We Study Billionaires - The Investor’s Podcast Network - TIP 120 : Warren Buffett's Clone: Mohnish Pabrai - Part I (Business Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 120 of The Investors Podcast. Broadcasting from Bel Air, Maryland. This is the Investors Podcast. They'll read the books and summarize the lessons. They'll test the waters and tell you when it's cold. They'll give you actionable investing strategies. Your host, Preston Pish, and Sting Broderson. All right.

Starting point is 00:00:30 How's everybody doing out there? Preston Pish, and I'm your host for The Investors podcast, and as usual, I'm accompanied by my co-host, Stig Broderson, out in Seoul, South Korea. And folks, we have the one and the only Monish Pabri with us today. And I know our audience is going to love this conversation because, Monish, you might not realize this, but we have a lot of fans of yours in our audience. So we are so thrilled to have you here to talk with us today. Well, Stig and Preston, I have really enjoyed. I enjoyed listening to many of your podcasts in the past and you're doing a great service to the value community.

Starting point is 00:01:08 And I love the energy and the spirit you bring to it. So this is wonderful. And I just want to put out there that anyone who thinks that, well, Preston just cooked it up, he was really trying to flatter our new guest. I would encourage everyone to go back to the very first episodes that we actually did. And the very first interview we had was actually the interview called Monis Pop Rai, the next Warren Buffett. That was actually the very first we did. So this is not something that we came up with. So back in Evan's on four with a good friend, Horam Rajanjadra, now a member of a mastermind group.

Starting point is 00:01:39 That was the topic. And now we have you on. So it only took us, what, 116 episodes? We're slow starters, but we will get there. Well, better late than ever. That's right. That's right. Muneesh, we're so honored. So let me kick this off with the first question. And just so everyone knows, we had a ton of people that wrote us over Twitter. saying, hey, ask Monash this question, ask them this. And so we've incorporated some of those questions into this show. So we might even name a few people from their questions.

Starting point is 00:02:08 All right. So the first question, Monash, that we have comes from Nick Fisher on Twitter. And he wants to know if you would have taken a different career path, if you wouldn't have found this Buffett style investing first. So he's really curious because you have this tech background that a lot of people know about. And I guess what he's getting at is, if you know what you knew today, would you have still gone down that tech path or would you have just gone straight into value investing right out of the gate? Well, that's kind of a funny or interesting question for me, because when I was a undergraduate student at Clemson University in South Carolina, I was an engineering major, but I had a very deep interest in finance and economics and business. And so I took as many

Starting point is 00:02:50 classes as I could in the business school. And I was a good student, but what I noticed is that the classes I took, especially the accounting and finance classes that I took in the business school, I topped those classes. And I was in a finance major. And there were all these guys who were finance majors in the class and topped them to the point that most of the time when I took those classes, I had such a high score going into the final that usually I would get exempted from even appearing for the final. So after a few of these classes, the professor asked me to come to his office. and I think I was a junior or just becoming a senior then. So he said, look, I did some digging and I see that you're not a finance major,

Starting point is 00:03:35 that you're a engineering major who's kind of coming over here to take these classes. And he says, I don't know what kind of engineer you are, but I think you're in the wrong major. And I think you need to move over. Now, my impression of and was a jaundice view of my classmates in the business school were that they were all more. because these classes were super simple. And when I took engineering classes, I mean, many times I get in my head handed to me. And those were really hard classes. So to me, coming into what was in Clemson, Serene Hall was like a walk in the park.

Starting point is 00:04:13 This was like, you know, these were the easy, you know, straight A classes. And so I said, why would I want to change my major to have a bunch of peers who are such underperformers, if you will. And so I told the professor, well, I appreciate your sentiments, and I appreciate you're telling me not to show up for the final, and you appreciate you're telling me I got my A, so that's all great. But I think I'm going to continue down the path that I'm on, and I'll keep taking any more classes that I can.

Starting point is 00:04:43 And this was in like 85, I think 84 or 85, when I had this conversation. And about 10 years later, in 94, I heard about 1.4, I heard about 1.5. Warren Buffett just by accident. You know, I was an engineer. I was running an IT company. And I picked up a random book on a flight from London to Chicago. And that book by Peter Lynch basically opened up a brand new world for me. And then that led me to Warren Buffett and then the Berkshire letters. And that led me to do a lot of changes to my life. So in some ways, kind of fate took me to a fork in the road when I was 20 and I blew it. And I took the wrong fork, if you will. And then it again introduced a fork in the road when I was 30.

