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Well, the interesting thing, uh, Harkort Brace Jovanovich, which was a publisher, but also owned amusement parks in Florida, believe it or not, went to buy a very small company called Florida Cypress Gardens, which I remembered as a kid going to. And they had water skiing Santa Clauses during Christmas time and, you know, all kinds of water shows and beautiful gardens.
And, you know, it was a very unique, interesting, and very memorable place to visit when you're five or six years old. And when I saw they were getting taken over and this was literally in the first month I went into business for myself and you know I was pretty nervous. I was 27 and I had gotten money from a very famous guy and I wanted to do a good job and I saw this opportunity where Florida Cockers Gardens was being taken over and there was a nice spread in that deal where I could make a lot of money if it went through and I thought the deal made a lot of sense at the time and so I was able to have a big smile on my face and buy Florida Cypress Gardens as one of the first investments I made when I went out on my own.
And a few weeks before the deal was supposed to close, unfortunately, Florida Cypress Gardens fell into what's called a sinkhole, meaning the main pavilions of Florida Cypress Gardens literally fell into a a hole that appeared out of nowhere. And apparently that happens a lot in Florida. I wasn't that familiar with it.
Thank God I wasn't at Florida Cypress Gardens when it happened, but you know, the Wall Street Journal wrote a really humorous story about it. And I was like, why is this funny? You know, you know, I'm about to lose my business. I had taken a pretty decent sized bet in this deal and you know so it just tells you things can happen that you don't anticipate that's it's not really your fault.
I had never even heard of a sinkhole before I read about this happening. So it's like a risk that I you know when you're doing a merger deal you're not really saying risk of sinkhole is in your checklist of things to look for and and so stuff happens. uh there are less kind words for that and uh you know it's a good lesson to learn especially out of the box so I was sweating pretty good.
They ended up recutting the deal at a lower price and I lost money but not that terrible. Uh and so I got a you know Howard Mars my favorite line from Howard Marx is always uh experience is what you got when you didn't get what you wanted. And I always love that line and that's what I got in Florida Cypress Gardens.
Some good experience. Yeah, it's a it's a good reminder of just the sheer uncertainty of this business, which I I think you you've talked about how you've seen that again with COVID, the idea that suddenly you could actually find that all businesses, all these businesses that you thought were pretty steady compounding machines would close entirely for a year, that nobody could go shop there, for example.
Yeah. I mean uh you know I have uh five kids a couple of which I've I've taught investing or tried to teach investing to and you know gave to my boys who I who uh you know I was trying to teach investing at the time that you know in early 2020 when when co appeared I tried to explain you know I've been doing this a long time I've never seen this never anticipated anything like this you know I've never seen where they just close down the world and you know besides the terrible human cost I never seen anything like this.
And I just try to explain to them that, you know, I'm not going to be much help here. I've never seen this before. But it's it is a good lesson to learn that you you have to be at least diversified enough and and aware enough that really bad things can happen and you have to live to play another day was probably the best lesson uh to learn that you you can't put all your eggs in one basket and you can come back from big mistakes as well.
you know, I've made big mistakes with big positions as well, and then bad things just happen. And part of what you I always thought you get paid for in this business is kind of your stomach. That it's uh you know, I I what I enjoyed about getting into the business was if you think well and if you try to figure things out, it's not really a you know, count how many hours you showed up thinking that.
It's the quality of your thought. And in this case, it doesn't matter how well you thought uh other things still can happen and understanding that understanding that uh bad things can happen and preparing to survive to play another day is important. And so I think that was one of the best lessons. Of course, the market came back fairly quickly, so it wasn't, you know, as painful as it it could have been, but we didn't know that at the time.
I mean, I remember watching Warren Buffett at his annual meeting right in the thick of things, maybe at the end of March 2020. I think it was maybe April one or I don't remember. Not not far after CO started. And he didn't look like, you know, this was was nothing. And it was it was a little frightening to see because it was really staring at the unknown.
And if you're looking at the unknown, one of the benefits of working for a long time in this business is, you know, a lot of it is gaining experience, seeing a lot of things, contextualizing things, comparing things to what's happened in the past and what might happen. And this was fairly unique. I love this story of the pavilion of this company falling into a sinkhole in Florida because it's just such an unforgettable metaphor, I think, about the uncertainty of life.
