BUFFETT!

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Welcome to Something More with Chris Boyd.

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Chris Boyd is a certified financial planner, practitioner,

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and senior vice president and financial advisor at

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Wealth Enhancement Group, one of the nation's largest

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registered investment advisors.

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We call it Something More because we'd like

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to talk not only about those important dollar

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and cents issues, but also the quality of

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life issues that make the money matters matter.

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Here he is, your fulfillment facilitator, your partner

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in prosperity, advising clients on Cape Cod and

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across the country.

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Here's your host, Jay Christopher Boyd.

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Well, welcome to another show of Something More

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with Chris Boyd.

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So glad to have you with us.

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I'm here with Jeff Perry, my regular co

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-host, and we are joined today by Brian

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Regan, senior portfolio manager for the AMR team

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at Wealth Enhancement, the legend of Warren Buffett.

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And he announced recently that he is going

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to be retiring early retirement after what, 60

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years?

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How long has it been, Brian, of investment

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history there?

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I think he said he made his first

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investment when he was eight years old.

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So 87 years, let's call it.

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Warren Buffett is in his 90s.

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He was born August 30, 1930.

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So he is 94, seems to be 95,

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not too far off, 95.

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Legendary investor, amassed enormous amounts of wealth.

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And not because he has this sense that

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he wants to go spend a lot of

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money or anything.

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He just is someone who loves to create

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investing companies that create wealth.

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And he's been a legend.

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We'll talk about some of the business structure

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decisions.

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We'll talk about some of his investment decisions

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and a little bit about his history and

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story.

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But that's what we're focusing on today in

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this episode.

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I'm glad everyone's here with us to enjoy

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this.

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So I have some notes about Warren Buffett,

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but Brian, I'm going to start by giving

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you the opportunity to get us started.

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Well, I'll say that, for better or worse,

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I don't really feel like I've been lucky

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enough to find a mentor in this business.

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But thank God it's the 21st century and

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you can read and listen to as much

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as from anybody as you can possibly want.

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And Charlie Munger and Warren Buffett have had

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a huge influence on my life personally.

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Rest in peace, Charlie Munger.

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He died a couple of years ago.

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And Warren's still with us, just retiring.

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But I was thinking about this when I

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was driving my son to school today.

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What would my net worth be if I

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was never introduced to Warren Buffett?

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And it's hard to tell, but it's undoubtedly

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at least twice as high as it would

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be otherwise, I think.

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And he's had a remarkable career and evolution

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as an investor.

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And if you just pay attention to him,

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I think you'll avoid a lot of headaches

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and you'll get to what's important very quickly.

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And I think there's a few tenets of

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his teachings that we'll probably talk about that

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I think are worth talking about and worth

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emphasizing today and well beyond when I'm in

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the ground.

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So I think this is an important conversation

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and one that we shouldn't just have once,

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but probably revisit the teachings of Warren Buffett

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as often as possible.

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So the thing that I think investors, we've

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seen him in times of crisis be a

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voice of calm and a sense of perspective,

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thinking most recently in the financial crisis.

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And let's face it, some of the opportunities

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he took advantage of in the midst of

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that saved companies, but gave him a tidy

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profit through his company.

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At the same time, he's kind of got

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this folksy way about him that, and he's

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very down to earth when it comes to

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his presentation, his demeanor, very relatable for considering

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the kind of wealth this man has.

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Lives, what is it?

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Lives in the same house since he first

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got married or whatever.

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I mean, he's a very interesting individual in

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that respect, but I think what we want

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to ultimately do is talk about his lessons

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for investing, and probably want to talk about

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these annual meetings and things like that as

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well.

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So let's start with maybe his early life.

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He went to college at Columbia, met Ben

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Graham as a mentor, but maybe even before

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that, we can talk about a little bit

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of entrepreneurial spirit that he demonstrated.

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Yeah.

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So he was from Omaha, Nebraska, where he

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still lives.

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As a young kid, he actually worked in

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Charlie Munger's father's grocery store, an amazing fortuitous,

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these geniuses who ended up being partners for

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many decades of their life, had a very

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geographically close relationship as well as personally close

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relationship.

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But yeah, he did stints at Columbia, he

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did stints at Wharton School, Wharton Business School,

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and he finished his graduate degree in Nebraska.

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But he met Ben Graham, who he started

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working as an analyst under initially, first thing

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out of college.

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And after a couple of years of that,

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he decided he was ready to start his

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own partnership.

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And the Buffett partnership from 1957 to 1969

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returned about 32% annually a year.

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Which is mind numbingly amazing, 32% a

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year.

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At that time, he specialized in what he

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called cigar butt investing.

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So cigar butt investing was, you're buying a

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company that has more cash on its balance

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sheet than the company is trading for.

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And this is something that you could do

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in the late 50s and early 60s a

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little easier than you can now.

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Information was not as publicly available, it was

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not as easy to trade stocks.

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He could buy small companies and he could

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buy them whole.

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And this is what he did and very,

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very successfully.

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So this is a pretty short term trading

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strategy, as you can imagine, right?

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He'd buy a stake in the company, get

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on the board or talk to the board

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and try to get them to disseminate the

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cash out to shareholders.

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And that was a very successful strategy for

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years until he met Charlie Munger and they

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ran separate partnerships for a long time.

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I don't know how many years, but Charlie

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Munger was very successful in his own right.

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He didn't start his career in finance.

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He was in the military service.

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He was the only person I ever heard

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of to go to Harvard Law School without

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an undergraduate degree.

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He did go to Caltech, but never graduated.

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He went there because of military service, because

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he was basically a genius in the military,

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identified that.

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And he started as a lawyer.

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He made most of his money as a

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lawyer.

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And when he met Warren Buffett through a

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doctor that they had a mutual acquaintance with

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in Omaha, they had dinner together and became

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fast friends.

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And what Charlie changed in Warren and something

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that I really admire is Warren had this

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amazingly successful strategy.

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And Charlie said, you know what would be

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even better?

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If we bought really good businesses and helped

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them for a really, really long time.

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And one of the things that I admire

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in him as a human being, and there's

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a lot to admire in him as a

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human being, I mean, for years, he never

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had any ethical issues.

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Vivi, I'm sorry, you got to go see

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your mother.

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He never really had any significant ethical issues.

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And he changed his investment philosophy, which is

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really hard to do to go from something

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that's successful to going to something that's overwhelmingly

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successful.

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One of the things that he did was

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he bought GEICO pretty early.

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So GEICO stands for the Government Employees Insurance

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Corporation.

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And it was a failing insurance company.

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Why don't we pause for a minute there?

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What honey?

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What do you need?

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I'm not using it.

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I'm putting it away.

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Oh yeah.

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But then it was GEICO, the Government Employee

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Insurance Corporation is what GEICO stands for.

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And one of the innovative things about GEICO

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was that he realized he could use the

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float.

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So float is you pay your insurance premiums

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and those premiums, you don't have a liability

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right away.

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You don't crash your car immediately.

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You don't die if you have life insurance.

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What the insurance company does is they invest

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it.

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And when Warren figured this out, he said,

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this is free capital that I can invest.

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And he made that the cornerstone of Berkshire

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Hathaway.

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Berkshire Hathaway is the name of his firm

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now, but it was really a failing textile

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company and not a good investment.

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He'll be the first one to tell you

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that it was an awful investment, but he

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ended up using it as a holding company

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and putting GEICO under that umbrella and building

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out both operating companies and investment securities under

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that umbrella.

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So him with Charlie Munger changed how they

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did things from basically a hedge fund to

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a holding company conglomerate that emphasized great management

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and good companies.

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And the trillion dollars later, it's one of

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the most amazing organizations in the world.

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One of his first forays into this, let's

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buy a great company and hold it, is

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See's Candy.

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He talks about it all the time.

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It's a relatively small company, considering that they

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own 2% of Apple, which is a

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$3 trillion company.

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But he'll talk about See's Candy all the

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time because See's Candy was the first company

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he bought that on a valuation basis might've

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seemed expensive, but it ended up being the

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cheapest company you could have possibly imagined.

