We Study Billionaires - The Investor’s Podcast Network - TIP168: Guy Spier on Value Investing, Markets, Bitcoin & more (Business Podcast)

Episode Date: December 10, 2017

When we first started our podcast, Guy Spier was one of the first guests on the show. He is the founder of the Aqua Marine Hedge Fund and he's a Warren Buffett Style investor. Guy is the author of the best selling book, The Education of a Value Investor, and he's a graduate of Harvard and Oxford University. During our discussion, we cover a wide array of topics like, what kind of daily readings he looks at, the impact of statics and humility, credit cycles, cryptocurrencies, and much more. IN THIS EPISODE, YOU’LL LEARN: What publications Guy reads on a daily basis. How to think about intrinsic value calculations. What Guy thinks about cryptocurrencies. Guy's opinion on writing letters. How to think about temperament. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Guy Spier’s book, The Education of a Value Investor – Read reviews of this book. NEW TO THE SHOW? Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts.  SPONSORS Support our free podcast by supporting our sponsors: SimpleMining Hardblock AnchorWatch Human Rights Foundation Unchained Vanta Shopify Onramp 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 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. So today is a really exciting show for us because we're talking with one of our good friends, Guy Speer. When we first started our podcast, Guy was one of the very first guests that came on the show, and he's the founder of the Aquamarine hedge fund, and he's a Warren Buffett-style investor. Guy is also the author of the best-selling book, The Education of a Value Investor, and he's a graduate of Harvard in Oxford. During our discussion, we cover a wide array of topics like what kind of daily readings he looks at the impact of statistics and humility, credit cycles, cryptocurrencies, and much, much

more. So I'm excited to bring you guys this episode. Stig was out of town and unable to participate in the call, but he'll be with us again next week. So if you're ready, let's go ahead and do this. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. All right. So we are super pumped to have our good friend Guy Speer back on the show again. It has been a very long time. You know, that when we talked to Guy last, I want to say it was like episode 15 or it was very, very early in the show. And I distinctly remember this interview because we got so many emails from people saying that interview was insane. It was so good. So, Guy, it's been way overdue. I know when we were talking about.

in Omaha back at the shareholders meeting this past year. I said, when are you coming back on the show? And you said, I'm going to come back on in the fall. And I said, I'm going to hold you to it. And so here you are. You're a man of your word. And we appreciate you taking time out of your very busy day to talk with us. I was delighted to accept the invitation to come back on. And don't put the other podcast too much because then people might be disappointed by this one. For the listeners, What's worth saying is that this year I got to meet Preston at the Berkshire Annual General Meeting. And so for the listeners and any of you who haven't been to Omaha, I walked into this bar and I thought, I thought I walk into the back and find this kind of nerdy guy with maybe three friends and then we'd have a nice chat until I realize that the whole bar, all 120 people of Preston and his gang. And Preston is just totally pumped.

and everybody there is totally pumped. And, you know, it's actually an inspiration. Hey, so going into the questions, so we opened this up to our Twitter community. A lot of them are very big fans of yours. And they had some really interesting questions. One of the first ones that I really want to hit at, because I think this is so fundamental to where we're at in space and time here in 2017. Akash, he asked, how does an investor build patience and temperament?

And this is something that we know Buffett and Munger talk about so much. But I think for a lot of people that maybe aren't as attuned to their teachings, they hear the word temperament and they hear the word patience and it's just kind of cliche. So can you talk to us why this is such an important concept? It is. But, you know, of all the questions and I've got them out in front of me, I found that this was the one that I was most nonplussed about actually. Because, I mean, I walk around saying, oh, I need to build my patience.

and my temperament. And I'm going to try and it's more, I would argue, the case that I feel the forces that make me want to sell something that I've just bought, or make me want to buy back something that I've just sold. And I find myself having to, you know, just go back each time to fundamental analysis that I did and focus on the logic with fundamental analysis. But it was hard for me to think through. I didn't have any easy answers for Akash.

And Ashikakash, it's a great question, but maybe what I'm reaching for is, is that you can't build temperament and patience in isolation. It's got to be related to something. You know, it's like if you're in a difficult marriage and everybody's marriage is difficult sometimes, the way I would argue that one builds patience and temperament there is to say, well, I know she's going through a tough patch, and know our relationship's going through a tough patch.

I'm not going to do anything until another month, another three months. And by the way, that's the same. If we think of long distance running, or long distance anything, we know that if you're at the beginning of a marathon and you say, I'm going to run the whole marathon, that can be devastating.

But if you say, I'm just going to run to that lamppost or I'm going to do anything, but I'm just not going to stop jogging. So if I bring it back to investing, because obviously the question is investing, I go through, I think of myself during the financial crisis of 2009.

You know, one day it's in my book, my analyst comes into my office, and he tells me he's gone to cash. And I was kind of angry with him because I felt like I didn't want to have somebody in my office getting to cash. When I knew intellectually that was the wrong thing to do,

but I also was feeling an awful lot of fear. And I just remember saying to myself and saying to some of my investors, like, look, I know that Nestle is worth an enormous amount of money, way more than where it's trading from for, I'm just not going to sell it. I'm not going to sell a great business

just because people are panicking. But I guess the key is that you don't build it in isolation, you build it in relation to the specific challenges that you have on that day. And it's kind of building the connection between what we intellectually know to be true, for example, bindhold is the right thing to do, but down to the specifics of, you know, I'm feeling this incredible fear and feeling as compelling need to sell my stocks along with everybody else.

But I know intellectually this isn't the right thing to do. And that's kind of a little similar to the idea of, not wanting to break out of the run when you're on the marathon. So, Guy, what do you think about people that write down their principles, they're trading principles before they put the position on? So if you're talking specifically about Nestle, it might be something like, I'm going to buy this.

The reason that I might sell this would be reason X, Y, and Z. And you list some of this stuff out in writing before you would put the position on. That way you can reference that. You can look at your principles and you can say, hey, this wasn't one of my principles. This wasn't something that I'm thinking about. So this is probably an emotional thing. Is that something that you believe would work?

And is that something that you do? I mean, I think it's more general. Yes, it's definitely a good thing to do. It's not the only route to take. But I think that you're just enunciating a specific of a more general principle, the more conscious we are, what we're doing, what's going on, the better it is. And writing is a great way to become more conscious of yourself. even better would be to keep an investment diary.

And it's just, I found it very, very hard to keep an investment diary. But I do actually use Evernote, have it on all my devices. And when I'm thinking something, I feel like I ought to capture. I go and capture it in Evernote.

And some of it's related to investing and some of it isn't. If I do it, yeah, actually now it's kind of like, I told my regulator here that this is what I do. And now I kind of like, I have to do it.

it. And I like that because it keeps me more disciplined than I'd be able to keep itself. Before I buy any stock, I have to write a paragraph, at least a paragraph. And I go through, it's on an Excel spreadsheet, I go through a checklist of about 75 items. And many of them I leave blanks. They just don't apply. But on many of them, I write something. So I think that's a really, really good thing to do. But at the end of the day, you know, Akash, the question is, how do you build patients in the abstract, I would argue it's how do you find the patients to own that stop? It's been in your portfolio of three years and hasn't moved. How do you resist temptation to sell? And then that becomes a little bit more concrete. And then maybe there are some strategies that one can

come up with when one gets to some concrete situation. Interesting. So let's talk about kind of your daily routine. When you get into the office, one of the questions we saw on Twitter as well was what publications do you read daily? And I like this one. Do you listen to any other podcasts? So, you know, one of my goals, actually, you know what you've got to do? What you need to do is you need to come out and visit me for a week. You'll stay with us.

