We Study Billionaires - The Investor’s Podcast Network - RWH009: How to Build Enduring Wealth w/ Guy Spier (Part 1)

Starting point is 00:00:00 You're listening to TIP. Hi everyone, I'm delighted to introduce today's guest, Guy Speer, who's one of my closest friends. Guy is a renowned hedge fund manager who's been running the Aquamarine Fund for almost 25 years. During that time, he's beaten the market by a little under 250 percentage points. Guy and I first met when we were students at Oxford way back in our youth, but we really became friends when we were both living in New York back in the 1990s. I ended up investing in his fund more than 20 years ago, not realizing that I was actually one of his first investors. I'm now an advisor to his firm, and I still own the fund all these years later.

Starting point is 00:00:38 I've often told him that I regarded it as a 40-year investment. But what really deepened our relationship is the fact that I helped Guy to write his book, the education of a value investor. I basically lived with him for several months during that period. So, as you can imagine, this episode is really a candid conversation. between two very old friends. As you'll hear, we talk in depth about a problem that all of us have to confront as investors, which is that everything changes and you can never truly predict what the future holds.

Starting point is 00:01:11 We've seen this very dramatically in the last couple of years. Before that, everything looked sunny and great, and investors were riding the tide of a massive bull market. Then COVID broke out, Russia invaded Ukraine, inflation went nuts, and now all those hot stocks, and cryptocurrencies that bullish investors used to love have come crashing back down to Earth. It's a great reminder that nothing is truly stable or permanent in markets or, for that matter, in life. So what are you supposed to do as an investor if the world is so unpredictable? As Guy explains in this conversation, his answer is to invest in a small number of extraordinary businesses that are likely to prosper under almost any conditions. To put it another way,

Starting point is 00:01:55 his goal is to find companies that occupy what he calls the economic high ground. If you're like me and you want to build enduring wealth in a resilient way over many decades, I think this is an incredibly valuable idea. Gaich has so many rich insights here that we ended up talking for a long time. I didn't want to cut this short, so I've divided our conversation into two episodes. What you're about to hear is part one. If you enjoy it, I really hope you'll also check out part two. Thanks so much for listening.

Starting point is 00:02:25 You're listening to The Richer, Wiser, Happier Podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life. Hi, folks, I'm really happy to be here with my old friend Guy Speer, who's joining us from the south of France of all places. Guy, it's lovely to see you. Thanks for speaking with us today. And it's lovely to see you, too, William. So actually, I wanted to start by asking you to tell the story really of your family. history because I think having known you for 25 years or so, the only way really to understand who you are and your career as an investor and what it is you've been up to for the last 25 years

Starting point is 00:03:17 of running Aquamarine is to understand a little bit about your family history because it's really shaped your life. And so I wonder if you could actually start by telling us about your great grandparents. This would be on your father's side, who they were, where they were from and what happened to them back in the 1930s? And just to get on the other side, my great-grandparents on my mother's side were economic migrants from the United Kingdom, Ireland and places like Manchester to South Africa, where they ended up in the towel, and where my grandfather ended up fighting in World War I on the British side, which is just fascinating because now we can move to my,

Starting point is 00:04:00 I guess you wanted to go to great-grandparents. And so great-grandparents on my grandfather's side in Germany were what were called Luntz-Yudden. They lived in the area around Frankfurt, which was close to the Rhine and was on the borders with France. It was an area that benefited from the emancipation of Jews earlier than most other parts of Germany. as Lance Udn, we don't know exactly what they did, but when we get into my grandfather's parents, they ran a couple of shoe shops. It started off with a couple of shoe shops in Frankfurt. And then at one point they had a business doing wholesale supply to shoe shops around Germany. And my grandfather was born into that, but was more of an intellectual type,

Starting point is 00:04:51 and ended up having done four degrees at various universities and considered himself, a lawyer and an historian, and also was an advisor to a number of well-known figures, actually. He appears in a book talking about a famous movie theorist called Siegfried Krakauer. On the other side, my grandmother's ancestors were Jews who lived in the area of Brandenburg, and that was under Prussia. And in a way that I don't know the full story, but they ended up in a town. 20 kilometres south of Berlin called Luchenvalde, where they ran the largest hat manufacturing

Starting point is 00:05:35 business and had famously a factory, a hat factory with some very unique architecture, because in order to manufacture the hats, you had to have these very sulfurous or chemicals that gave off fumes, which were not pleasant to inhale. So you had these huge ventilation shafts. And they owned also, they were investors in real estate in Berlin. All of that, of course, course came to an end in the mid-1930s when suddenly they could no longer practice their business or their professions. And so in the mid-1930s, there was a lot of movement of our family out of Germany and to Israel, the United States, and a little bit to the United Kingdom. And I'll pause just to see where you want to go with the story. Would the assets seized, like things like the

Starting point is 00:06:22 Hat Factory outside Berlin or the shoe business, or the property? What happened to all of that stuff. There are stories that I really ought to know better than I do, in which they received visits from the local Nazi party asking increasingly difficult questions and with the realization that their future was untenable. And so they were either abandoned or seized, or sorry, abandoned or sold under duress. I think in every case, the businesses, for example, had non-Jewish partners. The real estate will have had people around who were not Jewish. And so, of course, the family would have approached them and sought to do the best deal that they could. And of course, on the other side, they would have done an economic deal given the circumstances.

Starting point is 00:07:09 So they knew that the people trying to do a deal with them were under duress to leave. And so they were not given proper compensation for any of those properties. And my grandfather's case, he had just set up a legal practice in Frankfurt. And there's a letter that you'd have fun taking a look at where a friend of his from the German Lawyers Association writes to him to tell him that, unfortunately, because of decisions taken by the National Socialist Party, German lawyers of non-Aryan descent will no longer be able to practice law.

Starting point is 00:07:40 But he was happy to inform my grandfather that as a friend, he'd managed to secure the ability for my grandfather to continue to practice beyond the date at which she was supposed to have stopped to the end of the earth, so he could wind up his affairs with a little bit more time. So if I remember rightly, this is your grandfather. I think it was Selma, Spear, who had... So he had just married, this woman, Marlene, who is his true love, something like 1934, he gets married.

Starting point is 00:08:08 He becomes a lawyer in Frankfurt. Then he loses his right to practice law in about 1937, I think. And then he flees to Israel. which still was Palestine at that point, with what? And what does he end up becoming? Well, all of them were looking to leave. And there's a fascinating write-up of part of the story in this book by a guy called Yorg Spito that I only got to recently.

Starting point is 00:08:36 So if you were Hannah Arendt, then you would have found your way to the United States pretty easily because you were kind of like celebrated and recognized writer. If you're Walter Benjamin, who was already celebrated and recognized, you would have also found your way to the United States. Universities were falling over themselves to get these kinds of people, for example, in the U.S. And so those who could, and it's worth saying that it was not just Jewish people. I mean, there were many gays. Can you imagine in the cultural industries? So Walter Benjamin is a tragic story where he had an offer of, I believe, a place at a university, and he had passed.

Starting point is 00:09:15 to the U.S., and he had traveled by train through France and was going to get on a boat, I think somewhere around Spain, but then there was some kind of border post that he had to pass through manned by Germans. And he was so frightened that they would pick him up and put him into some kind of camp that he committed suicide en route to the United States. But if you had... Yeah, I just read about this. There was an article in the New York Review of Books about this in the last couple of weeks because there's a new book of letters from a friend of his. And it said, basically, he tried to get across the border to Spain. They turned him back, the whole group. And he commits suicide that night, basically. And the group got through the next day. I mean, it's so crazily,

Starting point is 00:10:02 crazily. And then you have characters like this literary theorist, Theodor Adorno, who had Jewish roots, but who'd become Christian for all sorts of reasons, because it enabled. him to enter the kind of mainstream of German society, which at the time was becoming more and more difficult for Jews. So there was attempts to go anywhere. My grandfather actually wanted to go to France. He thought that that would be a great place to go. If he had gone to France, he might not have survived the war. And we had, for example, on my grandmother's side, there had been one of the five children, so the brother of my grandmother had been in the UK studying hat making. Somewhere in the middle of England, I don't, in the Midlands. And so he had the ability to stay. But he had the

Starting point is 00:10:48 ability to stay. The siblings could not go. United States was the destination for two of her, no, one of her siblings. But then, you know, my grandfather wanted to go to Paris or to France. And my grandmother, who had been, you could say, perhaps infected or who was enthusiastic and Zionistic, wanted to go to Israel. And I don't know the details of how they, how those discussions went on, but she must have convinced my grandfather to go to Israel. He was able to, you know, the story that's told in the family is that he was able to leave with a thousand pounds, or the equivalent of a thousand British pounds. And that was what he needed or what he used to build a house in a German Jewish settlement in the north of Tel Aviv called Ramat Shavim, which is where my father

Starting point is 00:11:39 was born. And my recollection is that your grandfather basically became an unsuccessful chicken farmer. So in a sense, this is a story about the destruction of this life of privilege. Here's a guy who grows up thinking he's going to be a lawyer, surrounded by family that has property, shoe businesses, hat businesses, and instead he moves to a country that's incredibly arid that isn't really even a country yet where there's nothing and grows up, you know, with stories in the family of them not having enough food at times. And so this strikes me as relevant because I think so much of your life has actually been about the restoration of the family fortune. Is that a fair assessment of what you've been up to in your own kind of narrative of yourself and of your life?

Starting point is 00:12:28 Well, in Israel, there were a lot of sand dunes. You need to know that. A lot of sand that blows over and I just like as a child going there and covered the roads and it's just like everywhere sand and not very productive. Well, no sand is productive. You know, that is a story that has germinated and grown in my mind only in recent years as I started to understand it. Because the dialogue or the narrative that you have in Israel, which is where I I spent the first four years of my life. And I think it's a bit similar in the United States, is that you put all of history into the junk heap because a new start has arisen. And why do you need to go into the history? Everybody's got their story. But now we're in Israel, now we're in the

Starting point is 00:13:16 United States, and life starts afresh, and the rest of the world is bad. And here we are with returning a new leaf and starting a new page. So I think that I grew up in an environment where the history was not of great concern, if you like, and not brought up in a certain way. And I think that that's probably true of many, you know, the first generation after any calamity as they move to a new place, people don't really want to go into it. Or when they do go into it, it's gone into from a kind of a distance, and sort of an academic distance. You don't go into it with a kind of a personal history and personal stories, if you like. I think, you know, in the United States, Steven Spielberg and many others started realizing that we needed those.

