We Study Billionaires - The Investor’s Podcast Network - RWH033: Lessons From Buffett & Berkshire w/ Chris Bloomstran

Episode Date: September 17, 2023

In this episode, William Green speaks with Chris Bloomstran, President & Chief Investment Officer of Semper Augustus. This conversation has been divided into two episodes. Here, in Part 2, Chris discusses what we can learn from studying Berkshire Hathaway & Warren Buffett; weighs the risks of Berkshire’s huge Apple stake; discusses Berkshire’s valuation; & explains why the stock should beat the S&P 500. He also talks about avoiding charlatans and living with integrity. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 02:38 - Why Chris Bloomstran says it’s so valuable to study Berkshire Hathaway. 05:04 - How Warren Buffett thinks about intelligent asset allocation. 06:59 - How share buybacks are mishandled by many companies.  11:30 - How he values Berkshire, & why it should outperform the S&P 500. 20:40 - Why most investors shouldn’t pick stocks for themselves. 29:16 - How Chris manages his time. 40:28 - How he’s risen above a painfully difficult childhood. 43:42 - Why the key to investing success is a fierce work ethic. 44:57 - What his football coaches taught him about integrity & kindness. 54:10 - How Chris uses social media to criticize what he calls “charlatan promotion.” 58:41 - What he thinks of Berkshire’s huge stake in Apple. 1:08:15 - What a legendary golfer taught him about how to live. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Chris Bloomstran’s firm Semper Augustus Investments Group Chris Bloomstran’s 2022 Letter to Clients: “Crazy Train” William Green’s book, “Richer, Wiser, Happier” – read the reviews of this book Listen to Stig Brodersen’s April 2023 interview with Chris Bloomstran, or watch the video. Follow Chris Bloomstran on X (AKA Twitter) Follow William Green on X (AKA Twitter) SPONSORS Support our free podcast by supporting our sponsors: River Toyota Range Rover Sun Life SimpleMining The Bitcoin Way Onramp Briggs & Riley Public Shopify Meyka Fundrise AT&T iFlex Stretch Studios Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Hi there, this is part two of my conversation with Chris Blumstrand, a terrific investor who's the president and chief investment officer of Semper Augustus Investments Group. Chris has an excellent long-term record over the last three decades, but he's probably best known as one of the world's leading experts on Berkshire Hathaway. Chris's annual letter to clients has developed a cult following, not least because it includes an amazingly detailed analysis of Berkshire. In his most recent letter, he devoted 59 pages by my count to analyzing Berkshire's many different businesses and valuing the company in four

different ways. That attention to detail gives you a sense of how fiercely driven, obsessive, and intense Chris is when it comes to analyzing stocks. In this part of our conversation, We talk in some depth about why investors and CEOs should study Berkshaheathaway and what they can learn from Warren Buffett about things like how to allocate capital more intelligently and how to think rationally about share buybacks and also how to treat Shelders more nobly and honorably and fairly as partners. We also discuss the merits and risks of Buffett's enormous investment in Apple. And Chris explains why, he expects Berkshire to outperform the S&P 500 over the next decade. Along the way, we also chat

about why most investors shouldn't pick individual stocks for themselves and why they should be extremely careful of the casino side of Wall Street, which is full of smooth-talking promoters who are good at spinning stories and making themselves extremely rich, but are not necessarily looking out for the best interests of unsuspecting retail investors. Well, here in this very candid conversation, Chris has some intensely personal reasons for caring so deeply about integrity and truthfulness and protecting regular folks from abusive behavior. I hope you enjoy part two of our conversation. Thanks so much for joining us.

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 my mind. Markets and Life. Berkshire obviously has been an enormous part of your portfolio going back to 2000 when, as you said before, it had halved. And I think you bought it in February 2000 initially at about 43,700. And here we are. 43707.

There were $7.00. Yeah. And so, I mean, and this has grown at times to 20 or 30 percent of your client's portfolio. So it's clearly a very important anchor position and you're best known really publicly for your enormously detailed analysis of Berkshire, which you do each year in your shareholder letter. So I wanted to talk a little bit about Berkshire because it's so associated with you and you're pretty much unrivaled in your understanding of the minutiae of the business. When you were writing about Berkshire in one of your annual reports, you said it's run by the world's most serious. skilled and shareholder friendly management team and that it embodies how capital should work. And

it is probably the best business to study if you want to learn how to invest and how to run a company morally and ethically. And I wonder if you could just talk a little bit about Berkshire as a kind of model for others, what other CEOs and investors can learn from Berkshire about things like rational asset allocation and running a company in an ethical way and looking out for shareholders, these very fundamental things that I think so much of the casino side of the investing world forgets about? Well, I think Berkshire should be studied by managements. Rarely, rarely are companies led by great capital allocators. CEO comes out of operations in many cases. CEO comes out of finance in many cases. Managements are largely compensated

with a nominal base salary, but then in most cases, some varying degree of bonus, but then largely stock options, restricted share units, and the hurdles that are put in place to be rewarded with your options, it's not just time vesting, but they're performance elements. And a lot of times there are things like revenue growth and there are things like EBITDA, and they have nothing to do with any kind of return on asset, that return or equity return on capital. Well, from day one, Warren Buffett ran Berkshire to grow its book value per share and to not put the business in harm's way. And when it was in harm's way to pivot,

when the first business they owned, obviously was the textile business and famously ran it off and eventually closed it in 1985. Several of the first businesses, they bought blue chip stamps, diversified retailing, wound up essentially being zeros and they pivoted away from those. and it's been this capital allocation at Berkshire that's allotted to be so successful. But it's beyond that. It's the treatment of the shareholder. And what Warren is the largest shareholder.

You know, he's run it for, and I'm going to say this wrongly, but he's run it for his benefit, not so much to line his pockets at the expense of the other shareholders, but at the benefit of all of the shareholders. And so it's the lack of abuse in accounting. It's making rational acquisitions when you're laying out capital. You don't have a litany and a long history of write-off and write-downs.