And you'll see that my library is a great place to conduct some interviews. And so anyway, I'd love to have you over here sometime. We would love to come out there. It would be great. But when you come into my office, basically, you can go left. left or you can go right. To go left takes me to the room I'm in right now, which is my busy run. It's where computers are. And if they go right, get to my library, there's no electronic devices and there's lots of books. And my goal is to spend more time going right and going left

just as a matter of habit. And actually, I find, I mean, there are some days I don't make it in there at all. But the days I just go in there and I sit, even for 10 or 15 minutes, it kind of clears my head it helps me to see what I'm supposed to be thinking about or doing. Yeah, so this is like your form of meditation. You know, there's people that swear by meditation. There's other people that say that they have like a different routine that's similar to meditation. This is fascinating.

I love this idea of not carrying an electronic device into the room. When did you start doing that and talk to us about this whole idea? Because I love this. I mean, actually, sometimes I do have my mobile phone with me, but it's a great point that It's just that there's no computers or there's no phone in there. When I shut the door on that room, what people in my office, I tell them,

pretend that I'm outside the office. So, you know, if somebody calls, I'm not here, I stepped out. But sometimes, I mean,

sometimes I do have my mobile phone with me. I didn't actually think through that far. I'd also say that it's very mild meditation. I mean, I'm deeply impressed with Yuval Hariri and his one month year on Vipasana meditation retreat in India, which he credits. with the two great books that he's written.

And there's a guy I know here, the company is Bavaria capital, this publicly trade company. He does regular 10-day Vipasna meditation retreats. And I actually have not managed to do that. I think that that's what I really need to do to train my mind. So I think I've figured out meditation ultralight, but it's not much more than meditation ultralight.

And it's a place that just makes me a little bit more quiet. But my point being that for the minimum, I get into my office and you can see some of it. I've gone through. So I had an enormous amount of publications coming in, but they're not the first thing I look at. The thing that I really try and look at is whatever the hell I've printed out, which might be a penny report or a 10K,

or it might be some background reading that I'm doing. Like I'm now reading everything I can from Vaclav Smill. Black Lov Smil is just this amazing engineering mind. It really thinks about societal problems. and I'm trying to understand more about oil. So I'm reading plenty about the oil industry. And the publications, though, that are regular for me, I love the manual of ideas, I love the new format.

But I have to say that at some point, I love finding out about investors who are out there, but at some point you have to get away from reading about investing and reading for investing. But on publications, about two years ago, I had subscriptions to automotive news, scientific American, the new scientist, nature, advertising age. I mean, there are publications that are done by cranes, and I was kind of drowning in paper. At some point I said, right, I'm just going to go on a publications diet.

I'm going to get rid of the vast majority of them. And then if I decide to resubscribe or resubscribe to some of them, but these industry publications really, sort of like bury you in paper in a certain way. Another one was Aviation Weekly, which is a great publication. But on some level, I felt like that was the sort of like walking around the forest, looking at the funds and not seeing the trees. The publications I didn't give up are The Economist and Business Week. And I don't like the design of Business Week,

but I think that it's got an awful lot of great stories in it. And there's a publication I get here in Switzerland called Pilance, which is like the Swiss version of, Fortune magazine. And I think our fortune subscription stopped, and I think I need that one back because I like what's in there. And I actually sort of like daily publications, I still get four newspapers,

so I get the Financial Times, you get Neutsochutza on a weekly basis. I get Le Monde. I get the New York Times International. So that kind of is piling up. The truth is I don't read it on a daily basis, but every now and then, when I fly somewhere, I'll take eight of them, all the magazines, and I'll read through them,

because I find that I am reading more and more of those news publications on my iPhone, basically. Yeah. But the thing is, I used to get grants publication physically, and then I kind of re-engaged with my Bloomberg monitor, and now I get grants on the Bloomberg monitor, and every now and then I'll print it out to read. I think that what I have going on is that in spite of the magazines not coming in, Some time ago, I decided to buy, I kind of pretty much any company I look at that half interests me, I go and buy one share in my Charles Schwab account,

and make sure that my Charles Schwab account is set up to get physical delivery of mail. So, you know, I'm getting proxies and 10 Q's. I mean, I just got a two-inch think proxy on the merger of two companies, Praxair and Linda. So, you know, that's sort of a two-inch think document that's been sent to me. And I'll find that those things are sort of lying around along with whatever the hell else I'm looking at. If you're looking at something, you know, there's some corporate presentations to print out, some 10Ks and cues.

And I have a really high quality, large printer that has paper handling and stapling. So when I print out 60-page documents, print out on double side. And that's stuff that I carry around myself and I'm looking at all the time. So I'd say that's the stuff that I'm trying to read, trying to focus. So long answer to a short question. No, but to me it sounds like the focus is really the 10ks and the 10Qs. Like you don't miss a 10Q that comes out for any business you own. Would that be a correct statement?

No, I think I do miss quite a few. But I'm printing out the ones I think are interesting and are important to look at. And by the way, something that's really important that, you know, if this is a written article, I'd want this to be a call out quote. I gave a talk to the Swiss CFA society, which I was quite pleased with. it came out reasonably very well, I thought. One of the points that I made, Preston, is that, so I really appreciate your respect for me.

It's really kind of you and thank you. But all you have to do is read Nassim Taleb's book, all peranderness, and it's very convincing that I have a 20-year track record. I'm two percentage points approximately better than the S&P. So that's a good return. It's not Omaha numbers, but it's still market beating. But there's no way that you could prove to a person who understands how the numbers work,

whether I'm lucky, smart. So, you know, you're interviewing me, and what I'm doing, the story is you take 1,000 people and you run a coin flipping contest, you keep flipping coins around 1, run, 2, and 3, and you find the person who's flipped a series of heads. If a thousand people, if you go however many times it is,

there will be one guy who flipped a series of heads. When you go and interview that guy, and they've done this experiment in academic circles. The guy who's flipped a series of heads really genuinely feels like he's got some kind of skill and he's sort of like, what is it in the way you flip the coin? And humans are superstitious creatures and we start believing stuff. So what am I trying to say is that your listeners, the investors' podcast community, should not necessarily draw lessons from what I'm saying.

This is just interesting to hear what Guy Speer does. But we cannot rule out that I'm just a coin. flipper who happens to have flipped a high number of heads for many reasons they've got nothing to do with what I'm talking about right now. I think the learning point for me when I hear you say that is you have to be self-aware. You have to know what those probabilities are and then you have to have zero ego and total humility to be at a point where after 20 years and you've beat the market after 20 years, but you're saying you don't have statistical proof that you've beat the market with high probability, a large confidence interval to basically say there's statistical proof.

