What I Learned from Warren Buffett, Charlie Munger & Bill Miller w/ Robert Hagstrom (RWH060)

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(00:00) Value is always in the marketplace. It just migrates. It goes to different places. So if you're pragmatic in how you think about things, you're not afraid to buy value if it's in technology. You're not afraid to buy value if it's in a financial. You're not afraid to buy. You just go wherever the opportunity set is.

(00:16) But correspondence theory of truth does put you in a sense of absolute. You're not flexible in your thinking. There's so many classic value investors that have lost decade plus performance numbers because of stubbornness. Before we dive into the video, if you've been enjoying the show, be sure to click the subscribe button below so you never miss an episode.

(00:41) It's a free and easy way to support us and we'd really appreciate it. Thank you so much. Hi there. It's great to be back with you on the Richer, Wiser, Happier podcast. Our guest today is Robert Hagstrom, who's one of the most thoughtful writers and thinkers in the world of investing. Robert is the chief investment officer at Equity Compass where he manages a concentrated portfolio of dominant global stocks like Nvidia, Amazon, Microsoft, ASML, Meta, and Rishmon.

(01:09) But he's best known as the author of an iconic bestseller, The Warren Buffett Way, which laid out with tremendous clarity the principles that have made Buffett the most successful investor of our time. We'll also discuss another of Robert's most famous role models, Bill Miller, who was the leading mutual fund manager of his generation.

(01:29) Robert offers unique insight into Bill, having worked alongside him for many years. As you'll hear, he witnessed up close what led Bill to make incredibly bold and precient bets like buying a 15% stake in Amazon at a time when nobody else understood its competitive advantages, and most of Bill's peers frankly expected it to go bankrupt.

(01:50) This is a subject close to my heart as Bill is one of my absolute favorite people in the investment world and I've interviewed him at great length over the last 25 years or so. But before we get started, I also wanted to mention very briefly a new venture that I'm extremely excited about. (02:10) Applications are now open for the second intake of the richer, wiser, happier masterass.

This is a rare chance to study with me directly over the course of a year in an exceptionally small intimate group of just 10 to 20 people. Starting in November, we'll meet once a month on Zoom for 2 hours per session and we'll also gather in person at two unique events. (02:32) The master class is designed for serious investors and passionate learners who want to explore in depth how to build a truly richer, wiser, happier life.

To give you a flavor of the experience, the first intake brought together 20 extraordinarily accomplished people from seven different countries, including several highly successful hedge fund and mutual fund managers, asset allocators, wealth advisers, managers of single family offices, CEOs, entrepreneurs, a management consultant, a renowned physicist turned quant investor, not to (03:06) mention a friend of mine who's a very successful professional gambler.

Don't tell anyone, but I I often feel like I'm the least intelligent person in the room. In any case, if you're intrigued by the idea of a lifeenriching experience with a small, carefully selected group of unusually talented, but also really soulful people, please email my partner and fellow podcast host Kyle Grievy, which is spelled kle, at thespodcast.com.

(03:36) Kyle will be happy to send you details about the dates, the price, the call structure, and how to join the waiting list. And now, as our friend Stig Broerson would say, back to the show. Hi folks, I'm absolutely delighted to be here with today's guest, Robert Hagstrom. Robert is chief investment officer at Equity Compass Investment Management, where he's also a senior portfolio manager.

(04:00) Before that, he worked alongside the great Bill Miller for 14 years at Leg Mason. Robert is also an extremely successful author much to my annoyance. He's most famously he wrote the Warren Buffett way which does a superb job of distilling Buffett's core investment principles. My copy which I think is the third out of four editions includes three separate forwards written by none other than Howard Marx, Bill Miller and Peter Lynch which is quite a trifecta.

(04:28) So I think that's a reflection of what a valuable and important book it is. Robert also wrote a particularly interesting book titled Investing: The Last Liberal Art, which was inspired by Charlie Monger's multid-disciplinary approach to investing. So, we're going to spend a good deal of time today exploring some of the most important lessons really from three of the great investing legends who've all influenced Robert deeply.

(04:54) That's to say Buffett, Manga, and Bill Miller. So, Robert, it's lovely to see you. Thanks so much for joining us. William, it's delightful to be here. Thanks so much for the invitation. and I appreciate it. That's great. It's been a long time coming. We've been discussing doing this for a while.

So, I'm really happy that you're finally here. (05:08) I wanted to start by asking you about your early years. And one aspect of your approach both to investing and life that I think is very distinctive and special is that you draw on so many different disciplines from physics to philosophy to literature.

Yeah. and I've been reading a bunch of your books and rereading over the last few days and it was striking to me you've obviously you've written extensively about Warren but you also are constantly quoting scientists like Charles Darwin and philosophers like William James and (05:39) behavioral economists like Richard Thaylor mathematicians like Pascal Roman poets like Lucriccious novelists like Toltoy not to mention fictional characters like Sherlock Holmes and I'm just curious how you came to be this sort of multidisiplinary person.

Yeah, William, I I would like to tell you the finger came down through the clouds and God said, "This is what you're going to do, Robert. (06:04) " But I literally flailed about for years and years trying to figure out what was going to be my my score in life. My mom was a doctor. She was one of the first medical doctors out of Vanderbilt University and my dad was a chemical engineer.

