The Compound and Friends - Will There Ever Be Another Warren Buffett?

Episode Date: August 25, 2023

On episode 107 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Guy Spier to discuss: lunch with Warren Buffett, value investing, managing a hedge fund, Berkshire after Buffett, the bull case for Ferrari, and much more! Thanks to Public for sponsoring this episode. Visit https://public.com/compound for more information on how to earn 5+% interest with a treasury account on public. Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com 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. Wealthcast Media, 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

She loves New York City. She loves New York. What's not to love for a young person? For a young person, not much. As you get older, what I realize is there are all these buildings that are actually liabilities for the owners. So, I mean, it's just, do I need to put these on? Yes.

Wait, what do you mean by that? They're liabilities for the owners. Underwater? Well, the owners of the buildings make money, and New York City charges real estate taxes on them. But if you own an apartment in a condo or in a co-op, you are spending money every month on your share of real estate taxes and your share of the common expenses. And the common expenses are not actually the common expenses. There's a contract there that

is profitable for somebody. And of course, if you don't pay, then you're out. So it's just this, I feel like I see New Yorkers and they're just kind of like on a treadmill. They're trying to keep up. To keep up with that expense. Yeah. And it's a lot. Were you talking about like the HOA fees or the common fee? Yeah. Yeah. And you just really, I mean, it's just, you're just running to keep ahead. And then if you say, no, I'm going to just own the real estate outright, so now you can try and buy a townhouse.

But now your share of the real estate taxes is huge, so you have a massive real estate. So one way or another, you are paying money just all the time. And it reminds me of other assets that look like liabilities. So I realized at some point, you know, you're turning the pages. It happens every now and the FT. Turn the pages and you see some massive yacht that's for sale and it's in a big advertisement. And then you ask, why would the owners actually spend all that money to take a half-page ad? Because it's costing them triple.

Yeah. And like literally the minute you own it, the day you own it, if you're not spending vast amounts of money on it, it's going to be worthless very quickly. That is a horrible asset to own. Unless the experience of owning it and using it is so great that it's unreplaceable with anything else, I agree. For some people, boating is that, not for me. I mean, yeah, and as long as it doesn't bankrupt you within three years. And I think that some people, they'll buy a yacht,

maybe not like a $300 million yacht, but even a million or $2 million yacht. And then they just don't realize that it's $250,000 a year just to keep it afloat. Yeah. And that's, you know, the experience is worth it, but not if it bankrupts you. Right.

Well, Barry. Where did you come from? Speaking as a boater. I just came in just to say hi. Tell us about your $300 million yacht. So I'm fond of saying the cheapest part. bankruptcy right well barry where did you come from speaking as a boater just to say hi tell us about your 300 million dollar yacht so i'm fond of saying the cheapest part get the microphone in front of him the cheapest part of boating is the boat but you got the least expensive part of right it's everything else around the booze is the expensive part of booze the marina the i have a 24

foot dinghy by the way what about what about foot but the boat is the leastina, the, I have a 24 foot dinghy, by the way. What about the boat is the least expensive part. The winches, like one of those winches is like an insane amount of boat elevator. So especially the funny thing is when you first start boating, you learn all this stuff. Mike's going to bounce. Barry sit. So I just wanted to come and say hi because you guys are blowing in and out. Do you know each other? No. Do you know know each other? No.

Do you know of each other? Yes. Okay, good. Thank you, and vice versa. All right. Stay overnight. You'll do Barry's podcast tomorrow. Okay.

We'll just keep rolling. You'll get the Ritholtz bed and breakfast deal. It's being a bed and breakfast next Wednesday, and we'll go do our thing. This is like on the air, literally. He told me not yet. Oh, okay. What's next Wednesday? Scott we'll go do our thing. This is like on the air, literally. He told me not yet. Oh, okay. What's next Wednesday? Scott, we have dinner.

Oh, yeah, yeah. All right. That's okay. His assistant knows. It's fine. Barry Reynolds, ladies and gentlemen. Have a good show. Thank you.

The eponymous. Right? Eponymous is when you name the firm. No, he's somebody. Dude, but he's alive. I've got to play this guy off. He's alive. I need music play this guy off. He's alive. I need music.

Barry Riddles. All right. I'm so glad we finally got to meet. I'm so glad you're here in person. We have so much to do today. I'm almost worried we're not going to get to it all.

You saw the doc, right? You know, it's in there. It's extensive. It's extensive. But in a good way. In a good way. No, wait. There's a high correlation. What are you playing? What is this? Was that in a good way. In a good way. No, wait. There's a high correlation.

What are you playing? What is this? Was that an accident? No. Get your shit together. There's a high correlation between guests that are in the dock, which you are, thank you, and the quality of the show. I'm closing out tabs for exactly that reason.

Anyone you want to call out, Michael? No, in a good way. In a good way. Everything's in a good way. Everything's in a good way. Everything's in a good way. All right, shall we get going? Let's do it, John. All right.

It's all three o'clock, it's coming in. We're sounding good. Hey, John, what episode is it? It is Compounding Friends, episode 107. Welcome to the Compounding Friends. All opinions expressed by Josh Brown, Michael Batnick, and their castmates are solely their own opinions and do not reflect the opinion of Ritholtz 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 our friends at Public. Before we start today's show, in the securities discussed in this podcast. the government side, it's not that great. Public.com has made it stupid easy. Click of a button, boom, six-month T-bills right there in your account. I'm buying six-month T-bills like other people buy candy. Okay. I think it's great that they made it so easy. No, you know, the public is onto this. So 33 straight weeks of inflows into bonds. People know it's up. You get some yield in your cash for some of the long time. So it's good. It's a good deal. To learn more, go to public.com slash compound. Again, that's public.com slash compound. Again, that's public.com slash compound in the way that only I can say it.

We have a very special guest here today. If you're tuning in, this is your new favorite financial podcast. If this is your first time listening, and for many of you it is, The Compound and Friends is your new go-to. And boy, have you chosen a special day to join us on Play Something. Everybody doesn't need to have a voice. When I was dead broke and I was trying to figure it out, I wasn't worried about what was going on on social media. I had my blinds closed and I was locked in and I was staying up to 5 o'clock in the morning.

And I didn't ask for help. I never asked anybody for help. I never complained about anything. Like, I got off my ass and I was locked in and I was staying up to five o'clock in the morning and I didn't ask for help I never asked anybody for help I never complained about anything like I got off my ass and I got to it nowadays it's like if you got enough time to criticize people and go on social media and you broke I just don't understand that and I never will understand that like for me personally like if the number one job is to take care of your family you wake up every day you figure out how I'm gonna get money so I can take care of my family after to take care of your family. You wake up every day, you figure out, I'm going to get money so I can take care of my family. After you take care of your family, then you can take care of your friends, then you can take care of your community, but you got to start with your family.

Especially if you're a man. How you wake up every day and the first thing you're doing is going on Twitter, going on Instagram, and leaving comments on somebody's page that you never want. You haven't figured it out yet. You got to figure it out. You know who that is? It's Warren Buffett. No, do you know who that is? It's Warren Buffett. No, do you know who that is?

It's Rashad. Do you understand? Am I right? Yeah. Do you understand what Rashad has going on this weekend? It's a big deal. Talk about it. I just want to give a quick shout out before we get to the show.

Rashad Bilal created this thing called Earn Your Leisure. They have their annual event in Atlanta. It's cool. Holy shit. I'm sorry to cut you off, Josh. That's a lot of notes. We're going to get into it. There we go.

No, that's just, I want to find the show notes. Amazing. That's what I carry around with me. All right. So Rashad started this thing called Earn Your Leisure, and their annual event's called Invest Fest, and it's this coming weekend. And our friend Ian Dunlop, who's been on this show, will be there.

I was looking at the lineup today. Rashad has Diddy, Robert Smith, Steve Harvey, Jeezy, Rich Paul, Novogratz is going, Ja Rule, Jermaine Dupri. This is the most incredible lineup of people who have succeeded in entertainment and business and media. So shout to Ian, shout to Rashad. This is incredible to watch these guys build this thing. Like in the last two years, I basically watched them build this thing. So I wanted to mention that. Okay. Duncan is here. John is here. Nicole is here.

Rob is here. Graham is here. Michael Batnick is here. Barry Ritholtz just left, thank God. So we get a word in edgewise. And I want to introduce our very special guest today. Ladies and gentlemen, Guy Spear is the managing partner of the Aquamarine Fund, which is an investment partnership inspired by the original 1950s Buffett-style partnerships. Guy famously bid $650,100 for a charity lunch with Warren Buffett. We're going to talk about that.

You note that it was with another gentleman, Monish Pabrai, correct? Okay. You're going to tell us a story momentarily. The most recent bidder has paid $19 million on that lunch. So arguably, you guys got a 30 times return on your investment? Pretty good. Pretty good. Didn't feel like it at the time.

Okay. All right. Good. And lunch was Chipotle? Yeah. No. Okay. You had the burrito. All right. We're going to get into that, but I want to start with your book. I read your book, I think around when it came out. I'm not a value investor. I don't know what I am. I'm a hybrid, but the way that you write and the way that you explain things, I think, is so forthright. And you don't flinch away from saying what you think is the truth. And you're very direct in your approach and why you do things the way you do them. And I really respect that. So I wanted to talk about the education of a value investor. Tell us about the book and the impact that it's had and all of the doors that it's opened for you.

Yeah, well, New York City, even though I don't live here anymore, and it's a pleasure to be on your show and thank you for welcoming me and I'm still figuring out what's going on here and there are people around and it's great and it's exciting. By the time you figure it out,

it'll be too late. So go with it. I flew in here. I used to live in New York, and the book is so bound up with New York City, and we're kind of like right at the center of New York City. So where do I start? I mean, first of all, if you think that I actually write like that, I wrote the book, and then a wonderful friend who's written a book himself edited it and rewrote major bits of it.

I have an editor, too. Believe me, I know. But I think that that kind of forthrightness doesn't come easily. It came because I was absolutely hell scared of delivering value. I wanted to deliver value to the reader. And I felt like I didn't have a PhD and I didn't have all this academic knowledge. And what could I write about that I really knew? And I didn't want to write a book that was just going to tell people what a P ratio is, or here's how you analyze cash flows. I was not going to give them any new take

on financial analysis. So I kind of like turned myself inwards. But I just want you to know that didn't come easily to me. And then there was another side to it, where I kind of wanted to do a confessional because I'd made this early, huge career mistake. And somehow, I developed the courage to kind of tell the reader that. Wait, what was the mistake? You shorted Amazon? Before we get to that. I didn't buy Amazon. Many I didn't buy, but.