The $10 billion write-down of precision cast parts, you know, he's acknowledged was a mistake on price in particular. I mean, the business got worse. Part of it was already in bad shape. The term in business was already in bad shape when they bought it. who would have known with the pandemic that aircraft manufacturing would go through the lull that it did. But he paid, and I thought William was stock, I thought he overpaid for it. I think he probably was backed away from the big elephant hunting with the lesson of having

overpaid for a business that did get harmed in various ways. But you've got so much alignment, and it's so easy to learn the lessons by simply going back and reading the chairman's letters. Yeah, I thought it was striking that you, in one of the letters, you pointed out, for example, that Mark Zuckerberg, for example, had paid, I think, $330 in 2021 for shares that would later be worth less than 100. And you were just talking about the fact that, you know, not to, 331 again. Yeah, but not to gang up on Mark Zuckerberg, who's obviously brilliant in his way, but

the lack of discipline in a lot of companies about things like share buybacks, where instead of buying their stock back when it's cheap, they'll buy back kind of any, any time, the sort of short-termism. And it seems like, I mean, there was something very, very striking to me in a lot of your writing about return on capital. And maybe Berkshire is kind of the best way to look at this. You said in one of your letters, we think at least 90% of publicly traded companies aren't worthy of investment because they don't earn their cost of capital. Companies that slowly lose capital have generally been able to raise new capital and mask what is really going on.

In that way, many businesses operate on the order of a legitimate Ponzi scheme. So can you talk about how a company like Berkshire that's very rational about cost of capital, return on capital, how it embodies this kind of just much more logical and intelligent way of thinking about its investments. Well, the levers of capital allocation are known and understood at least by the value investing world. There are only so many things you can do with with money. And from a capital allocation standpoint, I had a chart in this year's letter, which

looked at the last five years of capital allocation at Berkshire. And it started with cash flow from operations from the cash flow statement, netted out depreciation expense, which is a real charge. In Berkshire's case, I think, in a lot of companies' cases, depreciation expense essentially matches what it called maintenance CAP-X as opposed to growth CAP-X. Berkshire has a lot of money being spent in the energy world where they're growing the footprint of their energy assets. But you can do things with the share.

You can issue shares in transactions. You can issue shares to management as compensation. You can buy back the stock and the price at which you buy it back. becomes critically important and so little understood by most CEOs. You can use leverage in the capital structure. You can issue debt. You can retire debt. You can spend money on Cap X on growth Capx.

You can spend money on growth R&D. You can make acquisitions using any of the combinations of capital available to you. Internally generated capital, net new capital, either through the equity markets or the debt markets. And then I had to throw off one-way line in my table. year or you can buy jets, a jet or jets, or you can have birthday parties and you can have a birthday party with matriculating ice cherubs of vodka. That's a nod back to the Tycho. Dennis Kozlovsky days for, you know, the young ones that don't remember the Tyco saga. And that's all you can do.

And I don't think that's what CEOs sit around thinking about. I think they look at, look, if I'm if I'm paid, if I'm incentivized to grow EBITDA, they're going to go grow EBITDA. If that's what drives their comp package, well, that's above the line. The components below the EBITDA line, interest is a very real thing. In first expense, but you become indifferent as to the capital structure of the business. If you're paid to grow the top line and you're paid to grow EBITDA, you become a lot more tolerant of leverage in the capital structure because you're measured before. for the interest expense.

And in so many cases, you'll put the business in harm's way with excessive leverage, but you're not paid to keep the business out of harm's way. You're not in the captain's chair as CEO, as Warren has been since 1965. You're in the captain's chair for four and a half years on average. And when you're given big option packages

and big RSU packages and big PRSU packages, this is your chance to make money. And your motivation becomes, in so many cases, short-term earnings, making Wall Street happy, driving the stock price up, and the share repurchase becomes front and center, perhaps your best use of capital. Now, I'd also argue that so many companies don't have the opportunity set to go invest in growth CAPX intelligently. They don't have the opportunity to go invest in growth R&D.

So what do you do with the money? Well, if you look at, it's fascinating to me, you've got this $38 trillion market cap for the S&P 500. The share count for the S&P 500 is exactly the same where it was 23, 24 years ago. If you look at the percentage of net income or the percentage of cash flow from operations that have been spent retiring shares and buying stockback, last year it was a trillion dollars out of the $1.6 trillion in aggregate profits for the S&P 500. Between dividends and sherry purchases, there's nothing left for the S&P 500 for the last 20 years. and you've been buying shares back at 20 times earnings at a 5% earnings yield.

Well, if you can go invest in a project, if you really have a business that earns 15 on equity, do you really earn 15 on equity if you can't go reinvest in a 15 ROE, but your best use of capital is buying the stock back at a 5% return? This is not a normal boardroom conversational strategy thinking this is not what the CEOs laying away thinking about at night. But if you're Tom Linebarger at Commons, who's retiring, God love him. He's one of the best CEOs and this best management team, the new CEO, I forget her name, she's come up for operations.

But the whole management team, they've all been there forever. I mean, they've been at Cummins for 20, 25 years. And they have a culture of their compensation is driven by the performance of their business units. And when they get to the executive level and they start to be compensated with options and RSUs, it's all very return on capital-based driven. It's very return on asset-based driven. And you love to see that because in that setting, the decision-making of how capital goes in and out the door becomes very aligned with the shareholder. And they're just very, very good. And so getting that alignment right is so critically important. And if you take the time

to read through everything that Mr. Buffett, that Warren has written about executive compensation and stock options and accounting and the treatment of the shareholder. It's just I don't think the incentives aren't there for the managers to go live that way and think that way. You know, they've come up through the system of seeing how their mentors got rich and they're going to emulate that behavior. They're not going to emulate this old guy in Omaha who's really aligned himself with the shareholders.

And I think he thinks deeply about treating all constituents. Well, it goes back to your note about Peter Kaufman. And our conversation, and we ultimately led to how Costco runs their business. But it's taking care of your employees. It's taking care of your customers. It's taking care of your community. It's taking care of your regulators. And through all that, the last thing it's taken care of is the shareholder.

and there are great businesses that really are aligned in differing degrees. But that's really what you're looking for. Now, you have places where you think you have that alignment. You used to have bad businesses. Most insurance operations are not good. I mean, especially underwriters, or brokers are a totally different story, but insurance underwriting is brutal. And it's very, very difficult to approach underwriting from a conservative standpoint.

Lending, banking is very. is very brutal. You go back and look at the long-term stock price charts of almost all of our leading banks over the last 25 years and the stocks are below or they're not much above where they were 25 years ago. They're cyclical. You lower lending standards at the peak of a cycle and you wind up with right off some losses. Then you wind up having to recapitalize your shares at the most inopportune time.

Some of the reasons that the divisor on the S&P 500, the share counts where it was 25 years ago, is because every time you have a recession, you know, you're right off so much of corporate assets and equity and you've got to recapitalize. And you're winding up now capitalizing when the share price is the cheapest. When it's the most attractive from an investment standpoint, you're not buying it in, but you're issuing it because you need the money. And so, you know, the sherry purchases tend to be a disaster at the wrong time. It's when you should be buying the stock back. But Olin couldn't buy the stock back in the pandemic because they had four plus billion. million dollars in net debt on the balance sheet. Today they've got $2.7 billion in net debt.

