy in the last three is that opportunists took advantage of that vessel to put their own much more aggressive agenda items in.

Oh, well, if we're looking out for the environment, here's what you need to do. And everyone needs to stop emissions and livestock development and oil. So it just got a little hijacked. And so to your point, Larry Fink, I think, was on the early wave that, hey, these are good ideas. And it's good for a portfolio of investors. Good for their shareholders. Yeah. Right. And then I think what he's recognized in the past couple of years, and just two days ago,

one of the big environmental coalitions saw a defection of three big asset managers. This is the Climate Action 100 coalition of large asset managers that all were getting together to say, we want to see more emissions disclosure. But withdrawing from that were PIMCO, State Street, and JP Morgan. And they didn't get into a lot of detail about why they left. But it's pretty clear that they had a different view of what that organization should be doing. And I think those firms were interested, honestly, in a little more disclosure and a little more systematic in ways that they could analyze in a big way. The coalition, upon their departure, acknowledged that we're in this for much more

than disclosure. We're trying to change business at our speed. And so there's a disagreement unfolding today, even now. And it ties into your tipping point question. Well, the SEC, I think, is now backing off from ESG climate disclosures. They wanted those to be mandatory for public companies to detail, I suppose, what their risks were from climate change or how causative their activities were negatively toward climate change. And what was the result of that? Yeah, we're in the middle of that game too because the SEC announced yesterday that it's going to meet next Wednesday to vote on how much of that proposal is going to be retained and how much they're going to live without.

It's tea leaves, but my impression is that the original proposal would have required companies to disclose the emissions data not only about their own operations but also about their supply chain, their suppliers of their energy, and the users of their energy. It's called scope one when it's theirs, scope two when it's the supplier's, scope three when it's downstream. Huge controversy, especially over scope three. I was going to say, it sounds expensive. Very expensive and very difficult to measure. This is, you know, you're relying upon, you know, measuring the use of your products by third parties way down the value chain. So it's very controversial. The inside beltway, inside

Washington, D.C. talk seems to be that the proponents of the proposal are willing to live without the scope three, but they're going to try to put on the table, put forward the scope one and scope two. So that's – I think you're right. There's a little bit of compromise, but I think critics are still likely to be concerned about the scope. It's not going to be popular. What do you think? No. What do you think if I say I think everyone loves ESG ideas as long as they don't cost the shareholders money. everyone loves ESG ideas as long as they don't cost the shareholders money. And the minute the rubber meets the road and companies start disclosing, we had to spend $8 million on

data collection for the regulator. That $8 million could have been 5 cents in earnings this quarter. I think that's where the pragmatists break away from the idealists and there were just more pragmatists. Demodaran's done a lot of work on this, just quantitative work. He just says it's a charade, and it's costing a lot of people a lot of money. Yeah, he had a great piece in the Financial Times a month or so ago making a version of that point. And this not-in-my-backyard kind of concept that you're talking about, like I like it unless I have to pay for it. Yeah, no, it's great. You do it.

Yeah. Buffett has a quote that I think applies here. It's a quote from St. Augustine. And St. Augustine is praying to God and he's saying, God, please make me chaste. But not yet. Right, right, right. My favorite Buffett quote, he wrote this in the last 10 years. Something about regulation.

He said, if a state trooper follows you for 500 miles, you're going to get a ticket. Like nobody is that perfect. right? It's a great, it's a great one. All right. We can, we can wrap on the ESG stuff. It seems like, I mean, you guys are writing comment letters to the SEC on this topic at, at your firm. So this is something that clearly there's a lot of horses in the race and a lot of people have a vested interest on the outcome of this stuff. I mean it's a top-tier issue for executives and boards, right? Yeah, it's a top-tier issue for executives and boards and shareholders and everybody else. I mean it's – let me – I mean it's a serious issue.