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And you guys hear me say a lot

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that I don't really appreciate PE ratios.

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I think this is a good example why,

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and one of the ways that I got

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around that was to listening to Warren.

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If you have a great company that's consistent

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and growing, you might want to pay up

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a little bit of a premium rather than

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buying a business that's not doing so well

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that might not be with us for much

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longer.

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It might be a better value actually for

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paying more for the earnings.

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And I think that's one of the great

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lessons that he's personally given me.

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When you come to personal lessons too, I've

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used float in my life.

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The idea of float is something that I

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have actively tried to do, but it was

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a lot easier to do during the 0

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% interest era.

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But I'll give you some examples.

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When I graduated from college, I had a

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job I didn't make any money whatsoever to

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speak of, and I wanted to study for

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the CFA.

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Now the company that I worked for would

274
00:12:18,700 --> 00:12:21,720
pay for your books and your registration, but

275
00:12:21,720 --> 00:12:22,460
only if you passed.

276
00:12:23,560 --> 00:12:25,780
So that means I needed to find a

277
00:12:25,780 --> 00:12:27,380
way to come up with, let's call it

278
00:12:27,380 --> 00:12:29,000
a thousand dollars to get the books and

279
00:12:29,000 --> 00:12:29,620
the registration.

280
00:12:30,180 --> 00:12:31,620
I got a 0% credit card.

281
00:12:31,740 --> 00:12:32,860
That was essentially my float.

282
00:12:34,200 --> 00:12:36,260
But that was a float and the investment

283
00:12:36,260 --> 00:12:38,140
was me actually doing the work and passing

284
00:12:38,140 --> 00:12:38,600
the test.

285
00:12:40,880 --> 00:12:43,120
Five years ago, I bought a new car

286
00:12:43,120 --> 00:12:45,440
at 0% interest that ended up being

287
00:12:45,440 --> 00:12:46,000
my float.

288
00:12:46,300 --> 00:12:48,060
That money stayed in my bank account rather

289
00:12:48,060 --> 00:12:49,340
than going towards the car payment.

290
00:12:50,060 --> 00:12:51,240
I invested that money.

291
00:12:51,340 --> 00:12:52,100
I made nice returns.

292
00:12:53,200 --> 00:12:56,000
And ultimately that car was probably, ended up

293
00:12:56,000 --> 00:12:57,400
costing me half as much as it would

294
00:12:57,400 --> 00:12:57,700
otherwise.

295
00:12:59,240 --> 00:13:02,020
I own two homes with an interest rate

296
00:13:02,020 --> 00:13:03,320
around 3%.

297
00:13:03,320 --> 00:13:08,020
One of them, I actually make an operating

298
00:13:08,020 --> 00:13:09,500
earnings on.

299
00:13:10,340 --> 00:13:11,100
That's float.

300
00:13:11,420 --> 00:13:13,500
When I rent that other house, I make

301
00:13:13,500 --> 00:13:15,720
sure I get payment upfront before I deliver

302
00:13:15,720 --> 00:13:17,540
the house to the tenant so I can

303
00:13:17,540 --> 00:13:18,700
invest that money for free.

304
00:13:19,160 --> 00:13:19,920
That's free money.

305
00:13:21,100 --> 00:13:24,700
So I encourage people, and this is the

306
00:13:24,700 --> 00:13:26,820
exact opposite of whatever Dave Ramsey will say.

307
00:13:26,820 --> 00:13:28,700
I think it's kind of next level thinking

308
00:13:28,700 --> 00:13:33,380
to utilize float in debt intelligently in your

309
00:13:33,380 --> 00:13:35,580
life and you'll probably be better off for

310
00:13:35,580 --> 00:13:35,740
it.

311
00:13:35,880 --> 00:13:39,060
I started off this conversation by saying, I'm

312
00:13:39,060 --> 00:13:41,020
order of magnitude wealthier because of some of

313
00:13:41,020 --> 00:13:42,720
the lessons that I've learned from Warren Buffett.

314
00:13:44,280 --> 00:13:47,100
That's a good example of how that happened.

315
00:13:48,620 --> 00:13:50,180
Going back a little bit, one of the

316
00:13:50,180 --> 00:13:53,480
interesting things that I heard in the aftermath

317
00:13:53,480 --> 00:13:57,900
of Warren announcing his retirement was people reflecting

318
00:13:57,900 --> 00:13:58,840
like you are, Brian.

319
00:13:59,600 --> 00:14:02,100
One of them was that Massachusetts and Rhode

320
00:14:02,100 --> 00:14:05,300
Island connection of the textile mills that you

321
00:14:05,300 --> 00:14:05,860
referenced.

322
00:14:06,780 --> 00:14:08,700
So we have a local connection to Massachusetts.

323
00:14:09,560 --> 00:14:12,160
The comment was, if you had invested $100

324
00:14:12,160 --> 00:14:16,200
in those shares of Berkshire Hathaway around the

325
00:14:16,200 --> 00:14:21,320
textile mills time in 1965, today it would

326
00:14:21,320 --> 00:14:23,140
be worth $2.8 million.

327
00:14:24,540 --> 00:14:29,700
That's just talking about building wealth and capitalism.

328
00:14:30,160 --> 00:14:35,020
To me, that's what Warren Buffett's legacy is

329
00:14:35,020 --> 00:14:37,760
as a business person of being a capitalist,

330
00:14:38,020 --> 00:14:42,380
being a moral capitalist, not an immoral capitalist,

331
00:14:42,700 --> 00:14:46,280
different show, different time, but someone who's built

332
00:14:46,280 --> 00:14:49,380
wealth, built companies, cared about the people, his

333
00:14:49,380 --> 00:14:52,100
employees along the way very much, cared about

334
00:14:52,100 --> 00:14:53,420
his shareholders very much.

335
00:14:54,620 --> 00:14:58,020
Now the legacy of Warren Buffett is all

336
00:14:58,020 --> 00:15:00,320
these lessons that he has left and all

337
00:15:00,320 --> 00:15:02,280
that money he's made, he's trying to give

338
00:15:02,280 --> 00:15:02,720
it away.

339
00:15:03,260 --> 00:15:05,320
His quote this weekend at the meeting was,

340
00:15:05,920 --> 00:15:07,560
he didn't think he'd be able to give

341
00:15:07,560 --> 00:15:07,980
it away.

342
00:15:08,400 --> 00:15:09,380
It's too much.

343
00:15:11,640 --> 00:15:13,760
While that's on topic, maybe we can come

344
00:15:13,760 --> 00:15:17,700
back to this giving pledge and what's happening

345
00:15:17,700 --> 00:15:17,980
there.

346
00:15:18,480 --> 00:15:21,940
Let's talk more about this concept of economic

347
00:15:21,940 --> 00:15:28,040
moats that is a foundational concept.

348
00:15:28,220 --> 00:15:32,380
What does go into maybe some examples of

349
00:15:32,380 --> 00:15:38,620
companies that Buffett has bought because of this

350
00:15:38,620 --> 00:15:42,940
principle and the advantages that they've provided?

351
00:15:43,780 --> 00:15:45,380
Brian, I'm going to ask you to do

352
00:15:45,380 --> 00:15:45,600
that.

353
00:15:46,120 --> 00:15:46,380
Sure.

354
00:15:46,460 --> 00:15:48,540
I think there's some great examples.

355
00:15:48,980 --> 00:15:51,200
He first bought Coca-Cola in 1988.

356
00:15:52,520 --> 00:15:55,460
Coca-Cola had gone through some spans where

357
00:15:55,460 --> 00:15:57,940
they made some pretty drastic mistakes.

358
00:15:58,900 --> 00:15:59,800
New Coke?

359
00:16:00,520 --> 00:16:01,360
That's one.

360
00:16:01,920 --> 00:16:03,980
I think that happened a little later, but

361
00:16:03,980 --> 00:16:07,560
they were actually investing in movie theaters and

362
00:16:07,560 --> 00:16:09,000
they were trying to afford to integrate.