It's a better business. And they can buy a Mac. The stock's trading it five times earnings. It'll be a private business in 20 years. That's a great use of capital. This management team at Olin absolutely gets it. But those managements, to your point and to your comment, they're fewer and far between, but that ought to be the quest of any investor is finding where you've got the alignment of incentive. 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.

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Well, I think it takes the proper wiring one. I think it takes a little bit of the contrarianism, the skepticism. I'm very jaundiced. I mean, when I'm talking to management and I'm reading K's and filings, I'm always looking for where I'm being lied to. And maybe that goes back to my upbringing and being in a household where you didn't have the honesty and you didn't have the behavior that you'd really want to see. But I also think it's repetition. I think it's, I think it requires an awful lot of time and purpose. You really do have to have a thorough knowledge of accounting. But you have to know, not just accounting. I mean, it's not, you can't just simply take some gap earnings number or even think you're making some accounting adjustments

and throw some multiple on it or you do it via running a DCF. You can tweak your models to get the output to be anything you want. It's really understanding over time how accounting is either judiciously applied or not. It's what is the history of write-offs and write-downs? I mean, you know, if you do have a return or equity component to your compensation and you're in the business of making a lot acquisitions, Maybe you do want to every cycle take a bunch of write-offs, write-downs, deflate the equity number, which in turn, in the next cycle, when your profitability comes through, it's now against a lower equity base because you're just taking a bunch of accounting write-downs and write-offs. I mean, since the mid-1980s, on average, the S&P 500 has seen 15% of operating earnings written off and written down to charges.

And it tends to be the most extreme at the highest during recessions, during times when times are bad. You don't have as many rat off when times are good. But what is book value? And book value can get distorted by repurchases of shares at a big premium of book value, which may or may not make economic sense. You know, what is net income? I mean, is it understated? Is it overstated? If you're doing a lot of deals and you're writing off intangibles, what kind of

of intangibles are being written down. If you have a lot of patents and you're in the drug world, patents really do lose value over time. If you're buying businesses where economic earnings are durable, the intangibles that are customer lists should not lose value over time unless you've overpaid. Then, of course, you're going to make charges to intangibles and good well because the,

you overpaid for a business. It's not as good of a business. It's hard. It takes a lot of work. I'm on. I'm fortunate to be, and I love this. I love being in college. campuses a lot. And, you know, just kind of passing along some of the few things that I've learned

and I always say, look, you always get asked for, you know, what one book should I read that'll teach me how to be a great investor? What podcast do you think are the best? And my point is, you know, get away from largely, you know, thinking you're going to learn something vicariously through an author or through somebody talking. And I love these podcasts. You had Ray Dalio on it. I mean, obviously, he's brilliant. He's a genius. But, you know, given an hour, given two hours, I want to figure out what's going on in comments. And I want to figure out what's going on in the world of hydrogen. Because these are the things I worry and think about. Well, part of the, part of the lesson for me, Chris, has been the more time I spend with really superb investors, the more I realize how ill qualified I am to play the game on my own. And so it becomes, so it's actually, it's really, helpful for me to study great investors because then I start to think, all right, well, I'm not wired that way. And I'm just not as interested. And it struck me, I was thinking about this the

other day. I was reading one of your annual reports. And there was a moment where you got really excited in the annual report and you were saying, you know, the light went on when I was looking at like this footnote about the tax treatment of the Burlington Northern Railroad that Berkshire owns. And then I realized, oh, no, there's there's the equivalent of float in there. You know, that that's not really understood. And I was just thinking, God, I just don't give a damn in comparison. And so for me, like, I mean, look, I own Berkshire, right? And I, and I love Berkshire. I've totally biased. But literally, part of what I do each year, I'm embarrassed to say this. But I, I read your report and I'm like, okay, well, here's how he's valuing it four different

ways. And I trust, I trust Chris to be really assiduous with this. And I'm like, I'm done. And I'm happy, you know, and I trust the values of Berkshire and Buffett. a manga and I trust that they're not out to screw me. But I'm really, I'm kind of almost like just outsourcing the really serious analytical work to you because I'm not interested enough or capable enough. Well, I have no doubt in my mind you're capable enough. But you said it. I think it's the level of interest. I mean, you know, Warren talks about tap dancing to work. I have never felt like I've worked in the business of money, management. I mean, I'm just so intellectually curious about business and industries, the

companies I own, the competition, finding new ideas, that that's all that interests me. You try to read books on behavioral economics. I get through a few pages and I can't do it. Podcasts. I mean, Ray Dalio is a genius, but I, okay, you meditate. I guess my meditation is worrying about what's going on in the displacement of the class. diesel engine. But you're walking like 10 miles a day, right? So that's presumably one of the habits that in some ways is your equivalent of meditation where it's enabling you to disconnect from the office, to disconnect from the noise,

to quiet and down a bit, to get some peace, to get some perspective, right? I mean, that's a, that's really. So, I mean, I think you've just found a different kind of habit to keep your sanity, no? It is. And even here in the last three months of I'm getting ready to have my hip replaced. And so it's been very hard for me to walk. I've got to, with all the surgeries on the knee and the damage I did to the body playing football and time in the weight room and all the sports I played, the body's broken down. My left knee I've been deferring a replacement for seven years.

The hip got really bad two years ago. Surgeon said, dude, this is one of the worst hips I've ever seen. So I did a cortisone shot. be going over to, before going over to Switzerland and Italy, just allow me to walk around. And I started taking a cox 2 inhibitor. And I really had to make myself walk more than my typical

one mile a day. And so I'm up to trying to walk 20,000 steps. And so here I am in all of July. I'm now walking. I have an 8-mile course. I change up the course a little bit. But, you know, that it takes time.

So I'm out there walking for two and a half on average hours per day. And you can either listen to music, which I like to do. And that gives me time to think. I mean, it's the time where I'm not engaged in analysis and I'm not on the phone and I'm not emailing. It's my time to think.

I'm not really listening to the lyrics of the song I'm thinking. But I'm walking so much more now. And I've lost 30 pounds, which is great that I've, knowing I'm coming on your podcast and listening to your podcast. And they're phenomenal. I mean, they're genuinely wonderful. Thanks. So I can take two hours listen to your podcast and then I can go through what my form of meditation is and that's thinking about what's going on and my life and the world and the portfolio and the competition that's coming and all the things that matter to me.