I want to hear that story because I think one of the reasons why your writing resonated so much with me is because I had a similar experience where I had made a huge career mistake. I made it for 10 years consecutively. So that's a whole different story. That makes me feel a lot better because mine was 18 months. I didn't make one. I made almost like a lifestyle choice, poorly. I was a retail stockbroker.

So I delivered zero value to anyone. I'm not sure that's the case. Well, then, it's a long time ago. But my book was confessional. I wrote literally backstage Wall Street. And it's 300 pages of all the shit I used to do that nobody should do. Not like breaking the law, but just like,

this is what it's like when a great salesman meets an investor who's willing to take shots on things. Who's just come home from work. So I think that's why what you wrote resonated with me. But let's talk about this mistake that led to the confessional tone of the book. Yeah. I mean, I graduated from business school.

I graduated from Harvard Business School. I could have gone anywhere. And this guy— What year is this? This is 1993. And another graduate of Harvard Business School from 25 or 30 years prior has offered me the opportunity to do deals and to have the title of vice president. And that just, out of scorecard, I felt like that was great and I was going to do that. And why should I stand beside a photocopier at Goldman Sachs or J.P. Morgan when I can do that?

And that was just a very bad idea because I didn't really look closely at what they were up to. And even in those days of no internet and going into a microfiche and looking at newspaper reports, you could have seen. And I didn't understand how important the reputation of the place you're working at

and your own reputation is in the world of finance. So I kind of, within six months, totally trashed the reputation that I'd built up all the way up to then. And it would have taken me, I feel like it should have taken me about two weeks, really, to realize that this wasn't the place for me to be. And I just didn't want to quit. I didn't want to admit that I'd made a mistake. Right. So a different version of you in a different universe exists, where you took the Goldman Sachs job and it was probably menial for two or three years and probably beneath your intellect, but you start life with that pedigree.

Yeah. And the bottom line is if you stand around the photocopier at Goldman Sachs or other well-known institutions, you're learning stuff because the people who get stuff printed at the photocopier at Goldman Sachs are a different breed of people to the people where I was working. And that's not to say that Goldman Sachs is perfect. And I have this discussion with my father the whole time. For those, anybody out there who feels like they've made a similar mistake, my father thinks that's the best thing that ever happened to me. I mean, I got a solid punch in the face and I deserved a punch in the face because I was a bit of an arrogant asshole. And he would say that I learned patterns of behavior at DH Blair, where I worked, which then prepared me for many, many other places. Because it's you so well put. And it's funny, because I'm looking at

you right now. I know that we've both been in a room where the investment bank has come in and they pitch the deal. 100%. And our job is to go out and sell it. 100%. And, you know, I think a lot of people in my life have pointed out to me, you would not have become whatever it is I've become. But absent those experiences. Husky. Yeah, very husky boy. Absent those experiences, which were in the time,

like very negative experiences, the lessons learned can't really be taught. They have to be experienced. What were they doing when you were at J.T. Marlin? That was so bad. I mean, they— Investment banking deals. So I was on the second floor,

and I can claim to have brought one deal in. But, you know, so they're about to be gotten the money that they need to continue to develop their business. And days before, they kind of, we can see, or the CEO can see that they've cut off all the other options. And then it suddenly comes in with a valuation that's 30% lower. And additionally says, well, actually, you know, the options package for us is not rich enough.

And so there's enormous dilution from the options. And then when the deals got sold, I mean, they were selling these deals in units, which would break up into two warrants. And the initial bid-ask spread on those units was, you know, it was a four to five bid-ask spread, which is a 20% bid-ask spread. The retail investor who's buying this stuff

doesn't really understand that that huge spread is kind of a huge profit margin, really kind of egregious, and shouldn't really happen. The brokers were some of the most incredible salesperson people I've ever met. I was on the second floor with the investment banking team. It was groups of people competing with each other. But there were times

when the brokers would call up a client or a potential client, and the client would say, well, I have a 10% allocation to equities. And a bunch of brokers would come into the room and laugh and make sure that the mark, effectively, on the other side of the phone heard this. So they've kind of felt bad. I mean, they had so many different techniques for getting people to do things that were not really in their interest. Yeah. All right. So, listen, a lot of people have had that experience early. They didn't know better.

You go work at a firm. The person who interviews you is wearing a suit. You're in a skyscraper somewhere in Manhattan. Yeah. You don't assume the worst. Yeah. You assume like, oh, wow, these people look successful. And then you're there. And then you're like, oh, shit, I don't know what this is. Yeah. You don't assume the worst. Yeah. You assume like, oh, wow, these people look successful and then you're there

and then you're like, oh shit, I don't know what this is. Yeah. I don't know what these people are selling. Okay. So that's happened

to a lot of people. So when was the moment- That makes me feel better by the way because I don't meet many people who've had a similar experience. Let me make you feel much better. You know who was financing

all this stuff was Michael Milken and he's now sitting at a conference every year in Beverly Hills interviewing the Sultan of Brunei. So don't worry so much. You came from where you came from. But let's talk about what made you want to write the book then and how you transitioned into a career that you want to have. I mean, the transition happens at this firm, and I'm walking into a bookstore on a regular basis when I'm not playing chess in my lunch hour.

Nerd alert. Nerd alert, yeah. I'm not very good at chess, by the way. It's terrible how much time I've spent and how badly I play. But I came across, I mean, this is a well-known story. I came across the Intelligent Investor. And I don't know if this has ever happened to any of the assembled company in the room. There are quite a few people here where I kind

of like woke up one day and just realized that I wanted to be where this guy Warren Buffett was, who'd written the introduction to the book. And I didn't like where I was and I liked where he was, but how the hell do I get from here to there? I've had that experience two or three times. I mean, when I wanted to apply to university, I knew where I wanted to be, and I just was desperate to get there. I kind of lost sleep over it. So that was kind of like a lifeline for me because, well, all I knew was I knew where I wanted to be, and I knew where I didn't want to be. But other than that, I had no idea of how to get there.

Okay. So Buffett is like the first thing you come across in your career that speaks to you. Yeah. I mean, I would imagine that's happened to a lot of people. I feel like the Mr. Market chapter in the Intelligent Investor was my light bulb moment. Yeah. And so many millions of investors' light bulb moments,

like, oh my God, it's not just numbers. There's like, you know, that's me. I do dumb shit all the time. Right. How come- Mr. Market frustrating the maximum amount of market participants as possible. Right.

How come so many people, so many investors, read Buffett, and so few investors actually invest like him? Isn't it fascinating? That is the question. And, you know, like pretty much every other year, Warren answers a question, something like this. He says, some people get it in the first five minutes and some people don't. And that is really a fascinating thing. I just don't get it. I really don't get it because it was like a light bulb for me. And I was a guy who had kind of overdosed on, at the time, the theories in college of rational expectations, markets are efficient. If there's a dollar bill on the floor, it's not a dollar bill

because if it was a dollar bill, somebody would have picked it up. So I never really thought of looking at companies. I thought of looking at them in terms of quantitative finance, analyzing the prices and correlations and all of those kinds of things. The ratios. But the idea that it represented part ownership in a business, just the light only switched on. Just think of that.

I had four years of undergraduate. I'd studied two years of law, two years of economics. I'd done two years of an MBA. And that simple idea wasn't in my head. And I needed to read The Intelligent Investor. The Intelligent Investor was not on one reading list of any of the courses that I did. I bet it is now. Now it's number one ever. I think there's two reasons why people can't do it. Number one, most people don't know how to analyze a business properly, myself included, like really and truly analyze a business. But number two, the market is a stimulant, right? It is not, it is not, we all often act in our worst interest because we're seeing the score or the price every single day and we get antsy, we get impatient and we get

fearful and gritty. Not me anymore. And it's kind of shocking actually, because I will not check prices for weeks and sometimes even months at a time. Now, it's true that there's somebody in an office the other side of the corridor from me who's looking at prices all the time. They'll tell you what you need to look. Yeah, but the idea of me looking and life is so much better. What's hilarious is after the financial crisis, 2008-9, so for a period, I switched off my Bloomberg. Then I discontinued my subscription.

And then I finally made peace with having a subscription and having it off most of the time. So it's kind of like a lifeline if I want it, if I want to sort of like go and grab it and look at it. And I would say that more than 50% of the time, the Bloomberg subscription that I have is switched off. That's also an interesting thing that you don't look at the prices of your businesses that the market is quoting every day, which is probably healthy mentally.

But the idea of not looking at it for an extended period of time, what if the market is signaling something that you're just wrong? Like, isn't the market— Are there valid signals in price? Yeah, a lot of it is noise, but a lot of it isn't. So I don't think you can generalize across. You need to go into specific situations. And I restrict myself to places where it's very unlikely that there will be a signal in the price. Types of companies where the market signal won't be that important.

Yeah. But then still. I mean, Coca-Cola, I'm just throwing out a random name. It doesn't really matter what the stock price is. Coca-Cola is a durable brand. Exactly. So you don't, you know. So there are, you know, whether that's Nestle or if it's a company that owns real estate or there are a thousand different places where that really is the case. Or in some cases, it's sort of asking

yourself, I mean, take any oil company that's extracting oil out of the ground. They're doing that. Or I've been forcing myself to look at coal companies, believe it or not. And if you do the discounts, so long as you know that they're going to be taking coal out of the ground for the next 15 years, let's say, then you can kind of predict the cash flows and it's enough for you. So then, you know, if the minute it's biotech or actually NVIDIA, which you brought up technology, then I'm kind of like, I don't know. There may be a signal in the price. Well, one of your analysts say, hey, guy, we love this company, and the price is offering us a gift, and we got to take a swing. As we're recording this, I'm sorry.

Like, as we're recording this, like as an example, Disney's at a 10-year low today. But there is the possibility that the share price actually impacts what they'll be able to do from a deal-making perspective. And that is the fundamentals. Yeah. It's a deal-making company. Yeah. So, yeah, it's hard to be in those. So, it's funny because you're saying, what if the analyst says, I don't have any analysts.

Actually, I do have a kind of an analyst now. But I got myself into such trouble. And the analyst, the one that I had for the most period of time, really wonderful guy, hardworking, smart, thoughtful, but this feeling of, you know, hey, guy, I recommended this stock to you yesterday, and now it's up 5%, and I think it's gapping up another 5%, another 5%, and now it's like, now I'm pulled in basically. And part of that is just to say, look, there are going to be

many situations where the price does give a signal. And because I'm not paying attention to prices on a daily basis, I'm just not going to see them, but that's okay. You know, I'll develop other sources. And what I found is that the important stuff finds its way to me one way or another. So I do communicate in various ways what I'm interested in, whether it's through an email or, you know, sometimes I tweet or I put it up on my LinkedIn. And then people communicate stuff to me pretty rapidly when there's been a development.