I think that that's insanely profound. And the reason I think it's profound is because it's telling people, even after 20 years, if you're not looking at things through that kind of lens and saying, you know, I might be wrong. My thought process might be wrong. That's the learning point for me. We were reading Ray Dalio's new book, the principal's book. in the book he talks about how he went through this just destruction of his company back. I want to say it was in 81, just literally lost everything.

And he said, I went from asking myself, why am I right to asking myself, why am I wrong? And that became his thesis for everything. Like, how am I wrong? What am I doing right now that proves that I'm wrong? And I think that that's what you're really getting at with your comment is, am I wrong right now. Is all this information that I'm talking about just dead wrong? Yeah. So that, you know,

what the way I would state it is, you can't rule out, I don't know what the confidence interval is, but you can't rule out. The guy is just a lucky coin flipper. And your listeners, the listeners should take it into account when you're asking me questions about what the hell I do when I get up every day, do I turn left or right,

what's my meditation process, all of those things. And then, you know, I get the feeling. I mean, if you take Monish Pabarai, he reads a lot more than I do. And I do think it has an impact on returns. And why does he read a lot more? He's just about a brain for it.

I don't know what. I mean, I'm not saying I don't read a lot. I think I read a lot. But I think that he reads more. And it's kind of like it's cumulative. I mean, if I read, I don't know, 300, I don't read 300. Maybe if I read 100 books a year,

he's reading 150 or 200 a year. Yeah. And that does make a difference. I'm not saying that I don't absorb the ideas as well as he does. But on the reports, I think here's what's really important, Preston, is that whatever it is you're doing, you've got to be doing it intelligently. And I think that that's something that when Todd Coombs talked about,

his 500 pages a day, I think that it stimulates a lot of people to find 500 pages a day to read. But you've got to be intelligent about how you're reading it. I mean, if you've got to, if you're reading an annual report, Or if you're reading a 10Q and you know there's nothing's change in the business, then I force yourself to read every word. Be smart. So just for context for the audience, Todd Combs, who guys mentioning,

that's who everyone thinks is going to be the replacement to Buffett. This is who Buffett has basically tapped as kind of being his replacement after he dies. And, you know, talking about this idea of education, which is just a huge theme for our show, an ongoing theme of our show, I think this is really neat to highlight. When Buffett was asked, well, how did you make your selection, of Todd and Ted. And Buffett came back.

He said, you know, these two are the only two guys we could find that read more than Charlie and I. And I love that quote. It is such a profound quote of what he values and what he values is people that are just going through an enormous spurt of learning at all times. And I just think that's just so incredibly important. And I think it goes back to our first point of temperament. You know, like you're going to have great temperament if you know what the hell's going on.

So another way that I think that I want to answer that question is that, I mean, I don't know, I live inside my brain. I don't live inside anybody else's brain, but I feel like my brain is kind of like an unruly horse that is galloping around an enclosure. But every now and then, every now and then, you know, the horse notices a good objective in the distance. And I'm in a position to ride that horse. and then I've got to frickin' ride that horse to that objective. And the key is actually, I would argue, to get, the worst thing is to have read something that says two 500 pages a day, which is not the objective of the horse that I'm riding, you know?

And like in a sudden way, ride towards meaningful objectives or pay attention towards meaningful objectives. And when at meaningful objective changes, then don't keep moving towards the same thing out of the same thing. some kind of sense of duty or slavage desire to follow some precept that you've read somewhere. Move on to the new objective, you know. In a certain way, maybe it's encapsulated this idea of being a learning machine. Learning machines change directions.

Learning machines stop halfway through books when there's really realized there's nothing else in there for them. Learning machines don't waste time reading stuff that's not worth reading. And for what it's worth saying is that for your audiences, I'm not saying that I'm a learning machine. For me, it's an aspiration as much as it is for everyone in the Imperson. This is a podcast. Yeah, I mean, something that I far prefer to read books, but I actually find myself reading an awful lot on a Kindle because when I get into bed next to my wife, she's not going to let me switch the light on, but Kindle's fine. So now I find myself, but I love the physical copy

books, so I find myself buying two copies, a Kindle copy and a hard copy. What can I say? Awesome. So this is a question that came up. on Twitter, and I guess I'm going to just kind of change it a little bit because it related the credit cycles. So one of my frustrations with the value investing community is the complete just lack of respect for macro. I think that when you talk to most really hardcore Warren Buffett investors, they just say, yeah, I have no idea what macro is going to do.

I just ignore it and I just focus on the small cap, large cap businesses, and I look at it from that advantage point, just buy inequities. And so Howard Marks wrote his incredible book. and he talks about kind of knowing where you're at in a credit cycle and he really goes against a lot of the literature that you see with Buffett and Munger. And so I really applaud Marx for this because I'm in the same camp as him. I think that it's very important. It almost be like if you were looking at a spectrum and value investing is in one part of

the spectrum, then you've got macro investors and another part of the spectrum. My opinion is if you have knowledge of all those spectrums, you're going to be more informed and more knowledgeable and can work inside of your environment better. So I'm curious to hear your opinion on that idea. And then I'm also curious that if you kind of think that it's important to kind of know where you're at in a credit cycle, where would you put us in the credit cycle today as you think through this? Because my personal opinion is whenever I look at this past credit cycle, it's been completely

manipulated by central banks. And the signaling that I'm seeing is that the U.S., specifically the Bank of Japan, And they're done with their quantitative easing for the most part. The only one that's still in town pumping out money is the ECB. And it's looking like they're going to start winding down, which for me is signaling the end of the credit cycle or that we're at the top of the credit cycle. So I'm curious your thoughts on all that stuff. I know it's a lot of speculation and we have no idea. But I think it's important for people to be thinking about that and knowing the risks that are associated with it.

If you like reading about the credit cycle, you'll enjoy grants because he has a central page. where you see what the central bank did. Say the resource again? Grant's interest rate observer. Jim Grant, I mean, he's a, what do we call him? He's part of the scaffolding of Wall Street. I mean, he's been around for so long. He's an incredibly talented writer.

I've been writing this publication for a very long time. It includes a lot of macro stuff related to the credit cycle, actually. And then he's always connected up to some interesting idea, rather, that he'll print on his pages. So it's kind of, I've never attended one of his conferences, but he predates a lot of the new media stuff. I think this is surprisingly influential. I think that I, at the end of the day, Preston, come out saying that I'm better off not allowing the credit cycle to determine my investment decisions. Or I think that here's the benefit of ignoring the credit cycle is if you ignore the credit cycle,

and try and buy cheap stocks that will do well no matter what. lot. And if you pay attention to the credit cycle, there's this huge danger that you end up becoming some kind of closet market timer of one kind or another. And so if you're super brilliant and you're capable of paying attention to the credit cycle and allowing that to steer you in where you pay attention and what stocks you buy, then that's really fantastic. But I think that for the vast majority of us or for many of us, looking at the credit cycle, which in of itself is not a terrible thing to do will lead to the next step, which is to start timing the market, which is probably a terrible thing to do. Let's take a quick break and hear from today's

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com slash WSB. All right, back to the show. So, and I completely agree with what you just said. That makes total sense. But then whenever I look at Buffett's balance sheet, which for me is the truth. Like when he goes on TV and he says whatever, that's less meaningful to me than what his income statement and balance sheet say. That's what I really pay attention to.