They seemed to have wanted to do that day one and I couldn't figure out what I want to do. (06:21) But as we'll talk about the whole journey of becoming an investor and writing the Warren Buffet way I would say there were the intersection of becoming and I don't consider myself a polymath I'm still a student of the art it were two people Bill Miller and Charlie Mer and they both happened almost coincidentally as I was writing the Warren Buffet portfolio after the Warren Buffett way that's where we really got involved with Charlie a lot more Charlie was a lot more in the Warren Buffett portfolio book than the Warren Buffett way and we (06:49) got into the art of achieving worldly wisdom and the psychology of misjudgment and all these things.

But that was also happening simultaneously when I began to work with Bill Miller after I wrote the Warren Buff. I met Bill as a stock broker when I joined leg mates in 1984. Bill was director of research and he's a true polymath and Bill and I struck a friendship that has lasted to this day and the friendship was largely built around this whole curiosity of multi-disiplines and Bill as you well know William is phenomenal at (07:21) multiddiscipline and so two things were happening one I was theoretically trying to wrap my hands around what Charlie was saying but the blessing that I had was the actual practitioner people have said Robert you wrote your dissertation on bucket You did your practicals with Bill Miller.

(07:41) I can't emphasize how important it was to do the practicals with Bill because I can see how Bill used philosophy and biology and literature and all down the line as we were actually making an investment. So I could see the payoff, the tangible payoff that was acrewing and it just led me to do it more and more.

It's like when you get that first spark, that aha moment, you go, gosh, I want some more. (08:02) Give me more. Give me more. And it just led me to do more readings in different disciplines and continue to drill down into different areas. So, you know, Charlie and Bill were pretty good. As you well know, Warren's not deep in this area.

I mean, he's really good at investing and balance sheets and income statements and businesses, but he's not too vocal about multidiscipline, but certainly Charlie and Bill are. (08:23) It's interesting to me that there's something kind of old-fashioned about the type of lifestyle that you've set up and that I've set up, both inspired, I think, by Bill and Charlie, where I mean, I look at you in your office there in Pennsylvania, I think it is, and you're surrounded by books.

And I'm curious about how you set up a life basically where you're able to be this continuous learning machine. (08:47) You've set yourself up. So, you're writing books. I think you've written seven or eight books at this point. You're also investing There's a lovely line in investing, the last liberal art, which I reread this week, where you quote Fisher Black, a hero of yours, talking about the importance of tuning out the noise, all the, as he put it, the rumor, miscalculation, and bad information swirling around with the good.

(09:10) And I'm curious about how you construct this kind of quiet, slow, thoughtful lifestyle that's more bookish, that's less noisy at a time, particularly when most people really are just being barged by these constant short-term inputs. Yeah, I would tell you it is by design. One thing that is important to remember, William, is being a concentrated low turnover portfolio manager.

(09:34) We own 20 stocks plus or minus and average holding periods 5, six, seven years. And I think out of the 20 stocks that I own, I think seven of them I've had for 11 years. So we're not doing a lot of trading. So there's not I don't have to be I don't have to spend a lot of my waking hours worrying about markets and prices and trading and stuff like that.

(09:53) We're market aware, you know, we're economically aware, but we're really agnostic. So we don't really invest a lot of time, energy thinking about where the market's going, where the economy is going. It's all kind of business centric. We just we feel like we own a collection of businesses and we just hang out with our owners and see what they're doing and how they're prospering and stuff like that.

(10:15) So just by design being this kind of portfolio manager opens up a lot of time. I just I don't have to be glued. The first thing I did was I just turned off all the financial news networks. I don't have a TV in my office. if you're in a brokerage firm or stuff like every broker seems to have a CNBC or Bloomberg or Fox Business on whatever the case may be and they just seem to stare at it all day long.

(10:35) The first thing I did was, you know, years and years and years ago was just get the financial networks out of the room, get them out of the office, get them out. I don't I watch Bloomberg for maybe 30 minutes first thing in the morning, 3:00, come up usually 5:00 and if we have trades going off in Europe, I'll start just what's going on in Europe with Bloomberg and then I turn it off.

(10:56) And it's amazing. I remember Debbie Bazanic, Warren's secretary. I said, "Does Warren watch CNBC?" She goes, "Well, Robert, I'm not sure how we would call it watching it. He sometimes has it on, but he never has the sound on. He uses it as a a ticker tape and see if there's any news coming in, but he spends no time watching TV.

(11:18) " And I think that those two things, one I have a portfolio strategy that allows me to have a lot of time to explore for ideas. But the other point is just turning out the noise. And it is noise for my particular style, right? For my particular style. I I wanted to share this with you. You remember when cable first came out, there was this idea that they would put a V chip in the television so it would protect the kids from violence, right?

So you could actually put a chip in and if there was a violent program come on it would black (11:48) out. I think we need that on with Financial News Network. If you're going to speculate about markets or try to forecast markets, I need a speculation chip that'll just turn it off, right? It's totally black because that has no interest to me.

And then I just want the chip that does how to understand businesses and how to think about that. (12:05) The problem is it probably would get no subscribers, no viewers, no advertis. It's kind of like Alistair Cook Masterpiece Theater. Nobody would watch it. So, uh, you know, by design, I have a good strategy that allows me open time.

Two, I shut off all the noise. And three, it's just this natural curiosity. And we were talking about this earlier that once you find a nugget and you have an epiphany, you want another one. (12:31) It's, okay, this was really good. I didn't expect this. I didn't expect to learn this, and boy, I can connect this to that.

And you go, I wonder what else is out there. So, one of the things that Bill did, we all go through the Wall Street Journal in New York. That's just daily information, but he would have me reading the New York Review of Books and the London Literary Supplement and the London Review of Books and just always scouring for books and ideas that might have relevance.