But often I think the developments, I mean, there's developments where it impacts the price and everybody's scared. And if I were to pay too much attention to it, I would myself get scared, you know? And it's kind of like just saying, I'm not going to do that. But don't you have to balance? You have to balance that with also you're running a portfolio.

Maybe there are times where you want to trim or add. Yeah, I try not to do that either. So like, so pretty much, I mean, you know, anybody listening to this, feel free to copy it if you like it, is, you know, buy up to 5% of the current assets. So I buy 5%. Now, if I buy a company for 5%, so I allocate 5% of my assets to it, and let's say it goes to zero, I've lost 5%. That's no fun. But it's not the end of the world. It's okay. But a 5% position, if it goes up three or four times can become really significant. So I'm trying really just to make one decision to buy over a certain period of time.

In other words, if these were private companies, you would have no opportunity to sell them. Right. Maybe once every 10 years you could sell a private company. And I just leave it alone. And I have had plenty of examples where if I would have traded, or in some cases I did trade,

I just left enormous amounts of money on the table. And even these situations where it's like, my gosh, the company is now half of what it was trading for. I wish I'd sold at the top. But I never would have bought back at the half. And then it goes on to double and triple from the previous high. NVIDIA just did that.

Right. Although, I mean, I'm not in NVIDIA. But NVIDIA is an example, though. This is a stock that went from 350 to 100. And then, I don't know, where is it today? 500. 9 billion. So you end up meeting.

All right, so a lot of people get turned on to investing by Buffett. And a lot of people become a disciple or claim to be. But you actually get to meet him. So I want to hear this story. I was sick because I was so scared. So you're going to meet him. Yeah. I want to hear this story. I was sick because I was so scared. So you can say you were six. I was so scared that he would like learn about me

and like this yo-yo. I'll have lunch with him. Sick with nerves. Yeah. I was actually, I had some kind of cold because I was so nervous in the time leading up to it. I so wanted him to like me and I was so afraid that he might meet me

and just not give me the time of day afterwards. By the way, that's price-impacting fundamentals. Wait a minute. What happened to your body? Right, exactly. So he announces a charitable thing where bid to have lunch with me is to give the money away. Really cool. How do you hear about it?

And then what makes you say, I have to win this? I'm part of the tribe that follows Warren Buffett. I'm a member of the cult. So, of course, I know everything Buffett. So, I'm aware of this. I'm even aware before Monish and I bid. I'm aware of who's had lunch with him. You know what he's doing right now.

Yeah, so. When is this? At the lunch. Is this 2002? This is. So, we actually had lunch with him 2008, and I think we won the bid 2007. We started bidding 2006.

Monish and I as bidding partners. But it's funny you should say that because at the lunch, one of the things I say is I say, you know, Warren, there are people like me who study every move you make. There's stories in the Talmud of these students of rabbis who would sneak into the bedroom to learn how the rabbi made love to his wife. And I'm kind of one of those. And Warren doesn't skip a beat.

He says, oh, well, I'd better check under my bed tonight before I go to bed. So yeah, I was that kind of guy. But I didn't think anything of it. I thought this is a really dumb idea. Why would you pay so much money to have lunch with Warren Buffett? It was Monash Pabrai at a breakfast that I know exactly where we were sitting at the Mandarin Oriental Hotel overlooking Central Park, who says, this is a really smart idea. This is an incredible opportunity to spend three or four hours with the guy. And he'd done the research. He knew that if he likes you, and there's no

obligation for him to like you, that he may well invite you and include you in things after that. Which has happened for many people. Yes so so did todd or ted uh when one of the ted wexler did it two or three times and now they work for him yes exactly so and you know i don't think that is that what you wanted um be honest no matter what he offered you though you you learned your lesson from the last time you had real job offers. You would have said, yes, I'm in. You know, I don't know. It's one hell of a spotlight to have on you.

And it's a lot of pressure. True. And I think that he's an incredible guy. But in the operating businesses, I wouldn't want to be in an operating business that's not performing very well. No, portfolio management. He would have said, I love the way you think. You learned it all from me there, after all. I think I, yeah.

Maybe can you come be a younger version of me for a few decades? I think for a good two or three years after the launch, I think you're absolutely right. Okay. I would have loved that. Who is Monish to you? So he is, in a certain way, a bigger teacher to me than Warren is. Okay. Because he's got this really unusual mind where he takes something where I'm like, who would do that?

And he turns it on its head and says, this is actually a great idea. And I go home and I think, wow, it is actually a good idea. And when I met Monish, I was living in New York, and I had a very kind of block and tackle standard approach to developing relationships in my business. And I had a very kind of block and tackle standard approach to developing relationships in my business. And I was kind of envious of this guy who was living the Southern California life at the time. Very different life, but seemed to have a very successful business. And he didn't go to client meetings. And I was like, how does he do this? And I realized that he had a kind of a different way of approaching the people who are interested in him, which involved not meeting them until it was really worthwhile and engaging in correspondence with them through letters and thank you cards and sending them a book gift maybe once a year. And I was like, I want to do this.

But it would have been – And you're both hedge fund managers at this time? Yeah. Okay. And they're like emerging – what's called emerging funds? I would say emerging managers, although he was like, I was maybe running 50 million. He was running at least three times.

So he had figured something out a little bit before you. Yeah. And so he sort of like in how to simplify one's life. And actually he had taken the things that he'd learned from Warren Buffett and applied them far more effectively than I had actually. So he's been an incredible teacher to me. I feel very, very lucky. The funny thing is, is that kind of the friendship developed around the launch. I mean, the time when he proposed being bidding partners together, and I still don't fully understand. I mean, he had so many options. Maybe he didn't want to go alone. He definitely didn't want to go alone, but he could

have done it with all sorts of other people. Yeah, but maybe he was like, this guy's going to talk about hiding under Warren Buffett's bed and he'll be the embarrassing one and I'll be the suave, sophisticated one. Maybe. Maybe you were the foil. I was the foil, yeah. Did anything interesting come out of that meeting

in terms of a continual relationship with Warren? I mean, you know, I was ready to invite Warren to Zurich where I could have treated him to some really good Zurich steak. Wait, where'd you go? So it was at Smith & Walensky. Oh, Smith & Wall. Yeah, actually, and if you go to- We're here?

Yeah, yeah. You know, I walk in that place, they bang a gong. I'm telling you, they love me. In the 50s. Yeah, well, if you go into the room with a view on the kitchen, there's complex on the walls

and you'll see my name and Monish's name. Oh, that's killer. So, I don't know, maybe a year after or not long after the lunch, Debbie says, you know, when you're in Omaha, you should drop by and say hi. And I'm thinking, well, maybe I should just like be there tomorrow. But I arrived a couple of days early from one of the Berkshire meetings. He gave us a lovely tour of his office. He came out and said

hello. We had a couple of lunches with Debbie. He introduced us to Tracy Britt. I was about to say Brittany. Somebody was talking about Brittany Spears. Who is that? Tracy Britt. She like sent a letter to him and he gave her a job for life basically? Well, she's not working. Tracy Britt Kuhl or something? Tracy Britt Kuhl.

Her husband, Scott Kuhl. She worked for him as an analyst and then she ran Pampered Chef for a while. And now she runs a firm called Canbreak. Okay. So he kind of, and he brought me and Monash into his circle. And then at a certain point, we got invitations to this brunch that he would host on a Sunday. And we met all sorts of people.

I mean, I met the treasurer of the United States at one of these things. I met John Alcan. Ajit Jain was there. I mean, that was an amazing thing. And you know, I still, to this day, I'm blown away because, you know, and I, I talked to William Green a lot about this, the author of Richer, Wiser, Happier. And I asked him, why would Warren do this? I'm a schmuck. You know, I cannot do anything for Warren Buffett. That was awfully specific. I'm sitting with Enriched Hill just saying. We're all schmucks. It's fine.

But why would he do this? And William has a kind of a nuanced view. He sort of says, you know, he probably realizes that there's no way you can thank him. He realizes that that little bit of inclusiveness on his part makes an enormous difference to you. And he says, why not? And he does that over and over and over again. And so, yeah, it's been incredible for me. It's been utterly transformative. And you also got a dividend out of that in the form of media attention,

wanted or not. I'm a very good example of somebody who knows how to parlay that into something. Right. You may not have loved it or you may not have been seeking it, but Google yourself. This is not to say that you're not an accomplished fund manager. I know you are. No, I mean, you know, I have part of your story. I't have omaha numbers you know i want to say one thing this really pissed me off during the pandemic it made me sad you don't have to respond to this i just want to say it i watched this kid justin's son who's the founder of some bullshit crypto thing i don't know if it's real or not i shouldn't say that it seems like bullshit to me but most crypto does he wins this thing for one, like to, or he's bidding on

it or I forget the whole story. I'll look it up later or I won't, but he wins the Warren Buffett lunch. And he's on Twitter being like, I'm going to teach Warren Buffett about crypto. And I'm going to convert Warren Buffett into a crypto fan. And I was just like, oh, that sucks. Imagine having the wherewithal financially to get this opportunity and your whole shtick around it is going on social media about how you're going to teach the old man something about some bullshit technology. So that kind of made me sad.

But I'll just – If I were Warren, I would never do this again after that. Well, I just give you two things. So one is – well, the book has a lot of Monash in it, the genius of Monash Pabrai. So after we've won our bid, there are people who call me up and they say, look, you know, I hear you're going with your wife. Why don't you drop your wife and I'll pay for your seat?

So I communicate that to Monash. And Monash says, he just smiles and says, no, no, no, guy, we're not doing that. No. Because it's a family. No amount of money is worth that. Yeah, it's a family event. He's there with his wife and two daughters. I'm there with my wife.

We're there as family. That guy did not get that at all. So another thing that, and I just find that Warren has figured things out where, you know, he does things and there's multiple layers of, there are multiple reasons for doing it. And so Monish now clones Warren and he auctions off a lunch with himself once a year, which this time it went for around $43,000. It's not nothing.

And then I cloned Monish because it takes me a longer time to figure stuff out. So I cloned Monish. And we won and that's how you're here. No, you're very glad to be here. And here's what's fascinating is that the people who bid are usually very interesting people. And so I am convinced that Warren would have found it interesting to talk to this guy. And it introduces a kind of a very specific kind of randomness into your life in that, you know, you've got a lot at stake when

you've bid even $43,000, which is nothing in comparison to what they bid for Warren. But people come, and the launch with me last year was, I think, maybe, I don't know, it was either $10,000, somewhere between $10,000 and $20,000. The guy came, wonderful guy, full of questions, full of thoughts. Is he an aspiring hedge fund manager? Yeah, he's just started his business. That's most of like who would be bidding on stuff like this, right? But we had a really great time talking and I learned a lot.