363
00:16:10,860 --> 00:16:14,460
Warren identified then at that very, very cheap

364
00:16:14,460 --> 00:16:18,580
price that what they sell is sugar and

365
00:16:18,580 --> 00:16:20,760
it's distributed globally.

366
00:16:22,360 --> 00:16:23,780
Ultimately, that's a great business.

367
00:16:23,840 --> 00:16:24,900
They don't even own the bottling.

368
00:16:25,320 --> 00:16:26,700
That's where all the expenses are.

369
00:16:27,280 --> 00:16:28,820
He was one of the first people to

370
00:16:28,820 --> 00:16:30,780
come on to this idea of a great

371
00:16:30,780 --> 00:16:36,380
brand with capital light business.

372
00:16:37,520 --> 00:16:40,620
He doesn't really invest in technology, but he

373
00:16:40,620 --> 00:16:42,700
did that before the internet in Coca-Cola

374
00:16:43,940 --> 00:16:45,620
when the stock was absolutely hated.

375
00:16:46,500 --> 00:16:47,920
He still holds it today.

376
00:16:48,640 --> 00:16:50,840
It pays in dividends per year more than

377
00:16:50,840 --> 00:16:52,020
he paid for it in 1988.

378
00:16:53,300 --> 00:16:56,740
It's just a remarkable example of identifying a

379
00:16:56,740 --> 00:16:57,960
great business and holding it.

380
00:16:58,780 --> 00:17:00,540
Not selling it after you make a quick

381
00:17:00,540 --> 00:17:02,260
buck, but actually holding it for the long

382
00:17:02,260 --> 00:17:05,079
term because it's a great business and a

383
00:17:05,079 --> 00:17:07,740
great business model and has that moat that

384
00:17:07,740 --> 00:17:08,560
Chris was talking about.

385
00:17:09,160 --> 00:17:11,060
Another example is American Express.

386
00:17:12,020 --> 00:17:13,760
Again, he bought this company when it was

387
00:17:13,760 --> 00:17:17,540
absolutely hated, but what he identified was this

388
00:17:17,540 --> 00:17:21,819
was a globally recognized brand that was important

389
00:17:21,819 --> 00:17:27,099
to not just consumers, but it was almost

390
00:17:27,099 --> 00:17:28,020
a status symbol.

391
00:17:28,880 --> 00:17:30,120
He recognized this early.

392
00:17:31,740 --> 00:17:34,960
American Express is different from Visa and MasterCard

393
00:17:34,960 --> 00:17:37,460
in the idea that they actually are a

394
00:17:37,460 --> 00:17:38,980
bank as well as a card provider.

395
00:17:39,400 --> 00:17:41,520
They aren't just processing the transaction, but they're

396
00:17:41,520 --> 00:17:43,500
actually extending the credit as well.

397
00:17:44,660 --> 00:17:46,280
It was a bit of a risk.

398
00:17:46,660 --> 00:17:49,540
This was before MasterCard and Visa even really

399
00:17:49,540 --> 00:17:49,940
existed.

400
00:17:52,080 --> 00:17:53,600
He still holds that today.

401
00:17:53,900 --> 00:17:54,680
Another great example.

402
00:17:55,020 --> 00:17:59,060
I mentioned earlier that Berkshire Hathaway owns 2

403
00:17:59,060 --> 00:18:00,420
% of all of Apple.

404
00:18:01,840 --> 00:18:03,740
It's a remarkable thing.

405
00:18:05,620 --> 00:18:07,100
He says he'll be the first one to

406
00:18:07,100 --> 00:18:08,940
tell you that he doesn't invest in technology,

407
00:18:09,400 --> 00:18:11,900
but what he did was he recognized that

408
00:18:11,900 --> 00:18:15,000
an iPhone is not technology so much as

409
00:18:15,000 --> 00:18:15,940
a consumer product.

410
00:18:17,280 --> 00:18:21,000
If you look at it as a necessary

411
00:18:21,000 --> 00:18:24,020
thing in people's lives rather than a technology

412
00:18:24,020 --> 00:18:28,600
product, then you can understand it more easily

413
00:18:28,600 --> 00:18:29,480
and not dismiss it.

414
00:18:29,780 --> 00:18:32,060
What he would say is it's within his

415
00:18:32,060 --> 00:18:33,060
circle of competence.

416
00:18:34,660 --> 00:18:41,280
This is something that I've taken into account

417
00:18:41,280 --> 00:18:44,080
in my life and tried to use that

418
00:18:44,080 --> 00:18:45,860
investing philosophy.

419
00:18:46,020 --> 00:18:47,720
You don't necessarily need to know how the

420
00:18:47,720 --> 00:18:48,460
iPhone is made.

421
00:18:49,100 --> 00:18:51,660
You need to know why it's important, how

422
00:18:51,660 --> 00:18:54,920
it fits into people's everyday lives, and how

423
00:18:54,920 --> 00:18:56,320
it's going to continue to grow revenue into

424
00:18:56,320 --> 00:18:56,700
the future.

425
00:18:57,800 --> 00:19:00,540
I don't necessarily know the ins and outs

426
00:19:00,540 --> 00:19:06,360
of NVIDIA, for example, or how they actually

427
00:19:06,360 --> 00:19:10,300
build their H100 chips or their Blackwell chips,

428
00:19:10,720 --> 00:19:12,260
but I don't really think it matters.

429
00:19:12,560 --> 00:19:14,400
I understand what a GPU is.

430
00:19:14,560 --> 00:19:15,580
I understand why it's important.

431
00:19:16,300 --> 00:19:18,420
I understand what people are trying to do

432
00:19:18,420 --> 00:19:20,420
from a competitive advantage to compete with them.

433
00:19:20,980 --> 00:19:23,060
I understand that generally people are behind and

434
00:19:23,060 --> 00:19:25,260
that software is really the competitive advantage and

435
00:19:25,260 --> 00:19:27,500
that NVIDIA has the CUDA software, which is

436
00:19:27,500 --> 00:19:29,060
going to be hard to overcome.

437
00:19:29,700 --> 00:19:34,300
Similar to how Microsoft was a dominant platform,

438
00:19:34,500 --> 00:19:36,540
Windows was a dominant platform on all PCs

439
00:19:36,540 --> 00:19:39,460
back in the late 80s and early 90s.

440
00:19:40,320 --> 00:19:43,100
I think that the lesson is you can

441
00:19:43,100 --> 00:19:45,820
stay within your circle of competence, but your

442
00:19:45,820 --> 00:19:48,420
circle of competence, things might sneak in there

443
00:19:48,420 --> 00:19:50,880
that you don't necessarily need to know.

444
00:19:51,700 --> 00:19:53,000
I live in a house, but I don't

445
00:19:53,000 --> 00:19:53,700
know how to build one.

446
00:19:54,620 --> 00:19:57,600
You can find what's important in the business

447
00:19:57,600 --> 00:19:57,880
model.

448
00:19:58,580 --> 00:20:02,540
There's this notion of durable, competitive advantages, this

449
00:20:02,540 --> 00:20:03,480
economic moat.

450
00:20:04,060 --> 00:20:08,760
Maybe that's brand strength, scalability, customer loyalty.

451
00:20:10,780 --> 00:20:12,400
Difficulty to enter the market.

452
00:20:12,920 --> 00:20:15,280
Yeah, keep going.

453
00:20:15,580 --> 00:20:18,840
It's just these kinds of qualities that not

454
00:20:18,840 --> 00:20:22,220
something that's speculative or a fad, but something

455
00:20:22,220 --> 00:20:23,580
that's long lasting.

456
00:20:24,700 --> 00:20:26,060
Brian, you look like you were about to

457
00:20:26,060 --> 00:20:26,580
chime in there.

458
00:20:26,720 --> 00:20:26,900
Yeah.

459
00:20:26,940 --> 00:20:28,220
One of the big ones that I look

460
00:20:28,220 --> 00:20:29,500
for personally is backlogs.

461
00:20:32,740 --> 00:20:35,520
Stocks tend to get hammered in market or

462
00:20:35,520 --> 00:20:38,420
the sector, but you'll notice that some companies

463
00:20:38,420 --> 00:20:40,640
have backlogs with deposits on them.