Starting point is 00:13:57 personal stories, this could not be an impersonal history. And those personal stories started getting told. But so it's only in the last few years that I started realizing that this story was a key, sort of key background music in the decisions that I had taken that I didn't fully understand why I had taken them or couldn't, maybe there was surface reasons, but kind of deep down, And I realize that this story resonates with many of the decisions that I've taken. Do you think it was doing lots of therapy? Because I know you're a huge advocate of therapy that helped you kind of understand, oh, this is what was going on.

Starting point is 00:14:37 This is why I wanted to become money manager. This is why I wanted to invest in a very generational way, right? You're not just investing to succeed over a cycle. There's a sense in which the way that you invest is generational. You're trying to, you think about. the next 20, 30, 40 years, 50 years, how to create a new foundation for your family? You know, I'm a huge fan of therapy and I was at dinner last night telling stories in the hope of convincing my children to engage in therapy at the right point. But I actually

Starting point is 00:15:11 don't think that, you know, this is me. We might have gotten to it if I'd continued. I mean, I was in Jungian therapy for like 10 years and at some point I wanted a break. I never really got back into it. I think that it, yeah, I mean, it's, it's me kind of examining the world and trying to understand reasons why I've done certain things. But also, I think that, you know, when you come to that, it was my father who, two or three years ago, he said, he said to me, you know, I think of, he thought of his grandparents, my great grandparents living in Germany. And he said, I feel like we're in the same place. And he said, I don't know, what's going to happen? How is this?

Starting point is 00:15:53 They, they, when they were living that life, there was nothing that they could see that required them to make plans for calamity. And they didn't think to plan for calamity or they didn't know how to, how, you know, he said to me, I wonder where it's going to come at us from. You know, so in a sense, it was a pertinent question asked by my father, I think. It feels to me like you've always had this deep-seated fear, that everything could go to hell. And it resonates for me, I think,

Starting point is 00:16:26 because I think I have the same deep-seated fear having come from the same sort of background, albeit we were less posh than you guys. We were in Holish and Ukrainian and Russian Stettles and while you guys were big businessman. Yeah, and because the emancipation came to Germany first, I mean, that group of German Jews is the most incredible generation of people,

Starting point is 00:16:46 perhaps ever, if I may be so bold to say so. There was just such an extraordinary concentration of talent in only about half a million people. And it's very, you know, the vast majority of German Jews did survive the war because they're rich enough and capable enough to understand what was happening, whereas people further east really, really suffered. So I'm really, really sorry about that, William. But I didn't answer your question and it's gone out of my head. Well, in a sense, it's about still having this sense that everything can. be swept away. Even when you're living in a prosperous period, like Germany in the early 30s, like your family, or in a period like we've been in the last few years before COVID and before

Starting point is 00:17:32 the Russian invasion of Ukraine and inflation, there's like this sense of complacency that most people fall into. And I don't, I think on the whole, you've not been that complacent. You always have a little bit of that sense of precariousness, of wanting to be careful about your money, about the way you invest, about not getting too carried away. I mean, I think that what I hear you saying is, first of all, you know, you're describing something that if you would have described it 10 years ago, I wouldn't have really understood it because it would be like describing water to a fish. The fish is just not aware of it. But I think that today, when you bring that up, what it helps me to understand, even though I didn't believe I had it, kind of an underlying angst that I,

Starting point is 00:18:25 that was the background music to decisions that I made that people around me did not make. So what's interesting for me is that I was economically, my father, we ended up in the UK, my father started a business, we were well off financially, and I had friends who were certainly not as well off as I was. but who didn't have any sense of insecurity about their place in the world, and therefore were quite happy and interested to pursue pursuits like arts or to pursue things that didn't have any necessary economic security attached to them. And I remember looking at them and saying, I could never do that.

Starting point is 00:19:06 And I remember thinking to myself, I loved languages. I was very quick at picking up languages, but it was never even a question for me to go and do that. It was actually never even a question for me to be a scientist or to engage in anything academic because I knew that that wasn't, well, I now see in retrospect that that wasn't a path to security. I saw the path to security as being financial well-being. And I didn't understand that. And I think that now I can understand it a lot better, if you like. I think that what's also interesting, William, is that these patterns are, they're very powerful and very deeply embedded in ways that I think people can live their whole lives and not understand them particularly well.

Starting point is 00:19:50 And yeah, and I think that life is better when you understand where the motivation is coming from because then you can examine it and say, well, is this really, either say, yes, this is really necessary for my well-being and security and therefore, how do I do it consciously and not allow the decisions to be driven by some kind of subconscious fear? You can engage it consciously, or you can say, well, that is an irrational fear, so I'm going to just step away from that or sidestep it. I think it's also really important as an investor, but investing is just a microcosm of life in any pursuit, to do it in a way that's aligned with who you are in this deep sense.

Starting point is 00:20:26 And so I think, for example, if you took wild and crazy risks, it just wouldn't suit your personality, given your sense of precariousness and your sense of wanting, wanting to build up wealth as a kind of cushion against uncertainty. You know, I can tell you that I think about the ways in which our spear family assets within the fund or the real estate that we owned outside the fund, there's a diversification across countries and across regions. You know, I don't know what happens if, you know, when the calamity, when the end of days comes. But you're more, you know, obviously if a big enough asteroid hits the earth, it doesn't matter where it hits and where your assets are. but maybe if there's only one region that's affected, then other regions will be okay. Yeah, I wanted to ask you about this, because as some of our listeners will know, I've helped you edit your annual report for many years.

Starting point is 00:21:28 Partly it's an excuse just to chat about life in the universe once a year for a few days. And this time around, I encourage you to update your investing principles and to add some new ones. And so we're up to 24 investing principles now. And one of the new ones, which you subconsciously stole the title from me, but I had stolen it from someone else, was that everything changes. And I wanted to... If I may just interject, this is, it's just a hilarious story. So I'm working on the letter and that's a whole story and I'm extraordinarily grateful for William because he doesn't edit is a... So for those of you who are not in the writing business, editing doesn't...

Starting point is 00:22:08 Editing is, it really means nothing. It could be, there's anything from, everything from copy editing and checking for facts to helping somebody elaborate their thoughts. And in William's case, there's an enormous amount of helping me to elaborate my thoughts and pulling things out of me that I didn't realize were in me until William engages with them, which is kind of a really fun and interesting process. And it's extraordinary. So, you know, I want to publicly thank you as many times as I can for that, William. Although you have like a hit to a proctology exam. Thank you. Just a proctology exam. So I'm there at around the same time.

Starting point is 00:22:45 And what had happened to me is that I'd been at ValueWex Middle East, first time in Dubai, and I'd listened to a wonderful presentation by somebody called Hossam Shabokshi. And Hossam is somebody that I hope that you get to interview William. And he's lived through extraordinary changes in the Middle East, really an amazing personality. And it was a presentation which I scribbled notes furiously, and I had those notes. And I've kind of written them up into a short paragraph and I'm thinking, what's the title of this paragraph? What's the title?

Starting point is 00:23:18 Yes, everything changes. That's the right title. And this is not quite how it happens, but more or less, you know, I tell William, I've got this great title for this principle. It's called Everything Changes. It says, yeah, you idiot. This is the title for one of the chapters in my book. Yeah, I think we're constantly subconsciously or consciously stealing things.

Starting point is 00:23:42 from each other. And you'll be happy to know, I stole it from a famous Zen teacher, who I think was the person who wrote Zen Mind Beginners Mind. And so it's originally a Japanese phrase. It's Shoggiomujo, I think. And this is something that had an enormous impact on Howard Mark's life, because it's really this idea that if everything changes, nothing stays the same in the future is unknowable, you better accommodate yourself to reality as it is instead of pretending to yourself that you know what the future holds and thinking that you're a master of the universe. So it actually had a really profound impact on how it's life. And I wanted to ask you about this whole subject because it's very related to the story that you told about your family, right? This idea that the world is profoundly

Starting point is 00:24:30 uncertain and nothing is truly stable. And so you talked to me when we were working on that investing principles list and you were adding. this principle about everything changes. You talk to me about Hossam Shabokshir's talk on investing in times of crisis. And you kind of mentioned various wars and revolutions and the like, just showing just how chaotic the world has been. Can you talk a bit about that? Because I think it's a really important recognition that for people like us who have lived in relatively stable countries, like the US and the UK and Switzerland, where you spend most of your time, much of your time, is really easy. to forget just how uncertain and tumultuous the world actually is.

Starting point is 00:25:14 Yeah, and what was revelatory for me in listening to Hossam's talk, and he sort of lived in Lebanon and in Egypt and in Saudi Arabia and has deep connections within all of three of those countries, but I thought that this was just sort of like a Jewish experience, if you like, or a European experience. And it was fascinating for me to realize that, because And especially when you have kind of a view of Middle East history from the Israeli perspective or maybe from the Western perspective, there is a capacity. I believe that I very much discounted the plights of families and of individuals from within the non-Jewish Middle East, non-Israeli Middle East, which is a very, very diverse region with a lot going on. And so, you know, he kind of

Starting point is 00:26:04 described how his expectations as a child, I believe, growing up in Egypt. were totally pulled apart by the, I mean, you had Nasser and then you had SADAT and then you had, I'm not sure I believe it was called the Green Revolution and, but then the same thing, kind of thing happened in Lebanon, for example. And Lebanon is a very, very different place now to what it was in the 70s. And, you know, who knows where Saudi Arabia will go. So it's a worldwide phenomenon. And I think that we have this kind of attachment, we kind of have this belief that things will be permanent and they're not. But what I would say, William, is that, you know, I am in the way I'm living my life and investing, making certain assumptions,

Starting point is 00:26:49 which I can't prove to be true about the permanence of, you know, the stable liberal democracies. And I'm making assumptions that they will be the last man standing to use something that we've talked about, the last man to fall, if we like. And I think that all of us, close observers of the United States have deep concerns about this idea of whether the center will hold. We have this incredible experiment in a democracy that was created not so long ago with this incredible foundational document in spite of its extraordinary flaws that we've just seen in the most recent school shooting. But we wonder if it'll all get torn apart, you know, and I sometimes feel like I want to get Alexis de Tocqueville out, who a French observer of American democracy who describes how

Starting point is 00:27:37 really, it's, yes, there's a constitution and there's the political set up with checks and balances, but this is kind of a, it's kind of very firmly based in the outlook of these very extraordinary people who learned a certain outlook on life and the kind of the, the democratic roots of the United States, liberal, democratic, rights respecting roots of the United States are far more deeply embodied better than just the Constitution, but we worry all the time about whether it'll be torn apart. And if the United States, if the political DNA that makes the United States, States work is torn apart, then we really can, I think, be very, very fearful for the world. Interestingly enough, William, to your point about the kind of mood music and the underlying

Starting point is 00:28:17 angst and fear about where the world might end up, kind of drove. I don't think it was, well, it's interesting. It maybe was the most important thing that drove up the decision to move to Switzerland, which was me, say, I felt the system sort of creaking and shaking. And I said to myself, I don't want to live my life trusting that the United States won't fall apart. I want to live in a place. And it's not saying that Switzerland cannot fall apart, but I think it's in a world in which things change so drastically where the United States is no longer a stable, liberal democracy, there's a chance that Switzerland might still be standing. And then of course, William.