I don't necessarily listen to what he says. And so whenever I look at the balance sheet and I see that he's sitting on $100 billion, $100 billion of cash, that doesn't make any sense. The argument falls apart. For me personally, it falls apart because when you're sitting in cash, you're effectively saying, I'm going to select a negative one or two percent return. That's what you're physically doing by looking at that on the balance sheet. So why not take, and I know he has a huge problem because it's such a large amount of capital. And I hear that argument all the time, always just sitting on too much money. He can't move it. Well, you know, you could move it.

into an ETF, which is priced at a 3% or 3.5% return today, he could do that, which is better than a negative 1% return. But he's not doing that. That's where I'm like, it seems like he's saying one thing and doing something different. I'm curious to hear what you think. He also pay out dividend. You know, he'll just start sending it back. No, I mean, it's an enormously profound statement that he's making. He's saying that he believes at some point within the reason, near future, he's going to get the opportunity to put $100 billion to work or most of it to work in some opportunity that right now he can't see, but conditions will arise, that will make that possible.

You know, it would be something like buying Bank of America or buying JPMorgan or buying General Motors, it would be enormous purchase. And he's basically implicitly saying, I believe I'll get that opportunity. So somebody said a CFO of a business inside Berkshathaway that I met a long time ago said these wide worlds to me, which you've figured out as well, Preston, which is pay attention to what Warren Buffett does. It's more important than what he says he does. And ideally you get the stereo picture.

But yeah, there is a bit of a dissonance there. Guy, whenever I started out in studying Buffett, from what I read, I was under the impression that I'm not ever going to think about what the market's about to do. All I'm going to do is I'm going to look at right now what is offering me the fattest yield with the lowest amount of risk. And whatever that is, I take my cash flow for this month and I stuff it into whatever that asset is. And so if that was a true statement today, because that's what all the literature says,

is that's how he does his approach. I don't have to predict anything. I just have to know what's going to give me the best yield today, and then that's what I buy. But that argument falls apart when you look at his balance sheet. at the top of credit cycles. When you go back historically, he starts putting a lot of money into liquidity. Now, in the past, like you go back to 2008, he was buying bonds because there was yield there. But now there's not really any yield in bonds that's worth the spread to cash.

And you're seeing them sitting in, you know, some bonds that are short maturities. But, I mean, it's cash equivalence. I don't know. I guess I'm just having a hard time understanding his actions. Well, maybe, I mean, not that I can explain them, but maybe what I'm about to say will help a little. It's worth also saying that he's not sold anything. So the cash is building up because, you know, profits are coming through and he's not doing anything with him. But he's not made a move like he's not said, if the market is feeling a little top, I'm going to sell my portfolio of securities.

Well, I think the big guy with all due respect, that's due to the cap gains, you know. know, like, he's not going to sell Coca-Cola because his cap gains are just going to, I mean, he's making more on the dividend than his purchase price for some of these things like Coca-Cola. So he's not going to sell out of those just because he's going to get murdered in taxes. But when you look at the companies like IBM, he had no capital gains. He's selling that. You know what I mean? Like, I don't know.

I'm just- He's selling that for fundamental reasons. He's decided it's not as, as he said at the puncture annual meetings, he's decided it's not as good at business as he thought, originally thought it was. I would argue that there's a kind of asymmetry when it comes to investing where I mean you get it when people talk about a particular price being a good entry point for a stock kind of saying once you've entered into it you're not going to pay attention too much and whether it becomes overvalued or not and I think that it's far harder to sell stocks well than it is to buy stocks well I think Warren Buffett's saying I'm going to let this cash piss build up I don't want to sell anything that's in my portfolio

other than the stuff I positively don't like, but all the businesses that are good businesses, I'm going to let them ride. Maybe sometimes like Coca-Cola, they'll get overvalued. But I'm only going to add in significant chunks to my investments when I know that I'm being offered really, really ridiculous prices. So there's this asymmetry in that you buy when things are cheap, but you don't necessarily sell and things are super expensive.

And I think that that's what he's doing. The cash builds up. And here's the point. I think for me that I just think is really, really important. And I don't know how to square this with awareness of the credit cycle. So I think we can all agree that 2008-9 was a trough in the credit cycle. Credit contracted in a massive way. And credit continued to contract in a massive way because the system sort of like had

these self-plexive mechanisms like the drawing in of credit the banks, more stringent capital requirements, more stringent, requirements on bond ratings meant that it was just much harder to get money for many, many people. And now we're probably five years into a sort of a long credit expansion. And I think that the danger of thinking about that is then when is that credit expansion coming to an end? Is it coming to an end in six months? Is it coming to an end in four years? And obviously, if we knew that it was coming to an end in six months, we might want to position ourselves very differently in our portfolios and if it's coming to an end in four years.

And I think that that's where it's really hard to tell. And I think of myself, there are so many times when I felt like I've had so much evidence that we're at a turning point in terms of stocks going up. The last time was when so many of my friends felt like the election of Donald Trump that it was time to get out of the market because he was going to be a total disaster. and the market totally surprised everyone. And I can't say that I didn't have the same feeling I did. I was like, oh gosh, I'm not feeling very comfortable about a Trump presidency.

I don't know how it's going to work out. I never let that interfere with the desire to basically be fully invested as much as I can. In terms of central banks, again, I think your point is well taken that when you look, whatever the hell explanations I'm trying to give you, and your point is when you look at the behavior of Warren Buffett, he appears to be looking at the credit cycle and making decisions relates to the credit cycle. And, you know, I can't prove it to you, but maybe somebody who's super well attuned to valuations is obviously their portfolio is going to look that way, even though they're not consciously aware they're doing it. But just to address something you

talked about central banks, this idea that the central banks are manipulating stuff, that central banks always have manipulated stuff and always will manipulate stuff. That's what central banks do. That's why we went off the gold standard. That's nothing new. I agree with you, but it's not something that we should get set about. They manipulate it. They believe that they're doing the right thing at the time.

And there's enormous debate that goes on in academic circles to figure out what the right thing to do is. It's a very, very powerful lever that they pull. I would tell you that someone, I don't have the exact quote, but it's along the lines of never get into an argument with somebody who prints money by the something. I don't remember what it is. The central banks have this towering. It's very, very hard to comprehend. They can just switch on the spigot as much as they like.

They have enormous, enormous, enormous power, and one should never be against them. and you have this kind of dichotomy. They open sluice gates in a major, major way, and nobody can really understand why inflation didn't take off. There are all sorts of explanations, but nothing that's definitive. Japan's been in that kind of state for more than 20 years. So exactly at what point they stopped the QE, and what would make them restarted again.

It's hard to understand. And again, you just don't want to get on the wrong side of that. That's what I would say. Yeah. No, I think it's a major concern. So my sense is, Preston, that you've been talking to some sort of, in the gold world, you'd call them gold hounds or gold something. Gold bugs. And monetary purists, if you like.