And it was kind of a connection that I wouldn't have had. And I learned from Warren. So Tim Cook has auctioned off lunch with him. But it's like one hour in the cafeteria of the Apple headquarters, which is nothing terrible. But Warren was there for like three or four hours with us. Yeah, I was going to say there's a quality that Warren has where it just would probably feel really genuine being with him. Tim Cook, you could picture there being like a scheduler standing behind him. Yeah. Like, okay, time's up. Wipe your mouth.

No. Say thank you. There was none of that. And so that's, I cloned that. And something that I learned as well was, so I took these guys and it's my treat. In the case of Smith & Walensky's, I think that they pay for the lunch. It's great kind of marketing to them, the power lunch with one.

I'm going later. Definitely. In my case, it wasn't. But we took them to this place called Scott's, which is like an incredibly expensive meal, but it was an occasion and we all felt great. And we'll remember each other forever after even, and we have been in touch since. So I'm looking forward to the next one. In fact, my next email newsletter, we'll see. And I'll tell you something else that's really great about these things. So you take two or three hours and you say, well, that's kind of like my equivalent to my hourly billout rate.

So somebody is trying to get a slice of my attention. And it's sort of fun to say, well, look, the last guy who got a slice of my attention paid $20,000 for it. What are you willing to spend? That's a good point. That's a new benchmark. I'm going to start doing that. Actually, I really consider doing it here. How much do you think you can get for lunch?

One ETH. I bet you can get more than you think. You'll be blown away. So first of all, your friends will feel sorry for you, so it's not going for less than $1,000. I bet right here it's not going for less than $5,000. The problem is it's going to be a mutual fund wholesaler that wants you to include some fund they have in our asset allocation.

That's all right. It's going to be transactional for sure. But they don't get the right to force you to do it. I mean, you get to have lunch with them. And if they abuse it in that way, then you're obviously not inviting them back for any other stuff. We should never pay for lunch again. Right.

You and I. We've got to figure this out. Will there be another Warren Buffett ever again? You know, I mean— Statistically, no. But like even somebody that we put on that— other than I once said maybe Chamath was in the running. Delete your life.

Delete my life. No, but statistically, probably not, just because of what his starting point was, right? He started when he was—he's been doing this for 70 years. But also, the markets were young. Right. I mean, a few things that really kind of struck me, and, you know, reasons why one should do this kind of thing if one can.

So the very beginning, my wife was born in Salisbury, North Carolina. So there is a – we sent him our bios. He didn't ask for it, but I felt like I wanted to send it. So I lived in Iran and Israel and was born in South Africa, and I feel like I'm interesting. And my wife's born in Salisbury, not uninteresting, but Salisbury. We're from America. Right. So I'm thinking that Warren's going to like look at me and go, oh my God, you lived in

Iran. And instead, he first meeting, he turns to Lauren and he says, wow, I see you were born in Salisbury. My best friend comes from Salisbury. What a move. That's so Buffett. What a move. There are so many ways in which he's kind of like a genuine Midwesterner.

And it's sort of like he's extremely sophisticated in his thinking. But there's also kind of a simplicity and a Midwestern simplicity to him, which is kind of really interesting. But also a shark. I mean, he's out for a good deal. Is it fair to say, though, that he really likes people in a way that it comes through and you believe it and it's probably true but like a lot of people in his position would maybe have an aversion to people just because everyone in their lives wants something from them so i i don't know him well enough i mean at the end of the day like this i've spent i've been like once sitting and a few times

standing so uh but what i believe and this is really just a speculation, is that he's, of course, extremely intelligent and loves being really on his own, but figured out to have the best possible life that he had to learn to engage with people. And in a certain way, some people are natural at engaging with and getting people to like them and vice versa. And for him, it didn't come naturally, but he learned it anyway. He taught himself. But here's something that was really astounding for me. So after that launch, I remember a friend of mine, we're at the Value Investing Congress in California. And I say, I'm going to do something,

go windsurfing or something. And the friend says, no, no, you should be here talking stocks with us. And I'm like, no, I'm going to go windsurfing. That's the right thing for me to do. But for Warren, Warren would never go windsurfing. He really doesn't notice what color the walls are. So he's this extremely unusual personality that if you tell him that he could spend the next three years

reading through the works of Marcel Proust, and he'd still have the same returns, and he would have made the same amount of money for his investors, or he can spend the next three years reading 10Ks. He has no interest in reading Marcel Proust. Now, that might not be entirely accurate, but he's a guy who genuinely, genuinely enjoys the process of studying companies and investing to make money. Yeah, no, it's not his gig. It's what turns him on.

It genuinely turns him on. And if I look at myself, there are many things that turn me on. I love going to art museums. I love having nice things in my home. I like going on holidays to interesting places. I don't just want to drink Diet Coke. I've developed an interest in wine, and I like those things. And up to that point, I really thought in order to be the best version of myself, I had to become— Singular. Yeah, but to your point, will there be another Warren Buffett? It's sort of like these amazing abilities have come together in a guy who genuinely loves that stuff. That's his best possible life.

And it was only at that point where I realized it's kind of painful to do that I'd stop trying to be like him as I write in the book, because that's not going to make me happy. I only have one life to live. Yeah. You know what? He's been consistent for 70 years. Like the letters that he was writing to his investors

in the 50s are timeless and consistent. He would say the same thing today as he did back then, which is just remarkable. How many people could you say that? Zero. Is it fair to compare the total return of Berkshire Hathaway versus the S&P 500 when people talk about Buffett's track record? Should they be looking at the underlying investment portfolio? Like is that fair to just look at BRK as it would be whatever? The share price versus S&P.

Just the share price. Is that a fair benchmark for him? I mean, I think it is because at the end of the day, what do we have a choice to do as, say, retail investors is we can choose to buy shares of Berkshire, we can choose to buy the S&P. It's a perfectly reasonable thing to ask oneself. And I think that he's underperformed for quite a period.

Yeah, I'm coming up for like six years of underperformance. It's no fun. I'm about to do an investor meeting. One of the reasons why I ask is because let's say that Buffett is bucketed or if you do some sort of regression, it's whatever it is, growth at a reasonable price

or maybe there's some value in there. And his particular style of investing is going through a 15-year period of underperformance over the S&P. It happens to everyone. I'm just asking. Could happen to the best people, really. Yeah, it does. And yeah, I mean, so I think that what happens to those people who've owned Berkshire for

any length of time, more than 10 years, is that you develop a different kind of relationship to it. It's a bit like owning your home. You know, and I've realized, you know, we, our children were at school in the UK under pressure from my wife. We ended up buying a Pied-a-Terre in the UK. And now, even though we only have two of the children are no longer at school there,

the idea of selling that home is kind of like painful. And I really don't care what the value of the home is. I love that you said that. I love that you said that. I own Berkshire, B shares. I have never once measured it against the S&P. I don't care at all. It's like the house I live in.

Yeah, I always own it. Yeah, and so in my case, I don't make that comparison. But I think it's very likely that there'll be moments when they get to do things that turn that track record around in a very, very profound way. One more Buffett question for you, and then we're going to move on. What's your best guess as to what might happen in a post-Warren Buffett, Charlie Munger world? Like what happens to the stock itself? What do they do differently at the company?

I know they say they're not going to do anything differently, but what would you guess? I mean, you know, it's funny. I was with an FT journalist who was trying to figure this out himself, and I think he wants to write a piece on it. And so, you know, Warren's a genius. So somebody asked the question at one of the meetings, Ajit Jain, who runs the insurance businesses and is an incredible, the kind of like the mirror image of a stock picker. He's incredible at finding profitable risks for Berkshire Hathaway to take on.

He takes on these extremely unusual risks. There was one where it was a billion dollars payout for a hole in one, you know, and how do you price that? And literally they took that bet, and they took the premium in, and if they would have lost that bet, they would have had to pay out a billion dollars. I don't know how much premium they took in.

But they asked the question, what would you do if Ajit Jain was hit by a bus? And they said, well, the whole job, the whole way the insurance division is structured is around Ajit Jain's abilities. So if Ajit Jain is no longer there, we're not going to try and run it in the same way. So I think the same is true of Berkshire Hathaway as a whole. If I'm Ted Wexler, I don't want to be a guy who, you know, this is Warren Buffett's baby.

He's made some very big ballsy bets. Many of them have worked out. Many of them haven't worked out. But I think that the range of decisions that they make will narrow down. So a guy like Ted Wexler will naturally not take big ballsy bets. He's not going to do an acquisition and issue a third of the shares of the company. Is that positive for the multiple or negative? I think that the company turns into this massive cash-generating melting ice cube

that slowly melts over 50 years or 75 years. The cash flows will be extraordinary for years to come. Yeah, and the share price will not sort of like be in the sky, but because of the constant shrinking of shares, those shares will constantly become, you know, in intrinsic value, more and more valuable. Ted is not going to be it. Ted Todd will not be empowered

to do the kinds of things like letting Apple become a quarter of the market cap of the company. How much does Apple pay them a year in dividends? Like literally? It must be, so I don't know. Is it a billion? I can't remember.

But I'm saying- It can't be, it could be. I mean, the dividends are a giant number. But the shareholders, as represented by the board of directors, are not going to give anyone else, including Greg and Ajit, the leeway to do big things that Warren can do. Yeah, but I don't even think it goes that far.

I think that if I put myself in Ted's shoes, I don't want to do big things. Or if I'm going to do a big thing that makes sense, I'm going to like, it's not just I'm going to talk to the board members, because let's remember that, I mean, the family that's so interesting is the family that used to own Marmon. I mean, my best understanding is that they have a huge proportion of their net worth now in Berkshire Hathaway. So you kind of like got these families who's only home in a certain sense of Berkshire Hathaway. So you're kind of talking to them and saying, look, this is kind of a big thing,

but I think we want to do this. What do you think? But I think that that's extraordinarily unlikely. I know if I was in, I'm not in his shoes, thankfully, but I'd want to just sort of like play it carefully in a certain way, play it safe. And that's what the families that have shares would want. So that's on the stock picking side.

On the operational side, like doing a deal like precision cast parts, which doesn't work out very well. So what is it, $30 billion? Right. Swing of the bat. Greg's not going to do that. I don't think, we'll see.

But I think that what I, you know, and it's amazing the lessons that one learns only if one's a shareholder. So I realize that, you know, how big a bet do I want to make in my portfolio? I think 5%, and you keep making, so there'll be a size of bet that they will make that probably Ted in combination with Greg Abel would make.

But they're not going to be, I mean, right now if Warren could do a 100 billion acquisition, I think that made sense. He would love to do that. Funnily enough, I wrote a white paper just for fun with an intern over one summer in which we studied what were the options for Berkshire Hathaway to acquire IKEA. And IKEA would be an amazing acquisition for Berkshire Hathaway.