(12:56) And it's been a treasure hunt that I every day I I always think about I wonder what I can find today. Yeah. I think this whole idea of of constructing a quiet, thoughtful life, having an environment where you're somewhere quiet, which presumably helps that you're in Villanova, Pennsylvania, which is not exactly the heart of Midtown Manhattan, but also really being thoughtful about your information doubt, I think, is so important.

(13:18) And I was really struck when I was rereading your last liberal art book where there was a lovely line where you said, "I've always believed there are no easy shortcuts to greater understanding." And it struck me that so much of what you do and what Charlie did and what Bill Miller does is really slow cumulative building of knowledge.

(13:40) And it's striking to me that if we're living in this era of chat GPT and the like where you just get instant answers, it how do we actually maintain this ability to do the slow drawn out work that actually enables us to understand stuff when you can get answers absolutely instantaneously? Well, there's a couple ways to go about that.

(14:05) I think kind of attack I think I read this stat the not too long ago. The average book takes about 8 hours to read plus or minus. And so when you think about do I have 8 hours this week? I won't read a book today, but let's say do I have eight hours this week to get through a book? I'll find eight hours.

I'll get it. (14:21) But let's back that up and say because this was important, which is does the book deserve my eight hours? And that was big opening. When I wrote Investing the Last Art, there was a guy Mortimer Adler that wrote a book called How to Read a Book. And I thought that's very presumptuous.

I know how to read a book but in fact I did not know how to read the book and this is for non-fiction and we can talk about fiction later and Bill is huge in fiction and the insight there but the idea is that every book that you come across you don't know whether it is (14:49) worth your time for eight hours you don't know yet and so Mortimer Adler set up this kind of three-step four-step process which is the first thing you do is figure out whether the book is worthy or not and how do you do that he goes first thing read the forward or something like that you go back to the the bibliography, see if there are any books in there that you haven't seen before.

(15:12) Look in footnotes and stuff like that. Skim maybe the first chapter, maybe skim the last chapter. I know people think that's taboo because you got to the end without reading the book, but you're really just trying to glam on to it real quick to say, "Do I really want to spend a lot of time with the book?" And you'd be surprised out of 10 books that you go I want to read, there's probably only two or three that really deserve an uplose spend a lot of time with.

(15:38) But what you try to do is is you're casting the net wide for all these ideas and different disciplines and different periodicals. It's just getting down to what's worth it. So after you do what's called this kind of is it worth my time? And then you go into intelligent skimming, which is you read it as fast as you possibly can and you're going through the pages to see if anything's popping up new.

(15:57) And the other thing that I did, I don't know how you treat your books, William, but for so many years, I refused to put a mark in them. They were like I was in a museum with my books. I didn't want anything to happen to them. They were glorious and stuff until I Mortimer said, "Make the book your own.

(16:12) It's your book, right? Take a pen, take a highlighter, underline things and try to figure out is this actually really worth your time. And if you get to there, then the third part is, okay, you've got my eight hours. So, the first thing I do is kind of systematically go through trying to figure out whether the book deserves my time.

(16:31) Now, if we get to that point and I make the book my own and I spend eight hours on it, what gets fun from there is do what's called synoptical reading, which is to find other books like this that are similar that are written by somebody else. You're trying to bring in multiple viewpoints of a single topic and that's been terrific as well.

(16:49) So, the whole idea here is that I am not going to learn anything. I'll get new information on financial news networks and mostly newspapers, but insight the things that kind of change you in a fundamental way have always occurred through books have always for me it's like you're reading it and and it is the epiphany.

It's the epathetic moment. (17:10) The light bulb goes on. You get a feeling in your body and it really stays with you. Bill said all reading is experential and what moves people in books is becomes an experience an internal experience for them that I never get from TV. I never get from the Wall Street Journal's a great paper, Financial Times, great paper, but I never get a shiver moment of aha, I finally got it.

(17:31) I finally figured it out. I get those from books. Yeah. Like you I spend an enormous amount of time skimming books. Yeah. But then, and I like your phrase in in your book where you talk about purposeful skimming to see what the book is about. But then, I don't know if you do this, I find I do an enormous amount of rereading.

(17:49) So, when I find something that's actually profoundly important, I'll go back into my copy and it'll literally my books are so beaten up and so covered in asterisks and squares and marginal. I could go back to my copy of investing the last liberal art over the last couple of days and it was very very easy for me to find the bits that were most important because they were so heavily marked up.

(18:16) And so for me I keep thinking of Charlie's phrase where he would talk about pounding ideas in that there's something so on the one hand there's this very broad skimming of self and on the other hand there's this very intense deep repetition of the things that really do matter. Does that resonate with you at all?

Yeah, it does. (18:36) And I'm so glad to hear that you treat your books the same as I did because I thought I was just a terrible person. But if you're doing it, it's okay. I'm in good company here. But the phrase, you know, an inch deep and a mile wide, I don't really I understand that phrase, but I would say I'm more like a foot deep and a mile wide because I do try to get as Charlie says the whole idea, you don't have to become an authority on the great mental model.

(18:58) You don't have to be an authority on any one philosopher or anyone aspects of the mental models that you're working out, but you have to have a working knowledge of it, right? And so that allows you to get the big ideas, the stuff, the moving and shaking part of it and the haha moment of it without me necessarily having to do a PhD dissertation on the subject.