So, and then, you know, and I was one of those guys. I was like, these people are just basing the currency. You know, it's just terrible. QE. And it was at one of the Westco meetings. So somebody asked Charlie Munger about this. You know, if you don't purchasing power of a nominal U.S. dollar over the last hundred years. So what a dollar was worth 100 years ago is like two cents now.

So cash is constantly depreciating. Charlie Munger just looks up at the room and he says, and this is good. I don't know why you're complaining. It could be a lot worse. So what central banks do is that they overtime to base the currency and they do it in the interests of all sorts of other things. And we as investors can't get upset about that.

I would argue the answer to that is that clearly you should see the currency as a way of transacting stuff, but don't stick around in that cash for too long, as you know which way it's going, it's going very seriously south, and which to come back to, you know, on the day that Bitcoin bounced above $10,000, you know, it's great to say that. And that just going back to Warren Buffett's Berger Halfway is again an incredible statement for Warren Buffett to say, I know the cash I own is depreciating at some rate per year, and I still prefer to hold it because I think I'll buy something, I'll get the opportunity to buy something within a reasonable period of time.

That's going to make it worth my while. So the whole Bitcoin thing is probably one of the craziest discussions happening right now. I recently did a Google Trends kind of search with Bitcoin in it to kind of see the global map, the heat map of where it's being. being discussed. And when I did that, it's literally being discussed almost in every single country around the world. And no more so. And you know where the hottest spot was on the map? It was Switzerland. So I know there's conversations happening in Switzerland that you're hearing about Bitcoin. Now, I want to throw out an idea. And I want to hear your thoughts on this

idea. So all these fiat currencies are deep-peg. And they have been for, a very long period of time. And so there's no incentive for countries domestically, no incentive whatsoever to be responsible with their spending because as they devalue it, it manufactures growth domestically. So we basically have a race to devalue currencies that's happening around the world.

And now all of a sudden this technology enters the space through Bitcoin, blockchain technology. Bitcoin's the emerging protocol compared to all the other ones that are out there. And you look at the market cap of this space, and it's now at $315 billion. So this is not, we're not talking about something that's like a little science experiment anymore. Like we're approaching, at the pace we're going, we're approaching a trillion dollars in this space

extremely fast. And this is becoming very real. And if this becomes real, we now have a peg. And we don't just have a peg domestically. We have a peg globally. And so I guess my question is this. are we seeing a reenactment of 1921 in Germany, but only on a global level? So, you know, I think the Bitcoin is a complex phenomenon.

When the history gets written, when we have the perspective of 100 years, we'll see that there were many things going on. And so I don't think there's any one way to describe it. But here are a few things. I think that I in the past underappreciated the simple network effects. So the more Bitcoin gets embedded in all sorts of different things, the more other currencies are created using Bitcoin as the reference, the more software embeds Bitcoin.

The network effects are being the first mover. It's the cyber currency with the largest reach. And that in and of itself may give it. it an intrinsic value that it didn't have before. So exactly the same protocol, exactly the same everything, to much smaller network, and it could get blown out of the water. But the intrinsic value in this is the same as intrinsic value of writing for iOS or writing for Windows, writing for Android or any of those things. So there's no question in my mind that that probably does lend Bitcoin an intrinsic value, even though the protocol itself could be replicated

by thousands of people. And it is being replicated by thousands of people with all the forks. So the next thing that I feel like I want to say about Bitcoin is, you know, I don't think that anybody disagrees that the underlying blockchain technology is extremely valuable. And we can separate out the blockchain technology and what that means for transactions, banking system,

and many other systems, and separate that from Bitcoin. And people say that we're in an age that the blockchain is where the internet was in the early 1990s. And I think that that's probably true. And there are a couple of Ethereum-based currencies that I am really interested in, Auger, A-G-U-R and G-Nosis, Chianos, I guess, because I love these political betting markets, and they keep getting shut down for all sorts of reasons. I'm really looking forward to those two companies getting going because I think there'll be so many ways to use it.

So I'm excited about that. And I want to comment on that because that's a really important point because a lot of the smart contract piece of this is reliant on technology that proves whether something is true or false through these poll type protocols that are true or false type prediction markets. So if you're entering into a smart contract with something and it's reliant on whether something happened or didn't happen. the way that that can be proven to be true is through some type of blockchain protocol through Ethereum. It seems like Ethereum is the one that's doing this. But I completely agree with you. So we'll have the links to those in the show notes for people to check it out. This is not in any way investment advice.

All this stuff with crypto and blockchain is extremely risky, but it's interesting stuff that people need to be aware of. I'm sorry to interrupt. You keep going there, guy. So here's another sort of what I think about Bitcoin is that. that you have to distinguish between hardens of currencies. So you have economies in the world, which are dollarized anyway, like in Zimbabwe. Nobody actually used Zimbabwe currency because it isn't worth of papers written on. And the only reason why you would kind of hold a Zimbabwe known is because the central bank makes the promise to automatically exchange into some either dollars or euros.

And that's the same in or was the same last time I looked closely in places like, Tina. And those are countries where the governments don't stand for much, or the government's fickle and governments capable of nationalizing property doing all sorts of things. I can see the move to hard currencies or more trusted currencies in those countries. And it's worth saying that those countries can be pretty good at preventing the dollar, the Swiss franc, the euro, the yen, from being a legal tender in those countries. But Bitcoin gives people a way to go to something that is a much more, at least from the perspective of being living in Zimbabwe or Argentina, a much more safe bet. So is it easy to see

why Bitcoin would displace some soft currency like the Zimbabwe dollar, the Argentinian, Pesso? I don't just find that hard at all. But if you ask me if I can foresee a world in which Bitcoin displaces hard currencies like the Swiss franc, the dollar, the euro, the yen, that I find it much, much harder to see because let's not underestimate what stands behind the US dollar. Some of those helicopters that you are fighting in sand behind the US dollar and a whole bunch of other stuff. And if I just go back to Bitcoin for seconds of market cap $300 billion, what I'd like to know and I have not seen and I don't know if that number exists is what have been the flows in Bitcoin? So what have been the flows, the money flows in and out? And I would suspect that what we see in the last two or three years is a period where

there's enormous, the inflows have been far greater than the outflows. But we're going to get to a point sometime in the history of Bitcoin where the outflows will be enormous. And will the currency be able to stand that? And at the end of the day, when you hold a dollar, what you hope is the ability to claim something from the US government, and the US government has real power. You know, it has a military, it has tanks, it has all sorts of things, all of the instruments of state, and you have the ability to claim something from them.

Whereas Bitcoin, I think the only thing that needs to intrinsic value is this idea that there's somebody who will accept it from you, for all acceptance, but it's a very real difference between Bitcoin and real currencies. You know, when we think about how the universe works in general, there's balance to everything. There's a plus side and there's a negative side. So whenever I think about what we've experienced in 71, it's like we're living in a world that's lopsided. You only have central banking. You have nothing else that's keeping that and checking, forcing governments to be responsible in the way that they spend. So it used to be gold, but that really kind of became manipulated. And then we came off the gold standard.

and now you look at how gold functions. It's not like you can go to Starbucks and use some ounce of gold in order to make a purchase. But I think that this brings the balance to the equation. Whenever I think about how this is taking place, this is going to add the ying and the yang to currency.