Starting point is 00:28:58 Well, Guy, is your amateur self-appointed psychiatrist? Yeah. I don't think it's an accident that you ended up. in Switzerland, which was a neutral country during the war. Yeah. And then, William, you know, Zurich's not good enough. You need to have your hole in the mountains. So there's, you know, so there you go to Closters. But then from Closters, there's a place that I absolutely love,

Starting point is 00:29:23 which is a high copper valley in a place called, in a place called Shlapin. And I actually imagine myself, if the world comes to the end of days, I would go and haul myself up there and look at the mountain goats and what have Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord,

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Starting point is 00:33:36 Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. You also have close links to London. So now you have a home in the UK as well because your kids are being educated in the UK. and then presumably you also have a bolthole in Israel and where you could flee. And so I mean, it's interesting because in your investing principles section,

Starting point is 00:34:06 you were kind of saying one of the morals of what an uncertain world we live in where things can change and of what Hossam said is that you need to take a global view and you want to have connections and relationships everywhere. You don't just want to diversify your assets. You actually want to have backup plans and escape hatches for your family. and your business and your investments. It's a pretty dark view of the world, but I feel like you're kind of hedging,

Starting point is 00:34:35 you're hedging your bets with the way that you, not only the way that you invest, but actually the way that you live, so that there's a little bit, there's a big margin of safety built in if things go wrong in one place. You know, my father has gold coins in his safe. I have to tell you that I don't have gold coins in the safe.

Starting point is 00:34:54 So I had a conversation with, a friend who was asking what happens to global financial markets if there's a nuclear exchange between the United States and Russia, which is on a lot of people's minds. And I think that we certainly have to accept that the probability of that has gone up in the last year or two rather than gone down. And so the question arose whether one should buy puts on the market, deep out of the money puts so that if the world goes to head in a handbasket, you have some puts that are in the money. And my question was, well, we'll, we'll the banks be there to cash in your puts? I mean, maybe in that state of the world, the banks are

Starting point is 00:35:31 not around or unable to pay out. And in which case, in spite of neither that person nor I being gold bugs, maybe the right thing to have done would have been to just own gold in the safe, you know? And I hear millions of our listeners now saying, what about Bitcoin? What about Bitcoin? Given that that's also now by many people regarded as a better thing to have if you want to flee and get out of a country or make sure that your government doesn't touch your assets, do you have any fascination with Bitcoin as a kind of a hedge against disaster? I have no fascination with Bitcoin. I have a fascination with what Bitcoin does to people. And I have a fascination with the amounts of money that some people see. seem to have made in Bitcoin, but it doesn't really bother me that I don't have any. And, you know, I've played with it. I have an account in Coinbase and I have an account with Metamask and I have a Bitcoin cash account and I've sent and received cash or Bitcoin

Starting point is 00:36:37 using that account. So it's not like I'm completely ignorant of it. And it's fine. I don't own gold either. So, no. Without wanting to go into too much detail here, but just so people understand, is you're misgiving about both of those things, the classic Buffett Munger point, that these just aren't productive assets? I mean, so, so I was going to, it's an interesting question to dive into and I want to, so, so just, I feel like I don't want to divert the conversation, but I just want to address something that I thought I'd let go, but I won't. So, you know, ideas always, good ideas are

Starting point is 00:37:12 eternal and always have a provenance that is beyond ourselves. But I've learned, and it's really so powerful that you never diminish yourself by acknowledging the provenance of an idea, acknowledging the provenance side of an idea, your provenance. So other people might have a different route that they take with the idea. And so for what it's worth, and I've said this to William privately, by not acknowledging the provenance, my provenance of the idea everything changes, I missed an opportunity to give credit to William and because it just benefits everyone in any case. Giving credit to somebody else,

Starting point is 00:37:50 Milo Jones, who attends Value X, who's a security analyst, professor of security analysis at various universities, he's talked about how the philosophy of value investing as we understand it today is very much a Midwestern mindset. somebody who grew up in the very middle of this vast economy and continent that I've talked about in my annual letters with all the advantages that that has from a particular perspective of history. And if you're kind of taking the perspective that you're kind of like bringing up, which is if everything changes, the world could be turned upside down.

Starting point is 00:38:30 There's a real question, if you don't live in Omaha, should you have, should you slavishly adopt the same philosophy that Warren Buffett does, which might work for him in Omaha? but might not work from the perspective of London or Zurich or somewhere else. But I think that a perspective that I've adopted, so I'm going to bring this around to answering your question, William. So this idea of owning productive assets, meaning assets that earn a return in measurable cash, cash that you can spend, is, I think, an incredible philosophy that actually does transcend the Omaha perspective

Starting point is 00:39:07 and the particular period of time in which Warren, Buffett grew up. And it's not that I have misgivings about Bitcoin. It's just that I don't want to spend my life in assets, around assets, that aren't cash productive. And there are plenty of highly respectable assets that are not cash productive, you know, all the kind of like, if you own oil, and there are plenty of oil traders who own oil, it's not cash productive. It just sits there and then eventually you can sell it. Now it has an industrial use. But there are plenty of assets that, you know, the art world is an obvious one. If you buy land in the middle of nowhere, and Ted Turner was a big fan of owning land, but he owned non-cash productive land.

Starting point is 00:39:49 He bought forests and parts of the United States where nothing was going to happen for a very long time. So it's not that I have misgivings. It's not that I want to this cryptocurrencies. It's just that I've chosen to spend my life trying to think about assets that produce cash. all of the venture capital world, all of the companies that are not producing cash are in for me the same category. They're consuming cash. They cost something to own. They don't produce anything in and of themselves. And so I just wanted to be clear that it's not Bitcoin that I have a problem with. It's just that I don't want to be around nonproductive assets. Yeah, there are a lot of paths up the mountain. And I think when I interviewed Joe Greenblatt on

Starting point is 00:40:30 this podcast, it really impressed me the way he just said, look, I don't need to play that game. is not the game I need to play. I also loved actually, on the other hand, what Bill Miller said to me when I interviewed him a few weeks ago on the podcast where he said he was disputing what Buffett and Munger had said about Bitcoin. And he said, the goal of investing is not to own productive assets. It's to make money. And I thought there was something really wonderful about Bill's. It was so characteristic of Bill. There's something totally agnostic about everything that Bill does intellectually that he was thinking, yeah, why do I need to own productive assets? Is it going to go up? Is it going to make money? Is the supply demand picture good? There's

Starting point is 00:41:13 something very free thinking about Bill. So to me, what was interesting is everyone I've interviewed about Bitcoin, it's a really good reflection of how they approach the world. So when you interview Howard Marks about Bitcoin, he says, yeah, I should be more humble and I should recognize that I don't know and that my son actually understood this better than me. So for him, it's a reminder of the need to be humble. For Joe Greenblatt, it's a reminder to play games that suit him, games that he's equipped to win. For Bill Miller, it's like, is it going to go up? It's a sort of, what is it? What is Bitcoin? How do I describe it philosophically? So it's interesting to me. So for you, there is something characteristic about this. Have you just saying, yeah, I don't need

Starting point is 00:41:54 to diss it. I don't know. Maybe it'll be great. But yeah, I want to own productive assets. I've been thinking a lot about luxury goods and the business of luxury and thinking a lot about the different cultures, even in some of the world's most celebrated luxury brands, LVMH as a corporation has a very, very different culture, for example, to Hermes, both, you know, at the top of their game, LVMH is a culture that is capable of acquiring other businesses. at least I read one paper that suggested that Hermes all the growth has been internal, has been organic and there are kind of structural reasons as to why Hermes would not do well to acquire another business.

Starting point is 00:42:38 And in Switzerland, the luxury business is mainly around watches. And it's been fascinating for me to kind of just observe from a distance. I don't own any businesses that own luxury brands. But I imagine the watchmaker, a very high-end watchmaker. a very high-end watchmaker who loves making watches. And then, you know, there's a whole business behind it. You can make enormous amounts of money. And so Bill Miller comes along and says,

Starting point is 00:43:02 who cares if the watch has an automatic or a manual or an electronic wind mechanism? Does the consumer want to buy it? Does it make money, so to speak? And there are personalities and characters who would just look up and then just say, I don't know, but I just like making mechanical watches. And this is what I do and I have a nice life doing it. So I kind of see the kind of conversation with Warren in the same way.

Starting point is 00:43:27 And I think that it's a choice that I happily and consciously make. I think that a life spent thinking about how to build businesses and what makes businesses tick, what makes businesses have a long-lasting life is a more interesting life and a more enjoyable life than one in which we're just figuring out, as Bill is very good at, what's going to go up. And I think that I got to this, I don't know, not that long ago where I kind of said, even if I could be guaranteed to make more money and there are no such guarantees, by thinking of the world the way Bill Miller thinks about the world, I'd rather not live that life. I don't want to be thinking those things.