It's not for sale. At any price, it's all tied up. No way. They don't need the money. They don't want the money. What is Ikea worth, like, back in the nap? So, it's very, very hard. They don't have consolidated accounts, but the revenues, I believe, are about $50 billion. And so, if you kind of got to buy them for one-times revenues, that would be a $50 billion acquisition. So many synergies with Nebraska.

Yeah, and just like, well know what we're getting well what we tried to do with we got to some of the board members of so it's sort of like divided in three different entities like one entity owns the intellectual property another entity owned some of the distribution even they operate together to kind of say look you guys are well taken care of for the next 25 years but if you really want your cultures to sustain over, let's say, the next 50 to 75 years, then you're far better off being, and your culture is aligned with Berkshire's culture. So why don't you kind of talk to these guys? And by the way, it helps Berkshire as well. So we tried to come at them from that direction.

And like a couple of them gave us the time of day for like five minutes on the phone. Who else was on that list? On the list of acquisitions. I mean, it was just IKEA because it's a special and unusual business. I mean, in Europe, I live in Switzerland and it's kind of been painful to me that there have been so few acquisitions

by Berkshire in Europe. And it's just Berkshire has not succeeded there. Here's maybe something sort of similar. I think this is a European privately held company, Lego. Yeah, so this is really funny. I have a friend who used to name… What is that, Danish? That is a Danish company, and it's also…

It's funny you bring that up because it's very, very similar, owned by a foundation, extremely profitable, very, very private, extremely wealthy family behind it. And we kind of, like, at the edges, thought about it, thought about writing a white paper, but having crashed and burned as we expected to do with Ikea, we decided not to do. But yeah, that would be an amazing brand, but it's not for sale. So I want to ask you about value investing in 2023. And the question I would put to you is, what does it even mean anymore to be a value investor? It means you want to perform.

No, but I still think that the most rational, the most rational possible way for somebody to approach investing is to say, I think that thing is worth a dollar and I can buy it for 70 cents. To me, like I can't come up with a better definition of what it means to invest, but that approach systematically at least has not been like a winning strategy relative to other strategies, investing in innovation, for example, in recent

years or investing in momentum or whatever the case may be. So what does it mean to be a value investor today? Because even Buffett, like Apple is not a value investment. It's half his portfolio. It's 30 times earnings. So talk to us a little bit about how you think about that question. I mean, I think that to be a value investor is to underperform. Look, the world that I entered into in 1995-6 was a world in which you did not have Edgar online.

There was no way to access financial statements online. You had an edge if you could get materials that other people weren't even going to look at. Yeah, and you just have bits of paper in front of you that nobody else was looking at. And it's kind of even without – I don't know what AI has been developed to kind of like read all the 10-Ks and Qs and other filings instantly and spy. Yeah, Spuffet GPT. Right. Does that exist? No, but it will. Yeah, exactly.

So everybody has access to the information. And the other thing that's happened, I mean, I don't remember exactly, but there were plenty of investment publications where the most important thing that they did was show you the chart of the stock. of investment publications where the most important thing they did was show you the chart of the stock. And there were mutual fund managers who said, well, I analyzed the charts, and I put the charts up on the wall, and I see the charts are going to make us money. Nobody seriously does that anymore. Everybody is a fundamental investor. Everybody agrees that ultimately, the company's intrinsic value exerts a gravitational force. So that makes it really, really hard, really hard. And in my case, I had some success in saying, oh, look, there's a branded goods company in the United States. I wonder where in the world I can find branded goods companies.

And there was, but I don't think that's finished as well. That was when money to invest outside of the US and Western Europe was only coming from there. Now you have rich Chinese, rich Singaporeans, rich Dubai, and they all understand that stuff, and they're all doing that as well. So I think that perhaps the only thing that does remain is just simply time arbitrage. I was going to say, if everyone knows everything, maybe the edge is just being— Your time horizon is longer than the person who's willing to sell to you. And so being willing to endure more pain with hopefully the eventual reward. Right.

But it's not much. And that's part of why I've gone to pushing my fees down to as low as possible because I think there's really doubts as to whether somebody doing what I'm doing can add serious amounts of value. I mean, Sanborn Map was one of the famous investments of Warren Buffett and his gang. And they found these shares of this company and they had an investment portfolio of bonds and stocks

that was like three times the market cap. That's it. There's your analysis right there. Assets. That doesn't exist anymore, obviously. And now he's sending, he's putting ads in the newspapers to try and acquire these shares. And then once he's got enough shares,

he's trying to convince the company that they need to liquidate the portfolio, do some kind of transaction. The game has changed. So, yeah, it's really, really hard. And I think that, so I think that if I look at myself, and so I don't know what value investing means anymore

because everybody's a value investor. anymore because everybody's a value investor. When everybody's a value investor, the competition is so much greater. What has changed is what metrics they are valuing. They're looking at IP. They're looking at intangibles and brand. A simple thing that has changed is just the dynamic inside the United States with the Magnificent Seven. What Google and Apple and Microsoft have continued to do is unlike anything that's existed to date in terms of company profitability, scale, efficiency, growth.

And that's where people want to be. And maybe it's just that simple. And so in the middle of the COVID crisis and, you know, a bunch of companies that I own have gone down a lot. And I'm looking at these companies like, and Google's one of them, but there's also companies like Zoom and others who like benefiting from the tailwind that the lockdowns provide. And I just said to myself, I'm going to hold my nose, take a big gulp and buy some shares of Google because I need to understand what it's like to own this thing. It doesn't meet any of my valuation metrics, but there's something else going on here. Came pretty late to the game in it, but I would totally agree with you. And it's taken me a very long time to understand. But what's strange

about this is that, so these different valuation metrics like lifetime value of the customer and looking at these subscription businesses, which basically have no expenses or no real variable expenses. But then there are people who took that too far. So that analysis was valid, but then there are many people who just took it to an insane place where I stood, sat at a conference that I run called ValueX, so values in the name.

That's yours? That's your event? Yeah, yeah, yeah. Come and join us. Who goes to that? If you like skiing. Does yeah. Come and join us. Who goes to that? If you like skiing. Does Meb Faber go to that? Who goes to that?

Where is it? So, we've had spin-offs. So, Vitaly Katzl-Nelson does one in Vail. Oh, yeah, yeah. I know Vitaly. There's a friend who does one in Kazakhstan. I do the original one in Zurich. And probably there's one in Charlotte, North Carolina now that Jeff Hendrickson does.

So, it's kind of like a TEDx, you know, something like that. You spoke about value investors. You buy something for the lesson you think it's worth, and you wait for prices and value to converge. But you can wait years if other investors don't see the same value as you do because there's all these other things that are attracting capital. So then you want to be in a business that's growing, and it's interesting. So another idea that has just taken hold of many investors

is this guy, Chris Mayer, that you should have on this show. I think it's called 100 to 1. He's talking about finding 100 baggers. There's Phelps who wrote 100 to 1 in the stock market. One to 100 or 100 to 1? 100 to, I wish I had it written down. But then Chris Mayer wrote kind of an update, his journey in finding 100 bag of stocks basically. Because if you're into something where it takes a long time for the market to recognize it, but it's becoming so much more valuable.

And what's interesting is there's an analysis that was done by a group of interns about five years ago. was done by a group of interns about five years ago. And the businesses that deliver 100 to 1 returns over a period of 10 or more years, they're not necessarily in tech, so they can be in distribution and all sorts of… Monster Beverage? Is another one. Dominos?

And Pool Corp. I don't know if it's a 100-bagger, but… Pool Corp is one of the biggest winners of all time. Right. They dig holes. Like, literally biggest winners of all time. Right. They dig holes. Like literally, they dig swimming pools. Right. And distribute all these consumables for swimming pools.

Yes. So I think that that's an idea that I'm not sure if it's, again, it's kind of like flavor of the month. Everybody's trying to find 100-baggers. And actually, it's a crowded trade right now because, you know, for every 100-bagger that is a 100-bagger, there are going to be 20 that look like it and aren't going to make it. But I'm really not answering your question because it's a really tough question to answer. I mean, I've kind of come up with

time arbitrage. And, you know, so it's really hard. I wish I had simple answers. I don't. What if the answer is that there are going to be certain market environments that are going to make you look really smart if you do this well, And you just have to almost like console yourself with the fact that there are going to be many years where no matter how good you are, the market's not going to reward you. And then that's the expectation that you set for your clients. And David Einhorn comes to mind. He had one of the best years in his career last year. It was amazing. His shorts worked. His longs worked. Yeah. And a lot of,

most people's longs did not work last year. And that's a one out of every now, maybe he could do that every three years in the 90s. You just can't do that anymore every three years.

There's a confluence of factors. There's a confluence of factors weighing against value, traditional value investors. One of them, one obvious one is interest rates. And you can't

really, it's hard to, it's hard to say that growth, growth companies have not benefited relative to value companies from ultra low interest rates. Yeah. And look, I just remember at the end of his letter that I was lucky enough to receive, David Einhorn said that he thought that now with the kind of break that happened over the last two years, value investing was going to go back from being an industry to being sort of like a handicraft thing. And there are going to be many, many people who are going to fall out. A lot of people got wiped out. A lot, but I don't know if enough did. And there's still a lot of money out there.

It's driving up all sorts of prices. And there are so many more MBAs there. And there are so many more people who've studied accounting and who know how to value businesses. And so- You said deriving an edge. It's hard. Yeah. But I would tell you something else. Of course it is. So there's this fascinating set of ideas that my team get really upset with me because I use this

word that I don't really understand called ergodicity. But I think I now have ways to describe it. I can even describe it right here, which is, it's not the fastest skier that wins the season. It's the fastest skier who doesn't have accidents. Because if you try and ski the fastest in every race, and there's a lot of pressure to try and ski the fastest, then you raise your probability of, you know, sort of damaging your knee or something so high that you don't get to finish the season. And I think that part of what is value investing today is having the willingness to disappoint investors for many years because you're not willing to do the kinds of things that would do the skiing equivalent of breaking your knee. Survive. Surviving is thriving.

The guy at First Eagle Global said, I'd rather lose half my clients than half my clients' money. Right, Matt McLennan. And he said that in 07, right before the market blew up, famously. Yeah, but that's really, really hard to do as well. And so there's an element, and I'm just trying to be a little philosophical here because I'm not being analytical, is that there's a kind of idea that value investing is

this stoicism and this idea of deferring benefits today for the future. And I think that if that is a kind of a behavioral edge, but it's really, really hard to get, I think it's hard for me to get even living in Zurich. And I moved from New York to Zurich to try and get that, to get kind of become calmer. Meaning you're not sitting in New York at steak dinners, idea dinners. You're not hearing all the bullshit. You're not like being influenced by everything, the Wall Street Journal, CNBC, Bloomberg. You have to get out of that bubble, you're saying. Yeah, but even then it's hard.