(19:21) Right? So that's the other key, which is Charlie says, you don't have to be an expert in all of it. You just have to grasp the really big ideas and so that you can pick up speed doing that which is once you've glammed on to the big idea the central component here you can move on. You don't have to continue to write your dissertation on this or to get your PhD in Ludenstein philosophical investigations.

(19:43) I don't go that far, right? But I got a pretty good idea about the philosophy of language and descriptions and how he thought about that which helped me in investing. So once you get a foot beat, you can then move on and continue to explore on the ripples what else is going on. I've talked to people like Tom Gainer from Markel about the importance of writing as well as a way to really distill and synthesize.

(20:07) Yeah. What we've learned and also teach it and share it with others. And I assume for you part of the power of writing all these books has actually been to kind of pound in these ideas to your own mind and to clarify what they really mean, why they're important. Yeah, 100%. I would say write, my mother used to say, write it down, you won't forget it.

(20:29) And when you write a book, you own it, right? You own the material, so to speak. writing things down. Even if I write a commentary for our shareholders, our partners I should say or for the firm or anything like that, writing for me, whether it's informal, formal, whether it's three pages, whether it's a chapter, whatever, really does pound it into me.

(20:50) It becomes a part of me once you've written it. You own it. It becomes a part of it's deep inside you. It's not a flighty idea that you forgot about and it showed up again. It really does become a part of your life. And you don't forget it. I mean I And to your second point, William, and you're brilliant about this, you are a teacher, which is once you then begin to share the ideas with other people and you share them with audiences or your listeners on your podcast or whatever they and you begin to verbalize it out in an hourong podcast, that's huge, too.

(21:20) It all then becomes a part of you and it stays with you. and stuff that I wrote in the Warren Buffet portfolio 25 years ago. Just thinking of the other day about risk tolerance and how to think about that and stuff like that. I wrote about that 25 years ago, but I could cite everything about that right now because it really became a pretty good part of my learning is I that learning was reinforced by writing it down.

(21:43) And I tell all I spent a lot of time with young college kids who are trying to get a job. And I said, "Look, you've gone to a great university. You got a great GPA. You've done all the internships and you're really terrific. You got the right contacts, but guess what? There's 20 of them just like you all looking for this job.

(22:01) " I said, 'What I want you to do is I want you to take one of your research papers, a term paper, whatever the case may be that you really, really like, and I want you to clean it up and edit it and send it to your English teacher and get it. And then when you drop your resume on the guy's table and you're doing the interview, and then right before you leave, I want you to drop that term paper on his desk and say, "Hey, this is something that I wrote that meant a lot to me that that I've been researching.

(22:28) It's a strong idea." And I said, one, if you do that, you're probably the other 19 people will not have done it. So, you're going to separate yourself. Two, it's going to demonstrate your thinking skills, your logic skills, and the ability to come to a conclusion. And more importantly, it's going to demonstrate your ability to write and communicate, which is what we're all afraid of with AI and texting and sloppy emails and stuff like that.

(22:50) It's just can you communicate? Can you write and communicate? And when you do that and you demonstrate that, it does take you up another level from other people that are operating at the surface level. I have this feeling that with AI, the faster everything is getting and the easier it is to get quick intelligent seeming answers, the more of a premium there's going to be on the kind of study that you're doing.

(23:19) And I may be deluding myself and trying to convince myself that we're still valuable, these old sort of slowm moving dogs, but I don't know. I was reading one of your books and there's like this beautiful quote from Arthur Conan Doyle where you quote Sherlock Holmes and you have him saying to Dr.

Watson, I have no data yet. (23:37) It's a capital mistake to theorize before one has data. Insensibly, one begins to twist facts to suit theories instead of theories to suit facts. And I look at that and I can absolutely see your joy in finding this stray thing from an old detective story and and being like, "Oh, that has such significance for an investor, right?

Don't twist facts to suit your theories. (24:01) " And it's I think in some way what you and I are trying to do is figure out how to operate in this kind of slowm moving lateral nonlinear way in a world that's becoming just faster and faster. I don't know. I hope this is still valuable. Yeah. What I find my experience is I find a lot of people have opinions and no facts.

It's kind of like, okay, you've got the opinion, what are your facts? And then they have sloppy facts, right? And the facts are, I heard it from a friend or, you know, it was on TV or, you know, it's kind of So, when I think about that (24:30) Sherlock Holmes is one, you got to have facts. If you're going to make a statement and it is maybe it's a conversational statement that you're trying to convince someone or persuade or something like, you think, I believe this and it's based upon these facts.

the facts ought to be pretty good and you should have facts who support your statements or whatever you're doing. (24:47) But I it's amazing how many people you'll run into and you'll start talking about something and they will then instantaneously almost act as if they are a professor on this subject.

It's kind of okay give me the what's your data set? What are your facts? What are your resources? What's the bio? You know, and they have no they got nothing. So that stood with me. (25:07) So if I'm going to say something or I'm going to write something, you can damn well sure I'm going to footnote it.

I'm going to have some backup because I'm not going to you you know from being a writer you're exposed as soon as you write it and put it in print. You better be able to defend it because if somebody comes at you a year from now, a week from now, a month from now and says, "Oh, that's wrong. (25:26) " There's nothing more horrid in your life as a writer than to be called out on athru that you said was true and it wasn't.

Being a writer, you really got to get that stuff right. I had it fairly early in my career where I wrote a profile of Sir John Templeton and I'd spent a day with him in the Bahamas and he had told me something about I think it was the year that Germany invaded France and so I wrote this story about and it was just a small fact but it was like when the market was collapsing during World War II and he made his first unbelievably (25:59) bold bet.