Starting point is 00:44:09 I want to be thinking the things that people who build businesses do. I think that's just more fun and more interesting. I think the real key is just to invest in a way that's deeply true to who you are. Yeah, and this is kind of like just an entrepreneur on fire. John Lee Dumas, he'd call that a value bomb. And I think that so don't try to be the smartest person, don't try to make the best investment, make the investments the truest to who you are and truest to your nature, I think is just a very empowering thing for every person who goes about investing. I was thinking about this recently with Bill Ackman, who, you know,

Starting point is 00:44:51 you've been close to in the past, I've known for a long time. Bill has had these massive blowups with things like Valiant, but then has had massive hits, right? When the financial crisis, sorry, when COVID first hit, I think he played the meltdown brilliantly and then the rebound brilliantly. And there's something kind of swaggering and bold. I think sometimes for someone like me who's more conservative, I would look at and I would kind of shake my head and be like, God, how does he do that? That's nuts. But it's actually deeply true to who he is in the same way that Bill Miller having 80-something percent of his personal investment portfolio in Bitcoin and Amazon is deeply true to who Bill Miller is.

Starting point is 00:45:33 I mean, I think that, and it's something that's come to my mind a lot recently, I don't know why, that when we read about these investors, when we know an investor personally and we're close to them, there is so much that we don't know about their lives that determine. determine whether or not they can take the decisions and the bets that they're taking. So somebody who has an extraordinary amount of security who's lived several, I mean, if I think of Bill Ackman, who I don't know when his ancestors immigrated to the United States, but it's least two generations ago, the security of living in the United States, a father who was in the real estate business, probably a certain amount of family real estate sitting there providing

Starting point is 00:46:20 an enormous amount of downside protection, creates a very different base from which to start investing in stocks and shares, for example, than somebody who's a recent immigrant who doesn't have that secure base. And so often when we look at somebody's portfolio, we're just seeing kind of the tip of the iceberg and we don't know what's underneath. And every now and then, we have people who are showing something that looks spectacular above the waterline, but actually there's not much to back it up below the waterline. And some of those people actually succeed. And some people in the smallest thing happens and actually because there's not enough kind of ballast below the waterline don't do particularly well. So I think that what comes to my mind when

Starting point is 00:47:03 we bring up people like Bill and I don't, I obviously know Bill way better than I know Bill Ackman, way better than I know Bill Miller is we don't know what's underlying that. And I think my point to you is if the same set of genetics, brain cells, academic training in me had grown up in the circumstances of Bill Miller, I might have been able to take the same mind and behave far closer to the way Bill Miller behaves, or if I'd had the same background as Bill Ackman, but there's no way you can manufacture that. It has to come from within. It has to come from sort of like if I'm mixing about eight metaphors at once here. It has to come from what is the part of the iceberg that doesn't show, if you like. And so I think the point is, you know, nobody should be envious of the way Bill Miller

Starting point is 00:48:01 or the way Bill Ackman invest, because even if you have the same mind or a better mind, if you don't have the same set of unique life experiences and kind of like security assets, if you like, around, you would not be able to do that. And I just think that the analysis of realize that when people do this 13-F analysis, I mean, my 13-Fs don't even cover my non-U.S. investments. And even if they covered all of the U.S. investments, do they take into account what is going on elsewhere? And relevant to me, actually, at one point, when I had an office in Carnegie Hall Tower, I shared an investor with.

Starting point is 00:48:42 So an investor in my fund was also an investor with Bill Act. and a wonderful, wonderful guy whose name I wouldn't mention because maybe he doesn't want to be mentioned, but really taught me a lot. And one of the things that he asked me to do is he said, you know, guy, with Bill, I have all these great ideas and I'm concentrated in Bill's best ideas. And in your portfolio, I have some really great ideas that I love. And at the time, there were things like Duff and Phelps and Alaska Milk and these kind of ideas that had the capacity to go up many times, but also had the capacity to be zeros. And he said, but I don't want your Nestle and Berkshire Half the Way and all of those things. I don't, and I thought long and hard about splitting

Starting point is 00:49:22 the portfolio, so you had the kind of, quote, best and crazy ideas along with the safe and secure ideas. And I decided not to do that because I felt like I wanted it all to be in one bucket. But often, if you think about how the people who want to develop a business of investing other people's money, they can't put the ideas that are going to make them the most secure into the portfolio. They need to put the ideas that have the highest probability of high performance, if you like. And that creates a very, very skewed view, a very skewed portfolio, if you like. And I think that why does it come up for me?

Starting point is 00:50:01 Because it realized that those people are doing that, there's actually not. nothing wrong with doing that, but you should not put your life savings into that. You should apply the appropriate risk and put X percent of your savings into it. Maybe more risk money. I don't know why I went there, William, but now I'm going to turn this over to you to get me back on track. Well, no, we both have very nonlinear minds, so we're about 400 miles away from where I expected to be at this point, which is pretty standard. I managed to get my thing in about attribution, which I thought we'd missed. That's good.

Starting point is 00:50:36 My train of thought, really, I'm wanting to talk to you about your family history and the uncertainty and the lessons from Hossam Shabokshi, if I'm pronouncing that right, about the uncertainty in different countries, is that I think one of the things that's very distinctive about you and the way that you invest is that you've tried to build something that's resilient,

Starting point is 00:50:57 that's going to last, that's going to endure. And that seems very distinctive, and you're almost 25 years into your journey, right? So a lot of hedge funds have fallen by the wayside run by very brilliant people. It's shocking to me about how many well-run funds run by very smart people have fallen by the wayside for one reason or another. Really shocking to me, actually. So this question of sustainability and endurance is hugely important,

Starting point is 00:51:27 particularly for our listeners, many of whom are not professional investors. And a lot of professional investors are engaged in this game that's slightly meaningless of trying to beat the market by half a percentage point, a percentage point, a couple of percentage points. But for regular investors, we want to get to the destination of being kind of financially secure over the course of a lifetime, over 10, 20, 30, 40, 50 years so we can educate our kids, so we can retire, so we can live in a home that we like, which is much more similar to the pursuit that you've been engaged in, where you're actually trying to build resilient well, over a generation. And so I want to talk in more depth about how you go about that task,

Starting point is 00:52:08 because I think there are some really important lessons there. But let's start with this question of why so many people have fallen by the wayside, some of whom are smarter than you, some of whom are harder working than you, some of whom, you know, would seem like they would be unbelievably successful. And yet they've all fallen by the wayside. Why? What went wrong when you look at the people who haven't stood the test of time. I mean, you know, if I look in the professional investing world, William, it is really, really hard to, so, so, you know, an unspoken or a truth of that business is that you need people to trust you with their assets because otherwise you don't have a business unless, you know,

Starting point is 00:52:53 some guy who said, the way to get wealthy is to have a few billion lying around so that when something good comes along, you can invest in it. Some famous guy, so he didn't talk about a few billion, but, you know, it's like, yeah, but that's where you want to get to. So you're a smart guy out of business school. You're a smart guy somewhere. You get all the ideas. You know you're capable.

Starting point is 00:53:13 You really want to try your hand at this. But now you're faced with this extraordinary wall of difficulty, which is how am I going to get assets to manage? Because if I don't have assets, I don't have a track record. If I don't have a track record, nobody's going to trust me. So how do you get this thing off the ground? You know, the path, that's a huge barrier to entry. And one of the paths that people take not consciously and they don't, you know, I have snow white, but I drifted, is that they try, they realize that when they sit down and they show a portfolio that is full of boring but good ideas, boring to the prospective investor, but the person running the portfolio knows that they're good ideas.

Starting point is 00:53:56 they realize that they're not kidding much paid art with prospective investors whose assets they need in order to manage. And just a very brief sidebar, I remember presenting Wheatabix to the Posse Group, which included David Eidgen, Bill Ackman attended a few times Whitney Tilsen in the years when I lived in New York. Wheatabix was actually the idea through which I connected with Nick Sleep. Somehow he'd found out that I owned it because I'd written about it and somebody had forwarded it to him. And so we connected on that. But, you know, Weita Bix was anybody who's lived in the UK knows Wheatabix, has got 50% market share in the cereal market, was a family-controlled business and was trading at four times earnings and had no debt.

Starting point is 00:54:40 And when you visited the company, you saw it was extraordinarily well run. And that was it. That was the whole idea right there. And I remember presenting it to the posse. And everybody was like, you know, the subtext, it wasn't said, was, that's all this guy can come up with. I mean, this was not an idea that was designed to, the idea worked out extraordinarily well.

Starting point is 00:55:03 I was on my honeymoon and it had gone up, I don't know, eight times in the sale. The other guy who owned it was a guy called Tom Rousseau, by the way, that I think that you've interviewed. So those are kind of very good but unsexy ideas. And so you quietly, you know, subconsciously, desperate to succeed in your business, start gravitating towards ideas in your portfolio that you know prospective investors will find sexy. And now if some astute interviewer like William says,

Starting point is 00:55:36 hey, do you think you might be engaging in some kind of group think? Or do you think that there might be some kind of selection bias in your ideas towards what's going to make your portfolio look good? you know, the person, if they were extremely self-aware, would take that point on board. But even if they were, and in most cases, they're absolutely not, you know. But even if they were extremely aware, it's just an extraordinarily painful question to ask because it comes back to this basic question of how do I convince people to send me their money so that I can get assets under management and that I can get a track record going. So people that I know who've fallen by the wayside have found themselves drawn into these kinds

Starting point is 00:56:16 of ideas, which it's not kind of obviously a puffed up sort of bad business. Sometimes these are extraordinary businesses run by very, very high quality CEOs that have a star-studded roster of investors. And it looks really good to be involved in those businesses. And it sort of reflects well on you, but it just so happens that you've bought them at too high a price. And if, as has happened recently, those prices come down dramatically, suddenly you've got no clothes on. And it's and you know, you'd find out when the tide's gone out, who's swimming with no clothes on. And so then people fall by the wayside. And this very smart people who did not realize that they were kind of quietly moving into a certain mindset, a certain style of investing, because that's

Starting point is 00:57:03 what the market expected of them. That's how they could successfully raise money. And then, you know, but then when you realize that you've been swimming when the tide went out, for one reason or another, you close up shop, basically, either because your future, You don't have a future because everybody realizes that the game's up for you. Or you realize yourself that you went, you were snow white, but you drifted, and you kind of can't bear it to continue to run that vehicle. That's one pattern that I've seen. I mean, and my point is there are plenty of people who end up falling by the wayside, you know, because they're dishonest or because they try to, they try to push a bad deal on the investors

Starting point is 00:57:42 or all sorts of things, which are obvious reasons for people to, quote, blow up or to fall by the wayside. But here I'm talking about people who are really extraordinarily well-meaning and they are doing a good job, they want to do a good job, but they've just kind of been sidetracked a little by the desire in this case to raise funds, if you like. And I mean, there are other kind of sidetracks where people get sidetracked just by the desire to be famous or does the desire to be recognized. And that kind of melds into the desire to raise money because if you recognize, then you're more likely to raise money. So that's one example. of what can happen.