Starting point is 00:05:29 And this time I was a little bit more sensible. And I think I took the right fork, the road less traveled. And I remember a few years after that, when I was about 35 and I was selling my IT company, you know, I was talking to some of my senior employees and I was telling them that I was going to be starting an investment partnership and so on, they couldn't understand why I would step down into the world. why would you go from technology to, you know, lowly finance? And so they couldn't understand it.

Starting point is 00:06:00 And, you know, I told them that the reason I was doing that wasn't driven by money or anything. It was just driven by what I enjoyed doing. And so I said, look, I don't really look at it that way that one thing is a pedestal, you know, higher or lower than the other. Like I did when I was 20, that's all. When I was 20, I did those, you know, high life, low life kind of comparison. but I think when I was 35, I had a little bit more sense than me. And actually, that was the absolutely right thing to do. So life is a very random journey.

Starting point is 00:06:36 I am here talking to you because I picked up a book at Heathrow Airport and it could have been a book on a number of different subjects. And so I think the lesson I've learned is that many times in life, we are intrigued or fascinated or kind of very obsessed with something new that shows up. And, you know, there's a Swami Vivekananda who was a fantastic, very bright guy. And he has a quote. He says, take a simple idea and take it very seriously. And what I have noticed in my, you know, 30 or year's career is that it is always surprising to me that

Starting point is 00:07:19 most humans, when they encounter simple ideas that are very compelling, do not take the left turn that they should. And life is a journey where there are times where you have to take the bull by the horn. And you have to be willing to say, no, the glove fits better if I take this left turn. Yeah, there are some uncertainties involved. But if you're not willing to be a little adventurous and explore the unknown, then it's going to be an unexamined life. It actually would be a life poorly lived, if you will. So I think that it's one of the lessons I've learned from that random book and the professor having the talk with me and so on so forth, is that I pay attention to things that

Starting point is 00:08:08 intrigue me. It's very important for us to pay especially close attention when they are kind of off the beaten path that we might normally take. And I can say that, for example, even our family foundation, Daksana, which is somewhat unusual, came about because of the willingness to step off the beaten path. So I think embedded in that question is a great insight that we will, nearly all of us will have times in our lives when forks are presented. And no one's going to put up a headline saying, hey, here's a fork and take the left fork. that's not going to happen, but you will clearly see that there is something out there which is intriguing you. Take the plunge. You can always come back, but take the plunge.

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Starting point is 00:13:01 W.S.B. All right, back to the show. You know, when I look at your background, I would think that as a stock investor, because you had these years of experience in tech running your own business, that, and I think you see this mistake all the time on Wall Street where guys, they get the finance degree, they then go and work on Wall Street, and they're making selections in the equity market or fixed income market. And they never have that firsthand experience of running a real business themselves. And when you've had that vantage point of what's behind the curtain of a real business and running it and all the operations, the marketing, all that stuff, how can't you be a better stock investor after you've had that experience? And I guess when I'm looking at you from an outsider's point of view, I would think that that had such a profound impact on your ability to be a better stock investor when that time kind of arrived in your life. That's right. You know, Buffett has a quote. I'm a better investor because I'm a businessman and I'm a better. businessman because I'm an investor. You know, I never realized it when I was taking those finance classes as an undergrad,

Starting point is 00:14:10 but the reason I found them simple wasn't because I had a higher IQ than my classmates or I was smarter than my classmates. I had had a very different life experience related to business between the age of 10 or 11 all the way till I entered that classroom. And my father was a serial entrepreneur. he had many bankruptcies. And after my brother and I were, I think, 11 or 12 years old, we were like his board of directors because he didn't really have a board.

Starting point is 00:14:40 He was these are small businesses. And many times when I'd sit down to my father when I was 12 years old in the evening, we had to figure out how to make the business run for one more day with whatever cash there was. And then we would make it run for one more day. And then again, the next day we'd sit down and say, how do we make it run for one more day? And so by the time I was 19, I think I'd finished several MBAs, you know, and what they still don't teach you at Harvard Business School.