Yeah. And then I got a letter from someone saying, "No, you got the date wrong by a year." And I remember thinking, "Oh my god, it was Templeton. This guy's way smarter than I am. Actually got the fact wrong." And it was like it was a really helpful early lesson in just being paranoid about everything.

(26:18) And really, I mean, not paranoid, but just obsessive about doing your preparation and double-checking things. And if Templeton, as smart as he was, couldn't remember something from his own life, it just was I don't know. I think in some way for a writer and maybe for an investor as well, you need somehow to have this tremendous self-confidence that you're like, "This is how it is.

This is what I believe. (26:40) I'm making this bet or I'm writing this and people should listen." And then at the same time, you have to have this humility and paranoia to say, "Yeah, what if I'm wrong? Let me double check. Let me make the extra call." Nothing nothing is more fearful. And it's funny because I would send Bill stuff that I would write and stuff like that.

And I knew it would really polish. (26:59) He'd always send it back with you need to check that, you check, that's misspelled. The University of Connorsburg doesn't have two G's. I'm like, oh god, you're in constant fear and paranoia that you don't have your facts right or you misspelled something or whatever the case may be.

So I do spend a lot of time backing it up. (27:17) But opinions are worth what a cup of coffee sometimes. That's a wellthoughtout debate or defense of something that's powerful. And a I'm bullish on AI. I'm optimistic on AI. But you're right. There's so much yet that hasn't happened and we haven't figured out, I think, how to use it to our best ability.

(27:36) There's a professor at at Wharton here at University of Pennsylvania who's actually teaching a course. He wants his kids to the students to actually use AI. I want you to use AI, but he's really helping them use it thoughtfully, not just as a get a quick answer and put it in the paper. It's just how to connect things and stuff.

(27:54) So, I think he's going about it in the right way. And but I, you know, AI, I was just saying chat GPT number five is coming out. Was reading the reviews on that. It's kind of they're getting better, but it's still though, William, I get your thought on this. This still to me is still these chat bots are still just Google on steroids.

(28:12) It just does a better job, right? and it gets you more material and it goes deeper and wider and but we're still not by example. I saw where Cliff Atna said AI now can do about 80% of the work of all his analysts. That doesn't surprise me. Cliff's a very successful investor and he deserves all his accolades, but he's a factor-based guy and he runs factors out.

(28:34) He wants to know factors 10 years ago and what were the factors when interest rates did this and inflation did that and so AI can get you that like that, right? It can get you anything you want in the historical database and it can build dividend discount models. I want a three-year model that does this and years four and five I want it to do that and it can get it for you.

(28:53) The one mistake that Warren says that he has made, the one mistake he has made most often and most critical and has cost him the most money is a question that AI can't answer yet. And the mistake that he made when we wrote the Warren Buffett way was he looks for companies that have favorable long-term prospects which is that's competitive advantage period.

(29:16) Michael Moes how long does this last and how long can I get a high rate of return on my capital and how long can I sustain it? Those are the mistakes Warren has made. The biggest mistakes that which he thought was going to last long didn't or that which he thought was going to do well with high economic returns longer didn't.

He says I got those wrong. (29:36) whether it's Dexter shoe or whatever the case. If you go to AI and ask AI to ask you what is the competitive advantage period of Nvidia, it can't do it. It could tell you what happened today. It can tell you what happened last week and we're going to monitor the sales and we're going to monitor the margin.

(29:54) They kind of drill it down into sales margins, return on, but it had no idea how to think about Nvidia within a financial ecology of other competitors and how it works with AI and what it can't get there yet. Now, maybe AGI gets there, but right now for a buy and hold low turnover portfolio manager, I'd spend 80 to 90% of my time on how long can this last.

(30:20) And there's nothing in AI that can tell me that. It's almost old school. You got to be thinking about who your competitors are. You got to be thinking about the landscape. You've got to pull this multi- hack trick together of all these things and AI is not there. That may be where we still have runway as human beings, as individual investors.

(30:40) This one of the great books that Andy Grove wrote, I think in the 1990s is only the paranoid survive. And a just can't put that together just yet. And I was looking at your portfolio yesterday and I don't know whether it's still the case but Nvidia was your biggest position and that's a really difficult judgment question as to whether the valuation is justified by the incredible growth and it seems to me that one of the things AI can't do is provide that kind of judgment on a really painfully difficult question right where you're (31:12) balancing questions about not only how long is it going to last but is it worth the amount I'm paying for it.

What are the risks that it stops? Yeah. Y I don't know. Does that resonate at all for you? Yeah. This would be Charlie and Pascal and from you know, we're we're building probability statements. (31:29) What is the probability that a 50% can you what is the probability can do this? What is the probability do that?

What is the probability can do this X Y and Z and then you do a weighted average is how Warren does the decision tree. But you're actually having to think about that. It it's not so much people look at my portfolio and said, "Oh, you're just an AI geek. (31:48) " the economic returns actually drove what are the positions in the portfolio.

The only reason why Nvidia went to the top and Amazon is at the top and that goes back to the Bill Miller days. Some of this is because they earned it. I didn't buy it in anticipation of some rabbit coming out of the hat and oh my god they finally figured it out. (32:08) They basically earned their way to the top.

I didn't start Nvidia in 2022. We bought it in the fall of 2022. We knew AI was coming on. We knew from the Santa Fe Institute that the GPU was the way to get there over the CPU. We knew that was all lining up. We just didn't know that chat GPT would show up in November of that year. (32:31) And of course, when it did, it was off to the races.