Starting point is 00:58:19 And I can tell you that I remember being at a Berkshire meeting, and it was also at a Ruehne-Kunif meeting where a shareholder, and this was in the 2000s, he just kind of stood up and sort of said, when the hell are you going to buy tech? You know? And, you know, in the 2000s, that tech bubble, there are plenty of articles talking about Warren Buffett having lost it. He's lost it.

Starting point is 00:58:44 He's behind the times. And it's not really very pleasant to be in those shoes. It's not very pleasant to be around that. Warren's kind of learned how to do it. And I would tell you that from my Value X conference, I've realized that the kind of thinking that permeates the market, I've kind of accepted that my Value X conference, I'm selective on who comes.

Starting point is 00:59:03 But that kind of thinking permeated the Value X conference as well. It's going to be interesting to see what next year it's going to look like and whether those voices are going to be as loud. I remember you telling me that there were all of these people in your environment who sort of infiltrated your environment of ValueX or elsewhere who were telling you you should buy things like Snowflake at 100 times revenues or whatever it was and Roku and Spotify and Netflix and stuff and it was almost like you started to feel like they were saying to you

Starting point is 00:59:37 you're too stupid to understand why it's really worth paying up. And I wonder if you could talk about that, because that's a really good example of the subtle but really intense corrosive pressure that you're under for years when you try to be rational and the world doesn't seem to be rational. And by the way, these people are extremely smart. I really like them. And smart, they're good analysts and they're not, you know, they're not rubs, if you like. And I think that in many of these cases, the, it's, not that they're, you know, in the 2000s, there was this concept of vaporware. Companies that would raise money and they would spend money on advertising what they were going to do, but they actually

Starting point is 01:00:21 had no product. And I think that all of the companies that you described really have a product, and they're really well run as best I can tell. And they have very, very good businesses. It's just that, you know, you can't pay an infinite amount. At some point, price really, really does matter. But so, I mean, I'll just. give one example. This year, we had a presentation on Snowflake at our Value X conference by a guy who's been coming for the longest time and it was very, very well done. And, you know, I was, first of all, just to be clear, I was very curious. I wanted to learn. I'd seen Snowflake. I didn't, I'd read or tried to read the book by Frank Slutman. I didn't really understand. I had a whole

Starting point is 01:01:05 bunch of questions. So of all the presentations, you know, there were presentations that were the equivalent of my Wheatabakes presentation. But we had something, William, this year on the Friday afternoon, we kind of did a, we did deep dive. So by, you know, we kind of just voted who, which of the presenters do you want to have come back to do a deep dive? And we, we did a deep dive on Snowflake. And half the room was as clueless as I was. And the other half of the room was trying to to be patient with us, to explain to us. I mean, I'll just give you one question around Snowflake. So Snowflake seems to sit on top of the Amazon Web Services and Google Cloud, and somehow the interface is just as easy, and it seems to have taken away the moat that Amazon and

Starting point is 01:01:56 Google Cloud and the other cloud companies have, because the snowflake interface to the business is so much better. But then, you know, the question that I still have unanswered is if Snowflake can do that to the other cloud companies, what's stopping somebody else coming along in the future and doing that to Snowflake? And what you'd get is this kind of like, oh, that's so sweet. You really have no clue, do you? I mean, it's so obvious. And if you understood, you'd see that it's so obvious that snowflakes, barriers to entry are just not like these other companies. It's like, it's not obvious to me. It's still not obvious to me. And but yeah, you know, I try to create environment where there's no such thing as a stupid

Starting point is 01:02:42 question, but there were plenty of people in that room who felt like they were asking, that when they asked a question like that, they were asking a stupid question and there was a sense, it wasn't impatience, but it was a sort of like kind eyes that sort of said, oh, you're that ignorant, you know? What I've learned is that, so if we think, and this is actually kind of a profound learning for me, William, you know, I kind of imagine that, oh, Warren's never going to be exposed to those kinds of pressures because Warren's been, you know, I think that what I learned from that experience is that every environment, however rarefied, however carefully you seek to curate a group of people around you

Starting point is 01:03:23 who are, you know, who focus on all the right things, when the market's going through one of its mood swings, you cannot expect that not to reach your inner circle, however well constructed your inner circle is, it'll get to everybody. And so you really have to have inner resources that stop you from going down that road, if you like. And I actually would tell you, William, that your, so this destination analysis is extraordinarily powerful. You know, I never realized it. Which I've stolen from Nick's sleep, of course. Yeah, yeah, yeah. Absolutely. But, you know, you kind of started talking to me about it, you know, after I'd read the Nick's Leak chapter probably and hadn't really focused on it. And if, you know, and there's game theory stuff. I, don't you love it when I try and bring out my potted mathematics, William? Yeah, this is when my eyes glaze over and I get confused. This is, this reminds me when you try to explain to me what a godic sister were. And I just, yeah, and I'm just like, I'm never going to understand this guy.

Starting point is 01:04:25 But, you know, and the hilarious thing is that I don't really understand. Well, I have a bet on it. to destination analysis. Destination analysis is what matters here. And just for our listeners who don't know, ladies of general, Williams are just stopping me from going off the side-right. I'm stopping you going into a game theory. But let me just to say the sentence, there are game theorists who will talk about this, looking at a game from the end and then working from the very end of the game and then working back, which is effectively what you're doing? You're just saying, what's the end point? Where do I want to be at the end? And then does taking this decision put me on a path to that end? And what's amazing is that so many of these investments have a completely unclear end point. It's just you have no idea

Starting point is 01:05:04 where it ends up, in my humble opinion, but people love it in the moment, and they're just these grandiose futures ahead of them. I'll pause, because I don't know if I'm on track for you, William. And I just want to make sure that our listeners know what we're talking about, because this idea of destination analysis that I interviewed Nick Sleep in case Zakaria about and wrote about a great length in the chapter about them in my book is really profoundly important and I think has had a huge impact on me and then because I talked about it a lot to Guy has had a big impact on him too. And what Nick is really doing is saying you want to focus on things in life that have a great long-term destination. So you want to say, is this company, Costco or Amazon or whatever,

Starting point is 01:05:48 does it have a great destination in 10, 20, 30 years? And if I work backwards, is it, are you seeing the inputs that are going to get it to that destination? And so is it treating its customers well? Is it driving down costs? Is it efficient? Is it treating its supplier as well? Things like that. And so this turns out to be an incredibly simple but helpful way to view the world.

Starting point is 01:06:11 Because you can also view your own life like that. So you can say, okay, if I want the destination to be, my family remembers me fondly when I'm dead or I am flexible as an old man and can actually lift up my grand kids and great grandkids and I'm healthy and I'm not bent over and I'm not weak and independent. What are the inputs I need to put in now in order to get to that happy and fortunate long-term destination? And so it's a really simple filter, but actually a profoundly important one. And so I think if you think about the people who are investing in all of these companies

Starting point is 01:06:49 that were kind of racy and were shooting up during the COVID period, for example, Zooms and the Pelotons and the Spotify's or whatever. Presumably for you, part of the problem was that the destination didn't look that great, not because they weren't great companies, but just because they were so expensive that you didn't have a margin of safety. I think, you know, the destination has to be something that is clear and tangible and understandable from today. So I think if we take Costco, people like high quality cheap stuff.

Starting point is 01:07:23 and Costco has a system of sourcing high-quality cheap stuff that they then put into their stores for people to go and buy and they love it. And that is kind of a given, an endless given, if you like. You know, I think a destination for me that I think the world will certainly get to is that people always want to have high-quality real estate in the center of towns with good transportation networks, infrastructure around. You know, the Brookfield, Bruce Flat, who wants to invest only in transportation-constrained downtown areas, he's kind of doing a kind of destination analysis. But when you got some of these new cloud businesses, SaaS businesses, the destination was, it was there, it is there, but it's very, very unclear exactly what that

Starting point is 01:08:14 destination is other than some kind of fantastic unbridled future with lots of optionality. But when you kind of say, yeah, but what basic human need is it meeting and how is it going to meet it in a way that is going to be profitable for them, that's not clear. It's just endless optionality. So, you know, if we think back to Warren's analysis of the automobile industry with hundreds of different automobile companies, there was no question that the automobile was there and was there to stay. But you go to a specific company and say, what is it about you that is going to make you the destination? your business at the end point. And there's no clarity on any individual business that that's going to be the case. I mean, a business that I've listened to podcasts about them and they sound like they're just unbelievable software wizers is this company Twilio that kind of like the founders figured out that they really needed to be an interface between these legacy phone systems that had a certain kind of operating system. And the telephone network is utterly huge, but that increasingly software would want to make calls onto that telephone network to send SMS messages,

Starting point is 01:09:25 to make phone calls, all sorts of interactions. And if they could build the tools that would enable that, that was the source of enormous and endless growth. And they're phenomenal software guys, as I understand. That was a phenomenal insight. As I understand, Twylio is embedded in so much, so many amazing companies have Twylio. embedded in them. But in terms of like, and so, you know, with a justified amazing business with incredible growth opportunities and, but what's the destination in terms of a simple understanding of what basic human needs are they meeting and how will they make money off meeting those basic human needs? And it's like impossible to see, if you like. So the destination, it's not so

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Starting point is 01:13:41 You've used language before, a phrase that's been incredibly helpful to me that I don't know if you stole from someone else or you invented it, where you talked about finding businesses that occupy the economic high ground. And that to me, this is something I've only really heard you talk about in the last year or so, maybe when we were working on your annual report a few months back. And it strikes me as actually a really important concept. to, in some ways, as useful as the destination analysis idea of trying to find the economic high ground. And this goes back to what we were talking about, about living in a very uncertain world where everything changes and anything can happen, as you experience from your own family

Starting point is 01:14:22 and as Hossam talked about in places like Syria and Iran and the like. And I wonder if you could talk about this idea of businesses that possess or occupy the economic high ground. Because When I look at your portfolio, for example, I know that you're not very public about your portfolio, but you can't help it because of your 13Fs being out there. So obviously, you've owned things like Berkshire and Moody's and Ferrari and Mastercard and Bank of America and Nestle and American Express and the like. These are companies that all in some sense seem to occupy the economic high ground. Can you talk about what that means and what these companies have in common? Because I think this is a really important idea for people who are actually trying to build resilient, sustainable wealth and

Starting point is 01:15:09 are not trying to get carried away, but want to get to the finish line over decades. So just to talk about the provenance of the idea for me is that there is somewhere in a conversation with Warren and Charlie there where they agreed perhaps in response to a question that if you take Omaha and you own the best office block, you bone. the best retail location, I think they talk about the best gas station and the best McDonald's franchise, then you're pretty much set, you know, you don't need to do anything else for the rest of your life, basically. Those things are going to do extraordinarily well. And I kind of realized that what they were talking about was the economic high ground, if you like.