Starting point is 00:15:10 You know, so it was great. And I never realized that because I just, it was really much later in life when I became an investor and I found that these things came really easily to me. And I realized they didn't come so easily to a lot of other people who were really smart. And the reason is the human brain, the human brain is set up. I mean, first of the brain, because of the narrowness of the birth canal, is one of the most underdeveloped organs when we are born, because you just can't have childbirth otherwise. So the brain is an organ that goes to the most growth of any organ in the first five years of life.

Starting point is 00:15:48 And you have just tremendous growth going on because it's just bursting to get to where it needs to. And you see a human child, just the exponential cognitive ability is growing over that period. but once we become about 12 years old, 11 or 12 years old, from the age of 11 or 12 to about 19 or 20, during that window, the brain actually cuts connections. So the synapse connections go up a lot in the first five years, and from about 11 or 12 to about 19 or 20, they go down. And not only do they go down, but the brain is optimally set up to specialize at that time. And so what needs to happen for humans is from the age of 11 or 12, if they have figured out that calling, they need to be going all in.

Starting point is 00:16:38 Five years spent from, you know, 13 to 18 in what is going to be your calling in life is going to give you significantly more advantage than 20 years later. And we see this with Michelangelo. We see this with Bill Gates. We see this with Warren Buffett. On and on. I mean, you look at these, you know, when people start lemonade stands, when they're 13 years old, the experience of the lemonade stand at 13 is very critical for having the skills to run IBM when you're 50.

Starting point is 00:17:12 If you didn't run the lemonade stand at 13, you're going to have a much more difficult time. So when you study great business leaders and you study their histories, you're going to find that there was stuff going on in their lives. Even if you look at Steve Jobs, all his interaction with his dad and all the intense focus on perfection, even on areas that people would never see, you know, all those things that jobs went through. Those things happened in his teen years. And, you know, I think my middle name should be Forrest Gump. I basically accidentally, because of my dad, you know, he wasn't aware of any of this, neither was I. I very accidentally got a very intense intro to business during a period of time when my brain was optimized to pick it up.

Starting point is 00:18:00 And so what a beautiful thing and what a random thing. And one of the unfortunate things about the way our society is set up is we do not allow high schoolers to specialize. We expect high schoolers to be jack of all trades. you know, take your humanities and take your sciences and take your math and take everything else, you know. And the one country that's actually taking a different path is Germany. And Germany starts, you know, segmenting out the kids when they're 11 or 12 into whether they're going to go to college or whether they're going to be factory workers and such. And what you have in Germany is that one of the highest wage countries in the world is a manufacturing powerhouse. Because

Starting point is 00:18:41 German manufacturing workers started on those factory floors when they were 13 years old. And no U.S. workers start on the factory floor at 13 years old. And so it is a tremendous advantage. And I think that one of the things, if there are parents listening to this, you know, try to optimize those years. You know what Bill Gates used to do. So he was a high school student in the U.S. forced to do all kinds of things that all of the high school students are forced to do.

Starting point is 00:19:13 But every night after his parents tucked him in, he snuck out of the window, snuck into his computing lab at the high school, spent all night coding. Then at 5.30 in the morning, he's come back home and go back to sleep. And he did that for several years. I mean, and by the time Bill Gates was 19, he had more experience on a computer than probably 99.999% of the people in the country at that time. So even with Buffett, he jokes that he bought his first stock

Starting point is 00:19:46 when he's 11 years old and he was wasting his time till then. And, you know, so at the age of 5 or 6, Buffett was buying a six pack of Coke for a quarter from his tight-fisted grandfather, Ernest, and then, you know, selling it for a nickel a piece. I mean, he started getting lessons in business when he was six. And by the time Warren was about 18, or 19, he had run several very significant size businesses. And we would not have the Warren

Starting point is 00:20:17 Buffett that we have if he did not have that experience on the age of 6 to 19. I love that conversation. As a parent myself, you know, that's something that I can really think about a lot as I raise my two youngest who aren't even close to that age right now. And as they get older, I'm going to remember this conversation. So thank you for sharing that. When they say that, you know, at 14, they want to drop out, please encourage them. So, Moni, so this would be the next question. So I saw an interview with you where you said that having an analyst employed really didn't work out for you. And I suspect that one reason might be because unconsciously one would feel pressure to continuously invest in something for the sake of investing and not because it's necessarily the right decision.