464
00:20:40,720 --> 00:20:42,080
Sometimes they're non-refundable deposits.

465
00:20:42,320 --> 00:20:43,000
I'll give you an example.

466
00:20:44,040 --> 00:20:44,980
We own Toll Brothers.

467
00:20:45,040 --> 00:20:46,700
We've owned Toll Brothers for a long time.

468
00:20:46,880 --> 00:20:49,660
During the pandemic, it traded down to, I'd

469
00:20:49,660 --> 00:20:52,180
say, a fourth of its land value, so

470
00:20:52,180 --> 00:20:53,480
the land that they actually owned.

471
00:20:54,680 --> 00:20:56,420
Not only that, they're a luxury home builder

472
00:20:56,420 --> 00:20:59,460
and they take non-refundable deposits from their

473
00:20:59,460 --> 00:20:59,800
clients.

474
00:20:59,940 --> 00:21:02,980
You can actually see years out how many

475
00:21:02,980 --> 00:21:03,800
houses they're going to build.

476
00:21:04,860 --> 00:21:07,180
I talk about consistency and growth and predictability,

477
00:21:07,340 --> 00:21:08,740
and Chris is talking about moats and Warren

478
00:21:08,740 --> 00:21:09,060
Buffett.

479
00:21:10,020 --> 00:21:10,800
That's a good example.

480
00:21:11,080 --> 00:21:14,460
You know, even through hard times, how many

481
00:21:14,460 --> 00:21:17,180
houses and how much revenue Toll Brothers can

482
00:21:17,180 --> 00:21:18,820
lock in the book.

483
00:21:19,620 --> 00:21:22,120
That is just an example of one of

484
00:21:22,120 --> 00:21:24,080
these competitive advantages that Chris is talking about.

485
00:21:24,880 --> 00:21:27,480
Another really interesting thing to talk about when

486
00:21:27,480 --> 00:21:31,020
it comes to Warren Buffett is leverage or

487
00:21:31,020 --> 00:21:32,660
lack of leverage.

488
00:21:34,080 --> 00:21:39,380
Cash, the retention of cash, and lack of

489
00:21:39,380 --> 00:21:39,720
debt.

490
00:21:40,140 --> 00:21:41,860
Do you want to talk a little bit

491
00:21:41,860 --> 00:21:48,060
about that principle of using debt cautiously in

492
00:21:48,060 --> 00:21:48,960
some respects?

493
00:21:49,400 --> 00:21:51,580
Is that a fair characterization, do you think?

494
00:21:51,660 --> 00:21:53,440
I mean, you had some comments earlier about

495
00:21:53,440 --> 00:21:59,980
moats, but it does seem like in the

496
00:21:59,980 --> 00:22:03,580
dire times, there have been, they've had a

497
00:22:03,580 --> 00:22:05,080
lot of cash on the books and ready

498
00:22:05,080 --> 00:22:07,060
to put it to work with opportunities.

499
00:22:08,040 --> 00:22:09,640
What are your thoughts?

500
00:22:10,520 --> 00:22:11,440
I love his quote.

501
00:22:11,780 --> 00:22:13,600
He has a lot of quotes on every

502
00:22:13,600 --> 00:22:13,880
subject.

503
00:22:14,020 --> 00:22:16,440
He's been around a long time, but he

504
00:22:16,440 --> 00:22:18,340
says two things to avoid in this world

505
00:22:18,340 --> 00:22:19,640
is liquor and leverage.

506
00:22:23,060 --> 00:22:26,700
Brian, to your earlier point about you using

507
00:22:26,700 --> 00:22:28,260
credit cards, I don't think he'd agree with

508
00:22:28,260 --> 00:22:28,380
you.

509
00:22:28,460 --> 00:22:32,100
He is pretty outspoken about the use of

510
00:22:32,100 --> 00:22:34,860
credit cards and the dangers that people get

511
00:22:34,860 --> 00:22:36,480
into them with them.

512
00:22:36,860 --> 00:22:40,780
He encourages people not to use them.

513
00:22:43,910 --> 00:22:44,050
Yeah.

514
00:22:46,030 --> 00:22:47,750
He's kind of complicated on the subject.

515
00:22:49,430 --> 00:22:52,430
Yes, he says over and over and over

516
00:22:52,430 --> 00:22:54,030
and over again, don't use margin, be careful

517
00:22:54,030 --> 00:22:54,530
with debt.

518
00:22:54,610 --> 00:22:56,490
I think it's very, very good advice.

519
00:22:57,670 --> 00:22:59,630
We talked about float earlier.

520
00:23:00,250 --> 00:23:02,410
Float is basically a liability, which is debt.

521
00:23:03,650 --> 00:23:05,710
It's intelligent debt, is what it is.

522
00:23:05,770 --> 00:23:08,870
It's debt that is long lasting and fairly

523
00:23:08,870 --> 00:23:09,390
predictable.

524
00:23:10,770 --> 00:23:13,390
Not predictable in the sense that when people

525
00:23:13,390 --> 00:23:14,450
are going to get in a car accident,

526
00:23:14,550 --> 00:23:15,870
but predictable in the sense that you have

527
00:23:15,870 --> 00:23:19,110
actuaries that can kind of statistically game out

528
00:23:19,110 --> 00:23:20,390
how long that cash is going to sit

529
00:23:20,390 --> 00:23:21,070
on your balance sheet.

530
00:23:21,970 --> 00:23:24,190
Then when you have a surplus, so if

531
00:23:24,190 --> 00:23:25,510
you invest that money and you do really

532
00:23:25,510 --> 00:23:26,970
well and you have a surplus, well then

533
00:23:26,970 --> 00:23:29,130
that ends up being free money that you

534
00:23:29,130 --> 00:23:29,610
can invest.

535
00:23:31,410 --> 00:23:35,530
I think what Jeff said is true.

536
00:23:36,210 --> 00:23:39,170
I don't think he won't be a proponent

537
00:23:39,170 --> 00:23:40,150
of credit card debt.

538
00:23:40,710 --> 00:23:43,110
The example that I gave was 0%

539
00:23:43,110 --> 00:23:46,830
credit card debt and it was termed out

540
00:23:46,830 --> 00:23:47,410
for a year.

541
00:23:48,090 --> 00:23:51,570
I think he is a proponent of using

542
00:23:51,570 --> 00:23:54,230
debt in a smart way.

543
00:23:55,050 --> 00:23:57,690
Float is a good example, but even in

544
00:23:57,690 --> 00:24:01,310
recent years, he's been buying Japanese banks and

545
00:24:01,310 --> 00:24:06,030
he borrowed in yen at 0%, so he

546
00:24:06,030 --> 00:24:07,630
hedged his currency rate, but he actually took

547
00:24:07,630 --> 00:24:08,150
out some debt.

548
00:24:11,250 --> 00:24:13,510
So, there's not like there's no debt on

549
00:24:13,510 --> 00:24:15,530
Berkshire Hathaway's balance sheet.

550
00:24:15,710 --> 00:24:17,130
There's debt on their balance sheet.

551
00:24:18,350 --> 00:24:20,050
When he says that, I think he's saying,

552
00:24:20,150 --> 00:24:25,030
hey look, I'm a genius and I'm the

553
00:24:25,030 --> 00:24:26,090
best investor in the world.

554
00:24:26,530 --> 00:24:27,870
I know how to use debt intelligently.

555
00:24:28,630 --> 00:24:32,150
You can learn from me if you want

556
00:24:32,150 --> 00:24:32,830
to be like that.

557
00:24:33,950 --> 00:24:36,810
Or if you're not a genius and not

558
00:24:36,810 --> 00:24:39,170
the greatest investor in the world, it might

559
00:24:39,170 --> 00:24:41,430
be smart just to stay away from it

560
00:24:41,430 --> 00:24:41,810
altogether.

561
00:24:43,670 --> 00:24:45,030
I'm not sure he would have framed it

562
00:24:45,030 --> 00:24:45,430
like that.