It's going to peg it. I guess that's how it's going to act as a global peg. And who knows if this actually happens. It's just a theory. And I agree with you, Guy. I think that the people who are these maximalists that think that Bitcoin's going to take over everything and there's going to be no more dollars or there's going to be no more euros or whatever.

I don't see that happening. I do see there being this equilibrium that will eventually occur. Now, when that happens, who knows? And the inflows that you're talking about are just, I mean, that's the thing to really pay attention to. And when I'm looking at the inflows to Bitcoin in the last, you know, quarter, it's been astronomical. I mean, this is tripled in market cap since the middle of the summer, tripled. Yeah.

But just to be aware, you have a triple in market. cap, no cash inflows. It's just the market cap is just the price of which people are trading or exchanging Bitcoin for dollars today. Well, wouldn't that be true? And I'm sorry to interrupt you, but wouldn't that be true if we actually controlled the money supply? So like, I agree with that statement.

If I can contract the money supply, call it like the way that the central bankers do it, if they contract the money supply, they can actually boost the value of it and you're not really adjusting the inflows, outflows. Those could be neutral by just adjusting that money supply. when we look at crypto, the supply that exists isn't something that anyone is actually manipulating or controlling. It's something that's completely out. The only crypto that's out there that's like that is ripple. That's the only one that has a central authority. It was pre-mined coins so they can adjust the supply and they can boost the market price because

they're adjusting how many are outstanding in the marketplace. But when you look at all the other ones, they're not like that. I mean, so yeah, banks can manipulate the supply. I don't about the other ones and the algorithm, the way it's written, does not allow Bitcoin to change the supply. But my simple point is, let's just imagine, just to make the point, that you and I are the only two people who trade Bitcoin in the world. And so at $10,000 per Bitcoin, let's say, for argument's sake today, a market cap of $300 billion, you and I could trade one Bitcoin for $10,000 instead of market cap for $300 billion. Yeah. We could trade one Bitcoin. for $20,000 instead of market cap for $600 billion.

But the total volume trade would be $10,000. So how much volume is traded and how much of the increase? So it's the liquidity of the market, I guess is what I'm saying. And there are measures that you can look at, the studies that you can look at that show how much money flowed into this commodity over the last month or how much money is flowing out of a commodity and are people removing their interest in the commodity or not? And how much money flowed out depends on the volume and the price at which it was trading. So if at $10,000 per Bitcoin, and we show that there was a $30 billion inflow, that's interesting. Imagine that at $10,000 per Bitcoin,

we could show that there was, I guess, is it possible to show an outflow? Let's say that people sold Bitcoin for dollars for a value of $10 billion. And there were enough new buyers of Bitcoin at 10,000 that it stayed at 10,000. That for me is enormously significant. So if Bitcoin hit $10,000 per Bitcoin as a result of $1 million going in and only $1 million worth of the existing Bitcoin holders willing to sell, that's a very different story to if it stays up there and there are tens of billion dollars flowing. in. And so the people who've held it from zero to 10,000, you know, there's tens of billions of

dollars who are able to get out. So the liquidity of Bitcoin is, I guess, what I'm trying to. And daily volume traded is important. The answer, I mean, we'd have to go to the exchanges to get the answer. We'd have to go to Coinbase in America and some of these other ones because those guys definitely know those numbers. But I don't think anyone else outside of the exchanges would know what that is. But I think that that's the keys to this to understand how profound the movement really is. One last thing that I've only learned recently, but it's very, very important. So if I had a lot of my assets tied up in Bitcoin, which I don't, I think that I'd want to know what's going on there and I want to pay attention to those numbers. When you look at the economics

of currency, there's been a spate of articles recently talking about how Bitcoin is very inefficient in terms of power consumption. So it turns out that Bitcoin uses more power than some small states because of this proof of work in order to manufacture new Bitcoins. And that's not terrible in that it also costs an enormous amount of money to take gold out of the ground. And that was also a currency. It's a lot cheaper to print dollars or to create ledges inside banks. But I don't know what the power consumption will do over time, but it may just become something that Bitcoin is not frictionless to run.

It's just a new kind of friction of power consumption. Yeah. Let's take a quick break and hear from today. sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC two or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenings,

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can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. Now, and I've heard a lot on the power argument as well. and I think that it is a concern, and I think it's something that people need to think about is where is this going to be in five years from now? Now, a lot of the numbers from the articles that I've been reading I think are a little bit misguided because what they're doing is they're assuming that

the current two megabit block that exists is going to be proportional to the number of transactions that exist moving forward and then the cost associated with that. But one of the updates that they did specifically with Bitcoin back in August with this segregated witness update is allowing off-chain transactions to occur, which you're getting a lot more transactions for the amount of energy consumption compared to what it was before, because not everything has to be on the blockchain in order to have the transaction occur. Now, the settlement will occur on the blockchain, but I think you're going to see a lot more,

in the articles what they're saying is, based on the number of transactions that happen today, basically all power consumption will be consumed on the blockchain in three years from now, but I think what they're doing is they're interpolating a line out that doesn't account for adjustments in the software that allow more transactions per energy consumption. But there's people out there way smarter than me on this. And if you're listening and you want to point me to an article that proves me wrong, please send it to me so I can read it. You know, I just wanted to rewind back to the question that was in there that we didn't answer. I guess was important for me to answer what podcasts I listen to. I want to hear this one.

You know, I don't listen to as many podcasts as I'd like to listen to, but I've just, I've got my phone here. I just wanted to see what would come up. And so I'm just going to literally read out. So the one that comes up top is 99% invisible. And if you know that guy, Roman Mars. Now. So just really high quality production values. I first heard him on TED Talks.

Then there's BBC Radio, The History of Mozart, and a dozen objects. And I've got just TED Talks. And some of these I don't actually listen to you. So I'm kind of moving for an alphabetical order right now. So there's a BBC radio podcast called Be a Brexit, Guide for the Perplexed. I'm kind of tuned into Brexit. There's a guy called Dan Carlin, who's got a podcast called Hardcore History, which I really enjoy.

And then just moving down. So I think the guy, I am sure you must know him, but I just find him really inspiring is John Lee Dumas. I don't know if you know him. I don't know him personally, but I definitely know who John is. I think that one of the things you know about John Lee Jumis is that what you see is what you get. He's not pretending anything. You know, it's so funny because I sometimes use his vocabulary now with my wife, even though it's kind of, so I say, hey, I'll catch you on the flip side.

And I haven't yet used the term to a lightning round. But the other thing that I find really wonderful about John Lee Jumass is that he's not just bringing great guests. He's kind of everybody's cheerleader. So he wants everybody. And you're like, you want your listeners to succeed, not just with their investing. You want them to live awesome lives and you want to help them. You need to serve. And I think that something that's really incredible about, you know, the way technology

has changed is that it allows the people who truly servants, who want to be servant leaders to really shine. And that's kind of why investors' podcasts become successful. So that's what you guys do. And that's what John Lee do, master. So he really stands out for me. And often when I meet guests on his program, I then go to their websites and listen to stuff.