Starting point is 00:21:04 And the reason I come to think of this is because when we talk to your friend Guy Speer, he mentions what he calls his New York vortex, which was his way of explaining how one is influenced by the environment and in this situation a negative way. So my question would be, how do you build a life where you can keep your head straight, but at the same time be influenced by the right environment and not the wrong environment? Yeah, well, that's a great question. And, you know, I lucked out quite significantly because, number one, I never worked in the investment business for anyone. I never worked in any company. And the only models that I was familiar with before starting my own investment fund and such was Warren and Charlie. I mean, those were the ones that spent the most time studying and everything that they were doing or had done had made all the sense in the world to me. So when I was going to set up a partnership, I looked very carefully at how Warren and Charlie had done it.

Starting point is 00:22:05 In fact, what I did was I took certain pages of Lowenstein's book and I photocopied them and gave them to the lawyer. I said, look, you know, the partnership rules, page 37, whatever it is and put that in, you know, legal language. And that's what we're going to do. I literally just took pages from the book to set up the partnership. So there were several aspects to the way Warren and Charlie ran their operations and ran their lives when they were running investment partnerships. And some of these things I understood when I was starting my own partnership. Others, I did not understand the reason, but I still just cloned it because there was no other model available to me. And what I discovered several years later is every single one of the rules that they,

Starting point is 00:22:56 followed were rules that had been very intensely taught through by these two really smart guys. And they weren't random chance that those rules were there. So one of the rules both of them had was they had no analysts. And even today, Buffett has no analysts. And if you think about it, he's got 90 CEOs reporting to him. He's got, you know, I don't know, more than 400 billion of capital. And he's playing, I don't know, 15 hours a week of bridge. and one would think that he's got all these billions

Starting point is 00:23:29 and he could pretty much ask anyone to come work for him and they would come work for him, right? And they'd come work for him for pennies or nothing, even if that were the case. But even with all of those conditions, he still does not have an analyst and neither does Charlie Munger. And I didn't really understand it when I started my partnership. I just said, okay, the model is to go zero fee

Starting point is 00:23:52 and performance-based fee structures. The other part of the model seems to be that you work alone. You don't have partners or analysts or staff. And it's only later that I discovered when I thought about this and I've been running the funds, that it is a huge advantage not to have an investment team in many ways as an oxymoron. Even though we accept it as common wisdom that you set up a partnership or a investment operation that you're going to have analysts and managing partners and all this sort of thing, that is all hogwash.

Starting point is 00:24:26 I mean, the bottom line is that investing is not a team sport. It should never be a team sport. And Buffett says that no part of the investment analysis process ought to be outsourced. So if you have analysts, then what's going to happen is basically you are not going to know the businesses that you're investing in as well as your analyst does. I mean, you're going to have the Cliff Notes version of those businesses in your head. and quite frankly, that's not enough. You need to know the businesses.

Starting point is 00:24:58 The second is there are bound to be circle of competence differences between any two humans. And so if you have an analyst, by definition, their circle of competence is different from yours. And so they could actually come up with a great idea, which is within their circle of competence. You're too dumb to understand it because it's not in yours. And you reject it, which is a disservice to that person. because they did the right thing. They came up with the right idea. You were just an idiot.

Starting point is 00:25:27 You couldn't understand it. And the third thing is that many times when I talked to analysts at different firms, you know, like the other day, a young man came in my office and he was telling me how he's been assigned railroads. He works for a very large fund house, I think more than 100 billion in assets. He's been assigned railroads and one or two other kind of things to study. his kind of focus. And he was telling me, Monash, it's not railroad. He was assigned U.S. railroads. So he said, Monash, there's four U.S. railroads. And one of them is private,

Starting point is 00:26:03 which is Bokshah Hathaway's, Burlington, Northern. So he said, I got three railroads to study. And I try to tell these guys, I've studied them all. And they're not, not the best things I would invest in. But what he's asked to do in his job is, you know, tell us which railroad is the best railroad. Well, that's the wrong question. The question should be, tell us where we should put our money out of the entire universe of possibilities. Right. And if railroads are useless, well, forget about railroad. Let's go study something else.