563
00:24:45,750 --> 00:24:48,710
He's a pretty humble guy.

564
00:24:50,050 --> 00:24:52,810
He is a humble guy and I'll say

565
00:24:52,810 --> 00:24:53,310
it for him.

566
00:24:55,170 --> 00:24:56,630
I admire the guy greatly.

567
00:24:56,950 --> 00:24:57,530
What can I say?

568
00:24:58,990 --> 00:24:59,570
Oh, sorry.

569
00:24:59,610 --> 00:24:59,890
Go ahead.

570
00:25:00,210 --> 00:25:04,630
There's all kinds of great anecdotal stuff in

571
00:25:04,630 --> 00:25:05,510
terms of the isms.

572
00:25:05,510 --> 00:25:07,970
That could be its own show someday, but

573
00:25:07,970 --> 00:25:09,310
Jeff, go ahead.

574
00:25:09,670 --> 00:25:11,370
I think one of the interesting questions is

575
00:25:11,370 --> 00:25:16,230
what motivates Warren Buffett?

576
00:25:17,010 --> 00:25:20,230
Brian, you've talked about some of the successes

577
00:25:20,230 --> 00:25:22,390
in his history and Chris, you noted that

578
00:25:22,390 --> 00:25:24,610
he lives in the same house that he's

579
00:25:24,610 --> 00:25:26,270
lived in and he's known to be humble

580
00:25:26,270 --> 00:25:26,970
and conservative.

581
00:25:29,210 --> 00:25:31,110
What motivates the guy to keep going?

582
00:25:31,490 --> 00:25:33,150
What drives him?

583
00:25:33,150 --> 00:25:34,990
It seems like he just loves what he

584
00:25:34,990 --> 00:25:35,450
does.

585
00:25:36,190 --> 00:25:41,090
It's a passion for the process, not about

586
00:25:43,530 --> 00:25:44,730
money anymore.

587
00:25:46,290 --> 00:25:48,450
It's a passion for the process.

588
00:25:50,170 --> 00:25:52,430
I'm sure he's a competitive guy.

589
00:25:52,510 --> 00:25:54,570
He wants to win in the sense of

590
00:25:54,570 --> 00:26:00,330
finding these great deals, these great values and

591
00:26:00,330 --> 00:26:01,750
benefit.

592
00:26:03,190 --> 00:26:06,810
In the process, it benefits the company oftentimes

593
00:26:06,810 --> 00:26:07,370
too.

594
00:26:08,170 --> 00:26:10,090
If you've got Warren Buffett as a buyer,

595
00:26:10,210 --> 00:26:12,250
you know there's continuity that's not just a

596
00:26:12,250 --> 00:26:13,270
quick turnover.

597
00:26:13,930 --> 00:26:15,710
One of the things I admire about him

598
00:26:15,710 --> 00:26:17,610
as a man is I think he actually

599
00:26:17,610 --> 00:26:19,010
really does care about his shareholders.

600
00:26:19,730 --> 00:26:23,590
One of the reasons why Berkshire A shares

601
00:26:23,590 --> 00:26:26,310
are so expensive is because he wants to

602
00:26:26,310 --> 00:26:27,170
keep the same shareholders.

603
00:26:27,670 --> 00:26:29,570
I think he generally looks upon them as

604
00:26:29,570 --> 00:26:29,870
partners.

605
00:26:30,690 --> 00:26:34,310
There's a reason why the Berkshire Hathaway annual

606
00:26:34,310 --> 00:26:37,090
event is in a stadium.

607
00:26:39,850 --> 00:26:44,010
It's important to him that these people come

608
00:26:44,010 --> 00:26:46,190
and feel like they're part of the organization.

609
00:26:47,290 --> 00:26:51,330
That is admirable and a lot that you

610
00:26:51,330 --> 00:26:52,830
could take away from in your own life

611
00:26:52,830 --> 00:26:53,570
and your own business.

612
00:26:53,990 --> 00:26:56,330
I think at this point, he cares about

613
00:26:56,330 --> 00:26:58,490
leaving a lasting legacy.

614
00:27:00,410 --> 00:27:02,030
I don't know how much time you guys

615
00:27:02,030 --> 00:27:05,190
have, but he's not infallible.

616
00:27:05,770 --> 00:27:07,070
It's not like he's never made any bad

617
00:27:07,070 --> 00:27:07,510
investments.

618
00:27:08,090 --> 00:27:11,610
I find that just as interesting as some

619
00:27:11,610 --> 00:27:12,230
of his wins.

620
00:27:13,090 --> 00:27:18,630
He's not shy about talking about it.

621
00:27:18,850 --> 00:27:21,030
One of the things about being a very

622
00:27:21,030 --> 00:27:25,710
rich man is he can just say, I

623
00:27:25,710 --> 00:27:26,150
gooped up.

624
00:27:26,690 --> 00:27:27,310
I made a mistake.

625
00:27:27,830 --> 00:27:29,770
It's harder for other people to do that

626
00:27:29,770 --> 00:27:33,770
for marketing purposes or lack of humility or

627
00:27:33,770 --> 00:27:38,390
the fact that if you're raising a surrender

628
00:27:38,390 --> 00:27:39,930
flag all the time, who's going to want

629
00:27:39,930 --> 00:27:40,410
to hire you?

630
00:27:42,510 --> 00:27:43,950
He will tell you that he made a

631
00:27:43,950 --> 00:27:45,130
mistake and he'll tell you what he did

632
00:27:45,130 --> 00:27:45,430
wrong.

633
00:27:46,810 --> 00:27:50,090
There is an enormous amount of value in

634
00:27:50,090 --> 00:27:51,130
learning from that.

635
00:27:51,270 --> 00:27:52,410
One of the things that I found is

636
00:27:52,410 --> 00:27:55,030
he goes back to the same mistakes over

637
00:27:55,030 --> 00:27:56,090
and over again sometimes.

638
00:27:56,230 --> 00:27:57,330
He'll be the first one to tell you.

639
00:27:59,310 --> 00:28:02,590
One of the things that stood out to

640
00:28:02,590 --> 00:28:04,270
me recently, I think he talked about this

641
00:28:04,270 --> 00:28:08,110
in the last week's annual meeting.

642
00:28:09,030 --> 00:28:11,170
He's lost money on airlines multiple times.

643
00:28:12,070 --> 00:28:15,110
I think it was the 80s, the airlines

644
00:28:15,110 --> 00:28:16,350
started to get deregulated.

645
00:28:16,790 --> 00:28:20,350
There was more and more airlines available and

646
00:28:20,350 --> 00:28:21,450
they started to compete on price.

647
00:28:22,610 --> 00:28:25,190
Warren Buffett thought that this was an interesting

648
00:28:25,190 --> 00:28:25,990
technology.

649
00:28:28,430 --> 00:28:30,170
And people are going to want to fly

650
00:28:30,170 --> 00:28:31,530
and I don't think he was wrong about

651
00:28:31,530 --> 00:28:31,730
that.

652
00:28:31,770 --> 00:28:33,030
But what he was wrong about was the

653
00:28:33,030 --> 00:28:34,210
fact that it wasn't a good business.

654
00:28:35,150 --> 00:28:37,110
And then he owned it again going into

655
00:28:37,110 --> 00:28:37,610
the pandemic.

656
00:28:38,110 --> 00:28:41,130
So he got killed on airlines twice.

657
00:28:43,010 --> 00:28:45,310
One, I think it was Continental Airlines.

658
00:28:45,510 --> 00:28:48,850
He might have got creamed on decades ago.

659
00:28:48,970 --> 00:28:51,430
And then I know he owned multiple airlines

660
00:28:51,430 --> 00:28:53,550
going into the pandemic and creamed on that

661
00:28:53,550 --> 00:28:53,870
again.

662
00:28:54,950 --> 00:28:57,270
And it's just kind of interesting, he's human.

663
00:28:57,770 --> 00:29:00,850
Even the greats make mistakes like that.

664
00:29:02,150 --> 00:29:02,910
Yeah, good point.