Yeah. And so, but to, you know, bring it back to your question, what is value investing today? It's a far less powerful idea than it was 20 or 30 years ago, because in a certain way, it's such a crowded trade, you know? You said something I have not done. I asked you,

what are you doing differently now as a value investor than you used to or what other value investors are doing? Yeah. You said something I have not done is update my valuation models to justify paying a higher multiple for businesses. Whether it's EBITDA multiples or unit economics or LTV of customers, one has to be very wary of supposedly updated and better ways of valuing businesses to justify high valuations.

Here's my question. Why is that such a sin? We look at things like the CAPE ratio, so 10 years worth of earnings a month. Yeah, that's great. That's old school in comparison to some of these things. No, no, no. We don't look at it to invest in. Right. We look at it and we say— Valuations have been rising for decades.

This CAPE ratio itself for decades has been rising. And why? Because profit margins are rising. Companies are just better at being companies. And why? Because profit margins are rising. Companies are just better at being companies. So why would it be such a sin to, for example, on average, just decide as a portfolio manager, I want to own the cheap enough stocks that I'm still a value manager,

but I might have to broaden my horizons because just in general, there's this upward drift in multiples. Do you have a line in the sand where you're like, I will not pay more than 17 times forward? I'm not saying it's right or wrong. I'm curious. Yeah, you know, so I'll give you one that I think is,

somehow I find this powerful is, I don't like companies that show less cash from operations generated than the income that they've shown. So I look at the cash flow statement. I want to see more cash being generated than income. If it's the other way around, they're reporting more income than they're generating cash, that bothers me.

What the hell is going on? Maybe they found a way to invest the business above the line, so to speak, but it bothers me. So I think that the reason why I don't like playing around too much with those, for example, simple kind of measures of what is the business actually producing is that you've got to start asking yourself, am I investing in what it is today? Or am I investing in, am I making heroic assumptions? In a certain way, we're making assumptions all the time about what the business will do in the future, and we're buying something today based on what we'll do in the future. the future. And we're buying something today based on what we'll do in the future. But the one that comes to mind to me is a wonderful friend who takes me through his model on Salesforce.

And I'm looking at Salesforce and I'm just saying, you know, this is the cash they're generating today and it looks super expensive. And he's got a model where he's kind of showing the cash that they're producing today, but showing how that's going to acquire more customers. And the average customer lasts 20 years. And once you've acquired the customer, you don't have to spend the money on them anymore so they can become super profitable. And if you kind of do that analysis, 20 years out, when they stop spending the cash

to acquire customers, it's going to be super profitable. Does that resonate with you? I'm like, you know, I kind of came out of that thing saying I wish I was smart enough to own, to want to trust that. Right. The big assumption is that they can continue that indefinitely. Right. And then if you suddenly realize actually the average customer doesn't stay 20 hours, they only stay 10 years.

Or actually, even though they're not acquiring new customers, what looked like acquisition marketing spend is actually customer retention marketing spend, and they have to keep spending it. That changes the numbers massively, and especially at low interest rates. And so I think a lot of businesses or a lot of valuations tripped up on that kind of thing. And so I just, I found myself shying away from that and hoping that I will find something

that is just not like that. So I would guess that if you look at the companies in your portfolio, there's probably not a ton of variability year to year in the earnings or the revenue. These aren't companies that are wildly gyrating based on the economy or new product or new entrance into their market. Is that accurate? So in a way, one way to describe value investing is a bet on things that won't change? Yeah. I mean, look, but even that, there's variations and nothing is a clear cut.

So, you know, I've invested in… But Nestle, you're not going to see Nestle's earnings randomly surprise you wildly up or down. That's correct. That's kind of like… You know, Nestle for me is sort of… So a way of looking at it is, you know, I'm a caveman. And so I can eat the food that's kind of at the back of the cave and that's safe.

Or I can go out and hunt for a mammoth. But if I go out and hunt for a mammoth, that would be like the NVIDIA. You might not make it home. I might not make it home. So Nestle for me is the thing at the back of the cave that I know I can always eat, even though it's not that exciting or all that great. But I know it'll be around forever and ever. But there are businesses. So when I do my 5% bets, I'll buy businesses where it's nowhere near as clear as Nestle.

And there's a business that I've bought as an exchange business in India where they're so profitable. There are many people who want to get in on it. And we keep seeing new entrants that they have to fight off in a certain way, the way, you know, every now and then with MasterCard and Visa, you think that maybe PayPal or maybe Revolut or somebody's going to take away all of their business

and eat their lunch. So it's like the FTX of India that you're talking about? FTX, why am I blanking on FTX? No, they're not in crypto. They're not in crypto. But I spent quite a bit of time thinking about Coinbase and thinking maybe that was a really interesting way to play it. You know, to just bring up

FTX, I mean, I just didn't like how much money, their take or their rake was really high. So it's Coinbase. And Destin, if you know anything about Wall Street, you know that's destined to shrink. Destin to shrink. But yeah, so like, I think their rake was like 5% or 6%.

It was pretty big. The worst tell on Coinbase was they made three times the amount of money on retail than institutional. And you just said, well. With like a quarter of the volume. That's how you know it's not sustainable. But you know, I don't know. This might have hit your desks.

I mean, a guy that I don't remember his name, highly respected, really smart, comes out with like a 50 or 60-page analysis of Coinbase. Okay. And basically the document says, you know, you must be a complete idiot if you don't want to buy this. And by the way... He wrote that? He didn't write it.

That sounds like research I would have written. That's sort of implicit in the document. So, Guy, I know you don't care about day-to-day markets, but I do. Guilty. I don't care. Josh does. Look at this. The outside and the Qs and the S&P is pretty disgusting. Well, I mean, you might have to define outside day. So the NASDAQ opened at the highs of the day, which was significantly higher than the highs of yesterday,

and closed at the lows and completely— The lows were lower than yesterday's low. Engulfed the prior day trading. And on a day where NVIDIA reported blowout numbers. So we had this- Hold on, guys got to do some trades. Let him make some calls on your outside day. We had this hilarious thing that happened last quarter

when NVIDIA reported where they took this recent quarter's estimates up, I think from 6 billion to 11. Yeah. And the stock went up in the previous 90 days. I mean, what did the stock go up in the previous 90 days? Whatever it was. The stock's up 256% year-to-date. Yeah, and a lot of that is in the last 90 days.

And so, okay, so today, instead of hitting the 11 estimate, they smashed it up. They did 13.5 billion or something like this. Yeah. And they got it for 16 for the next quarter. Versus 12. Like hilarious numbers. And now that this is the end of the day, I know people are short-term. I'm being short-term myself. The stock closed exactly flat. It was up 10 basis points today. It was up

9% earlier in the day. And again, short-term, who the hell knows? Noise, noise, noise. But it's interesting, nevertheless, that all of the good news, as we learned today, was baked in. Now, I don't know what's going to happen tomorrow or the next day, but for today, that's where it is. Yeah. And where I come out is I just, well, do you know Chris Blumstrand? Yes.

He's another Buffett disciple, right? Yeah, he's like, you know, I hate it when people have IQs that are multiples of mine, and he's a guy whose IQs, I feel like it's multiples of mine. He's had an amazing presentation that he did on NVIDIA, actually. And he compared it to Microsoft of the Microsoft of 2003, 2004. And it could be an amazing business. Microsoft, under the new CEO, has done extraordinarily well in their cloud businesses. But it took 16 years for them.

And so NVIDIA- Microsoft's had more than a lost decade in terms of its price. If I stop and think about it, actually, there are some businesses that I own that are 10 times revenues, but 10 times revenue is kind of the limit for me. Yeah, not 40. Yeah, it's way up there. It's not as bad as Snowflake. I mean, Snowflake just completely flabbergasted. I want to make sure that we get to,

we talked a lot about what you own and invest in. Tell us about, so you're in India Energy Exchange. Yeah. So that's where you can find Alpha. There's probably 10 other people looking at that. So why do you own Peloton? Okay. I was like,

did they do a trade that I don't know about? But tell us about some of the other stuff that you are, not like talk your book like other people should invest the way you do,

but you mentioned Ferrari. Is that an active holding of yours? Yeah. I think it's a fascinating story. So the ticker is race. Yeah. How many do they make a year?

It's like 14,000 right now. And when I bought it, they were like, I mean, it was like 12,000. 12,000. But how many cars are there? They're only selling that many a year. 12,000 units a year, yeah. But you prefer the stock to the cars? Because there are people that will invest in the cars themselves too.

Yeah. I mean, wine, cars, art, if anybody pretends that those are investments, they're not. But it's a good excuse. If you need an excuse to buy it, call it investment. Collectibles. So I used to own shares of McDonald's. And I used to have an office on 53rd and 5th in the 666 building. And I'd go around the corner and eat regularly at McDonald's

because I needed to check the merchandise and see what else. Yeah, that's why I go there. I was getting fatter and fatter. And at some point, there was some element where I was saying, you know, I want to sell this because I just don't want to eat at McDonald's all the time. No more channel checks. Josh is out with Shake Shack, literally. Right.

Actually. But now I spend a lot of time thinking about what is it that makes people want to buy a Ferrari and pay so much money, so much more than they have to pay for four wheels. And I can tell you that, but not on the podcast. Right. So, yeah, maybe I could tell you something not on the podcast either, but, but here's what I can say is that, and I love this analogy and I want to do something with this somewhere. I used to get into fights with my wife who wanted to wear high heels to events and weddings here in New York city. And then to take, to go three blocks, we had to get into fights with my wife who wanted to wear high heels to events and weddings here in New York City.

And then to go three blocks, we had to get into a cab because she definitely wasn't walking those three blocks in high heels. Right. A Ferrari does for a man what high heels do for a woman. They make the person feel fabulous. And any time a guy gets upset at his woman for wanting to wear high heels, he should just remember that it's way less expensive to buy high heels than it is to buy the damn Ferrari. But it's the same thing. I wonder what percentage of Ferrari purchasers on an annual basis are men.

I bet you it's like 90 plus. And how many of them are bald? Yeah, and how many of them are short? Yeah, and so I keep joking with my office staff. I keep saying, you know, I think strictly for investment research purposes, I think I need to maybe go buy one. You might need a Ferrari.