It's a reminder that more or less anything can happen. As Joel says, these things aren't necessarily your fault and you don't anticipate them. And it really reminds me of a story that Peter Lynch told me once many years ago. I I was interviewing him as a journalist more than 20 years ago. And Lynch, as most of you will know, was this legendary investor at Fidelity, ran the Mellan Fund with just blistering success over about 13 years or so, and then retired.
And I I was talking to Lynch about his early experiences as a money manager, and what he'd learned from Ned Johnson, who was his boss and mentor at Fidelity, who was the the patriarch of Fidelity, this firm that now runs trillions and trillions of dollars. And Lynch told me that early in his career, he made this investment in a some kind of fashion retailer.
And he said they'd had this amazing year and I think their best year of revenues ever. And then the movie Bonnie and Clyde came out and FA Dunaway, this actress starring in Bonnie and Clyde, was wearing these incredibly beautiful retro dresses that I think had very long hemlines if I remember correctly.
And um this changed women's fashion so dramatically and so suddenly that in the same year that this company had record revenues, they also went bankrupt and he lost his entire investment. And Lynch said to me that he was kind of worried about this and he was breaking the news to Ned Johnson and Ned Johnson just burst out laughing and said, "No, no, sometimes things just come out of left field and there's nothing you can do about it.
It's just part of the game." And I think it's just such a valuable thing to remember that we live in a world of tremendous uncertainty. Where a movie can change women's fashion totally unexpectedly. Where a pavilion can fall into a sinkhole. where somebody eating some wild animal in a wet market in Wuhan, China, can lead to this catastrophic pandemic that changes all of our lives and transforms the way we work, transforms the way many of our kids have been educated over the last couple of years, costs millions of lives, turns the economy upside down.
I mean, it's just astonishing. It's an incredible reminder of just how little we know about the future. And it reminds me again there's a wonderful quote from the Athenian playwright Uripides that I think he wrote about 2500 years ago who said something along the lines of how can you consider yourself a great man when the first accident that comes along can wipe you out completely.
And Montenia the great French philosopher actually wrote those words on a beam in the library of his shadow in France. And I think it's a good thing to remember. I used to have this discussion often with my friend Guy Spear who runs the Aquamarine fund and whom I helped write his autobiography, the educational value investor, and we would talk about this great story from Damon Renan, a wonderful writer who he wrote the story the idol of Miss Sarah Brown, which became the musical Guys and Dolls.
And Renan tells this fabulous story in it where Sky Masterson, the star of the hero, the protagonist of this story, is a high rolling gambler. And his father sends him out into the world with one piece of invaluable advice really against the perils of overconfidence. and his father says, "Look, one of these days, son, somebody is going to come to you and they're going to open a totally pristine new pack of cards and they're going to say to you, I'm going to bet you that the Jack of Spades can leap out of this pack of cards and squirt you in in the ear with cider." And he says, "Son, do not take that bet.
For sure, as we're standing here, you're going to end up with an earful of cider." And so guys and I used to joke about this this idea that you have to beware of ending up with an earful of cider. So in some ways this is kind of unsettling right you start with this recognition that we live in a very uncertain world where almost anything can happen but we need to recognize reality as it is right this is one of the great lessons from Howard Marx that that you need to accommodate yourself to reality as it is not as you wish it to be.
And so we start by recognizing that we live in a world where, as Joel Greenbbert says, you're staring at the unknown. Right? This is a world where there's the potential for natural disasters, cyber attacks, wars, as we've seen in Ukraine, pandemics, conmen like Maidolf. I've been watching a terrific series about him on Netflix.
I encourage you to watch. And so one of the first lessons that I think we really want to internalize is this one from Joel, which is you have to live to play another day. And that's just vitally important. I think this emphasis on survival and avoiding ruin, avoiding disaster is just a fundamental idea both in investing and life.
You've got to position yourself so that if you're wrong, you're still going to survive. or if you're unlucky, you're still going to survive. And I I think this is really what Ben Graham's idea of the margin of safety was all about. It's about how to protect yourself in an incredibly uncertain world from bad luck, misanalysis, mistakes, your blind spots.