Climate change is real and we definitely have to manage it and govern it. We definitely have to manage it and govern it. And I think there's a big debate about exactly how, how much mix of market innovation and carbon capture initiatives and how much government regulation that pushes, you know, that has an industrial policy that favors certain players and disfavors others. I think that's the debate. And my concern is I'd love to have that policy debate. I think the EPA, the Environmental Protection Agency, ought to help figure that out. I don't think the Securities and Exchange Commission is the right agency to help to facilitate that debate.

Okay. I want to ask you about insider trading. You for it or against it? Yeah, how often are you doing it? This was a really interesting story that came about over the last month. This is the Wall Street Journal. An executive bought a rival's stock. The SEC says that's insider trading. So it's shadow insider trading. Let me set this up

for you. Biotech executive Matthew Ponawat bought options on another drug company's stock and earned a windfall of $120,000. The Securities and Exchange Commission now says he committed insider trading, even though he didn't buy his employer stock and didn't have information about the company he bet on. As soon as I read this, I said, this has definitely been going on for 100 years. Because if you're an insider at a company, you definitely know things that are going on at one of your closer competitors.

In this case, it's science. So you probably talk to other scientists and you have a pretty good sense of how they feel about their company's drug or whatever. How do you police this? It seems like they want to set the standard and use the courts to make this a new version of insider trading. And I understand why we don't want this in society. I'm kind of shocked. This hasn't like, there's not a law in the books about this. Like this.

Well, they're true. That's how you establish law is you sue someone and win. So, right. Yeah. My sense is this is a long shot case. I mean,

one of the problems with insider trading as a, as a law is it's not defined anywhere. Congress never said. Securities fraud. Yeah. It's within this very, there is no law not defined anywhere. Congress never said. Or securities fraud. Yeah, it's within this very. There is no law about it. Oh, really? There's no express law about it.

It's a securities fraud suit. Yeah, so it's this idea that you're not permitted to misuse your position to take confidential information and use it for your own gain. It's a form of fraud. Yeah, and the SEC developed that on its own. And the states had done that too. It's not just the SEC.

But the SEC is the policeman on the beat, and so it likes to flex its muscles. And so it tends to push the limits of the law. And the opposing force are the courts that will rein it in if it gets too far. And that's how the current law of insider trading has been developed. So by SEC suing and courts sort of shaping it. And the current judicial standard, the court standard, is called the misappropriation theory. It basically means theft. So if you're working for a company, you owe that company the duty of confidentiality. You're not allowed to steal that information, take it home with you, and you're not allowed to steal it and trade on it.

So that's the judicial boundaries. So lawyers advising companies have a similar duty to keep things confidential. So they're not allowed to trade on it either. And just to keep it tidy, those insiders are not allowed to tell their neighbors and friends. The neighbors and friends trading on that stolen information are committing fraud too. But that's about the scope of it. So this approach to say you're an employee of this company, but because you're working there, you're learning about a rival. You're learning about an industry.

You're learning about a product. You're not allowed to trade in that zone, that penumbra, about a rival. You're learning about an industry. You're learning about a product. You're not allowed to trade in that zone, that penumbra. It's a reach. It's never been tested. I think it's a long shot. I think the SEC is reaching. I think my prediction is that a court would not sustain this, not uphold their reach. uphold their reach. And to Josh's point that laws are made by filing a suit, winning a case.

But courts are very careful about that kind of innovation. They're very careful to make sure that people know what the law is. They don't want to be in a landmark decision. The judge is not looking for that when he wakes up in the morning. There's this great Latin phrase, ex post facto laws. Our constitution and our history says you can't punish people by making a law after they did something. Well, here's their case. The SEC says two facts about Ponowat's trading show it was illegal. First, his employer, Medivation, had a policy that forbade trading other companies' shares when employees had material non-public information about Medivation. And second, Panawot traded on his work computer just seven minutes after he allegedly learned that Pfizer would buy his company. So the guy is like obviously – like even if he's innocent of this, the guy is on the edge. But basically Pfizer is going to buy his company and he says to himself, OK, what other stock will probably go up on that news?