Starting point is 00:26:30 But every day when he goes to work, he has to think about railroads. And what a miserable existence. So I think that's the other thing is that when we set up investment teams, we are taking away human potential. If I were to have analysts, what would end up happening is that those analysts would not be able to have the freedom to do anything they wanted if the structure was anything like any of the other firms. So one shouldn't have an investment team. I've never had an analyst or an associate and I hope I never do. Very, very interesting discussion. Some of the inspiration that

Starting point is 00:27:07 you're getting, that's from the 13Fs filing from other fund managers. But even when you have those and you're looking at, for instance, what Warren Buff is bought or call a Kai icon, whatever it might be, it doesn't mean you don't call up guy or any of your other friends and ask them. So what do you think about this pick? Is it just between you and the screen, so to speak? Yeah, no, that's a great question. In fact, I did not talk much to anyone about my investments. I was just kind of doing it on my own.

Starting point is 00:27:38 And I remember I met Charlie Munger. I think when I met him the first time I met him was in 2009. And right in the first meeting, Charlie had asked him. me a bunch of questions. And he told me that it's very important for an investor to have people to talk to. And then he said, you know, I've always had people to talk to about my investments. So I said, oh, you mean like Warren? And he said, no, it wasn't always worn.

Starting point is 00:28:05 For several years, it was worn and such. But there's already been someone. And he said it was a very important thing for me to change in my modus operandi. And of course, you know, when God tells you to do something, you know, salute and do it. And so I came back from that lunch, you know, we're going to make a tweak, which is we're not going to have a staff because that's not what he's telling me to do is higher analysts and such. And one of the one of the things about talking to people who are not on your payroll is that you get rid of kind of vested interests and conflicts and those sorts of things. So if you can identify, it's important to identify the right person. And if you can identify the right person or people that you can bounce ideas off of and talk about different things,

Starting point is 00:28:59 what's going to end up happening is that all of us have blind spots. And other people process things just kind of differently. And it just so turned out that around that time, I had actually the Warren Buffett lunch brought Guy and me together. It made us friends, really. We just have our acquaintances before that. And I decided that, you know, it sounds like he might be a good person to bounce things off off. So I tested it. And it seemed to work really well because every time I talked to him about something, he would mumble some things.

Starting point is 00:29:29 But those would be really things that was spectacular, which I had not thought about. And so I found that these conversations were really good. And these conversations are actually bringing up things that were truly blind spots for me. And so I started seeing value in those conversations, and I've continued them since 2009, and it's been extremely useful and beneficial. It's a very good addition to my mental models to have that. So the thing is, I think that an investment team is a bad idea, but having people that you can bounce things off of, especially people who do not have any kind of biases of vested interests, that can be really good. Let's take a quick break and hear from today's sponsors. No, it's not your imagination.

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Starting point is 00:33:34 I know you've had different engagements with Charlie and Warren since your initial meeting that you had with Guy. Through all those different engagements that you had with these two, what would you say is the best question that they've ever asked you? Or maybe something that really sticks out in your mind that just really made you say, wow, I never even considered that or just one of those experiences would be so profound for our audience to hear? You know, the thing that I found very intriguing is, so let me take a step back and let me take you all the way back to when I was in third grade before I answer your question. So when I was in third grade, I had extremely low self-esteem. I remember in my third grade class, they were like something like 70 or 75 kids. It was a very big classroom. And I remember I was seated like way at the back, you know, kind of 15 rows back or something.

Starting point is 00:34:26 and I also remember that I basically had no clue what was going on in the class. You know, there was someone would come and mumble, jumble, jumble, talk with something or put something, but I had no clue. And when I used to take tests and such, I had no idea what to do. You know, and I remember my report card in third grade was that I was a 67th out of 70 kids in my class, you know. And I'm surprised I wasn't 70th because there must have been like three carrots in the class. class or something because I had absolutely no idea what I was doing. So I always figured that I had gotten the kind of the short straw in terms of intellect and such and that I was a significantly below average person. And my grades reflected that all the way till I think I got to ninth grade.

Starting point is 00:35:20 I was always a below average student until I got to ninth grade. And in ninth grade, I was in a really good school. It was a very competitive school. I switched a lot of schools when I was a kid. This particular school, the Air Force school in Delhi, was a school which had the highest quality students that I'd ever been with. I mean,

Starting point is 00:35:40 it was very challenging and very good school. And they brought in some outside people and they did some testing and they basically did an IQ test on our class and they were like about 40 odd kids in the class, maybe 40.