And it's a I guess everybody needs a channel to get out and get away and bring themselves to a calm. It's also striking to me, Chris, that you have a, I mean, you were saying to me last week, look, if you need more time to dig through some of my annual. letters and interviews and the like, it would be easy to postpone our conversation. And you said, I have no travel in a very open calendar. And I was really struck by that, this idea of having a very open calendar. And likewise, I've seen you say that you have a kind of ADD approach to structuring your day. And while your business partner, who you've worked with forever is very structured and very orderly and very systematic, you kind of leave your day largely unstructured so that you can do your research and like, can you talk about that idea

of how you structure your life so that you can think and work independently and peacefully and get some perspective on the investment world rather than being kind of sucked into the mayhem, the noise and confusion that most investors subject. to. Well, I'm blessed, to your point, with a great business partner of 25 years, Chad Christensen, in the early days of the firm, we all, we had to wear a lot of hats, you know, a lot of blocking and tackling. And so you find yourself spending a lot of the day involved in running the business, setting up the business mercifully, you know, he threw the team he's built on our operation side. I've taken all the hats in the firm other than the investing hat away from me,

which is wonderful thing. And I'm blessed with a wife that I don't deserve. And I'm blessed with two kids that I don't deserve. I think if you observed my household life, you'd find it pathetic because I don't do anything. I would love to admit this, but I don't cook. You know, I occasionally do some dishes. I don't do the laundry, outsource the laundry.

the lawn mowing. I kind of grew up a lawnmower in my hand and doing all the jobs and all the projects and I did the laundry and I swept the floors and vacuumed the carpet. My life, it's luxurious, but I have all the time to do what I'm interested in doing and that's doing what I do for a living,

which doesn't feel like I'm doing it for a living. It's just something I enjoy. And all of my friends, my colleagues, again, another lesson that I tell students is, look, if you've got bad people in your life and I've been using this message for years, get the cancers out of your life. I said, you're going to look around the room, the classroom. Very few of these people are going to wind up being permanent friends,

unless you're in a place like Columbia's MBA program where you're going to have a great social network. But, I mean, how many high school friends do you still spend time with? How many of your college friends? You don't. And I said, and when you have families, to the extent you have families, your friend group is going to change based on your kids' activities and where they go to school. If they're playing sports teams, you're going to spend time with the families of the sports teams and you're going to spend time with the families at schools and whatever their

interests and activities are. But from a professional standpoint, your friends and your profession, if you like your profession, so at first I say, if you don't like what you're doing, you're looking at the clock at 455 means you can't wait to go home. If you can find something else to do with your life, you know, because if you find something you can get paid to do that you like doing, you know, that's a great combination. But I said, build, build your friend group carefully. And I've been really, really blessed and lucky over the years to develop some wonderful friendships with like-minded, not cookie cutter.

We don't look at stocks the same way. But I have a group of 25 or 30 really good friends, a handful in particular that I spend a lot of time talking to, one who I talk to three, four times a week, typically. two like that, spent a lot of time with one in person here in town and another on the song with. But if you have bad people that enter your world, if you have immoral people, and maybe this is lesson that I learned when I was a kid, which is interesting because I lived and I set out to live an exact opposite life of the, of what I had seen, a little bit of a boomerang effect there. I had another, one brother in the house who, you know, in the same setting, observing the same sets of behavior co-opted the behavior that I found so repugnant and has chosen to live his life that way, which is very interesting at minimum. But the message to students is, look, if you wind up with immoral, unethical people, if you wind up out with people that don't make you feel comfortable because they're abusive to servers, get them out of your life. surround yourself with kind people, good people.

So Chris, I keep hesitating to ask you about this, but you've referred to it a few times, and there is the journalist in me that can't resist, so forgive me. But you've mentioned a few times the growing up situation. I'm wondering, is this your father? Is it your stepfather? You know, what was going on? Because it's obviously had such a profound impact on you in terms of you defining yourself by not being that way and by gravitating towards people like Bob Smith or towards

Mangram Buffett or also to your football coaches when you were growing up who've obviously had a really profound impact on you as moral exemplars. And so I just wanted to get a sense if you don't mind me asking of what is it you're referring to? Because you obviously had a very intense and kind of traumatic, formative experience there. Well, I don't want to get it. I won't get into too much. Yeah.

But I lost my mother this year. She passed. She'd be the poster child of why you shouldn't smoke. She smoked from the age of 12 on a couple packs a day and wound up ultimately passing of COPD. But she wound up in a relationship with somebody I really just didn't like for a whole host of reasons from the get go. I found the behavior unsettling.

I just observe a way of it. to live a life that was not great. And throughout her life, there was just a lot of dishonesty the way women are treated. Very much with intent chose to live my life 180 degrees opposite. And I set out to be a different father. And so I've gone out of my way to raise my kids differently than the experience that I had when I was a kid. It was important to me to be involved in their lives and their activities to be good to them, be fair with them. What a privilege to coach some of their youth teams. And you mentioned my football coaches.

I go through the roster of each of them and they all had a profound impact of my life. And they were all genuinely good men. I got to be very good friends with my high school football coach, Brian McGregor, in life. And these were all men of integrity. And they were men of honesty and most of them were hard. I mean, football coaches are hard. They're hard on players. But at bottom, they were.

fair and so many lessons of life on how to behave and how to behave with modesty. So, no, my mom, I just lost my mom four weeks ago. She was in hospice for four or five weeks. And there were just a lot of horrible things at the end that maybe I'll tell you over a beer sometime. But, yeah, I'm so sorry. And I appreciate you sharing that. I'm sorry to put you through it.

I was very struck in reading your annual report that at the end of the letter, I mean, you said she deserved more joy in a life filled with not enough of it. And she'd obviously had a very hard life. But then I was also really touched by a part where you were saying, I'm not sure dedicating an annual investment letter is a thing. I do want to say in the spirit of my mom, don't let a day go by that you don't work on relationships with those closest to you. Let them know as often as you can how much you love them.