Like everyone would have that thought. Most people would not go into their – That's hilarious. OK. Hold on. His purchase of Insight to the other company, Insight Options netted $120,000. He sold some of the contracts just days before buying them. He sold others weeks later and lost money on those, but still earned a profit overall.

He's a former Merrill Lynch investment banker. This is also relevant. His objection, why he thinks the case should be tossed, Pfizer's interest in Medivation wasn't a corporate secret because news about the possibility of a deal had leaked months earlier. A French drug maker, Sanofi, had also tried to buy Medivation. Your Honor, everybody knew. What were he saying? This thing

was in play, man. Look at seeking alpha. I don't know. Yeah. I think this is going to be a fun case. I'm glad it's going to court. Right. Look, the SEC, their lawyers, they're extremely sophisticated and they will only bring a case that has some interesting facts like that. He looks bad. Exactly. But they also know it's a test case. And the thing, when a court

has to weigh in on this, it's got to be doing two things at once. It's got to resolve the particular matter right before it, and it's got to think about the implications of its ruling. And so a district court, a trial court might be more inclined to follow those unattractive facts and rule against this fellow. But an appellate court will have to sit back and say, but what would this mean for, what's the limiting principle? How will we define the sources of knowledge, the timing between you learned about something and when you did something? I don't know the legal term of this, but can't you just use the defense? Yeah. In New York court, that would absolutely win. That's a very, Brooklyn, the Brooklyn defense. I wanted to ask you, are there other companies in the market that have the potential to become, this is like, it sounds stupid just as I'm saying it, maybe not the next Berkshire Hathaway,

but that are Berkshire Hathaway-esque? And if so, why haven't they been discovered yet by investors? Robinhood. Why doesn't, no, seriously, why doesn't there seem to be an heir apparent? I know there are other insurance companies that are also investing the premiums. You know, you're involved with an insurance company, which we'll talk about in a minute.

But like, what's your view of like, why this is such a unique company and no one has really gotten even close to it in 50 years of notoriety. Excellent question. I think the combination of personality, timing, opportunities that Munger and Buffett represented is unique. And just – Of course.

Not replicable. Yeah. And just – Of course. Not replicable. Yeah. And the policies that they put into place, trust-based management, decentralized structure, insurance float that's used to make acquisitions, the patience that they've had, the loyalty. We can emulate parts of that in our lives and in our businesses. But to get it all at once at all at that one time is a big part of

the story. And to your point about, there are other companies that have tried and successfully emulated parts of this. Well, the outsiders. So I think like CapCities before it was acquired by Disney or ABC, I think- Yeah, ABC first and then Disney. ABC, right. Transdime, but it's, it's one industry. It's defense. Some of these companies are Berkshire-esque. They don't talk to analysts. They don't do roadshow. They don't do the dog and pony show, the governance stuff, the decentralization stuff. So they do exist, but they're not famous. There's no other Buffett. Don't you think the idea of taking in insurance premiums, which are a future liability,

and using that money to invest in the equity of other companies, it sounds kind of crazy. Like, yeah, Buffett and Munger did it really successfully, but what if it doesn't work? A lot of insurance companies have failed by trying that strategy. But you're right. There are a number of- You just had to buy Coke and American Express.

Well, it's so hard. It was lucky. Or smart. Just buy some Apple. What's the problem? There is a sort of insurance company model. And you referenced Markel. I'm on the board of Markel.

And I'm a great admirer of the company. Yeah. Well, you can see my S4s. I buy the stock regularly. But it's a mini Berkshire. People say that it's a mini Berkshire. And exactly that business model. It has a very disciplined underwriting program.

It generates a lot of flow. Who's the CEO? Tom Gaynor. Is he the founder? No, but he's been there for 38 years. It was the Markell family founded in 1930s. And the third generation Markells are still on the board and still around. But they're not attention seeking.

They're not renting out a basketball arena and inviting their shareholders. Well, we actually are. We have exactly that. Where are you promoting this exactly? At the University of Richmond basketball arena last year. I think we had 2,000 shareholders come. We're going to have 3,000 this year. That's something.