Starting point is 01:15:54 And maybe that actual phrase has an origin somewhere that I'm not aware of. And when I thought of Bruce Flat and the way he would turn down. I had this conversation with a friend who was investing vast amounts of money for an American company and apartment blocks in Europe. And she explained to me the differences between Berlin as a city to invest in as opposed to London or New York. Now, Berlin is a really wonderful place, I think, to live. It's got an enormous amount of space, good transport infrastructure. It's a very kind of like quiet, carefree feeling, but also an intensity of life there that's associated with this growing capital. It's an intensity which is not dissimilar to Chicago. But then she explained to me that Berlin especially was

Starting point is 01:16:43 not a good real estate market for her because there was no constrained real estate. And she explained how places like, she kind of screwed up in terms of infrastructure and accessibility like London and New York are far better because there's so much constrained real estate. So to be in this places where once you own that key asset, nobody can really displace you. Once you own the World Trade Center or a similar kind of downtown buildings in the city of London, nobody can really displace you. You are there with all of the nexus of transportation. And I'm using the real estate, real estate as an analogy, obviously not all businesses, real estate businesses. But if I think of downtown areas, that you have a wealth of, there's a cumulative effect of the transportation,

Starting point is 01:17:28 density, the fact that if you're in the downtown area, your catchment area for people that you employ can come from anywhere around the town because people can get there, because transportation brings them in. Not to mention the close accessibility of restaurants and a diversity of restaurants and a close, the accountants, lawyers, you name it, there's quite a lot that's been written about this. So to own, and again, the real estate analogy, I just, again, it's not to just describe real estate. I'm just using it as an analogy. So, So by contrast, you could own underused warehouses on the edge of town. And that would not be the economic high ground.

Starting point is 01:18:06 A warehouse might have many times more area and might feel good in all sorts of ways. But if you want a closely accessible restaurant, if you want a closely accessible accountant, if you want to be able to have a good catchment area from which to get potential employees from your warehouse on the edge of town with its less good transportation infrastructure is not going to be as an attractive location, for example, to place an office. So that is not the economic high ground. And in real estate, what I learned is that the economic high ground, the A grade real estate, the price goes up in strong markets and the price goes down less in weak markets. Whereas in edges of town, not prime real estate, the price,

Starting point is 01:18:55 goes down very rapidly in wheat markets, and maybe if you're very lucky at the very end of a bull market, it goes up a little bit. And so the pricing on that very simple asset, real estate is a very simple asset, is very different when you're in those two different locations. So I'm not particularly interested in investing in real estate as my sole area of focus. But if you take that now, make that analogous to other kinds of businesses, I think that it's very hard for me in the vast majority of retail businesses. They're not economic high ground. If I have some fashion concept, you know, what's fascinating to demonstrate this is that I was having a conversation with somebody the other day about a brand Abercrombie and Fitch.

Starting point is 01:19:40 Abercrombian Fitch, when I lived in New York, was an utter blockbuster brand. I mean, everybody wanted Abercrombian Fitch. It met a need for a certain demographic. There were queues outside their stores. It was a very good performing, well-performing stock. But it's not economic high ground. And at the end of the day, you're selling apparel. And what you're meeting is a perception of what the consumer wants, a certain look, a certain feel in the stores. So that would not be economic high ground. My equivalent in the real estate analogy is that would be on the edge of town. By contrast, if you own the railway network, you know, there are the vast multiplications. of industries that want to access your network in order to transport certain kinds of goods

Starting point is 01:20:27 from A to B. And as the price of real estate goes up, as the price of petrol goes up, your relative advantage in that rail network increases. And you're not just reliant on the transportation of coal, for example, you're reliant. I mean, there's not everything that you want to transport by the rail networks, but there's a lot. And they represent diverse industries. And so, you're far more likely to see your way through difficult times in the railway network than you are, for example, in Abercrombian Fitch. And that can go within franchises. So obviously, there's a McDonald's franchise, or it's actually a company-owned store at the time I visited it in Times Square. So the average McDonald's store sort of sells between one and one and a half million does revenues a year.

Starting point is 01:21:17 And this place is 7 million. You know, so in a time when there are less visits to McDonald's, this Times Square McDonald's store is going to suffer less than one that is again on the edge of town is in a less visited location. So I don't, you know, I don't think you can define it down to its last attribute. But what I realized is that what the market does is it regularly shows you stuff on the edge of town that appears to be cheap. And what I wanted to do was to not,

Starting point is 01:21:55 was to sidestep those things and wait until something at the center of town to use the real estate analogy, economic high ground was what I perceived to be good value and own that. And so that I want to end up, and this is a kind of destination analysis, I guess, I want to end up if I possibly can in 20, years time, owning a collection of extraordinary businesses, which are economic high ground, which are where people say, my God, he owns the best assets. They're just like sort of amazing

Starting point is 01:22:27 businesses. I don't want to own the Abercrombian Fitchers or the Chikos or I want to be right in the center. And kind of figuring out what those are is not easy. Now, if you can find something that is not economic high ground right now, but turns into it, now that can be really extraordinary and phenomenon. So people, it's either that the perception of the business is not that way or the business itself transforms into economic high ground, which is effectively what happened with the railway networks that around the time that Warren invested in, he saw it. So think about something like Indian Energy Exchange, for example, is that, which is a big holding of yours in India, would that be something that embodies this in a sense, this idea

Starting point is 01:23:12 of economic high ground? You know, I believe so. It's a story that will unfold, and I'm going to do everything I can to help it to unfold in the right way. I think that probably all stock exchanges are economic high ground. And the issue, as an observer, I've never really owned them, which is a great shame, is what I learned from observing stock exchanges whose monopoly on trading shares was taken away whenever it was.

Starting point is 01:23:44 And you sort of thought, well, if their monopoly on being the sole venue where shares are traded is taken away, what do they have left? And it turns out that they had an enormous amount left. And there was still an enormous amount of value that they could bring to, in this case, the trading of shares around settlement, around data, around showing depth of market, around organizing the marketplace in a way that's efficient for everyone, means that companies like, intercontinental exchange, London Stock Exchange and others have done extraordinarily well. And so when I saw that there was an energy exchange developing in India, which was clearly going to organize the market, be a key player in organizing the market, then yeah. So that's kind of an example of certainly not perceived to be the economic high ground at the time that I invested it in India.

Starting point is 01:24:34 And by the way, no guaranteed outcome. but looking out and saying this is very, very likely to be the economic high ground in that it will be an institution in 2030 years time that is critical to the good functioning of the Indian energy markets. And between now and then, there's an enormous amount of work to do, but an enormous amount of profitable work to do. So yeah, that would be a great example of why I chose India Energy Exchange. rather than, for example, at the time on the visit to India,

Starting point is 01:25:11 a company that I really enjoyed looking at and seeking to understand as a company called Sera, which manufactures toilets. And, you know, so obviously, so there's this shocking number, William, in which out of 1.4 billion Indians, there's only about 200 million who have a toilet inside the home. So you can imagine the sale of Sarinjewaer

Starting point is 01:25:33 there's an enormous amount that needs to be constructed. And obviously my problem was I couldn't tell whether Cira would be the winner. There's a very, very high likelihood that it will be the winner and it'll be the supplier of a big chunk of sanitary wear in India. But I could not see that as the economic high ground, the way I could see, I could not see my way through to it being the economic high ground, the way I could see India Energy Exchange being the economic high ground. But in that vein, so in credit rating, Crizzle is the economic high ground. I think that care rating has the potential. Didn't you want to own Chris, old guy?

Starting point is 01:26:06 Pardon? Didn't you once own Chrysle? That's a whole other story. I'm bringing this up slightly cruelly because I remember you once saying that the mistakes in our portfolios are often not apparent. And Chrysler was something where I think you made about five times your money and then sold it. And gave up making 500 times my money. Thank you for reminding me of that. I'm just trying to keep you humble.