And so then, you know, I listened to the first episode of Masters of Scale, the Reid Hoffman, which I thought was really fantastic. I thought it was really well produced with the name of the woman escapes me. You know, I mean, it's funny. I don't know if you've listened to the art of charm.

I haven't, but I've seen it in it. You know, honestly, Guy, this might surprise people. I don't listen the podcast. I don't listen to any podcasts. Thanks for all the podcasts that I want to listen to. I'll just leave you with the last one before showing you. Here's also what I got on my phone. Hang on a second.

Can you see it? Oh, yeah. Look at that one. I know that show. You're one of them. Now I see, you've got a discussion on Bitcoin. I'll have to listen to that. And I'll just give you one last one as a guy called Mark Bidwell.

He's got a people who work in corporate environments. He's got a podcast called The Innovation Ecos. system. We interviewed some really interesting people about how to create the kind of enlightened environment that you're creating, Preston and that John Lee Dumas creates, but in this case, for people in the corporate world, are trying to make a little bit more and more dynamic, a little bit more open, trying to bring new ideas, and he kind of shares practice. So I just wanted to get that out there because it would be fun to do. No, that's cool. And you know, John Lee Dumas, he was a former army officer.

We need to invite John to the Berkshire meeting in May. And, you know, Stig's making it this year. Stig, you know, he wasn't able to make it last year. Stig's coming this year. One of the things that I talked with Stig, and just so, you know, Stig's out of town. He wasn't able to be with us for the discussion today. But Stig shot me a message right before we chat. And he said, remind Guy to tell our audience about going to the Berkshire meeting because

here in December is when we start spreading the information about how can you go, get your tickets now, get your hotel room. So put a plug. Tell people what, from your vantage point, what is the Berkshire meeting like? Well, you know, Preston, I meet so many people. I've actually got an intern in my office right now. And they kind of, they want to make a change in their life. They want to have a better career. They want to have a more meaningful, more soulful career. They want to get onto a different path to the one that they're on. And, you know, they come to me looking for advice and insight. And I kind of tell them, you know, you're just looking at, you know, go to the source. don't come to me.

I'm not worth so the expression is don't seek out the master's seek out the master's thought and the source is Berkshire and if you don't know

what you're going to do at Berkshire you're going to be just fine because you're going to be enveloped probably from the minute you get onto the flight to Omaha wherever it is you're flying from

you'll just be in a crowd of people who are your crowd and you'll be meet there'll be these meetings meetings everywhere in Eplea Field Airport all the way to the Sunday evening bar event that I'm looking forward to attending. You'll be around awesome people.

So, you know, there's so much one could say I dedicated, I think a whole chapter in my book about how the Berkshire Hathaway meeting transformed me. I was in New York City suit. I was a guy who went to the Berkshire Hathaway meetings trying to drum out business. And, you know, I don't go to the Bukch-Hathaway meeting to drop the business. I go to the Berksham pathway meeting to be with my tribe. And it's a big tribe, the 50,000 of them. I'm not saying you like every member of the tribe.

And I'm not saying it's the only tribe one should be a member of. But it's just such an awesome tribe to be a part of. And I actually know from somebody, where did I get this? I'm going to go and speak at Bob Miles' conference this year at the Berkshire meeting. And I think that he had contact with Moran Buffett's office. The meeting's not going to stay like that forever. you know, Warren and Charlie are getting on in years. At some point they're going to stop doing the meetings that way.

So come experience the atmosphere before maybe one. They just don't do it anymore. Yeah, no, I think you're exactly right. You had a really profound point there about seeking out the knowledge of the master. And like where did they acquire it from? What book did they read? I absolutely love that point. And I think it's super important for people to understand how profound that was.

Can I ask you one more question before you go? know you're under the weather and I'm just drilling you with all these questions. But my voice is surviving fine and we haven't gotten through to, and maybe we did. I'm loving this person. I have a great time with you, really. We had a person on Twitter asked that they wanted to have a little bit of a discussion about intrinsic value. So, you know, my personal approach is through an IRA calculation, trying to figure out what the yield is based on the price today. I'm curious if that's kind of the approach that you use. I get very frustrated whenever I read like Morningstar and I say, all the price of the stock is $115 per share, but then they don't even talk the discount rate or what that 115 even mean.

So I'm a big fan of IRR for that reason. And I'm curious if you are. And then what is the one thing that you think people mess up the most when doing that calculation or their intrinsic value calculation? So you know the story. There's nothing as dangerous as an MBA with the spreadsheets. I really believe if you've got the run, you've got to run the numbers on a spreadsheet. is not cheap enough. And what I'd say is that I think that the vast majority

is really good investments. It comes down to insanely cheap. Nobody disputes insanely cheap. It's just there's this horrible thing staring you in the face that you have to overcome or you have to see or understand or reason with. So one of the moments for me that was a very teachable and learnable moment was when Warren Buffett made this huge investment,

$6 billion investment in preferred stock of Goldman Sachs. And it was right in the middle of the financial crisis. $15 on the book. I remember this. This is right back in 08. Yeah. And I was like, wow. Right in the middle.

And people like, you know, we're in the middle of financial crisis. Companies are going bankrupt all over the place. Doesn't this, you know, and like everybody knew it was cheap. Nobody was going to buy it. Yeah. Ron Buffett didn't do an IRA calculation. or there's the company that, and I'm not going to mention the name, I looked at it, I did my checklist, I did my write-up, I started buying,

and then I was like, wait a second, I need to figure out the price of oil, I need to figure out where it's going. And the thing is so cheap, you can't believe it. But it's trading like oil's going to stop being mined tomorrow. Within five years, people are going to stop eating oil. So the real question is not, is it cheap, the IRA is not going to change that. it's what is my opinion on oil can I take the other side of this pet so I try to get away from these kind of finely tuned calculations and what the IRL will be there's just there's nothing wrong

with saying I think I want to own some butcher I think I want to own some whatever it is I'm just going to buy a bunch of it and you know that's where I tell you at the other end of the spectrum I've done this a couple of times on Amazon and I've done all the adjustments that you need to make in order to kind of understand Amazon as a normal business, and I just couldn't bring myself to buy it, you know, because it was still too expensive. But without doing an IRA, just saying, well, you know, the business has to perform this well for this long,

this valuation to make sense. And it was a momentum. Yeah, it's a momentum play. And I think, yeah, for a value investor to look at that, you're always going to have a hard time with the numbers based on how high the premium is today, right? But a famous or should be famous, an extremely successful value investor called Nick Sleep.

And he made a call on Amazon five years ago, put a third of his portfolio into it, you know, made, I don't know how much because he doesn't talk about it, but shut down his fund, sent an enormous amount of money back to his investors. I think made enough money for a few lifetimes of his, you know, not extravagant but not an unextravagant lifestyle. He's a value investor. And he called me up and he said, I was visiting in London. He said, you've got to look at this.