665
00:29:03,190 --> 00:29:06,470
You talked about the annual meeting.

666
00:29:08,650 --> 00:29:09,690
I've never been.

667
00:29:09,850 --> 00:29:11,190
Sounds like it's an amazing event.

668
00:29:11,410 --> 00:29:13,030
I wish I had gone while he was

669
00:29:13,030 --> 00:29:13,370
there.

670
00:29:14,670 --> 00:29:17,230
But tell us a little bit about the

671
00:29:17,230 --> 00:29:19,630
shareholder letter as well, because it sounds like

672
00:29:21,150 --> 00:29:24,570
there's a few people that just write these

673
00:29:24,570 --> 00:29:27,370
shareholder letters that are filled with perspective.

674
00:29:28,770 --> 00:29:31,690
I put Jamie Dimon in that category, but

675
00:29:31,690 --> 00:29:35,570
Warren Buffett- He's on the top of

676
00:29:35,570 --> 00:29:35,910
the list.

677
00:29:36,150 --> 00:29:36,250
Yeah.

678
00:29:37,110 --> 00:29:39,290
So he's written one annually and they're all

679
00:29:39,290 --> 00:29:40,690
online and they're all available.

680
00:29:41,150 --> 00:29:44,650
And it is a educational process to go

681
00:29:44,650 --> 00:29:45,350
back and read them.

682
00:29:45,630 --> 00:29:47,050
And we had an intern a couple of

683
00:29:47,050 --> 00:29:48,130
years ago and I made him read them.

684
00:29:49,570 --> 00:29:51,130
And I don't think he got through all

685
00:29:51,130 --> 00:29:53,450
of them, but I'm not even quite sure

686
00:29:53,450 --> 00:29:53,850
he tried.

687
00:29:54,030 --> 00:29:56,630
But I thought that was a good way

688
00:29:56,630 --> 00:29:59,370
of, hey, look, go learn from this guy.

689
00:29:59,670 --> 00:30:00,930
That's an excellent exercise.

690
00:30:02,690 --> 00:30:05,230
There's also a book, The Complete History of

691
00:30:05,230 --> 00:30:07,310
Berkshire Hathaway, which I've read, which is interesting.

692
00:30:07,810 --> 00:30:11,090
There's a good biography called Snowball, which is

693
00:30:11,090 --> 00:30:11,510
interesting.

694
00:30:11,830 --> 00:30:16,390
It talks about him as a kid, he

695
00:30:16,390 --> 00:30:22,910
started a vending machine operation and he was

696
00:30:22,910 --> 00:30:24,270
putting that in grocery stores.

697
00:30:24,550 --> 00:30:27,390
This guy was an entrepreneur from jump.

698
00:30:29,130 --> 00:30:30,650
Those are all great, great reading.

699
00:30:30,870 --> 00:30:33,410
And if you're not a reader, I recommend

700
00:30:33,410 --> 00:30:34,630
The Acquired Podcast.

701
00:30:34,730 --> 00:30:36,810
The Acquired Podcast has multiple parts.

702
00:30:37,030 --> 00:30:38,650
It's like seven hours of listening on The

703
00:30:38,650 --> 00:30:41,190
Complete History of Berkshire Hathaway to have their

704
00:30:41,190 --> 00:30:45,430
own interview with Charlie Munger, like weeks before

705
00:30:45,430 --> 00:30:45,910
he died.

706
00:30:46,870 --> 00:30:50,470
If you're interested in this, I can't recommend

707
00:30:50,470 --> 00:30:53,750
that more on learning from these individuals.

708
00:30:55,410 --> 00:30:57,070
Also, these events are on YouTube.

709
00:30:57,390 --> 00:30:58,090
Just watch them.

710
00:30:58,830 --> 00:31:00,950
I mean, he's 95 years old.

711
00:31:01,010 --> 00:31:02,870
He stood on stage, did not know the

712
00:31:02,870 --> 00:31:05,190
questions in advance, and spoke for four hours

713
00:31:05,190 --> 00:31:07,690
right before he announced his retirement.

714
00:31:09,630 --> 00:31:10,610
That's pretty amazing.

715
00:31:10,830 --> 00:31:13,970
And I'm telling you, I listened to at

716
00:31:13,970 --> 00:31:15,530
least half of it on two times speed.

717
00:31:16,990 --> 00:31:18,850
And he sounds like a bit of a

718
00:31:18,850 --> 00:31:23,930
chipmunk at two times speed, but still as

719
00:31:23,930 --> 00:31:26,130
sharp as he was a decade ago.

720
00:31:27,570 --> 00:31:28,930
Well, I wanted to come back to one

721
00:31:28,930 --> 00:31:31,350
thing that we just kind of skipped past

722
00:31:31,350 --> 00:31:32,710
a little bit because we got a little

723
00:31:32,710 --> 00:31:33,510
sidetracked.

724
00:31:33,790 --> 00:31:40,670
But it seems that Berkshire has this capacity

725
00:31:40,670 --> 00:31:43,750
and tendency to retain cash and to build

726
00:31:43,750 --> 00:31:47,890
up cash, which oftentimes provides them opportunities.

727
00:31:48,750 --> 00:31:50,730
They don't pay a dividend on their stock,

728
00:31:50,910 --> 00:31:51,810
right, Brian?

729
00:31:52,050 --> 00:31:54,730
But is that part of how these companies

730
00:31:54,730 --> 00:32:01,370
that are productive pay into essentially this accumulation

731
00:32:01,370 --> 00:32:06,750
of profitability from these various companies that Berkshire

732
00:32:06,750 --> 00:32:07,250
owns?

733
00:32:08,130 --> 00:32:09,390
And that gives them an opportunity to say,

734
00:32:09,510 --> 00:32:10,630
how are we going to deploy this?

735
00:32:10,810 --> 00:32:13,610
And sometimes that leads them with cash when

736
00:32:13,610 --> 00:32:14,650
things happen.

737
00:32:16,310 --> 00:32:16,490
Yeah.

738
00:32:16,690 --> 00:32:19,050
So basically it's a conglomerate where they pay

739
00:32:19,050 --> 00:32:20,790
dividends back to the home office and the

740
00:32:20,790 --> 00:32:21,970
home office is Warren Buffett.

741
00:32:22,070 --> 00:32:23,430
And so Warren Buffett not only has the

742
00:32:23,430 --> 00:32:26,950
float, but he has the earnings from these

743
00:32:26,950 --> 00:32:27,750
operating companies.

744
00:32:28,370 --> 00:32:30,870
And he says that he paid a dividend

745
00:32:30,870 --> 00:32:32,390
once and he regretted it.

746
00:32:32,570 --> 00:32:34,670
And the reason being is he thinks that

747
00:32:34,670 --> 00:32:39,770
that cash is more valuable under his advisement

748
00:32:39,770 --> 00:32:41,310
than it is in our pockets.

749
00:32:41,830 --> 00:32:42,730
It's tough to argue that.

750
00:32:45,270 --> 00:32:45,750
He's right.

751
00:32:46,050 --> 00:32:48,030
I mean, there's no argument.

752
00:32:48,190 --> 00:32:49,490
I mean, he's absolutely right.

753
00:32:50,130 --> 00:32:53,390
And we own Berkshire Hathaway shares for our

754
00:32:53,390 --> 00:32:54,290
discretionary plans.

755
00:32:54,530 --> 00:32:58,930
And I am unfazed by the amount of

756
00:32:58,930 --> 00:33:00,870
cash that he has, because what I know

757
00:33:00,870 --> 00:33:02,090
what's going to happen is if he gets

758
00:33:02,090 --> 00:33:03,570
that fat pitch, he's going to invest it.

759
00:33:03,630 --> 00:33:04,590
He's going to invest it well.

760
00:33:04,850 --> 00:33:05,970
Now, part of the reason that he owns

761
00:33:05,970 --> 00:33:07,750
all that cash is because of those liabilities

762
00:33:07,750 --> 00:33:09,150
that I mentioned before in the float.

763
00:33:09,470 --> 00:33:11,390
So he's not just being irresponsible.