And at that time, I think Nvidia was 2 3% of the portfolio. They ended up being 10 to 12% of the portfolio. We had to actually because of a we manage a lot of pension plan and individual IAS. the attorneys either right or wrong say you got to be careful about your overb. (32:47) So once you know it gets to 10 to 12 we'd peel a little bit back but basically Nvidia should have been at the top because it earned its way at the top.

We did a study in 2023 to 2024 when everybody was telling me that Magnificent 7 was 1999 at the tech bubble when Bill and I were managing money back then and Cisco was 101 times earnings and Microsoft was 60 times earnings and all this that and another. (33:15) And we looked at the price gain of Nvidia 23 to 24 and looked at the earnings per share of Nvidia 23 to 24 and the earnings per share over that was actually over a 2-year period were growing faster than the share price.

The multiple onidia actually was coming down. The same was with Microsoft. The same was with Google. The same was with Meta. The same was with ASML. (33:35) So all of these gargantuan businesses that are at the top and causing everybody so much angst because they believe it's the beginning of the end have actually earned their way to the top.

And so then the question is what's the value proposition? Is it still a value proposition? And I would make an argument that 25 30 35 times earnings for some of these businesses and remember Nvidia is earning 125% return on capital right and it has no close competitor. (34:04) And if you believe AI is not a bottle rocket, but it's going to last much longer than a few more quarters or a few more years, it looks to me that Nvidia is really quite compelling.

And you can make that argument about Meta. You can make that argument about Google. What's just freaking everybody out is that we've never had a trillion dollar business become a $4 trillion business. (34:21) It just escapes people's ability to comprehend. It's just phenomenal. But we've never had, you know, if you go back to Brian Arthur and increasing returns economics at Santa Fe, when you get into digital economies, it's totally different than brick andmortar economies and you have to think about them differently and you end up valuing them based upon return on capital much more so than just gap earnings.

(34:45) And when you start to do that, what is more stupifying to me that Nvidia and Microsoft are four billion and Meta's heading that way, Google's heading that way, Amazon's heading that way, is I can't see right now how that slows down at all. So then you got to check yourself with that. These are questions that AI doesn't answer.

(35:03) You've got to run through all these, you know, Rubik cube type things. But what I would tell you is looking at these companies, I don't care if they're 4 billion or 400 billion, 4 trillion or 400 billion, whatever the case may be, is they actually have earned it. They actually have made the money that justifies the price.

It's not 100 times Cisco in 1999. (35:24) Far from it. You mentioned the Rubik's Cube and in in one of your books, you wrote that one of the secrets to Bill Miller's success is his desire to take a Rubik's Cube approach to investing. Yes. Yeah. And this obviously is an approach where he's drawing on so many different disciplines and ideas.

(35:43) And I wanted to go into that in more depth because it relates to the question you just raised about how we have to think more broadly about how big a company can get, for example, or how companies can scale if they're digital. And I wrote about Bill. I wrote a long profile of him for fortune back in 2001 when he had built a 15% he had bought 15% of Amazon and it was hugely controversial.

(36:07) The stock had fallen to six at the time. Yeah. And you were very much in the mix in those days with him. You I think he had got you to come run a fund at LegMason in 1998 and so you were there during that period. Can you talk about what it was like watching Bill make this extraordinarily contrarian bet?

because I think you were even around when Amazon was going public in 1997 and he was making his initial bet in the company. (36:35) Yeah. Well, it is a fascinating story and I want to share the complete because it shows the brilliance of Bill which was first of all he bought Dell let's just back up.

He bought Dell computer. Bill slapped me on the head, you know, 93 94 and it was a single multiple stock and he had an idea the internet's coming blah blah. (36:57) He had that all figured out and Dell looked pretty cheap. But what happened with Dell is that it became the very first company that became a 100% return on invested capital company.

Never had happened in history before. And of course the multiple went through the roof. I think it ended up being 18% of the value trust portfolio and he didn't sell it. (37:18) Dell computer went up 8,000% in the decade of the 1990s. I think Bill got 5,000% of that in value trust. So, it wasn't that it was hard to buy Dell at six times earnings.

The hard part was how did you hold it at, I don't know, 50 times earnings, 55, wherever it was maxing out. And it was the 100% return on capital because they had negative working capital. (37:43) You'd order a computer, you call up Dell and you'd order a computer and you'd say, "I want this monitor, this keyboard, this much speed, this much storage, whatever the case may be, and they said,"Okay, that's great.

And x amount of dollars and it'll be to you in two weeks." You say, "Great. Thanks." And they get your American Express number. (37:59) And then the American Express number went into the that money went into the Dell Poppers that night. They didn't have to pay the suppliers for 30, 60, 90 days. So he grew the entire business on the accounts receivables, right, of his customers, right?

It was a negative working capital story that allowed him to get to 100% return on capital. (38:19) So through the roof, we go to visit, you know, we're in Amazon. And I think we were out in Las Vegas at the time doing a the brokers was a boondoggle out there and we were out there speaking and Bill met with Jeff was right when the IPO's coming out and Jeff is just as loud laughable, you know, and everything like that.

(38:37) And Bill said, "Okay, what are you doing?" By and at the time it was books, right? And he said, "What's your business model?" kind of everybody was waiting around and he was trying to figure out was it Barnes & Noble this was it? How do you think about that? And Jeff said, "It's Dell." And Bill went, "Okay, explain.