We have a brunch at the Berkshire Hathaway annual meeting every Sunday. Tom's hosted it for 30 years. He had six people come the first year. And last year, there were 1,500. So we've got a following. And we follow a lot of those practices that you just talked about. Retained earnings, no dividend, very low debt. They do a quarterly earnings call, but it's not hyped. And Tom writes a very thoughtful letter, a lot like Warren's, where Markel is a significant shareholder at Berkshire Hathaway. It's probably the seventh largest shareholder. We've owned that stock for 30 years. So there's a lot of similarity there. We have a fixed income portfolio, obviously, but then a very big, I think, $10 billion of assets under management and equities, a very high-performing portfolio. And then we have 19, we've acquired 19 businesses.

And non-insurance. Non-insurance. Yeah. Everything from house plants to concrete. You guys long in video? I'm just teasing. You know, I wanted to talk to you guys afterwards. So like, I remember Lucadia was deemed to be the next berkshire hathaway and then they bought jeffries but adopted the jeffries name and dick handler runs that business but it looks more like an investment bank than it looks like the kind of holding company that could one day be yeah uh washington post was kind of like a kind of like a, kind of like a pro, you know, she was a protege of his and that sort of looked like the, but then that got bought. So it just, it seems like none of these like ever get to the level where it's like, oh,

we have a new Warren Buffett. Well, Washington Post then. By the way, anyone that says I'm the new Warren Buffett, you will usually lose money. Oh yeah. That's a black man's job. Shamoff. Oh, yeah. That's Bill Ackman's job. I think Chamath. Yeah. Yeah.

You take the Washington Post, interesting, because then they sold the paper, but Graham Holdings continues to be very much a mini and with the same prosperity. What, they bought TV networks and a learning educational business? Yeah. The family runs that? Yes. So Kay Graham was the matriarch along with her late husband. Then Don Graham was the CEO for a long time, and he retired three years ago, and his nephew is now running it. Tom was on that board for a long time.

Don is a close friend of ours. Yeah, it looked like that was going in that direction. It's got a lot of that philosophy. Yeah. I'm glad about that philosophy. Yeah. The other funny thing is that companies that have achieved something like a Berkshire Echo were acquired by Berkshire. So Marmon Group was a big one and Allegheny Insurance just two years ago.

That's a great point. So if he sees somebody who's really doing that, he might just bring them on in. Maybe the next Berkshire Hathaway is SoftBank and we all just have to stop. Maybe the next Berkshire Hathaway is SoftBank and we all just have to stop. I wanted to ask you about one of the hot topic items in corporate governance is this proliferation of stock-based competence really run amok at certain companies. Buybacks have been a hot-button topic for a long time. And correct me if I'm wrong, that's something that the board of directors and the finance committees are making those decisions. Talk about corporate governance and where buybacks versus dividends fit into the equation. Yeah. These are capital allocation questions. And a rational board or CEO will try to think about how to deploy each dollar of capital to its best and highest use. And there are four or so different avenues.

And they're not mutually exclusive, and it's not sort of linear, but the initial place to look is to see if we can reinvest that dollar in our existing businesses to grow organic growth at attractive rates of return. The second place is making acquisitions of new businesses that we can deploy capital at high rates of return. The third is to pay dividend to the shareholder. We don't have any other good ideas. So to pay dividends to the shareholders, and there's a whole bunch of complicated factors that go into that in terms of your shareholder base and its appetite,

whether they like to have cash. Some of them do, especially the non-taxable holders are happy to receive some cash. And if they can deploy it at higher rates of return than the company, that's a good thing to do. You have to worry a little bit about stockholders who don't want that cash, either because they're taxable or they've got plenty of liquidity and just would rather not have it. And that leads to the fourth possibility, which is to buy your own stock back. And that was only attractive as an economic matter, as a rational matter, if your stock is trading below its intrinsic value. And if it is, that's a great way to deploy the dollar of capital because you're

accreting value or increasing the value. Shrinking the flow, bigger earnings to spread out over a smaller number of shares. Exactly. So it increases the ownership share of each continuing shareholder. And that's particularly attractive for your taxable shareholders because they can decide if they want the liquidity, if they want to receive that dollar or not. So that's a very shareholder-friendly approach to capital allocation. So that's the framework. And done thoughtfully in that manner, it's – the buybacks are perfectly legitimate, rational, friendly, good for the business. But if a board is authorizing buybacks at prices way above value, the company is destroying value.