It's a very mature and worldlywise view of our own limitations. And I I'm reminded also of something that Jeffrey Gundlac, who's often called the bond king, once said to me, which is he said, "Look, I I'm wrong about a third of the time." And he said, "The key is to make sure that your mistakes are nonfatal.
So what do you do?" You're not powerless once you actually recognize the fact that you need to focus on avoiding ruin and making sure that your mistakes are non fatal. because the most obvious thing is you need to diversify. And this is just a recurring theme. It's so obvious that I'm almost embarrassed to say it.
And yet we fall into this trap again and again. And it's funny, a friend of mine who's a well-known mutual fund manager, sent me an email the other day, pointing out that a 4th century rabbi named Isak Ba Aa, I think I'm pronouncing his name right, but probably not. um recommended putting a third of your wealth in property and a third in merchandise and a third in cash.
So this is 1,600 years ago. This is not a new idea. And the first episode of the podcast that I did, which is before the richer wiser happier podcast existed and I did a guest episode on we study billionaires which I think came out on January 1st 2022 if you want to look for it was with Ray Dallio and Dallio again talked about the power of diversification.
He talked about his all-weather portfolio where he finds a bunch of different assets that aren't highly correlated. So for example he talked about investing in stocks but also in inflation index bonds and gold and the like. So this is just a really fundamental idea right we live in an uncertain unpredictable world where the future is unknowable.
So you have to diversify but I would say there are some other really key ways in which we need to diversify. One one of which is I'm slightly fearful and paranoid about what would happen if there were a problem with an institution that was holding my money and um I don't want to have too much money in one fund in one brokerage firm in one bank you know call me paranoid but who knows what can happen in terms of cyber attacks and the like or financial malfeasants and I I just don't want to take that risk.
I would rather just spread my money, spread my bets. And I I think the same goes for asset classes. You don't want all your money in one asset class, in one country. There's a well-known bias, home bias, home country bias, where people think, "Oh, yeah, I'm in America. I should have all my money in America." I think you should remind yourself of what happened if you lived in a place like Cuba or my in-laws who had to flee from Vienna during World War II or my ancestors who had to flee from Ukraine and Russia and Poland in the first part of the 20th century.
And so this idea of diversifying not just among asset classes but countries and currencies I think is just a wise proportion in a world where anything can happen. And another really important idea I think comes from Howard Marx who when I interviewed him for my book just said look the real question is how much do you push the limits you just want not to overreach because given that we're facing an unpredictable and unknowable future part of preparing for that unknowable future rather than trying to predict it which it as we all know I think it's impossible even though we fall for the foolishness of people who pretend that they can predict the future for the economy and for the market.
We have to admit to ourselves, I think, if we're honest, that we can't predict it. So, if we want to prepare for it, what do we do? We have to say, well, I'm not going to overreach. So, I'm going to set aside some cash. I'm going to diversify. I'm going to live within my means. I'm not going to take on so much leverage that I'm a forced seller at the worst possible moment.
And so these very simple precautions actually grow out of a mature recognition that the future is unknowable, unpredictable, and that we live in a world where a pavilion can fall into a sinkhole when we didn't even know what a sinkhole was. But then there's a caveat here, which is I remember Howard Mark saying to me once that at a certain point risk avoidance becomes return avoidance.
And so you don't want to become so paranoid about the future and all the things that could go wrong that you fail to take advantage of opportunity. And there's a quote in my book I think where I in a chapter called the resilient investor where I think it's niche I quote who says that at a certain point if you stare into the void too long you become the void.
And I think we want to avoid that. We want to be wary of what can happen and position ourselves to survive our own mistakes and our own misfortune and our own ability to be blindsided or biased. But at the same time, as we'll talk about more later in this episode, we want to be very positive about the future.
We don't want to become so pessimistic that we curl up in fetal position and don't invest because really what all of the greatest investors are doing is taking advantage of these uncertainties, taking advantage of the times when other people are fearful. And so I think it's it's not about avoiding risk.
It's about taking intelligent risk. It's about taking considered risk. And there's one other lesson that I think is really important from this clip of Joel Greenblack talking about this early mistake in his career, which is that he said you can come back from big mistakes. And again, it might sound like a trivial and obvious point, but I think this idea of how we deal with our mistakes is really important.
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