(38:57) " He goes, "Well, with books, I can keep them for six months and don't even have to pay for them. And sometimes I'll take them back for free." He goes, "I got no capital in this thing and we're going to run it out of the garage." What we got things like that. But basically, he convinced Bill that Amazon's business model was Dell.

(39:17) And by Bill seeing what a Dell business model could eventually become went I'm interested. Now here's the part. So then Bill was PhD in philosophy absent the dissertation pragmatism all that one of his favorite philosophers is Ludit Vitkinstein very famous Austrian philosopher who I think it was Bertin Russell said the greatest example of genius that you've ever seen and considered Bertin Russell was a genius the guy was pretty good but he did the philosophy of language that everything that you do is based upon the words that you choose that give the (39:47) meaning and the meaning then forms a description the description is your ultimate explanation and Bill's walking us through this right and we're all scribbling.

He goes, "What is the description of Amazon today?" And everybody said, "We think we should buy Barnes & Noble and sell Amazon because Barnes & Noble is 15 times earnings and Amazon is through the roof and stuff like that. (40:10) " He goes, "No, that's not the right that's not the right description.

You have the wrong explanation." And they said, "Now it's Walmart because they're doing other things. They're doing kitchen stuff and stuff like that." He goes, "Nope. You've chosen these words. This is what's forming your description. Your description is wrong. So your explanation's wrong. (40:25) And when he got it into our heads, it was Dell.

Then it was home free. You know, it was just we're off to the races. But everybody on Wall Street had the wrong description. Therefore, their explanation was wrong. And so when you go into the philosophy of language, you begin to understand very quickly that how you form descriptions ultimately determines your explanation.

(40:45) You better damn well have your description right. So then Bill would come back to us and say, "How many different ways can you describe something?" I mean, you know, take a company, whatever the case. How many multiple descriptions can you come up with? And you can come up with several different ones.

Then he goes, "Which one's right?" Because whatever the right description is, that ultimately tells you what's going to happen to the Scott. (41:04) So that's not taught in CFA land. I got a CFA designation back there. That's not what they teach to get a CFA designation. But Bill Miller taught me more about investing outside the world of accounting, finance, and economics than I could ever imagine that you could learn.

Making those decisions required you to have a multid-discipline thought process that allowed you to pull on models from different disciplines that gave you the insight to make the bet. (41:34) And when I saw that reality and I saw the payoff from that, I went, "Holy mackerel, this is just good stuff.

It's to make Charlie was right be laalooa effect, right? When it all comes together and all these multimodels are starting come and working in I think confidence goes up not stubbornness your confidence goes up and you're able to pull the trigger and more importantly you're able to defend it when the stock price doesn't always behave correctly.

(41:58) There was also something exquisite going on at the time not just with his use of Vickenstein to say how do you describe accurately what Amazon is? Is it a money losing business or is it I remember him comparing it to Fanny May as well to me and saying its profitability is concealed. (42:17) It's its cost advantage is concealed at the moment but it will become evident later.

But there was also this beautiful thing that you're deeply aware of as well that I'd love to unpack, which is that he was really profoundly influenced by William James and pragmatic philosophy in the bet on Amazon. And he got me to read this amazing essay that I'm sure he got you to read. (42:41) There was this I guess it was a talk that William James had given in 1898.

It had the most wonderful title. It was called on a certain blindness in human beings. And it I mention it briefly in the notes on resources and additional notes on sources and additional resources at the back of Richard Wiser happier because it had such a profound effect on me. (43:00) And so there's this story that Bill pointed out to me which is that William James goes to North Carolina and he sees this cabin in the mountains in this really beautiful area and it's just like unmititigated squalor and he says basically it's hideous.

describes it as a sort of ulsa where they've just ruined the beauty of nature. (43:21) And then this mountaineer comes along and says to William James, "No, you've got this completely wrong." And actually what this cabin is this triumph of the human spirit where this guy has created this warrant of safety for family and for his babes and and that you know it's all about the triumph of struggle and duty and success.

(43:41) And there's a beautiful line from William James there where he said, "I had been as blind to the peculiar ideality of their conditions as they certainly would have been to the ideality of mine had they had a peep at my strange indoor academic ways of life at Cambridge." And so he's sort of saying, you know, if they came and saw me teaching psychology at Harvard, they would be so beused by this odd guy surrounded by books.

(44:06) And for me this had a profound effect because Bill was explaining to me do you see the biases that that we have that William James points out where he said to me look at this guy who writes in Barons every week and I love Baron but every week he would basically crap on Amazon and Bill was like do you see the biases this guy has you can't see it clearly and same with so many fund managers.

(44:30) I remember someone as brilliant as Howard Marx, right, saying attacking Bill at the time, saying, "How can you buy something like this? It doesn't look like value." And Bill said, "It looks like value to me." And when I interviewed Howard a couple years ago, he was like, Bill was totally right.

And and so there's something really beautiful about the fact that Bill could draw on a philosopher like William James and say, "Okay, let me look at this company, Amazon, without bias and just be totally agnostic." Sorry, I know I've dumped a (44:59) lot on you there, but does that raise any thoughts for you with pragmatism?

Of course, that was that's probably, you know, Hopkins was rich in pragmatism there and Sanders Pierce with Charles Sanders Pierce taught there and stuff like that. But the whole thing about William James and how Bill related to investing was just observe what's working. (45:19) Now, what does that mean?