I just, I couldn't see it. So some value investors do it. But so my point to the listener and my point to you is, I think you've got to be all over this stuff. You've got to be willing to look at value five different ways, five different lenses, do the IRR, but look at it in other ways as well. Look at a replacement value. Look at just all different ways you could value it.

And then just decide is it's seemingly cheap or not. And it is not screamingly cheap. I'm not saying don't buy it. But I'm just be aware of what you're doing. All right. So, Guy, one of the major themes of our very first interview years ago was this idea of writing letters. And if I remember the quote correctly, you said something to the tune of, if I had to choose between writing letters and value investing, I would choose writing letters every day of the week. I'm curious, and one of our members of the audience wanted to know, are you still writing letters and do you still put as much emphasis and weight?

on the power of writing letters. And explain to people what we mean by writing letters. So, I mean, there's a part of my book where I, and this is why I said that comment, is that it's only because I wrote a thank you note to Monash Pabri that he knew I existed. And after I wrote a thank you note to Monash Pabri, he invited me for a dinner, it turned out. And that dinner changed my life. In fact, in my case, if you asked me, though I'd rather have that dinner with my, Monash Paprai or that lunch with Warren Buffett, the dinner with Monash Papi was way more important

for me. He introduced me to so many, so many valuable things in that dinner I would have never have gotten to. So the way I write about it in the book, writing thank you letters, writing notes of appreciation increases optionality in your life. And the thing is, is that part of why I wanted to write the book is that people think, oh yeah, he met Monash Papi and then he had lunch for him and Buffett, so he's a very lucky guy. And what I wanted to convince people of a note, well, there's a certain element of luck,

but the harder you work for luck you get. And I wanted people to know that I didn't write one random note to Monash Mabri. At that time, I was writing like 15 thank you notes a week, you know, sort of like three a day. So when you add that up, that's of the order of hundreds a year. And when you, you know, you compound that over five years, that's getting into the thousands of letters, thousands of people being touched. So I've been to a sufficiently strong habit of doing that. What is it? The chains of habit are too light to be felt until they're too hard to break. But funnily enough, I have a hard time leaving the office unless I've penned something to somebody stuck it into the two cents pile. And I've streamlined some of it. So any person who meets me

personally will get some piece of physical mail from me at some point. Well, let's say that 80% of them will, 20%, for one reason or another, I'll decide that I don't want to send them something because they're not people that I want in my life. But the vast majority of people I do want in my life, and I send them something. So yeah, I still do that. And the real, at the core of it, is whether it's a thank you note, whether it's a book, whether it's just a small token of appreciation, is giving people a little bit of joy and a little bit of a sense that I'm glad that they exist.

I think it's extremely powerful. I think it works, makes the world a better place and gives me a far more beautiful life. I feel like as a result of doing that, I'm living my life, bathed in an environment of people who have an initially positive reaction to me.

So I'm curious. And I really, as of right now, I can't confirm it, but have you received stuff from me? Oh yeah, absolutely. And you know what? The highlight of my mail for the year is whenever I get the Guy Speer Christmas card. And I know I'm probably not the first person to ever tell you that because Guy's Christmas card is on epic levels. It's something that no one has ever seen. I think the one last year when you get it, it actually turned three-dimensional whenever you were able to unfold it.

It was quite incredible to say the least. I just want to tell you that the designer of that card is somebody called Cecilia Wong. She's also designed the cover of my book. She's brilliant in ways that you and I cannot understand. And it comes to visual communication. So I have so much fun with that card. One of the problems that we had is that she started designing the cards and they were getting better and better. And we were on this Sisyphian treadmill.

of like, how the hell do we top what we did last year? So I hope you like this year as one person. But I love doing it. And it's so much fun because, and this was the talk that I gave at the Swiss CFA Society, which I think might turn into an article, which is, and he made, this is a nice point to close this podcast, is that, you know, so many of us in the financial world don't actually add value. That was the nature of that whole between Warren Buffer and Protégéy partners.

And that's a scary thought. And if you combine that with the idea that, you know, you can't tell if I'm lucky, what's skillful or lucky. And, you know, I really do hope that I've added it at the end of my career that I would have added value to my investors because of superior investors. But I have to prepare for the possibility that at the end of my career can be provably shown that it was not the case. And given that that is a possibility, I think it's just really important to have been a

decent human being to make the world a better place in other ways. And so starting off with writing notes of appreciation is a great place to start. The best place to be is when you're doing it on industrial scale, the way Dukhanna does with Monash Barberai's Foundation. But it doesn't matter what scale you're doing it so long as you're doing it. And I think that the professionals in our industry, in my industry, I hate it for good reason because people consider that we cause the financial crisis. I don't believe that I cause the financial crisis, but I think that as an industry, we have a very strong obligation to redeem ourselves in the minds of society by at least trying to make the world a better place. It's just really important to do. And so the thank you

notes is a good place to start. It's not the place to end. I think I've done a very good job of that. Knowledge has done a far better job of that. But at least I'm trying. You know, and we should make some progress. And the great news is, is that it's not just about making the world a better place. It'll make your life a better place. You want to live in the world. We want to live in a world where people are grateful that we exist. You know, I can point to a few financial types, famous corporators that nobody's happy that they exist on the planet. We don't want to be that kind of person. Walk into the bar in Omaha on a Sunday night. And you've got 120 people or more We're all glad that Preston Pish exists.

He's changed their lives. But we can all be that way. And here's the, we can't all start the Gates Foundation. We can't all start the Dukshana Foundation. But we can all see individuals and say, you know what, I'm going to tell that person that they did great today. I'm going to write to that speaker and say they did. I'm going to write to XYZ person and say, you know, that they had an impact on me, wherever it is. And when you do it in a thank you note, when you do it in a written document, it's so powerful because the person puts it in the desk drawer, they read it again, they put it up on a notice board, they reread it as permanent evidence of that.

It's something very special. And last thing, truly last thing, person, it's not a zero-sum game. If your listeners do more of it, the TIP community do more of it, it doesn't take away from anyone else. It just makes the whole world a better place. insanely profound comments, Guy. So folks, Guy Speer, you know, the humble, very humble Guy Spear, thank you so much for coming back on our show. For people, if you want to learn more about Guy, he has an incredible book. It's called The Education of a Value Investor.

Stig and I read this, oh, what is, it's been a few years now, right, Guy? Two or three years? 2014. Oh, yeah. So it's been a few years now. but I'll tell you, you want to read a fantastic book, pour into this, and you're going to be very, very happy that you did. And Guy, where else can people find out more about you?

I know you're very active on, well, you're not very active, but you're active on Twitter, right? Actually, I am, I am active on Twitter. I don't know if it's a good thing or not, but you can find me on G-spear on Twitter. I do answer questions there. You know, most of the stuff that I put up, it's not, I can't put up on my websites on Guy Spear.com. So you can always go to that website to see stuff. But it's quite likely if you shoot me a message on Twitter that I'll respond.

Awesome. Well, Guy, thank you for your time and safe travels tonight. Thank you for having me on your show again, Preston. You're a good guy to have in the world. I'm grateful to be your friend. Thank you, Guy. Thanks for listening to TIP. To access the show notes, courses, or forums, go to theinvestorspodcast.com.

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