Starting point is 01:26:32 So the economic high ground in Crissel's case is, extraordinarily expensive. And perhaps I don't even know if Snowflake is the economic high ground, but there comes a point to which if you're being offered the economic high ground at such nosebleed valuations, then it's unlikely that you'll make any good or extraordinary return for your investors. So what I've done in the case of care ratings, and it's a, so I've sized the bet right. And in retrospect, if it's successful, and I may add to the bet, but I'm saying that this company has is not the economic high ground right now. They have a lot of wood to chop. But I'm making the bet that they can get there. And I'm making the bet that they can get there

Starting point is 01:27:16 in part because I think of the way the industry is structured, they have to get there. I don't think any new ratings licenses are being handed out in India. And one could say there are too many ratings agencies out there anyway. But I make it also the bet that there will be over time a preference, at least in some of the market participants for a homegrown local agency. But it's not yet the economic high ground in that they have a long way to go to be, in market share, they rival chrizzle. But in terms of perception of the brand and desirability of the brand, they have a long way to go. So that is me kind of saying that's a warehouse today, but it could be an office block because look at all the train stations going up around it

Starting point is 01:27:57 and all of those things. And this idea of position sizing is. actually really an important part of what you do to remain resilient over many decades, right? With something like BYD, for example, which you bought pretty early, I think probably in about 2011 and still a own good chunk of, that was initially a 5% position, I think, something like Micron as well, it's a 5% position. A little under 5%. And I'd missed actually, because I was in this mindset that said, well, it's China and I can't read their any reports. And yeah, I know Lilo's amazing and I know that the Charlie said these things. And I just said, yeah, but I can't do it because I had these kind of, I'd put these ridiculous blocks in my mind. But when I finally got there,

Starting point is 01:28:46 it had done a 3x on me. So I'd failed to capture that 3x, if you like. But it was a period of price weakness, so the price had been weak for a year or two. And I, and, and I, and, and, and, and, somehow I found a way to re-evaluate the way I was approaching it. Yeah, so I think that, I mean, the super ego, many of us have a very powerful super ego, that voice that's telling us what we ought to be doing and what we ought to be thinking. And it's extraordinarily well developed in those of us who've been to certain kinds of universities and high schools. And often the super ego is telling you that the position should be a certain size and if it's not a certain size, then it shouldn't be there. And I can remember the same kind of feeling that we were talking

Starting point is 01:29:33 about with people investing in businesses like Twilio or Snowflake looking at me and saying, oh, you poor soul, you just don't have the brain cells to understand how brilliant this company is. In the case of position sizing, it was sort of, oh, you poor soul, you know, you just don't have the, the, the Cochones is what you would say in Spanish. You don't, you don't have the big balls to take these bets. You're not really cut out for this, are you? And so I think that in a counterintuitive way, when those feelings come up, it seems to me, William, I don't have a conclusion on this. I'm curious to ask you this with all of your, all of the people that you've interviewed. It's counterintuitive, but that very feeling that's saying, oh, you poor soul,

Starting point is 01:30:19 you're really not up to this. You might actually be right onto something. And it's that very feeling that the market is giving you a feeling inadequate in one way or another, either in terms of your understanding of the business or that you're not willing to pay a high valuation or that you're not willing to make it in an enormous bet, that actually may mean counterintuitively that you're in absolutely the right track. Yeah, I think one of the things that makes investing so exquisitely difficult is that you're trying to listen to these messages and you don't really know what they mean. So, for example, I've found during that period where everyone was making so much money off all of these really hot growth stocks, which I didn't own, there's a part of me

Starting point is 01:31:00 that, or of crypto, there's a part of me that's like, am I an idiot? Do I just not get this? I need to learn more about this. Why aren't I embracing this stuff? And obviously, you do want to expand your circle of competence and learn more and understand more about these new paradigms and these new technologies. But also, I'm looking at myself and I'm like, is the fact that there's a part of me that has this deep yearning to be part of that bet, is that yearning actually exactly the sign that I shouldn't be doing this? And so you're having to kind of judge your own ego, judge your own vulnerability and your own flaws,

Starting point is 01:31:36 and be circumspect about yourself. And this is where, you know, having a clear idea of where you're going and where you want to end up, regardless of how successful your current investments turn out to be is extraordinarily helpful. So I think that what I realize is I don't want to be a successful investor at any cost, if you like. And I've ruled out being a successful, I mean, I would call it a successful speculator, if you like. I think when Bill buys puts on the market, and that's the side of Bill that is being a speculator, and I think he's got an extraordinary mind and is good at it, but I'm ruling that out.

Starting point is 01:32:18 I'm saying, does this get me closer to owning the economic high ground? Because if it doesn't, it becomes much easier to discard it. And it becomes actually, by contrast, it was very easy for me not to say yes to crypto, for example, or to, for example, Peloton, which I couldn't really understand. I mean, the whole sports business, whether it's online sports in the case of Peloton or whether it's real sports clubs, I don't know where the hell that is going, but it's not the economic high ground. But by contrast, to say, well, you know, so long as I'm not staying up at night over it, I think that maybe buying BYD does get me closer to the economic high ground.

Starting point is 01:33:01 And actually, I know it's kind of perceived to be a bit of a crappy company, forgive me all my friends at care, that has spoiled its copybook a little bit. But actually, there's a destination there that I can't be sure that they'll get to, but I think they can get there. So that's something I am willing to step into. It kind of rips many choices away from one. And so, funnily enough, I mean, work with me on this, William. If you're just a guy who shows up or a person who shows up who says, I want to be a successful investor, that is very, very close to one's ego. And you create the danger of, but you know, But if you say, and one of our investee companies, Exor and John Elkan does this, you don't say that.

Starting point is 01:33:46 You say, I want to build great businesses. Or in their most recent presentation in Turin, I want to build great businesses with great people. So, you know, do you use that as your filter? Does this get me closer to building a great business? And does it get me closer to building it with great people? And that, you know, so much is pushed away as a result of that. It seems to me. And actually, I think my thinking has been clarified on that.

Starting point is 01:34:14 I would actually tell you, I thought about it this year and I couldn't find a way to do it. I would love to have that emblazoned all over my new report. We build great businesses with great people. And I find it interesting. I had at this most recent Berkshire meetings, I had some interaction with Tracy Britt, who is now running her own show. and she had a conference in which she had CEOs talk about building great businesses in a very kind of like in smaller to medium sized businesses an area that Berkshire could not compete in.

Starting point is 01:34:49 And I find it interesting that that's the approach that she's taken with her business. There's some sort of conflict built in here that maybe you can talk about a bit, which is a lot of what you and I have discussed over the years with Monich Pabry is this idea of cloning, learning from people who are smarter and wiser than us and have already figured things out and then replicating it. And yet on the other hand, there's this whole aspect that we've been talking about of trying to become more true to yourself, trying to invest in a way that's true to who you are. And I wondered how you reconcile this tension between learning from people like Warren and Charlie and Monish, who are great at work.

Starting point is 01:35:35 what they do and Bill Miller and Bill Ackman, all of these kind of masters of this game. But then at the same time saying, yeah, that's not my game. This is my game. Because this seems to me a very central part of your journey to have learned from people like Warren, Charlie and Monash. But actually, I see you increasingly diverging in certain ways from Monash. And this totally isn't a criticism of Monash. I think it's more a matter of you becoming more who you're supposed to be.

Starting point is 01:36:04 It's a great question, and I just want to restate it. So, on the one hand, cloning is very powerful. On the other hand, being true to yourself is very powerful. How can you clone somebody different to you and be true to yourself? And I think that the story that I want to tell is that when somebody comes up to clone, there's a reason why that person, I believe, that person is being thrown up in front of us as opposed to somebody else. So Arnold Schwarzenegger would have been had very different heroes, say, to me, we all have

Starting point is 01:36:38 different heroes. And I think that the perspective that I have is that there's a part of us that's deeply, that we're not aware of, but that is deeply wise that kind of has a sense of which path that we want to take. So the mere fact that somebody's, you know, when somebody triggers strong feelings of envy, strong feelings of admiration, strong feelings that we want to be like that person, that is a very important clue about ourselves. And so I think that then we go through a life cycle. And the first part of the life cycle is

Starting point is 01:37:05 admiring everything and wanting to copy everything. The clothes, the wear, the watch they wear, where they hang out, what they say, the phrases they use, the companies they invest in, you name it. And I think that that's very good. And that is a learning process for the person who's doing the cloning, the person who's got that, who's doing the learning. And then I think that you go through a period of mastering some of those lessons, and then towards a more mature phase of admiring these people and cloning them, we get to a place where the shoe doesn't fit so well. And the shoe might not fit because we're just not capable of doing what they're doing,

Starting point is 01:37:48 or because cloning them in that particular way does not fit with our nature in one way or another. And I think that that's kind of the life cycle where, so I found, I started off with intense and endless admiration for Warren Buffett and everything he did and said and all that jazz. And then at some point, I kind of found myself being quite annoyed and not liking him. And when I looked inside myself, the best I could do was to say, yeah, the reason why you're having this problem with Warren is that, you know, you could never be him. And you know, so those are interesting clues when we get to the point in our cloning of somebody, in our admiration of somebody where we realize that we're diverging.

Starting point is 01:38:31 And then the goal is to be nuanced to value the lessons that we've learned from them to reinforce those things. Those were things that we could take on board and make our own. And not to cry over the spilt milk of those lessons that we haven't been able to take on board or where it just doesn't fit. The shoe doesn't fit for us. and quite possibly new heroes emerge at that point, that we also need to clone. And the ones that we've had, so I don't think that I'm in the mature stages of cloning Warren Buffett, and I think I have a deep and good understanding of, you know, where I cannot be like or

Starting point is 01:39:10 where I shouldn't even try. I think that happened around the lunch, where I kind of understood that I had to sort of like take the valuable lessons, continue to learn those valuable lessons, but understand. stand the ways in which I was different. I think I've been through that life cycle with Monash. I think there's an extraordinary friendship there, which I'm very, very grateful for. And there are probably other ones that I'll have in the future. I mean, I would tell you right now, William, I'm reading the book, I guess it's the autobiography of Michael Overt. And I know that the book does not have the full story, but I'm being a bit of a fanboy of Michael Ovitz right now.

Starting point is 01:39:47 I mean, the guy is just so amazing at building relationships and getting things done in the entertainment industry. And so I'm kind of examining myself and saying, what am I learning from Michael Ovitz? And in what ways could I actually take what I have as human material and develop it a little bit in the direction of Michaelovits for a more successful life? So I think that we get new heroes all the time. I don't know how long the Michael Overt's life cycle will last. I met him once when I was a young man. I was on a trip to Paris with a friend of mine, Dennis, who's family was sort of powerful in the film business.