And the hilarious thing is that I can talk about it like that. You're a genius. You really are a genius. Okay. But I still, I mean, you know, it impacts, even if I talk about it like that, the fact of the matter is if I went and ended up for investment research purposes only buying a Ferrari,

it would make me feel fabulous. Absolutely. What's the bulk, like in one or two sentences, what's the bull case on Ferraris? And what's your price target? $300 stock. Yeah, so I don't have it. It is a very expensive stock to own. But the bull case is not dissimilar to, let's say, Nestle or this idea of real estate, which is that it is kind of an asset that is impossible to recreate. So what goes into a luxury brand, you know, we could together design a car, and they do. There's a car called Koenigsegg, which outperforms

in all sorts of ways a Ferrari. It just doesn't have the tradition. It doesn't have the heritage and the pedigree. And the people who want it want to feel like they're buying the real thing. And somehow Ferrari is the real thing. So we can ask ourselves, how many Ferraris could be sold in the world? And could we imagine 60,000 being sold in the world? Would that saturate the demand? No way. But couldn't they destroy the brand by doing that? Yeah, they could. And so it's a more delicate brand to own because it has to be managed well. And I have this question about LVMH, which is something that we could spend a lot of time talking about as well. That is the most valuable company in Europe. And I'm fascinated by that company. Yeah. Luxury items. Yeah. And the guy, Bernard Arnault is a freaking genius. And, but it's way more than that. I mean, there's a building in Paris called La Samaritaine.

I was there. The giant statue outside the building? That is LVMH land. It's incredible. Good luck having a product that is not an LVMH product. I'm trying to sell it there. They kind of own like all the high ground in Paris, all the places.

And then what they've done with Tiffany's is unbelievable. I mean, and you know, as a Berkshire shareholder, I kind of say, well, it wouldn't be nice if our jewelry store, Borsheim's, would have had the same thing. I mean, maybe they could have done it with Borsheim's. Wasn't Tiffany a piece of shit stock? It was. They say they doubled the revenue since they bought it,

thereby making the price they paid about half. After they closed the flagship store for like two years. To redo it on Fifth Avenue. And they spent a fortune to redo it. Have you been over there? I haven't actually. I should go. Holy shit, you should go right now.

Yeah, maybe I will actually. But the incredible thing there is that, and I don't understand where it goes because the LVMH sort of luggage, the sort of logo, is everywhere. And, you know, vast numbers of people from Asia want to buy that. And you sort of say, is it saturated? And what happens when it does get saturated?

And when do you know if it's gotten saturated? And I hope that those guys, I don't own the shares, but I hope those guys are thinking about it. And, yeah, you're absolutely right. Ferrari has to make sure that it doesn't blow that. And it does bother me that, you know, so I was not interested in Formula One, but now I kind of like the brand is developed through Formula One.

They have this special relationship, but they just keep losing. Ferrari, McLaren. Ferrari keeps losing. Red Bull. Red Bull has won for the last eight years. I don't fully understand how or why. Wait, Red Bull's a car company now? So Red Bull. Red Bull has won for the last eight years. I don't fully understand how or why. Wait, Red Bull's a car company now?

So Red Bull… They have a racing team. They have a racing team. Red Bull, by the way, is a private business. But, you know, I think if I could just own Red Bull. And what an amazing company or what an amazing marketing machine. So they market their Red Bull drink in part through getting guys to parachute from the highest height, like the practically satellite height, and they sponsor a car.

Guy, before we get out of here, I want to make sure that I ask you, you've been doing this a long time. What have you learned about communicating with investors through difficult periods of performance? Yeah, that it's hard. You learned that. So, why I started off doing quarterly letters

maybe a month ago. Sorry, just one thing to set the stage on this. I apologize for cutting you off. One of the things that Buffett's so magnificent at is communication

with his investors. Once a year. Once a year and a letter. I'm sorry. This is like a... By the way, you can cut me off anytime you like.

This is a tangent. He doesn't communicate with his investors. Not the way that he used to. No, no, no. I'm going to go somewhere even different than that. The money that he's investing is insurance premiums. It's not mutual fund deposits.

In other words, he's investing money that people would be paying anyway, whether he's doing well or poorly because it's insurance float. He has shareholders of Berkshire, but that's a different conversation. There was a book that was published. I can't remember who was the author

that put this together. Buffett's Letters from his hedge fund in the 50s. Did you read that book? Who did that? Larry Cunningham. Larry Cunningham. So that's what I'm talking about. Just an incredible communicator.

Up, down, side, whatever. But you agree with that delineation because if you have an insurance company, you could cut your investments in half and people are still making their payments. I'm not talking about Buffett circa 2023. All right, fair. So how do you do it? Well, first of all, Buffett's a genius and I'm not. I mean, that's a cute way of not answering the question,

but it really, really is true. I stopped communicating on a monthly basis and even stopped communicating on a quarterly basis because you get onto a treadmill. And then now, if you don't send out your quarterly letter or your monthly letter, or some people do weekly, some people do it daily, now the investors are worried what happened to you. And you get tired. And what I saw was that the quality of my writing went down. And we've all read them. They're kind of like warmed-up market commentaries. And the guy is just, or woman, is just tired of writing, and they can't come up with new stuff.

And repeating things that other people have said. It's not that much interesting to say. Yeah, so I limit it to once a year. And it's really tough. I mean, I can't say, I mean, again, we've mentioned him before. Everybody should read Chris Broomstown's letters. I mean, they're just incredible. Are they public?

Yeah, you just go to his website and download them. But, you know, take some time to read them. Every one of his annual letters is like 300 pages, maybe not 100 pages. But then you're going to all spend a lot of time just on the perform? I kid, I kid, I kid. You know, he like, his analysis of Berkshire, I mean, he dives into the weeds of the numbers in a way that nobody else I know.

And he just loves doing that. So Chris publishes some stuff on Twitter, and he's obviously incredibly, incredibly intelligent. Yeah, yeah, in a way that's sort of shocking. How many investors are you writing to once a year? So it's 150 is sort of like the outside investors. Are they all sophisticated or half sophisticated? Like, do you have to think about the audience?

So, no, they're like, I mean, they've gone up a learning curve. I mean, I and my dad went up a learning curve, but some of them are relatively new to the fund. And so, and look, so I, the thing is, I got myself into a good groove because starting with that first chapter of my book, The Belly of the Beast, I kind of like did this. You know, so William Green sits down with me and my dining room table is a wooden table like this.

And we start looking at the first chapter and he hasn't read the book yet. He starts reading the book. He's like, dude, I, you know, because he's invested with me as well. He's like, I invested with you and you did this. You know, I can't believe it. Oh, wow. I invested with you and you did this. You know, I can't believe it.

But there's this amazing dynamic that if you kind of try and keep your, you blurt out from time to time your biggest mistakes and you can keep your ego below kind of like that outer boundary, I can continue to write in a humble way and be honest about what's happened. And, you know, a lot of people will be like, holy moly, I don't want to go anywhere near this guy. But there are just some people who will say, you know, I don't like the fact that he underperformed slash lost me money, whatever it is. But I know that he's being honest.

And I know that he's not trying to cheat me. So that makes me sleep well at night. So you don't have to be Warren Buffett and still live an extraordinary life and do extraordinarily well. You don't need to have an Omaha number of 20% plus per year annualized or 15% annualized per year. And at the end of the day, I think that, well, actually, I have outperformed over the whole life of the fund. And I'm trying to add value in these other ways. And I think that that... I love it. No, that was awesome. But that's really what I'm trying to do in the letter as well.

That thing that you said, first of all, ties to beer, ladies and gentlemen. It's painful to do. I just want to say that one thing that you said, though, is so important. I might not be the best performing whatever over any time frame, but if you connect with the way I think

and I lay it out for you, this is my opinion of how the fund is done this year, how the markets have fared, like the insights that I want to share with you. If the person reading that connects with you and says, all right, I don't know how this portfolio did relative to every other manager I could have given money to or some hedge fund benchmark or whatever. All I know is I agree with a lot of what this guy thinks and I trust him and I know he means me well. That's my benchmark and I'm happy.

That is what I think what this business should be. Right. Because if it's just about three-year track records, all you're ever going to do is chase the person who's going to come off a hot streak and disappoint you. How many times do you want to do that? Ten times? You know, there's this amazing moment that I remember. So I had one of my partnership meetings or an investor gathering at the Harvard Club.

And I keep kind of like, here we are next to the New York Public Library. And it's like two or three blocks away. It's so funny how much of my life has unfolded in New York City city and so i somebody asked the question so could you tell me what your sell discipline is and i take a big i take a big gulp because i'm going to be honest with the guy i say look i you know i meaning how long can you be wrong for or no uh when do you sell a stock when oh okay and what you know the standard answer is sort of like, well, when it comes to intrinsic value or when my thesis has changed. And I look at the guy and I kind of take a great big gulp and I say, you know, it's really hard.

I actually don't know. And I feel like, and, you know, here's what I try to do. And I think I've gotten it so wrong many times in retrospect. And there was a kind of a, you know, it's this feeling of once they hear me say this, they're all going to take their money and go somewhere else. And this kind of utter surprise

that they didn't have a great answer for that plan that it had. But if you're honest, there is no perfect answer. Right, there isn't. But so many people feel under pressure. At the top, that's what I say. My answer is 69 times earnings.

There we go. I'm out. That's why I'm out. Guy, credit to you. We've done this show 100. How many? What episode is this? I don't know.

It's the first time. It's an infinitesimal. This might be the first show that we've done where not a single chart went on that screen. Yeah. What do we need charts for? Look at the intellect we're sitting across from. We're good charts, guys, but not today.

I'll tell you something else. I mean, I don't know if you get invited to do presentations, but it was a huge freedom for me. And it's kind of somewhere in the same way is that I realized that I wasn't going to ever put up charts ever again. And actually what I was going to do is I was going to be the presentation. And there's something that happened. So the other thing I learned was, you know, don't bone up on facts or trying to memorize stuff. If there's anything you're going

to do before live presentations, get some good sleep and, and then just go out there and be yourself. And when you, the first time I did it, it was a fun story for me at least. So I had a presentation prepared. Are there like, where's your slides? Yeah. And so the slides are there. And I'm going to take the risk. And I get up and I tell the group, I don't remember where it was. I say, you know, I got some slides here. And there's a presentation. I'm going to send these slides to you.

But there's something that I really want to talk about that's not on the slides. Yeah. And so like you sort of feel the whole room shift forward. Oh, the audience is probably excited about that. They're like, holy moly, what's he going to say? Oh, I'm going to steal that. I like that. And then the next time I just didn't bring the slides.