And then there was a really beautiful thing towards the end of the letter where you were talking about a friend of yours who you mentioned before, Jeff Goodall from the Marines, who, you know, is obviously a big, tough, six foot four, two hundred and 95 pound guy who said is beating the hell out of cancer at present. And you said, he was someone who would always kind of stand by you and someone who could never be messed with. And you said, but sorry, Jeffrey, you're now number two. Nobody protected me like Bob, your mother. And you said her children were her universe peace. And so I thought it was a, it was a lovely tribute. And I, in the same way, that we talked about, Mr. Smith, before I wanted to, you know, honor the memory of your mom,

who clearly was remarkable in, you know, being this sort of staunch defender of you in through thick and thin as a child, but also later in life. Yeah, as a kid, she did. I mean, her life was all about her children. And I think she tolerated a relationship. She really shouldn't have been in. And when, when the behavior got so bad as an adult, I really were. to try to convince her to not be in the relationship, but there was even a little bit of

Stockholm syndrome to it. And if I have any regret about my relationship with my mother, it's, and I haven't thought this fully through, but it'll be that maybe I didn't do enough to get her out of that relationship. But, you know, she also may, you make your own decisions, and family was important to her as misguided as, and as unconventional, has this relationship was, you know, perhaps like could have and should have done more. But as you say, everyone's responsible for their own decisions and it's hard with a mother to be the one who's like, here's how you should live your life. Yeah.

Yeah. And I tell you, being in hospice in her last days, the people in that world are wonderful. And, you know, they saw that they understood what was going on. They knew of the behavior. Her neighbors, in fact, knew of the behavior. And they knew of a lot of what had gone on in her life and even to the end. and they were very supportive of her. And so she had a little bit of a network,

but there were so many good people in her life, especially at the end of her life in our last five or six years, neighbors. And then in the last five months, certain members of her hospice team that managed to bring her a lot of joy. As I said, in a world that was devoid of enough joy. And there was even strife at the end.

And I won't get into the details. It got pretty ugly in the last few months. I'm so sorry. She endured a relationship that I wish she hadn't gotten into and I wish she had gotten out of earlier. But I think she did it in large part for her perception of trying to keep in her mind what was a family together. And I think she tolerated a lot of badness in the spirit of thinking it was the right thing for her two sons. So I think you and I pretty much the same age. I think we were both born in 1968, if I remember rightly.

And it's kind of, I mean, I in many ways had an easier path than you because, you know, I had two very loving parents. Flawed at times, not my mother, but who will be listening to this, but occasionally flawed on my father's side. And I'm wondering like how you, how you were able to rise above this very difficult childhood, because you had an extraordinarily successful career. it seems like it's, I mean, it seems like your dad was also a tough guy. I mean, I remember you, you, I think writing a story about how he would get you to work during the summer and work incredibly intensely. Like, what, what was it that enabled you not to be messed up by this really difficult childhood, but actually to become a very successful and functional human being?

I there's a lot too I suppose it was it was it was probably a trusting you know I always harbored a little bit of anger toward my mother for being in that relationship

in the first place so I think what evolved of that is is the ability to learn how to trust those that deserved it and not trust those that didn't and maybe that's what led itself to the approach of the contrarian approach to investing and approaching the written word and the spoken word with

a skeptical eye. I mean, it makes you a very guarded, guarded person. And it wound up making me very driven to succeed. I mean, I had to channel my energy somewhere. So I,

in football, I was never going to get outwork in the, in the weight room or in preparation. I never got outworked and out in a practice approached academics with, similar rigor, although school was very easy for me, and I wished I'd, to your point, studied Greek and some of the classics, but I just did enough to get by. I was an academic minimalist. But then when I approached the academic side, the real academic side, my academic side, my academic side of investing, I approached it with a vigor because I loved it, but it wasn't

what was the taught side from the booth school. It was, how do you break down a business? And it was the cumulative learning and loving to read financial statements. So I suppose some of that background always made me driven and very, very dependent upon myself, very willing to take, very, I needed to take care of myself and make sure I was okay. But that then lent itself toward who I think I am and how I treat people. The whole whole combination of things, I haven't, I've never really articulated it and gone through it all in conversation.

I have clarity in my mind about how things all evolved. But senior year of high school, I lived with friends in their basements off and on. I was ready to be on my own when I was eight years old, frankly. And so, I mean, it's clear that your work ethic was a huge part of getting you out of the mess.

And I was very struck in your 2020, any letter to clients that you said the best investors I know seem to come at investing with a chip on their shoulder. They will outwork you. They will outcompete you. And you talked about Mario Gabelli, his quip of wanting to hire PhDs, but that's standing not for people with doctorates, but who are poor, hungry and driven. And that was clearly the case with you that there was always this intensity to you and this kind of fire to you. And it seems to me that's something that when you're when you're coaching kids of football or you're mentoring kids on campuses that that comes up again and again just this idea of like having a really good work ethic

which which obviously got you to be an exceptional football player got you to be an exceptional investor is that is that fair to say that work ethic has just been absolutely central for you oh it is and when the football ended sooner than i thought it was going to end for injury I had to find something to rechannel my energy and I'd become so curious about investing already that it absorbed all of my focus, 100% of my focus. And were you really close? Like, could you have been an NFL player? Like, were you that good and that serious when you were a college before you got injured

and broke your foot? Well, hard. I mean, who knows? That was always the goal and the plan. You know, a good friend wound up my backup at the roommate. in fact, wound up playing to the Steelers for three years. I mean,

you have to, first you have to survive health-wise, long enough to get there. I think had I had I not been hurt and played and gotten the repetitions, you know, given the work ethic, given some of my just innate athleticism, that was the strongest player in the big eight,

just lived in the weight room, lived for working out. And I was very quick. and who knows, but I do know had I played having watched the game now for a lifetime and even in those early years. I played defensive line. I think I probably would have been a better offensive guard or a center than on the defensive side of the ball in retrospect. But when I saw guys like Warren Sapp play the game, Hall of Famers, there was no way was I ever going to play on that level.

I mean, that just size mixed with athleticism, mixed with raw meanness. I was very mean. I mean, I was a very, I think you have to be in the football world. You have to be a little mean. But a guy like Warren Sapp was, he played at a different level.

So, you know, I would have been one of those. If you know how pro football works, you hit free agency at three years, you don't get paid anything. I think the league minimum, when I was a senior, we won the national championship my senior year.

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This is a paid advertisement. All right. Back to the show. You also, you once said that when you look back at your high school football coaches and your college football coaches, you said everything I learned from those guys

carries over to the investment arena. What are you thinking of when you think of the stuff that really applies from your football days that's really helpful? I think it's the dedication to the process. It's the dedication to practice and the work that goes into it.

But the other takeaway is, I think, the interaction with people. I think it's this cultivation of my friend network. I mean, I owe a lot of how I think and how I approach the world to being able to spend time with my good friends. We have a group that gets together once a year. Here in St. Louis, we spend three days and get through 10 or 12 ideas. These are all marvelous investors and analysts. But they're all kind people.