Starting point is 01:40:29 And so we got invited, I think it was the bicentennial. And so we got invited to Disney's private party overlooking the Arc de Triumph that night. And so I met Overt's there. And I must have been 19 or something like that at 20. You know, I mean, this is a long time ago. I remember being introduced to him and not really warming to him. I mean, I think he looked at this kid and he just sort of looked straight through me like,

Starting point is 01:40:51 what hell am I having to bother with this kid when there are all these important people? And I think this gets an important point. I'm not trying to say this in any way to be critical of Michael Ovitz, who I know, you know, I mean, I've had like a 15 second exchange with him 30 years ago or something. It's more that I think part of the thing with cloning that I've learned is also, you don't have to clone every aspect of the person. You can look at someone who's deeply flawed in one area, but extraordinary in another area, and just take that one thing. And that seems to me a really helpful thing as we mature and try to clone better.

Starting point is 01:41:29 I remember a friend of mine once saying, you know, you don't go to Charlie Munger to learn etiquette. You know, there are other things you learn from Charlie. You don't go to Warren to learn to be a great sports person. Yeah, and I tell you, I mean, it sounds like a weird thing to say, but when we were in Omaha a few weeks ago at the annual meeting, there are a few things that had an impact on me that relate to cloning. There was a moment, I haven't told you this, there was a moment like one in the morning, I think, where we had just been meeting with Lee Lou in a hotel lobby. And it was kind of lovely. And some people had come over to talk because they really wanted to say hi. and they were like, isn't that Lee Lou?

Starting point is 01:42:12 And they wanted to sort of be in a photo with him or something. And they were excited that you were there. And it really wasn't an appropriate moment to talk. And then I think Lee Lou went sort of, I don't know, was it 1.15 in the morning or something like that. And we were about to go home. And you sort of said to me, I really want to go say hi to those people. I don't want them to feel like I, you know, was rude or unfriendly or anything. And so it's like 115 in the morning.

Starting point is 01:42:39 and you've been up since like five in the morning because we had to go to the annual meeting that morning. So I looked at that and I was like, it made me kind of proud of you in a weird way. I was like, oh, that's a really nice characteristic that guys got there where actually late at night when he's really bushed. He doesn't want to insult these people and make them feel that he was being unfriendly. And so you went over, we went over and, you know, they took some photos and you were really nice of them. And so that's, it's a long-winded story, but it's actually a way of me. That's one of the things where when I think of the things that I've learned from you over the years. I look at that and I'm like, that's something that's worth cloning.

Starting point is 01:43:16 That's a really nice habit. I mean, I have to say that I think that I learned that. I think I probably learned that from Monish. Or maybe I, because you have to draw a fine line. You have to respect your time and your energy. At the same time, you don't want to diss people. I think for Monish, he would laid out in the same way. And for him, that's a game.

Starting point is 01:43:39 because Monish likes to play games. And so he's figured out a way to play that game well. And so you have to respect your own time and energy, but you also want to acknowledge humanity and you want a humanity to feel good about itself. How can you play that game? And actually, it was pretty straightforward. I mean, we brushed them off

Starting point is 01:43:59 while we were in conversation with Lilu, and then we went and talked to them afterwards, which was the right thing to do. And this is all stuff that I learned in the Berkshire world where everybody has, every individual is an equal soul and should carry equal weight in a room as much as you possibly can. And yeah, what's interesting just to bring Michael Ovitz is that I've not met him. So what I know is the public persona. And one of the weaknesses of just reading a book about the person is that there's so much that's left out.

Starting point is 01:44:32 And I've, in multiple cases of stories that he's told in the book, asked myself, I wonder what part of this is being left out that would actually complete the picture. And these meetings, these one-off meetings even with people that you're reading about can really help to complete that picture a lot and that you just gave me a valuable piece of insights, that there's a lot that's missing in the book, basically. You also have no idea really what's going on at that particular moment. And I remember Ed Thorpe saying to me at one point, talking about how suspending suspending judgment is such a rational and smart thing to do because often you're offended by someone because they did something that you perceived to be rude or you perceived as insulting.

Starting point is 01:45:21 And what I often find is I just didn't understand what was going on in that person's life at that moment. And I remember this once when I was living in Hong Kong and I went to a dinner and I met someone or a party and I met someone I thought was really lovely. which is such a nice person. And we had a really great sort of thoughtful, soulful conversation. And then I remember thinking, it's weird that we never became friends,

Starting point is 01:45:46 never got together. And then I discovered that her husband was in the final throes of dying of cancer at the time. And I had no idea. And here I was projecting something onto the situation. I was saying, why do I not manage to turn these really nice meetings into good friendships? Like, how come I don't have better friendships in my life? And in fact,

Starting point is 01:46:05 there was this totally other thing going on in her life that I just wasn't aware of. And so even when I'm doing something like judging Michael Ovitz for how he didn't regard me as being super important in that room of important people 30 something years ago, I think part of growing up has been to say, what the hell do I know about what was going on then? I think that, you know, if I think of how many of us have kind of revered and adulated Warren and turned him into a mentor, is that, you know, we're looking. to, because so much, he's gotten so much in his life right that we kind of like admire pretty much the whole person. And the life cycle there is that I admire the whole person. And then

Starting point is 01:46:47 I realize at some point that actually I don't want my family to unfold. And he probably doesn't want his family to unfold in the same way. And you had some really interesting thoughts about that at the meeting actually. And then there are people, maybe people like Michael Ovitz or Tiger Woods or where you kind of say, well, I, I, I said, you. There's this particular thing that they do well, and it's not this all-encompassing mentorship or cloning. You're already at the very beginning understand the specific things that they do well. You're not even going to try with the other stuff, if you like.

Starting point is 01:47:20 But I think that figuring that out, in the case of a deeply flawed and obviously flawed individual has a very specific skill or ability that we want to copy or learn from, that's one thing. but in the case of Warren where he's gotten so much of his life right, then at some point teasing out the bits that we actually don't want to try and become like. I mean, you know, if I'd had the famous launch with him again, I think I would have ordered red wine. I like red wine.

Starting point is 01:47:50 You know, I said, Warren, I'm glad you've got Coke. I'm ordering a bottle of wine. You don't have to drink it, you know. But at the time, I saw, you know, I was going to clone the Coca-Cola as well, you know. I think that's a good thing because you don't know. Maybe get drinking the Coca-Cola is central. So do it until you realize that it's not central, you know? Yeah, I think that there is a sort of life cycle here where early in life you want to really clone when you don't really know what works.

Starting point is 01:48:21 And then gradually you become a little more selective. and you look for the deeper things in people that are really impressive. We talked about this in Omaha. I thought it was a fascinating moment when Warren talked about these revelations in life where you suddenly realize maybe you should be kinder. Maybe you need to be more lovable. And it was said in such a sort of in-passing manner that I think it was so easy to miss. But I kind of saw it as him being slightly.

Starting point is 01:48:56 confessional, whether consciously or not, and saying, I wasted a big part of the first half of my life by not being quite as lovable and quite as kind as perhaps I should be. And when I look at Warren, one of the things that I actually admire most is the fact that he's becomes, I mean, you know, what do I know? But it just strikes me that the amount of kindness he puts out there is kind of extraordinary and that he figured out at a certain point how to become, how to become lovable, how to become kind. That's a hugely impressive thing. In some ways, it's much more impressive than the ability to make a smart, rational bad. Yeah, it happens to be good, long-term greedy as well. So it's a smart way to be even from investing perspective. But I think that in Warren's case, he's not doing it

Starting point is 01:49:42 for that. He's doing it because there's a part of him that's discovered this wisdom. He would be doing it even if it wasn't long-term greedy. But it happens to also be long-term greedy in that you you probably get better opportunities in the world, better opportunities for Berkshire Hathaway by being that way, but I agree with you that that's not why he's doing it. Happens to be an added benefit. And it may be part of why he's doing it, and it may be driven partly by the fact that he has a deep yearning to be loved and admired.

Starting point is 01:50:11 And I suspect there was part of you going back and talking to that group of people in Omaha that night is, you know, you're very kind and you'd want them to feel included. part of it's that you have a deep yearning to be loved. I certainly have a deep yearning to be loved and I have I have embedded within me a sense of deep insecurity that arises when I don't feel I feel like people don't love me and I certainly wouldn't miss an opportunity if it's it comes at a low price to have people think positively of me if I can. I think I probably invest you know I if Margaret Thatcher said that if you care what every single person thinks, you'll be beholden to them and that you'll

Starting point is 01:50:59 not have independence of thought at some level, independence of thought and independence of action requires you to say, and if X, Y, Z constituency or individual or group of people don't like this, then too bad. So you can't, you know, it's actually a potential terrible weakness. I also feel like there's a certain justice. I remember being at maybe my first year at university and looking for a summer job and writing to people in the city of London and getting a very, very unpleasant reaction from people. And I wouldn't want to visit that on anybody around me if I can possibly avoid it. So it's complicated because there's a part of me that wants to sort of show myself as being

Starting point is 01:51:42 more just. There's a part of me also that wants to be loved for my own insecurities because I have insecurities, and there's a big downside cost to that that I still haven't quite figured out. All right, folks, thanks so much for listening to Part 1 of this conversation. If you'd like to hear more from Guy Speer, please check out Part 2, which is being published today as a separate episode. In the second part of our conversation, Guy talks in some depth about the high-performance habits that have helped him to build a successful investment career, so I hope you'll find

Starting point is 01:52:15 it a really helpful and very practical episode. Meanwhile, thanks to everyone who sent me questions over Twitter for me to ask Guy. As you'll hear in part two, I ended up asking him questions from three different people, Stacey Smith, Stuart South, and Miko Dizant. As a way of saying thanks, I try to send a signed copy of my book, Richer, Wiser, happier, to one person per episode whose question I've used. This time, the grand prize winner is Stacey Smith, so Stacey, I hope you enjoyed the book. Please feel free to follow me on Twitter at William Green's 72,

Starting point is 01:52:48 and do let me know how you're enjoying the podcast. I'm always really happy to hear from you. I'll be back very soon with some more terrific guests. My next guest is Daniel Goldman, whose classic book on Emotional Intelligence has sold over 5 million copies. Until then, thanks so much for listening. Take care. Thank you for listening to TIP. Make sure to subscribe to We Study Billioners by the Investors Podcast Network. Every Wednesday, we teach you about Bitcoin and Eighty. Every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com.

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We Study Billionaires - The Investor’s Podcast Network - RWH009: How to Build Enduring Wealth w/ Guy Spier (Part 1)

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