So that is an irrational use. And that's where I think you get into some of the controversy. Well, especially if they're doing it just to offset the dilution. Sterilized buybacks where they're issuing $100 million worth of stock-based compensation, and then they're doing $100 million buyback. And that is nasty. To hold the float steady. That looks gross.

That's outside of this framework. Yeah, exactly. That's where the problem is. It's a different framework. And you see those charts of stock. So a lot of companies are doing that, though. Tom Reiner at Altimeter has done really great work. So Lyft, for example, the company run rate dilution, it's 9%.

We have this, John. Wayfair, it's 8%. I mean, it's crazy. Somebody else, RBC, did work looking at stock-based comp as a percentage of revenue. And Snowflake, it's— Here's one of the tickers. Can we talk about Snap? It's the third biggest offender on here.

Michael, what is the 8%? Just diluting the shit out of their shareholders. So I don't know if these numbers are completely accurate, but I read somewhere the company basically lost like $2 billion or more since it's been public and has paid out that same amount in stock-based comp. The company has never earned money in its lifetime. For the shareholders. Yeah.

So the stock is below its IPO price. They've paid like $2 billion to themselves for running it, and they've basically done that via SBC. They're not even a buyback. This is from RBC Capital Markets. Stock-based comp as a percentage, as a percentage of revenue, a three-year average or since IPO. Snowflake, it's over 50%.

I mean, these are massively dilutive numbers. And this is clearly not shareholder-friendly behavior. The other thing is almost every name on here is tech or tech-adjacent. So it almost seems like it's cultural on the West Coast for that type of payout to- Well, it is. So again, this guy, Tom Rader from Altimeter, non-tech, it's 0.5% annualized dilution. And that's been steady. That's basically what it is. Large cap tech is double that. And then internet and software, it's triple that. I mean, just massively. Now, there's reason

for this, right? This is the mechanism through which they retain talent, attract talent, pay their employees. But my God, shareholders are taking it on the chin. I guess nobody cares as long as the stock's going up. Well, I'd like to get that culture to read the essays of Warren Buffett because he's got some excellent, that capital allocation framework that I just described. Good luck. Can you make it as an NFT? Well, the boards I'm on, we take – and Berkshire's board, very different approach. We don't pay in stock options.

the board is paid in cash, and then we have to use the after-tax cash, 100% of it, to buy stock, buy stock with our own money in the company. And then we have to hold it for an average holding period of, I think it's five years. And then we just tend to keep holding it that way. And so we never get into these kinds of situations. Well, this game worked on the way up when the companies were growing and when the market rewarded growth because they were reinvesting. A lot of them didn't have positive free cash flow. And this is the way to compensate their employees. Now on the way down, it just looks horrendous.

A lot of this was papered over by the fact of rising share prices. Yeah, yeah. Now, I like to look, going back to your other question about looking at a board or looking at corporate governance, I like to see leadership, and it could go down to the executive ranks too. I like to see stock ownership, but I really like to see it bought with their own money. Was Constellation Brands in your book, dear shareholder? Constellation Brands, Constellation Software.

Yeah, we feature in my book, Margin of Trust, and in a couple of books, Margin of Trust. Remember, I wrote all those books. But I feature Constellation Shareholder. But I read one of your books two summers ago, and I thought it was Dear Shareholder. Yeah. Okay.