And there's this feeling that you can actually go in multiple different directions depending on the mood in the room, which is kind of like what you guys are doing here. How would you describe the mood in this room? I've never done this before, actually. This is kind of really cool because it's sort of like exciting and alive but deeply genuine at the same time so i think that so i like so i agree with that like uh we could have taken this anywhere we could have dwelled on one topic for 45 minutes we could have asked you about 100 different things but there's a logic to a conversation like this

and you just surrender to the logic like like what should be the next thing that we go to. Michael and I are highly skilled interviewers. Most people would not be able to find that logic and follow it. I just want to give us a shout. You are highly skilled. There's a lot of guests who are really smart

on one topic and we want to make sure we give the audience just that perspective on that topic and not ask them things that they have to like struggle to answer. You're a little bit different. You have thought a lot about a lot of aspects

of this industry and we're very lucky to be able to pick your brain on all these different things. Depth and breadth. Thank you. That's very kind. I mean, it goes both ways.

You know, talk to my wife. She really knows that I'm a schmuck, you know. Well, she's on next week. It works out. I just love, I've said this many times, but I love this thing. So Golda Meir apparently actually says,

the movie's coming out, I think tomorrow it's premiering, the Golda movie. But so she says to her ministers, don't be so humble, you're not that great. Oh, that's good. That's perfect. Love it. So we always finish the show with favorites

and we ask people about whatever they are reading or watching or listening to, and you gave us a bunch of cool stuff. So let's make sure we get to these. The first thing is chess.com. Yeah. Okay. Excuse me.

So Michael beats up chess players. I've never beat up anyone. Stop. What is chess.com? What a goldmine of a URL to own, by the way. Yeah, so it's an app on my iPhone. And I kind of like stopped playing chess. And I found I used to, I've had to delete it on my office computer because chess is something you just get into and you just like,

it's a rabbit hole for me that I just like go into. I'm not that good. I don't have a particularly high rating as those people who've come and played me have realized. But it's just really fun. Oh, you like it so you can't stop playing. Yeah. And so you can play different time controls on this chess.com website or app. You can go down to one minute chess, which is called bullet chess, which is like the most intense adrenaline thing that you've ever seen. But I play seven days a move. So I make a move, and I don't have to even look at it for another six days if I don't want to.

And it's just, I don't know. Playing against a machine? No, no, always other players. It's so much fun. I was going to say, Nvidia doesn't care if you take seven days. You're going to lose. People who I may have met and may not have met, and there may be chats going along the side,

and somehow I've just been really enjoying it. You talk shit? You know, not much conversation taking place. I've probably played you on there before. But you know, there's people who... Are you good? No, I'm not good, but I enjoy it. I'm on chess.com.

Yeah, we should play. That's great. Do you play seven days? Yeah, I do. I also do the Blitz stuff, but it stresses me out. Yeah, exactly. Don't do it late at night. If I do that, I can't sleep for two hours.

But it's just a great app. I love it. And all of my female groupies are now like turning off the podcast. Let's bring it back. You gave us a couple of books. Nobody's Fool. How do I pronounce the author's name?

Chabris? Chabris and Simon. Chabris and Simon. Yeah. Tell us what this is. So we've all seen the video where you're asked. Now I'm going to kind of do a plot spoiler. So sorry if you haven't seen this. But you're asked to count the number of times these basket players pass the ball.

And now do I do the plot spoiler? So maybe I don't do the plot spoiler. Wait, wait. Who's nonfiction? What are we talking about here? Who's passing the ball. And now do I do the plot spoiler? So maybe I don't do the plot spoiler. Wait, wait. Who's nonfiction? What are we talking about here? Who's passing the ball? This is Chabri and Simon. It's a very famous experiment.

Okay. So the bottom line is I'm going to spoil the plot. Sorry, everyone who hasn't seen this. So people count the balls, and they're asked how many times did the players pass the ball within each other? Basketball players. Yeah.

Okay. Now they get asked the question, did you see anything unusual? And 99% of people say, no, I didn't see anything. And during that video, he stops in the middle of the screen and beats his chest. It's like insane. So inattentional blindness or attentional blindness, you're looking for one thing and the thing appears in front of your eyes and it's just not registered in your mind. So these guys, Chabris and Simon, have become experts in identifying the ways in which our brain puts together a reality and will ignore facts that are right out there. And of course, this is extremely relevant for investors. And they didn't write a book for 10 years. And they're researchers, they're,

you know, Chabris was in the computer science department at Harvard University, but then he moved on. He wrote a PhD thesis on chess, but we'll leave that aside. And he went into psychology. And so he's kind of like, takes us in the book circumstances in which people have been fooled in one way or another, how you get fooled and how you can prevent yourself from being fooled. Oh, I love that kind of thing. Yeah, it's pretty. Is that a new book? Yeah, it's just out. Just out.

Very, very cool. So that's called Nobody's Fool. Yeah. Okay. What's Authenticity by Alice Sherwood? So Alice Sherwood is a British woman whom—so she is a lecturer and a researcher at King's College in London. And she—so like the kind of like starting point of the book or the reason why she wrote this book is that she worked with somebody who remains nameless in the book, but was a total social fraud. So he had two women who both thought they were going to marry him. Very, very smart guy. And he kept them going for the longest time until he suddenly disappeared. And so she kind of like,

it was a kind of a damaging and traumatic experience for her, not to mention the two friends who were kind of jilted and didn't realize this guy was doing this. And she kind of like takes the reader through many examples of the ways in which we are deceived constantly and people take advantage of us. When we want to be deceived, especially, right? Yeah. And so she kind of like has become fascinated by this. And the book is kind of catharsis for her because she's trying to work through the issues. I mean, she didn't know how to trust people after that because this guy was so convincing. And so she kind of, again, takes the reader through thinking about what is authentic, what is not, what is real, what is not. When are you being deceived? And I think both books,

while ostensibly having nothing to do with investing, actually have everything to do with investing. That's fantastic. Those are two great recommendations. And so one is Nobody's Fool, the other is Authenticity by Alice Sherwood. I feel compelled, you know, he's a friend and he's written about me in the book, but Richer, Wiser, Happier is a kind of a great sequel to my book. It's written by William Green, also from the UK, was a student the same time as me. He edits my letters, but he kind of takes the questions that I ask in my book about what am I supposed to be doing? How do I live a more intelligent life? And instead of writing what my answer is, he goes and interviews some of the world's smartest investing minds like Ray Dalio and this guy Arnold Fondenberg and

Charlie Munger. And he says, what are their answers to how to live a better life? And I think it's a wonderful book. And I am really grateful to you for giving me the time to plug it. Of course, absolutely. That's William Green's podcast is called what? So he's joined up with Stig Broderson and Preston Pish

and he's on the Investors Podcast. So he does have a podcast out there as well. And he works insanely hard to prepare the interviews. I mean, I have a podcast where I- Wait, what are you trying to say? You guys work hard as well. Yeah, that's right. But he's obsessive in a way that's kind of insane. Okay. Well, we're definitely not that. We're definitely not that. Michael, you saw Dave Chappelle last night at MSG. We spent a lot of time talking about New York City and Guy. You spoke about the struggles.

And sometimes you get what you pay for in the case of a Ferrari and the case of New York City. So last night I saw Dave Chappelle. And I was a little bit weary going in to see a comedy show with 15,000 other people. Comedy is an intimate thing. But it was an incredible experience. So today is Dave's 50th birthday. So he brought some friends out on stage. Jeff Ross emceed.

Jon Stewart and Chris Rock each did 15 minutes. There's a few other comedians that aren't as big in names. And then Dave did an hour 15 and absolutely destroyed it. It was like watching a Netflix special live. And after the show, I went home because I'm old and tired. Nas, The Roots, and Ludacris each performed. Which is, I mean, if you buy a Dave Chappelle ticket and you get all of that other stuff on top of it,

that's like as good of a value as you could get. So there's a lot of great cities in the world, but that's an example of what you get living in New York City. Yeah, and I'm with you, man. Although I didn't recognize many of the names. The one that I do recognize is Jon Stewart, who's my hero. There's a video that I've watched like three or four times

of him interviewing somebody. I love the way he's gone political. And I get his political standpoint, and it's great. I think I don't have a favorite. Because I wanted to talk about Aaron Rodgers, but then I feel like did we talk about Hard Knocks already in the last couple of weeks? I watched the third episode last night.

You fall in love with every team that's on there, and you root for them. So this, I don't know, do you care about American football at all? You know. Not much? Okay, good. Sorry. I'm going to keep this really short then. No, that's fine. Teach me.

So there's a guy, Aaron Rodgers, who's 38 or 39 years old. He's one of the oldest players still playing. He's 20 years and he's won a Super Bowl and he's been at the top level of the game. And there's always been this talk about how he's a weirdo or he's aloof. That's the word they always use. Like Aaron Rodgers is aloof. He does some weird shit in his personal life. He does weird shit or he disappears for a while.

Or he says things that are designed to like create mystery around him. But then you watch the show and it's the polar opposite of his reputation. The show is a documentary

film crew for HBO. They do this every year. They pick one team to follow through training camp. Yeah. As they get ready for a season.

And it's usually a team that's on a crossroads. This year, it's the Jets. The Jets got Aaron Rodgers to come after he spent his whole career in the middle of nowhere. And multiple MVPs, Super Bowl winner. Yeah. Great player. So he comes to Green Bay, storied career.

Anyway, the point I wanted to make is he is nothing like what people think of him. They show this guy interacting with like 20 year olds yeah that's the whole team is kids that could be his son yeah like biologically yeah and he's surrounded by all these kids there's nothing aloof about him yeah the team loves him he's like the best guy you see him involved in all these conversations with people he's not like shut away in a trailer somewhere. So I just like that it kind of shattered that myth about him.

I totally agree and had the same thoughts. I will only just add to caveat that you're seeing the best version of him. No, no, no. So fine. Maybe HBO is editing it to make him look like America's sweetheart. He comes off great. You can't fake it for that long. How many hours of training do you think they do with

the PR teams for the NFL franchises they work for? Probably a lot. Yeah, that's a good question. Right, so if he's smoking crack behind the building, I wouldn't know because they're not going to put that on the air. My caveat is I hope he loses by 50 points this weekend when he plays the Giants preseason, and then when they really

play in October, I hope he gets demolished. But other than that, I like the guy. Okay, that's it for this week's episode of The Compound and Friends. Very special thank you to Guy Spear at the Aquamarine Fund. It was a lot of fun for you. We had the best time. I had a

great time. It was intense, man. Of course. It was enormously fun. We've been trying to do this show with you. I told you. We've been trying to have you for a year now. So I'm so glad we could get it together. Yeah. All right. Thank you for having me.

Shout out to Chantal who helped us do that. Nicole, John, Duncan, great job this week. Of course, Sean, we know you're out there. Great job with all the charts we didn't post. We appreciate that too. Thank you guys for listening. Leave us a rating and review. And we will see you next week

alright that was the warm up and I just wanted to give you a little bit of an idea of how the show did that go out live? no it didn't say live live tape It doesn't say life's paid. Life's paid.