I go back to my first high school. High school, I wrote my first football coach when I was eight and nine years old, gentleman named Ken Acker. And he was driven. He was probably my age. And I thought he was really old because, you know, I was eight and nine years old. But he wound up being so supportive. And as I evolved in my first two years of playing to be a very driven player in practice.

And my love for the game exploded. We had a game that we loved. against Columbine, which is the Columbine with the high school, but it's in Jefferson County school. And we lost a game against some of those guys who became friends later in life, but yeah, we had a good football team. We had some really good football players. Turns out on that little league, our Vatam Midget football team. It lost a game and I played my heart out. In retrospect, I think I got blocked an extra point and a punt. And I'm thinking why at that age is anybody kicking an extra point upon having coach little kids later in life? I mean, only bad

things can happen when you kick the ball when you're eight years old, nine years old. But I was pretty down after the game. And in a setting, he didn't have to do this, but he saw that I was down. And in a setting of all of my teammates and all of the parents and you're having your your Pepsi and your Coke, whatever it was after the game, which we got, he came over and put his arm around me and talked at length about my character and passion for the game and how I played the game and that message, well, boy, that at that moment, I mean, that, that kindness from that man changed who I was. Really? How so? I just thought, you know, he makes you feel that. He just, it made you feel that important and that good. And I thought, you know, what a way to treat other

people. And even at that early age, that lesson of how to treat other people, I think became hardwired in my DNA. Yeah, I think that's something really inspiring. when I look at your career and I see, you know, this trajectory where you came out a very, a very difficult beginning. And, you know, you made a conscious decision about the type of person you wanted to be. And I don't know, it's interesting. It's also really nice to see the amount of pleasure you get from mentoring college kids and business school students and people through the CFA society that I know you've played

an important role in. But also, you know, kids football teams and like, really giving back over the years. Yeah, I think about this image, I suppose, that's developed by my being on Twitter and what I've done a little bit with that platform rightly or wrongly. But, you know, I've chosen to take the abusers of the retail investors, the charlatans, you know, when somebody tells her constituents on TV that you're going to make 40%, then 50% a year. and, you know, I call that behavior out. I think there are a lot of people that think I'm probably quite a bit of a jerk. And I was just at the John Rolovich's conference in Switzerland last month. And one of the guys who only knew me, I think, from Twitter, put out a picture of three of us.

And his comment was spend time with Chris and he's remarkably a very nice guy. I think you have a sense of righteous indignation. about people being abused, lied to, deceived. And it's, I don't know, I think it makes a lot of sense psychologically, given what you came through. And I think you've harnessed it in a really powerful way, because there is a lot of deception. And as you put it, Charleston promotion within the investment industry.

And this is people's life savings. I mean, it's blood money for a lot of people. And so I mean, I tend not to call, people out because, I don't know, I'm sort of a repressed Englishman and also because I don't want to be too judgmental of other people. So, because I think I would invite judgment of myself. And so I tend, I tend just not to interview people who I think don't have great integrity. So I sort of, I try to shine a light on the people who I think are impressive and a good role model, some of people we can, we can learn from. But I applaud you for the fact that you take a stand and that you call out these inconsistencies.

Because you also, you have the actual granular knowledge to be able to point out the inconsistencies. And I was very struck when, I mean, again, I don't really want to be disrespectful of individuals. But, you know, I think of someone like Chamath, Palaipataya, if I'm pronouncing it, even vaguely correctly, who obviously is a brilliant guy. I mean, I remember once seeing him at a conference to me like, God, this guy's smart. But at the same time, a brilliant promoter. And, you know, when he was starting to say

that his returns were better than Warren's, your take down that actually kind of analyzed the distortion of the returns and the, you know, was very powerful. Yeah, and I think it was necessary. You know, not that the Berkshire record needed defending, but it was the comparison was so maligned and so unethically done that you know I kind of reflexively you know I never would have even heard of the guy had he not made the comparison and I'd

seen the comparison and wound up he'd done it a few times in his most latest in his most latest iteration on Twitter somebody brought up the the his comparison to Berkshire which he claimed to have never made which is extraordinary yes I don't I don't think it's so much about, you know, maligning Chammath, who, you know, as I say, I was impressed at how smart he was when I was just listening to talk. He's a smart, charismatic guy or Kathy Wood, who have never met or interviewed. But I'd like to interview her one day. I think she's an interesting, interesting phenomenon. It's more about reminding our listeners that you've got to be really careful. This is an industry where there's a lot of misalignment of interests and incentives.

and, you know, if you can align yourself with people who actually have good ethics and who aren't overcharging you are not. I mean, even you think back your first investment all those years ago, college, I think, you know, the commission was 10%. It was kind of a pretty good introduction to the casino aspect of Wall Street. And so, I don't know, if there's, if there are messages for our listeners to take home, one of them, is you've got to be diligent about things like price and valuation and you've got to really assess whether the people you're getting in bed with have integrity or, you know, a record of not looking out for their shareholders and just being promoters. You can't take this stuff on trust. No, you can't. And, you know, in the last, in the latest chairman's letter out of Berkshire,

and even the last several. I mean, Warren has said, essentially, we have deserved, we have deserved, trust over all these years. And, you know, we have owners who have trusted us for this long. And so in essence, he was saying you can trust us. But it's such a hard thing, trying to figure out, you know, who the charlatans are and who the promoters are from, you know, who's legitimately doing it the right way is so difficult for the ordinary investor to ferret it all out. And with attention spans being short, I'd like to say most people spend more time analyzing what their next car purchase is going to be, then they do who's going to shepherd their capital for the next 30 years.

But you're not armed with the tools to analyze, either whether, you know, how to go about investing for yourself or how to allocate the allocation of that capital to somebody else, which is why I think Warren says the default of the S&P 500 for the typical industry that doesn't know what they're doing is such a suitable thing to do because you're eliminating the frictional costs of fees. and you've got a diversified portfolio.

And Charlie would beg to differ and say, well, I think Berkshire's better. He might say they're active managers that are better and there are, but how do you go about finding them? Today, you've got, again, such a concentration at the top of the market. 30% and seven names, that group trading at well north of 30 times earnings today, it becomes dangerous. And so, you know, if you're the family that's just starting out on a biweekly saving plan through your 401 and you overpay for your first S&P 500 shares, that's okay if you have a determined, regimented, consistent saving plan over a lifetime. You're going to wind up eventually getting some shares that are reasonably priced,

some shares that are undervalued. But if you have real money today and these backed into these high price to sales, businesses that are pricing almost too much perfection, pricing in the implausible outcome, especially now with some of these bigger businesses, even Apple that's now 50% of the Berkshire portfolio. You know, Berkshire's, Warren's kind of corner himself into the box of, well, it's become a never sell. Well, it's half and it's 33 times earnings.