Starting point is 00:35:56 kids. And this is kind of like one of those, you know, Mensa type IQ tests. And when I took the test, I ranked number one in the class. Not only did I rank number one in the class, they told me I didn't miss a single question. So they told me that my IQ

Starting point is 00:36:15 was above 180. And so I, the first time in my life that I've ever taken any kind of test where I wasn't in the bottom half. okay and it was not even in the top half I was number one and there were a lot of smart kids in the class so I went to the two guys who had come to conduct the test quietly I was like this you know 14 year old kid and I said hey you know sir can I just ask you some questions about this test you know he said yeah you did really well and I said you know what does it mean he said oh you're super smart okay so I said yeah but you know my grades and on my classes I do horribly I know my grades are useless they spent less than two minutes minutes they said oh because you're not applying yourself. He says, clearly if you work hard and you apply yourself, you will do well. And I don't know if you guys saw the movie Seabiscuit.

Starting point is 00:37:04 I had no. Oh, you're missing out. Both of you got to see the movie. So anyway, Sea biscuit was his amazing horse. And in order for him to win the race, he had to come head to head with another horse. It could be a loser horse, but he had to spend some time with this other horse going to head and then he would just take off. And then he blew all the horses out of the field.

Starting point is 00:37:23 So I felt like after that two-minute qualification in ninth grade, I was like C-Basket. I just took off. And what I found is every few months, my rankings in the class started improving. So from being 30th ranked, I came to 25th rank, then I came to 20th rank. And I saw every few months, I was moving up. And by the time I finished 10th grade, I was in the top half, which was amazing. By the time I finished 12th grade, I finished high school, I was third in my class in the school, a third out of the entire school.

Starting point is 00:38:04 And then by the time I finished college, I was number one. I, you know, was summa cum laude and all that. So it's almost like, you know, someone just tells you something, right? But the low self-esteem takes a long time to go away because, you know, it's so deeply built in. And when I met Warren and Charlie, one of the things that stood out for me the most is they told me, Charlie has repeatedly told me that you're off the charts bright, Monash. You're phenomenal at this investing stuff. Okay. And when he says that has to me, you know, God is saying something like this to you.

Starting point is 00:38:41 I am in disbelief. And part of the reason I'm in disbelief, we've got to have these. long history of being a low self-esteem person. And I remember somewhere, I think I read a quote or a book somewhere where, you know, the way I feel about Warren and Charlie is I don't believe what they tell me, but I have a belief in their belief. So what I mean by that is that I know that they can't be wrong. But because I am kind of screwed up mentally because of all the low self-esteem, if someone

Starting point is 00:39:12 just tells me, hey, you're great, that doesn't sink in. But if I respect a person, then I have a respect for their viewpoint. So one of the things that has been the most beneficial aspect of the interaction at Warren and Charlie has been that they have helped put a mirror in front of me, whether that mirror is a real mirror or a funny mirror. I don't know which way it is. But clearly, what it has done for me is it has given me a little kind of wind on my back, if you will, where I say, okay, you know, I might actually be pretty good at this. And we have these guys who are the, you know, the patron saints. And it's not so much Warren.

Starting point is 00:39:57 I think Warren is a little bit more reserved about what he says and doesn't say. I think it's been more Charlie than Warren. And of course, I've had a lot more interaction with Charlie than with Warren. or one of the reasons is because he's in California as I am. So the one thing that has stood out for me is that they've talked to this crony kid from Mumbai and given this kid all kinds of great perspectives, which have been tremendous for the kid to hear. It's been great. So I think that's one thing that I will always cherish and remember.

Starting point is 00:40:29 The second thing that stands out for me, for both of them, is how beautifully and carefully they've laid out their life. I mean, the thing is that what Warren and Charlie have done is they've looked at this kind of playing field that they're playing this game in, and they've figured out a way to play it in a very unorthodox manner, but they're playing it in a manner that plays to exactly what their strengths are. And the execution, you know, many times when I talk to Charlie, he'll tell me things like, that's not our system.