Yeah, it was all the letters to shareholders. So what you did was you curated the best insights from the CEOs at 11 or 12 companies. PremWatts was in there from Fairfax. And I thought Constellation was in there. That's where I first learned of it. So it's Canadian or Toronto traded? Yeah, Toronto based. What are they doing? They're very, very niche verticals within software, like car dealership operation software, things that like nobody would even think about. And then they own a constellation of them. Yep, exactly. It's all

business to business. So consumers wouldn't have heard of it. It's not a household brand name, but Mark Leonard founded the company 25 years ago on the thesis that each of these little businesses would have their own moats, their own competitive advantages, because they're working inside a particular industry and inside a particular company and helping that company manage mission-critical parts of their business. Very high value to the company. Sticky. Sticky, high switching costs. A lot of expertise.

And the economics of these businesses, while they're all in different industries, cars, parking, justice, libraries, museums, aviation. We're in everything, every industry, thousands. But the economics of the software business is the same so that we can, we have a lot of base rates and ratios and best practices that work in every industry, in every geography. So we've got this enormous, no, so he started doing it 25 years ago. We've now made 1,000 acquisitions. Oh, my God. In 80 different countries. And we have got learnings from all of them. It's a very highly decentralized, autonomous business organization.

So when you buy one of these, you leave the people in place? Try to, yeah. If possible. And just say, do what you do, but now there's more money behind you if you need it. Yep. And a lot of knowledge. Yeah, yeah, yeah. There's best practices.

And that's what a lot of people do. Say you're working in a high-tech industry in Tel Aviv in Israel. You've got 40 guys, a lot of really smart people. You're doing well. You've got good clients. You're building and building. But you're just sort of at a breaking point. You don't really know how to get bigger.

You don't really know what to do next. People at Constellation know. So that's a great reason to sell to Constellation for the autonomy and the decentralization, the balance sheet, the resources, but also the knowledge. It's a sharing culture, best practices, and that sort of stuff. So we take this business and just help it. Not everyone works out, but we help it get to the next level. And so it's to the next level. And so it's been a remarkable business. And I think those letters that Mark Leonard wrote that I

collected in Dear Shareholder speak to the culture, speak to a lot of the economics I've just described, a lot of sense of trying to get decisions made by the person who's closest to them because that will probably be the best decision. It also gets the best out of people. So a lot of sort of organizational and behavioral thinking behind the company. It's so hard to be decentralized just because the tendency is always to consolidate power centrally, either out of paranoia or greed or for some reason. It's so hard to like find really talented people and leave them the hell alone. But that's what Munger and Buffett did.

That's what they did, and that's what Constellation has done, Josh. He hit it on the head. It's so hard. That's why people – I try to give Michael autonomy. But I think what Mark Leonard was able to do, and this is why it's so hard to replicate Berkshire, is you have to figure out some mechanism to produce trust so that you're able to delegate.

And I think there are a lot of features at Constellation that enable doing it. But one of them is the similarity of the economics in all the different industries. So we have base case and ratios that work in every language and every civilization and every culture. And so when a manager comes in and says, in every civilization, in every culture. And so when a manager comes in and says, oh, yeah, I just – you can't do that for auto supply in Brazil. We say, well, let's talk through this. And so it's a system where, yeah, if a person consistently fails to improve the ratios, we have – managers will talk to them. So it's not like you're just, like you just go do whatever you want.

It's if you meet these basic requirements, you can do anything you want. But you do have to meet the basic requirements. Now, that's a lot harder at a place like Berkshire because the economics of candy and freight are completely different. So he needs a different toolkit. But the need to have a device that assures that trust so that you can rely on the autonomy is the biggest challenge. So that was part one. And we will be back after a break. We'll do another two hours with Larry Conn.

Did you have fun on the show? Yes? I love it. This is great. I would keep you here all day if I could, but I won't. I just appreciate all your insight and spending this time with us.