And you've got a big business, you know, doing sufficiently large number of sales revenue that thing can't grow much more than maybe a high single digit on a earnings per share basis after sherry purchases. And so, you know, he acknowledged later in the game that Coca-Cola probably should have been sold when it traded at, say, 50 times starting. So, you know, I hope there's a price at which an Apple position might be trimmed because the economics of what you can earn out of it, even on a net of 21% corporate tax rate basis now, you know, would justify a trimming of the position at least. He did trim the position a couple years ago and then regretted it because the

stock did so well and the business did so well. But there's a price at which anything ought to probably be trimmed or sold, including Bursher. There are prices at which I would sell down my bursher position, especially from an opportunity cost standpoint, but I'm going to do it tax efficiently. I need to have as much after-tax proceeds available to buy my best idea at the top of the opportunity cost stack to justify that shave to the government. And so there are nuances between taxable money and non-taxable money, but it's a really hard game. And it's not easy, but it requires constant thought, constant worrying, risk management. And I think probably if he took some similarity to most of the great investors, they spent a lot more time thinking about what's going to go wrong than what's

going to go right. And the non-professional investor and even I think the majority of professional investors aren't armed with either the psychological wiring that's required to do that or the the temperament for approaching it that way. Yeah, well, the technical knowledge. I mean, you think of, you know, in your annual letter, the four different approaches you take to estimating the value of Berkshire, that's an enormous amount of work to break that down. And at the end of the end of 2022, if I remember rightly,

I think you said your calculation was that it was basically at around 74% of fair value. It was trading at a pretty generous discount. And your view then was that over the next 10 years, it would outperform the S&P 500. And now that it's had a pretty good run, but also the S&P has a lot of inflated stuff, I know that you update your intrinsic value estimates every quarter, I think, for all of the stocks you own. I'm asking this very selfishly, should I over the next 10 years still feel happy to own Berkshire? Oh, in Berkshire's stock portfolio is up 20% this year. Apple's grown back to where it's now at a record 50% of the portfolio.

But the stocks are a much smaller percentage of the portfolio than Coke was when Berkshire was much more of a peer insurance operation than it is today. You take the moving parts of Berkshire, the profitability from the energy business where the intervisions has the ability to retain capital, they're earning $5 billion, retaining all of it, minting it with a like amount of debt. You've got $5 billion there. You've got what's pushing $8 billion from the railroad, earning low-teens returns on essentially

the capital of the business. You've got another $13 billion coming from the manufacturing service retail group that are earning adequate returns on unlevered capital. Three billion, let's say on a regular basis from underwriting a few billion from the less than the more than 20, less than 100% held businesses. And then whatever you think, the equity portfolio is that what's now $370 billion, $360 billion in stocks, you know, that's now a third of Berkshire's assets. Their assets are going to be over a trillion dollars. And so all those moving parts of the income streams, Berkshire's less cheap today than it was at year end.

The stock's up, what, 11 or 12% for the year? And so you've basically earned in the first six months and a month. Here we are in mid-July. It's probably earned what it should. And it's trading at a reasonable price. I think it's trading in a discount. But if it maintains this 140% a book and it's it's a more expensive book today than it was because again, Apple is so much more expensive. A year in the year in 21, I'd shave the Apple position in my appraisal by $50 billion. The stock got killed last year. I eliminated the shave. I'd be shaving it by 50 or $60 billion today. But all in all, you have the S&P trading at 21 or 22.

Margins have not recovered. I just did my S&P work up and the portfolio work up for quarter end. Earnings at 204 for the S&P 500 or $4B500 or $4.4 below where they were at the year in 21. Sales are up probably 17%. So you've had margin compression from what was probably a peak. But you're paying 22 times what's probably kind of it's still peaky type profit margins where they're just, you know, likely they're not going to grow here.

And if you get inflation rolling, it's in decline at the moment, but you may have rolling inflation for the next decade or two, you're more likely than not to get margin compression. I think the best case, the index at the moment is a five or six percent return. More likely than than not, you'll have periods where it's substantially underwater in the next 10 or 15 years. and Berkshire's a very conservative 10 to 12 if you hold the current if you hold the current valuation constant and it's a very durable predictable learning stream and so I think Berkshire's hands down an easy bet from evaluation climate like you have today when everything gets washed out you know it's crapshoot my advantage

prospectively in late 2008 early 2009 when I'm down 20 and the market's down 40 you know, my advantage is less than it is in a period like today when I got a portfolio training at nine and a half times earnings you get 10 and a half percent earnings yield, which is half the multiple of the index. And I think we've got a better roster of businesses and managers. Berkshire is just a better manager and on a net essentially unlevered basis. You're not going to blow yourself up. You'll never wake up with the headline Berkshire Hathaway negotiating with creditors. I mean, they're negotiating with creditors, but it's the one where they're buying businesses because somebody's going bankrupt. It's not Berkshire ever having to worry about the balance sheet.

And so I look at it as a bond. It's business that earns 10 to 12 on equity that trades at a pretty modest premium to equity. And it's a place where you can make 10 to 12 in a world of low interest rates. And I think it's got some inflation protections built into some of the big moving parts that make it very attractive in the current setting. And we all know that it's not going to do what it did in its first 35 years, but, you know, relative to what I think is, you know, maybe a half return of what Bercher can earn. It's deserving, at least in our world, at present prices of a big position. Yeah. I don't know. Everyone always wants to kind of hit the ball out of the park.

I kind of put a pretty high premium on survival. I want to get to the finish line. And I always feel like I'm more likely to get to the finish line with Berkshire. than with many other things. Like, but if it's emphasis on survival, resonates pretty deeply with me. I was on the phone with the guy yesterday. We were talking about that, you know, the notion of return of capital and return on capital. And not so much, not so much yield, but return to par, you know, in the credit world.

And you've got so much leverage on corporate balance sheets. You know, the total leverage in our system is still 350% of GDP. Corporate leverage is very high. if we have persistently high, albeit rolling interest rates, I mean, if we have a recession, the Fed will be back at zero, they'll be at the next iteration of QE. But we have so much leverage on the corporate balance sheet, and so much of it is short-term and intermediate term, a lot of it coming due on 24 and 25. Fuel rates at current levels, you have a massive hit-to-profit margins coming because

the interest burden is going to grow from something that was almost not existent to something that's very real. And so again, if you live below the EBITDA line and not above it, you know, leverage in a world of high and rising interest rates when you've got to refinance low coupon debt with higher yield, higher coupon debt will become very problematic in a world that's allowed too much leverage to build up on the aggregate balance sheet. And so being on the unlevered or less levered side of things allows for the survival that you talk about. I want to tell us you one final thing for I let you go. There's a lovely story that I remember hearing you tell. Maybe I read it in one of your annual reports about a golfer Ellen Port and she had been teaching, I think your daughter's high school team.