764
00:33:13,590 --> 00:33:15,890
I've talked many times before about how insurance

765
00:33:15,890 --> 00:33:17,690
companies are almost impossible to analyze because you

766
00:33:17,690 --> 00:33:19,610
do not know their contracts that they're underwriting.

767
00:33:20,590 --> 00:33:22,170
And you don't know how they're investing the

768
00:33:22,170 --> 00:33:22,490
excess.

769
00:33:22,790 --> 00:33:24,890
You don't know how they're investing that float.

770
00:33:26,050 --> 00:33:27,210
And one of the ways that I get

771
00:33:27,210 --> 00:33:29,470
exposure to insurance companies is by buying Berkshire

772
00:33:29,470 --> 00:33:29,890
Hathaway.

773
00:33:30,090 --> 00:33:32,790
I know that they have those liabilities covered.

774
00:33:33,530 --> 00:33:34,990
I'm unconcerned about it.

775
00:33:35,110 --> 00:33:37,170
And I know that he is massively concerned

776
00:33:37,170 --> 00:33:37,650
about it.

777
00:33:37,850 --> 00:33:41,730
Let's talk about Solomon and maybe the financial

778
00:33:41,730 --> 00:33:42,830
crisis a little bit.

779
00:33:42,910 --> 00:33:46,730
Some of these instances where people have turned

780
00:33:46,730 --> 00:33:49,810
to Warren Buffett in challenging times.

781
00:33:50,870 --> 00:33:55,910
Yes, I think John Goodfriend was the CEO

782
00:33:55,910 --> 00:33:57,970
of Solomon Brothers when they rigged the Treasury

783
00:33:57,970 --> 00:33:58,310
auction.

784
00:33:59,930 --> 00:34:02,730
And if that sounds hyperbolic, it's not.

785
00:34:02,950 --> 00:34:03,770
That's what happened.

786
00:34:04,090 --> 00:34:08,030
The traders in Solomon Brothers rigged the Treasury

787
00:34:08,030 --> 00:34:08,489
auction.

788
00:34:09,730 --> 00:34:11,730
So as you can imagine, that wasn't good

789
00:34:11,730 --> 00:34:14,409
for the company, which is no longer with

790
00:34:14,409 --> 00:34:14,730
us.

791
00:34:15,429 --> 00:34:17,610
But Warren Buffett owned preferred shares in the

792
00:34:17,610 --> 00:34:21,389
company at the time against Charlie Munger's advisement.

793
00:34:22,510 --> 00:34:25,949
So they begged him to become the CEO

794
00:34:25,949 --> 00:34:29,429
of the company to use his reputation, which

795
00:34:29,429 --> 00:34:32,090
was very solid, to put a foothold under

796
00:34:32,090 --> 00:34:35,550
the disaster that had become Solomon Brothers from

797
00:34:35,550 --> 00:34:36,130
the scandal.

798
00:34:38,150 --> 00:34:40,929
And as much as he disliked it, he

799
00:34:40,929 --> 00:34:46,530
was able to, let's just say, save the

800
00:34:46,530 --> 00:34:48,210
foundation of what the company was.

801
00:34:48,550 --> 00:34:49,850
And I think he eventually sold it.

802
00:34:50,429 --> 00:34:51,750
He didn't want any part of it.

803
00:34:52,830 --> 00:34:55,190
And from what I understand, the biggest lessons

804
00:34:55,190 --> 00:34:57,770
that he came out of that is he

805
00:34:57,770 --> 00:35:00,490
spent a lifetime, he was in his early

806
00:35:00,490 --> 00:35:02,090
70s, late 60s when this happened.

807
00:35:02,790 --> 00:35:04,210
He spent his lifetime building up a great

808
00:35:04,210 --> 00:35:08,110
reputation, and being attached to Solomon Brothers sullied

809
00:35:08,110 --> 00:35:09,070
it real quick.

810
00:35:10,470 --> 00:35:13,330
So one of the things that he learned

811
00:35:13,330 --> 00:35:14,690
from this is know who you're getting into

812
00:35:14,690 --> 00:35:15,130
bed with.

813
00:35:15,750 --> 00:35:18,510
And be very, very careful about how you

814
00:35:18,510 --> 00:35:20,890
judge both the character of people, but also

815
00:35:20,890 --> 00:35:23,030
the businesses that you invest in.

816
00:35:24,810 --> 00:35:26,730
When it comes to the financial crisis, he

817
00:35:26,730 --> 00:35:28,030
was one of the people who stepped in

818
00:35:28,030 --> 00:35:29,790
and put a foundation on the Goldman Sachs.

819
00:35:30,110 --> 00:35:32,830
He was basically the first person that company

820
00:35:32,830 --> 00:35:33,350
out.

821
00:35:33,770 --> 00:35:36,430
I believe he got preferred shares at 10%.

822
00:35:36,430 --> 00:35:38,510
This is at a time when interest rates

823
00:35:38,510 --> 00:35:40,790
were put to zero, still getting 10%

824
00:35:40,790 --> 00:35:43,630
preferred shares that could convert to common.

825
00:35:45,370 --> 00:35:48,110
A brilliant stroke, a brilliant stroke.

826
00:35:49,170 --> 00:35:51,690
I was a junior in college at that

827
00:35:51,690 --> 00:35:54,550
time, so a little fuzzier on the details

828
00:35:54,550 --> 00:35:55,410
and the exact investment.

829
00:35:55,830 --> 00:35:57,230
It was amazing stuff though.

830
00:35:57,590 --> 00:36:00,550
To the extent, that's essentially what it was.

831
00:36:01,070 --> 00:36:03,630
I think he did that most notably in

832
00:36:03,630 --> 00:36:05,070
the one you mentioned, but I think he

833
00:36:05,070 --> 00:36:07,810
did it in some smaller opportunities as well.

834
00:36:10,610 --> 00:36:12,490
In any case, and I think there was

835
00:36:12,490 --> 00:36:15,330
a lot of effort to try to see

836
00:36:15,330 --> 00:36:17,750
if he would do more in the midst

837
00:36:17,750 --> 00:36:18,250
of that.

838
00:36:20,270 --> 00:36:24,250
But it's one of those instances where I

839
00:36:24,250 --> 00:36:29,290
think at that time, the public was familiar

840
00:36:29,290 --> 00:36:31,310
with Warren Buffett in the midst of those

841
00:36:31,310 --> 00:36:34,410
times because he was on CNBC quite a

842
00:36:34,410 --> 00:36:37,490
bit trying to offer perspective and help people

843
00:36:37,490 --> 00:36:40,270
to make sense of what was going on,

844
00:36:40,370 --> 00:36:41,690
how to behave.

845
00:36:43,970 --> 00:36:46,510
What's the expression about blood in the streets?

846
00:36:48,650 --> 00:36:50,790
But you want to be a buyer when

847
00:36:50,790 --> 00:36:52,330
there's blood in the streets type of thing.

848
00:36:54,310 --> 00:37:00,050
In any case, just an amazing legacy and

849
00:37:00,050 --> 00:37:03,650
lots of lessons to be learned, lots to

850
00:37:03,650 --> 00:37:05,830
- I suspect there's more coming from him

851
00:37:05,830 --> 00:37:08,890
in the remaining time he has with us.

852
00:37:08,890 --> 00:37:12,670
We didn't mention this, but that giving pledge.

853
00:37:15,030 --> 00:37:18,490
Warren Buffett has pledged his wealth to go

854
00:37:18,490 --> 00:37:21,270
to charitable purposes.

855
00:37:21,490 --> 00:37:23,110
I think almost all of it's the Gates

856
00:37:23,110 --> 00:37:28,110
Foundation, as obviously the Gates have made that

857
00:37:28,110 --> 00:37:29,170
pledge as well.

858
00:37:31,030 --> 00:37:34,790
I think it started that process of trying

859
00:37:34,790 --> 00:37:42,080
to urge the super wealthy who've had this

860
00:37:42,080 --> 00:37:46,720
enormous wealth to identify how are they going

861
00:37:46,720 --> 00:37:50,080
to have an impact with their wealth after

862
00:37:50,080 --> 00:37:50,740
they're gone?