And we're huge fans of your books. And just, you seem to have a really fascinating, fun life. Like you seem to, I don't know, I feel like you wake up, you deal with smart people all day long. You have responsibilities. You have real work to do,

but it seems like you're right? It's been pretty cool yeah doesn't that describe you guys too? It does we are so lucky

90% of the time I think so yeah I think so that's great my job is only 10% thank you Larry thank you it's been amazing

we always end the show with favorites and we ask people to share something that they're reading or watching or listening to or something that the audience might not know about. So I'd love to hear what you do when you're not serving on boards and reading and writing. Well, I think one of the books I'm reading right now, I do read a lot, but not necessarily in this, but is the biography or autobiography by Jim Mattis. He's The general.

The former general, and I think he was Secretary of Defense in the Trump administration. What's it called? Is that Shoe Dog? I'm just kidding. Yeah. It's called – The Gold Knights book is brilliant too. It's called Deer Shareholder.

Yes, yes. Go out right now. Get it. It's a funny name. It's called Call Sign Chaos. And that's his call sign back in the Marines. And they gave him that. So Call Sign Chaos on his radio transmissions is chaos.

And they gave him that name. He's a great leader, a revered figure. And it's a phenomenal book about leadership. His nickname is Mad Dog. His nickname is Mad Dog. And he helped win Operation Desert Storm. He was just – he is an amazing leader. And he's also really nice and cool.

And his troops love him and all that stuff. And they make fun of him and that's all good. And chaos was – it stands for does the commander have another outstanding idea? Commander have another outstanding idea. Chaos. Because he'd come up with ideas. What do you guys think about this? And he'd be like, that's the dumbest thing I ever heard.

And so one day when they were all talking about it, I'm like, what the hell is this? It's the dumbest idea. And he had chaos written up there. He's like, oh, OK. You don't like that idea? So they gave him the nickname, the call sign, Chaos. But it's a great.

The best thing about the book, I mean, it's interesting because it's about the military. It's about combat and leadership and then about leading from a desk and setting strategy. So it covers the range of, um, context in which you have to think about leadership and what he does all the time. It's page after page, is that he tries to, he wants to delegate, he wants to get decision-making made down at the lowest possible level. I mean, you picture, you know, you're marching up to Baghdad being shot at. Your front leaders can't be calling back to ask you what we should do now. So he leads that way. And what he says is, I just, I formulate my intent and I make it clear what my intent is.

And then the troops figure out how to execute. They interpret the intent to make decisions. My intent might be cut off the enemy lines on the west. And then the colonel, the sergeant has to go out and figure out, should we blow up that bridge? Should we get that brigade? How should we do this? And that's up to them. That's how me and nicole work together no i swear to god like nicole knows knows what the intent is there you go and then for her it's like by any means that i said listen

larry cunningham needs to be on the show i don't care what you have to do make decisions is that why that happened okay she's made this is her second year with us it's great her second year with us unbelievable excellent unbelievable shout out to n year with us. Unbelievable. Excellent. Unbelievable. Shout out to Nicole. Well, you'd love that book, Josh. And I think- I'm not a great- So I've been put into a leadership position.

I think I have some leadership qualities. Then I think I have some very anti-leadership qualities. I don't know if that's going to change. I'm 47 years old, but I do read a lot of books about leadership. So I'm definitely going to look for that. Excellent. Appreciate it. Hey, Michael, you have a favorite for us this week?

I listened to Bill Ackman with Lex Friedman. I told you you would like it. Lex Friedman is – no, I did. I did. I did. I did. All right. Thank you.

I thought that Bill Ackman came off fairly well. Lex Friedman is an interesting interviewer. I mean, it's pure monotone. What do you mean, Michael? I mean, how did he – I don't get it. How did he do it? It pure monotone. What do you mean, Michael? I mean, how did he... I don't get it. How did he do it? It's monotone.

It's magic. Are you familiar with Lex Friedman? Yeah, sure. It's just one tone. Anyway, I thought that was worthwhile. Shogun on Hulu. You watched it? I did.