And she told a really wonderful story that gets at a lot of what we've been talking about in terms of choosing the path of integrity while also being competitive and successful. And I wonder if I could ask you just to tell the story if you remember it of what happened to Ellen Port, because I know it's a story you've often told to college students. I remember well. Ellen was a great mentor to my daughter, and she's a great friend of mine. She and her husband are wonderful people, very well known in the golf world, but not known at all outside the golf world. Ellen took up the game of golf in her early 20s. She was a great athlete. She was a tennis player, but grew up with around the golf course, but never played golf competitively.

And she took up the game in her adult life. And she was a teacher, but took up the game of golf and wound up over all these years. She's now, you know, I won't tell you how old, but she's, well, she didn't easy. I mean, she's, she's, I'll take up the game at such a level with local instruction. She started winning some local tournaments. And she went out and worked with Hank Haney and didn't have the money. And Hank was very good to her. and just saw the drive and at a point told the Oklahoma State men's golf team that lady up on the hill.

I mean, how many of you were here on the driving range at 6 o'clock this morning? Well, she took golf balls into her cottage because she wanted to get out before my lesson and get two hours of work in. He says, now, how many of you were out hitting balls before with Ellen in the morning? I didn't know, nobody, of course. So Ellen, in the meantime, has now won seven USG championship as an amateur golfer. and she's like right there in the top floor with Jack Nicholas, Tiger Woods. She's won, I think, three USGA women's mid-ams and four senior grams, and she's still playing golf at a highly competitive level.

And she's played on Curtis Cups. They just introduced a couple, three years ago, the women senior open. But she was honored to coach a Curtis Cup. I'm going to say six or seven years ago. The Curtis Cup, for those that aren't in the golf world, we have the Walker Cup and the Curtis Cup, and it's the top amateur golfers on the men's side with the Walker Cup and on the women's side with the Curtis Cup. They play against the top players from Great Britain and Ireland.

So it's a Ryder Cup type format at the amateur level with the US against GB&I. Golf is the game of integrity. You call penalties on yourself. it's the rule book has sections on etiquette. Ellen takes that just to heart. It's who she is, the human being. You know, you talk about Bob Smith being kind and wonderful and all the high level of morality and ethics.

I put Ellen on a pedestal on the same level. So Lucy and I were invited to St. Louis Country Club to listen to her talk to the media and a gathering before the Curtis Cup. And she told a story about playing in one. of the USGA championships. And I guess she was in, so you play, when you're playing amateur championships, you have, you have two metal rounds. There's a field of 128, I think, and you wind up with the top 64 that wind up in match play. And then it plays all the way down. So you've got to win six matches to eventually be champion. And it's, it's grueling. So she was in metal play.

And I think she was, you know, as she normally was, she was leading the field or not, but she she said you know every night when she when she's going to bed she replays the round of golf in her head in her mind and tried to figure out what I could have done here what I cut it on there and I don't remember where she was I think it was I think it was one of the championships and one of the courses great courses in Michigan I could be wrong but wherever it was she got to a par three and she said oh my god Ellen you did not par of the hole. He made a bogey. And her playing

partner did in golf, in match play, and even in metal play, you keep the opposite player score in your group. And so you rotate that around. Well, you know, they all wrote down three. They thought Ellen had made a three. That metal round

play wasn't on TV. The, the scorekeepers that walk with the group, you know, everybody thought she'd made whatever she thought she had made. Maybe she said the score. And the next thing she said was the, she said the drive home the next day was the longest drive of my life. And, you know, kids that don't know golf or what happened?

Well, she disqualified herself from the tournament. Nobody knew. It would have been that easy to move on to the match play around. But, you know, she recorded an improper scorecard, which is a disqualification from the turner. It was at that time. And so she took herself out of the chance to win because, I mean, she's literally, when she's, if she wins the eighth USGA championship, I think she's tied for all time at either the professional or the amateur level. And, you know, out of that, at that high of a level of a game, just ask the students all the time, look inward as to whether you can do something like that. I just, I think of the world of Ellen and she's so awesome.

And what a proper way to construct your life to be able to do something like that. Yeah, I think that's a great note on which, Dan, it reminds me of a lovely thing that Jason's why said to me on the podcast when I was interviewing him where he said something like, more people should say, would I sell this to my mother? And I think that idea of looking inward and saying, yeah, I better not do that. is pretty good. And so anyway, I've just really enjoyed chatting with you. And I've, I've learned a lot from studying your, you're writing over the last week. And it's, I'm thrilled that we got a chance to talk in such depth. And I hope we'll get a chance to actually meet in person before too long. Maybe in Omaha this coming year. By all means, or sooner, or sooner. I'll be great. I'll be in New York in October, but

great. Well, let's get to be on the counter. It's what a, what a, what a treat to be here. thoroughly enjoyed this conversation while I am. Thank you so much. It's a real delight for me. Thank you. Cheers. Take care. All right, folks. I really hope you enjoyed this conversation with Chris Blumstrand. If you'd like to learn more from Chris, I'd highly recommend reading his terrific annual letters to clients. You can find more than a dozen of them archived on the website of his investment firm, Semper Augustus, and I'll include links to the website and his letters in the show notes to this episode. As you'll see, his letters are enormous. They're sometimes as long as 140 pages, so they're not a quick and easy read, but he's a very good writer, and they're full of really

helpful insights about how to invest more intelligently and how to think better. They're also invaluable, if you want to understand Berkshathaway, as he analyzes the company in exhaustive detail and offers an array of different ways of valuing it. It's really an extraordinary feat. and amazing that this is publicly available for people who actually care to look. In any case, I'll be back very soon with some more great guests, including a fascinating conversation with Peter Keefe, a brilliant investor and thinker who very rarely speaks in public. So that's really a treat and an important conversation, I think.

At least for me, I've learned a tremendous amount. In the meantime, please feel free to follow me on Twitter at William Green 72, too, and do let me know how you're liking the podcast. I'm always delighted to hear from you. Until next time, thanks so much for listening. Take care. Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by the Investors Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to The Investorspodcast.com.

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