863
00:37:51,080 --> 00:37:52,320
What are they going to do with it?

864
00:37:52,340 --> 00:37:53,060
What kind of impact?

865
00:37:53,720 --> 00:37:57,860
You see lots of other wealth people have

866
00:37:58,740 --> 00:38:01,040
made similar pledges to some extent.

867
00:38:01,340 --> 00:38:05,820
I think it's an important thing in a

868
00:38:05,820 --> 00:38:08,560
society where we don't talk about this often.

869
00:38:08,740 --> 00:38:14,320
Oftentimes there's this sense of, is it right?

870
00:38:14,440 --> 00:38:18,040
Is it fair that so few people can

871
00:38:18,040 --> 00:38:19,680
amass so much wealth?

872
00:38:21,060 --> 00:38:24,340
That's the nature of capitalism that it doesn't

873
00:38:24,340 --> 00:38:27,280
mean other people are unfair, that they can't

874
00:38:27,280 --> 00:38:27,840
do that.

875
00:38:27,940 --> 00:38:29,920
It's just that these people have had great

876
00:38:29,920 --> 00:38:31,740
success.

877
00:38:32,500 --> 00:38:36,760
I think it's also societally, there is a

878
00:38:36,760 --> 00:38:40,940
virtue to this notion that maybe it's something

879
00:38:40,940 --> 00:38:44,020
that we want to give people the opportunity

880
00:38:44,020 --> 00:38:46,140
to decide how they want that money to

881
00:38:46,140 --> 00:38:52,160
be influencing society long-term rather than have

882
00:38:52,160 --> 00:38:54,980
it be a taxed decision by government.

883
00:38:55,740 --> 00:38:57,960
In any case, another topic for another day

884
00:38:57,960 --> 00:38:58,360
as well.

885
00:38:58,920 --> 00:39:03,680
I think the good news is even after

886
00:39:03,680 --> 00:39:06,200
he's gone, which I hope isn't for a

887
00:39:06,200 --> 00:39:07,840
very, very long time just because he's retiring

888
00:39:07,840 --> 00:39:10,700
doesn't mean he's leaving here, but his son

889
00:39:10,700 --> 00:39:12,120
and daughter are going to take up that

890
00:39:12,120 --> 00:39:12,380
mantle.

891
00:39:13,420 --> 00:39:16,120
The philanthropic ventures are going to continue and

892
00:39:16,120 --> 00:39:20,360
I think he's going to make sure that

893
00:39:20,360 --> 00:39:22,840
in his estate planning, if you will, to

894
00:39:22,840 --> 00:39:26,440
bring it back full circle, that wealth is

895
00:39:26,440 --> 00:39:28,360
going to be given to good causes for

896
00:39:28,360 --> 00:39:29,340
generations to come.

897
00:39:29,520 --> 00:39:31,860
I think that is great news.

898
00:39:32,040 --> 00:39:33,480
We talked about what's motivating him.

899
00:39:33,500 --> 00:39:35,240
Maybe that's motivating him.

900
00:39:35,360 --> 00:39:37,740
The wealthier he can become, the more philanthropic

901
00:39:37,740 --> 00:39:39,760
he can be and the better off the

902
00:39:39,760 --> 00:39:40,300
world will be.

903
00:39:40,540 --> 00:39:42,060
I actually believe that to be true with

904
00:39:42,060 --> 00:39:43,000
a guy like Warren Buffett.

905
00:39:43,660 --> 00:39:46,660
With other people, I just think they're mostly

906
00:39:46,660 --> 00:39:48,620
being self-serving, but with him, I think

907
00:39:48,620 --> 00:39:50,600
it's genuine and it's true.

908
00:39:51,260 --> 00:39:54,920
One thing I wanted to bring up because

909
00:39:54,920 --> 00:39:56,200
I imagine we're probably running out of time,

910
00:39:56,240 --> 00:39:57,960
but I know this is near and dear

911
00:39:57,960 --> 00:40:01,660
to Jeff's heart particularly and definitely to me

912
00:40:01,660 --> 00:40:01,980
too.

913
00:40:02,400 --> 00:40:04,060
Warren says it's impossible to time the market.

914
00:40:04,260 --> 00:40:04,920
He doesn't even try.

915
00:40:06,980 --> 00:40:08,260
That's coming from a guy who seems to

916
00:40:08,260 --> 00:40:08,980
be awfully good at it.

917
00:40:09,580 --> 00:40:11,460
He is awfully good at it.

918
00:40:11,600 --> 00:40:13,480
What lessons do we take from that?

919
00:40:13,560 --> 00:40:14,320
Well, he's not timing.

920
00:40:14,900 --> 00:40:16,040
He's looking for great value.

921
00:40:17,560 --> 00:40:20,720
You tend to get great values at bottoms

922
00:40:20,720 --> 00:40:23,020
and you tend to get excessive values at

923
00:40:23,020 --> 00:40:23,340
tops.

924
00:40:24,060 --> 00:40:27,380
I think that's the lesson that I take

925
00:40:27,380 --> 00:40:27,780
from that.

926
00:40:29,000 --> 00:40:31,000
Don't necessarily try to time the market.

927
00:40:32,040 --> 00:40:33,820
I think you could throw out your charts

928
00:40:33,820 --> 00:40:37,060
for the most part altogether, but look for

929
00:40:37,060 --> 00:40:37,500
good value.

930
00:40:37,700 --> 00:40:39,520
Look for actual businesses.

931
00:40:39,740 --> 00:40:41,560
You're investing in businesses, even when you're buying

932
00:40:41,560 --> 00:40:43,100
an individual stock, even if you're buying one

933
00:40:43,100 --> 00:40:46,460
share, you're buying into the prospects and cash

934
00:40:46,460 --> 00:40:47,280
flows of that business.

935
00:40:48,960 --> 00:40:52,160
If you evaluate your stocks on that basis,

936
00:40:52,480 --> 00:40:55,160
I think Warren has shown that over generations

937
00:40:55,160 --> 00:40:57,140
and generations, and I think this will continue

938
00:40:57,140 --> 00:40:59,020
to be true for generations, that that is

939
00:40:59,020 --> 00:41:03,400
the best way to invest and outperform by

940
00:41:03,400 --> 00:41:05,160
finding great businesses and investing in them.

941
00:41:05,220 --> 00:41:07,340
Not market timing, and one of your favorites,

942
00:41:07,760 --> 00:41:10,760
Chris, having a robust liquidity bucket.

943
00:41:11,380 --> 00:41:12,100
Yeah, there you go.

944
00:41:12,960 --> 00:41:15,120
Well, I think these are some of the

945
00:41:15,120 --> 00:41:15,520
lessons.

946
00:41:16,720 --> 00:41:20,240
If you are in a position where you

947
00:41:20,240 --> 00:41:26,380
think investing is challenging, and it is, it's

948
00:41:26,380 --> 00:41:30,500
something you sometimes can benefit from getting help

949
00:41:30,500 --> 00:41:34,820
in the process and a helpful perspective on

950
00:41:34,820 --> 00:41:37,740
how to approach things, whether it's good times

951
00:41:37,740 --> 00:41:38,160
or bad.

952
00:41:38,720 --> 00:41:42,700
If that's something that you'd benefit from, please

953
00:41:42,700 --> 00:41:44,700
don't hesitate to reach out to our firm

954
00:41:44,700 --> 00:41:46,280
to see if we could be a resource

955
00:41:46,280 --> 00:41:46,600
to you.

956
00:41:46,780 --> 00:41:50,000
We offer a complimentary consultation and would be

957
00:41:50,000 --> 00:41:51,120
happy to speak with you.

958
00:41:51,540 --> 00:41:53,860
Everybody, thanks for being with us, guys.

959
00:41:54,000 --> 00:41:54,460
Thank you.

960
00:41:55,400 --> 00:41:58,580
Until next time, keep striving for something more.

961
00:42:45,400 --> 00:42:55,140
Transcribed by https://otter.ai https://otter.ai