I didn't get to it yet. It's pretty spectacular. I'm really excited about it. It's like big, right? The scope of it? It's huge. It's huge. It feels like Game of Thrones, I heard.

It's going to be epic. Okay. There's a lot in Japanese with subtitles? Yeah. Okay. I watch these whole things with subtitles now. That's like a very millennial or Gen Z thing. I watch everything with subtitles. Yeah, I just like automatically subtitles on. Except for sports. Everything but sports. Okay.

Big TV show guy or not really? I'm watching things. I'm trying to learn Spanish, so I watch them in Spanish with English subtitles. You watch Narcos? It kind of helps. Yeah, I've seen that. I mean, that's the best.

All right. The Regime is coming from HBO. This looks like it's going to be their next big prestige show. I think it's Kate Winslet playing the chancellor of a Central European dictatorship. I mean, she's amazing. And I think it's the people from Succession are behind this show. So it seems like it has a lot of good ingredients.

All right, my favorite is Kyle Bass got ratioed into the Stone Age for sending a very ill-advised tweet. People send tweets my way, or I see them in articles. I'm not really like on Twitter actively. This looks like it was a lot of fun though. So this is, no disrespect to Kyle Bass. This is a hedge fund manager

who goes and stays in the Carlisle Hotel and then tweets the room service bill. I don't, looking for other people to be as outraged as he is or maybe looking for sympathy, I don't know. It's a $90 breakfast. The orange juice is $14. The Diet Coke is $8, which by the way, Diet Coke for breakfast is interesting. $26 waffle, $12 bacon, $9 cover charge. Not sure what that's for. $10 gratuity, $6 tax. It's an $85 breakfast.

gratuity, $6 tax, gets us to 85. It's an $85 breakfast. So he, um, brilliantly takes a picture of the receipt, tweets it. And it's now like the meme of the week. Just like, I don't know. I kind of, I kind of miss that aspect of Twitter where people just like martyr themselves and, uh, become like the, did you see any of these responses? It was, I couldn't. It was so outrageous. Dan Loeb chose to reply. He said, try intermittent fasting and you'll save money and glucose spikes.

Like everybody, everybody, when you look at the responses, it's a who's who of financial industry people. When you say stupid shit and hijack it for political reasons, both sides, doesn't matter where, you just get destroyed as you should. I mean, who else is in here? Bookvar

is in here. Everyone's in here. Nonsense. Should I reply? Yeah, have fun. Get in there. How are the waffles? Alright, Larry, thank you so much for being on the show today. We want to tell people where they can follow you or get more of your insights. I know you're writing for, I guess it's an industry trade, boards and directors.

Yeah, but I think the best place, you were talking about Twitter. I prefer LinkedIn. Yeah, me too. And I do a lot of stuff there. You're great on LinkedIn. And how often are you contributing columns to MarketWatch? I used to do it every week for two years. And it is a lot, especially I'm doing a lot of other things now.

So now it's just sort of whenever I have something interesting to say. Okay. All right. It's rarer. And anyone who wants to connect with you on LinkedIn? Yeah, connect with me on LinkedIn. I'd be happy to connect with people from your audience. That's super cool.

You're going to have about 1,000 requests tomorrow. But you could sort through them judiciously. The weekend's coming, you know? Yeah. All right. Lawrence Cunningham, thank you so much for being on the Compound of Friends. We appreciate you. Great job all week to the team. Duncan, John, Daniel, Nicole, Rob, Sean, thank you guys. And thank you so much to the listeners. We appreciate all the positive feedback. Keep it coming. Keep the reviews coming. It really helps us trick the Google algorithm, trick the podcast feedback. Keep it coming. Keep the reviews coming. It really helps us trick the Google algorithm,

trick the podcast algorithm. No, I'm just kidding. We really appreciate the ratings and reviews. They mean a lot to us. That's it from us. We will talk to you soon. All right, thank you.

That was great. That was fun. So that was the warm-up. Yeah. Just want to kind of give you a sense of what the show's going to be like.

That's great great job.