Starting point is 00:41:06 This is not our system. This is our system. And I don't hear him talk about the system so much in public. It's come up in the private conversations. And what I glean from that is that they have spent a lot of time thinking about how they go about it. So, for example, Warren believes that the real control he has is in the selection of the CEO or the manager of a business. He has no control beyond that selection. because the only other thing he can do is he can let the person go.

Starting point is 00:41:39 He does not believe that he can tell the person what to do. All he can do is pick the person. And this is a tremendous insight. And what this does is it gives them infinite bandwidth to have 200 managers reporting to him because none of them are looking to him to figure out what they ought to be doing. They've been told very clearly, send the excess gas to Omaha. And beyond that, run your affairs. And run your affairs, as if your family owned this,

Starting point is 00:42:06 for the next hundred years. Just use that. And, you know, there's a beautiful Ben Franklin saying, which is only four words, when in doubt, don't. So Warren, you know, sends a letter to his manager saying that we can lose a lot of money and we don't care if we lose a shred of reputation. We care a lot about that. So always remember that. But he also says that if you're ever confused about whether a particular course of action is correct or not, just call me. But he also says the letter, but when you have that doubt in your head, you already know the answer that you don't need to go there. So what I'm saying is that they have optimized the time they spend on what they are able to accomplish and the efficiency of that. I mean, two guys talking periodically on the phone

Starting point is 00:42:55 built one of the greatest businesses on the planet. It's incredible. It's incredible what they built. and I do believe that this is true because having interacting especially with Charlie, you know, Charlie repeatedly says that we do fewer dumb things than the others rather than a bunch of brilliant things. And I have to agree with that because most of the things that they do are basically common sense wise things to do if you think about it. During the lunch with Warren Buffett, I'd asked him a question.

Starting point is 00:43:30 I asked him, you know, Mr. Buffett, if you could have lunch with anyone living or dead, who would you want to have lunch with? And he said, well, I'd love to have lunch with Sophia and then he said, okay, you know, like scratch that answer. He said, no, I'd really like to have lunch with Isaac Newton. And I probed him a little bit. I said, why, why Isaac Newton out of all the humans? Why do you want to have lunch with Isaac Newton? he said he believes that Newton is probably the smartest guy who ever walked this earth. And so he said it would just be fascinating for me to be able to sit down with a person like

Starting point is 00:44:10 there and talk to them. And then, you know, immediately in the next sentence, he says, he says, you know, Newton was the smartest, but Franklin was the wisest. And that is the difference. I think the thing is that neither Warren or Charlie, they're very smart people. but what they've relied on for their success is not their smarts. They've relied on their wisdom. And most of the wisdom, if you look at the wisdom of Ben Franklin,

Starting point is 00:44:37 it's common sense after you read it. But it's not obviously common sense before you encounter it. And so that's been the other thing that, you know, many of the things that Warren and Charlie say, we kind of say, okay, you know, that makes sense. But what the meetings have helped me calibrate is what is really important. And what I've been able to calibrate is that, yes, these guys are smart, but there are lots of people who are very smart. And it's not about IQ.

Starting point is 00:45:02 This is not a game about IQ. This is a game about wisdom. And this is a game about making less mistakes than the others. And if you take the mistake, the error rate down, then it works out very well. All right, Monash, this is all the time we have for the first part of the interview. For anybody, if you're enjoying this interview, it even gets better in the second week. So make sure you guys tune in next week to hear the rest of the interview. I want to throw it over to Monish really fast so that he can give you a hand off to some of his websites

Starting point is 00:45:30 and places where you can go and find out more about him. So Monish, tell people where they can find out more information about you. Yeah, and actually one great resource that I really like a lot is YouTube. And I have a YouTube channel. It's called Monish Fabri. And one of the things I really enjoy is speaking to students. And what I've always tried to do when we have these conversations, with students is we try to record them and we try to put them on YouTube.

Starting point is 00:45:57 It's been a lot of fun. So I've been doing Boston College for several years. I just did UC Irvine for the first time I spoke to students in China at Peking University. And so those are all on the YouTube channel. And I think you'll enjoy those as well. So thank you. That was all that Preston and I had for this week's episode of The Investors podcast. We'll see you each other again next week.

Starting point is 00:46:19 Thanks for listening to The Investors podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.theinvestorspodcast.com. Submit your questions or request a guest appearance to The Investors Podcast by going to www.com. If your question is answered during the show, you will receive a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment purposes only.

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