It could be mean the stock price is going up or it could mean that sales are going up or market share. just be an observer of what is the reality going on in the market and he would look at things that were being successful. Then he would say okay why is it being successful let's figure out right why this thing is doing what this thing is doing instead of stopping which other people did and said oh the multiple too high or and you wrote about this too and I think it's something that Bill had made the bet he asked a room full of (45:51) people maybe this was 2002 or something like that and said how much profit had Amazon either gain or lost over the last three or four years and the numbers were like they've lost $3 billion and they've never made any money and Bill came up with they made something and I I don't have the right number.

(46:09) They made like 500 million 600 million and the crowd was a gasast and Bill walked him through and said look here's the income statement and here's the number but right before he dropped it to GAP to record it he just throws it back in the company but on that moment before he reinvested it and it had earned $100 million and it earned $200 million.

(46:31) had a thriving growing business that was growing little leaps and bounds year-over-year. But Jeff was smart enough to do what he should have been doing, which is continue to reinvest in the business to make it as big as you. So there can't be an Amazon 2. Get there as fast as you can, get the land grab, build out.

The thing that was so lappable was the guy that did maybe that was the Baron story. (46:49) The guy that did he was doing the convertible bonds for Amazon. what they did a convertible bond issuance because Jeff wanted for a one time only built six or seven eight big distribution centers in the marketplace that he needed and the guy continued to linear extrapolate that he'd do that every year he'll go broke without ever talking to management saying how many more times do you have to do that and Jeff goes I'm done and Bill said but he's not doing this again this is all he needs for the time being what that struck to me is (47:18) this two ways one is you just didn't do the work you hear you're talking about Amazon and you basically making a call on it, you might have thought about calling management and saying, "How many more distribution centers do you need and how many are you going to build over the next 5 years?" And that would have said your thesis is wrong.

(47:35) Or two, could you have gone through the income statement and followed the cash all the way down and said, "Yeah, there's a lot of cash here." Just because it didn't get to the gap number at the end of the quarter and the quarter showed a loss or the quarter showed a break even, there's tons of cash.

(47:50) a secondyear student at the college could have figured that out if they just would have had a nose for curiosity. So there's Bill. He's got a company that's working. He could see the revenues. He can see how it's getting bigger and getting larger. He knows that it's working. So go let's figure out how it's working.

(48:07) William James is always the cash value of ideas. Go figure out what's working and get to it, right? And just figure out is it sustainable or it's a one crook pony. and and William James just kept saying I don't want to say follow the cash but it was like what's the cash value of these ideas and Bill seemed to be able to sniff those out beautifully and no matter what the street was saying and he had the self-confidence and the ability just to say the street says this I see this and I'm and I furthermore I'm betting it and he was right that counts that counts (48:36) it's such a an interesting and unique experience that you had actually to watch him applying philosophy because I think this subject that seems obstruuse and esoteric.

You and I both got to see with this tremendous sense of revelation and excitement, one of the great minds of our time kind of taking ideas from philosophy and using in a totally fresh way to make a fortune. (49:01) And there was something just thrilling about it. And you have a chapter in investing the last where you talk about philosophy and you home in quite a bit on pragmatism.

And there are a couple of really important parts of that discussion where you say that I think it was in that chapter where you say that Bill helped you avoid being stranded on a desert island of absolutes and you also said he made sure that you never became a prisoner of absolutes. (49:31) And I think that's such an important idea like that Bill was so freethinking that he didn't let you get carried away and become dogmatic about anything.

Yeah. Yeah. Bill with you and I thank you for that quote. That has to be one of my most favorite lines. I'm not sure how I ever came up with that, but let's not get stranded on a desert island of absolutes. (49:52) Just was one of those moments where I went, gosh, maybe you can write. I don't know. But Phil, remember Bill talked about there kind of two theories of truth.

One is a correspondence theory of truth, which is you basically have figured out how the world works. The scientists have basically said this is how it works. You are connected intellectually, emotionally, psychologically to just this is how it works. (50:13) This is the correspondence theory of how the world works.

And then there's the pragmatic theory of truth which is in a biological system things are changing, evolving, adapting, things of that nature. And he said most of Bill said most of the problems and failures of investors is they're too wedded to the correspondent theory of truth and unwilling to see what's changing and working and the pragmatic theory of truth.

(50:39) And you could see it everywhere, right? And I don't know how many times you and I probably have listened to a classic value investor who's had a great career, lots of money under management, stuff like that, but it's in a dry hole performance-wise and says, "As soon as value investing returns to the market, we're going to make a lot of money.

(50:57) " And Bill used to laugh. He goes, "I just made 20 times on Dell. That was a huge value investing. How come they didn't own Dell?" And he could go through all of these other stocks that people with a correspondence theory of truth of how to think about value ignored because it doesn't work the way the world says it's supposed to work.

(51:16) And Bill went to a pragmatic view about what's working and how long can this work and you know how to think about that. And he says value is always in the marketplace. It just migrates. It goes to different places. So if you're pragmatic in how you think about things, you're not afraid to buy value if it's in technology.

(51:33) You're not afraid to buy value if it's in a financial. You're not afraid to buy. You just go wherever the opportunity set is. But correspondent theory of truth does put you in a sense of absolute. You're not flexible in your thinking. There's so many classic value investors that have lost decade plus performance numbers because of stubbornness.

(51:53) Later this year, I'm going to be launching a richer, wiser, happier master class for a very small, select group of people who'd like to study with me over the course of a year. We're going to meet once a month over Zoom, typically for about 2 hours per session, to discuss the themes in my book, Richer, Wiser, Happier.

(52:12) We'll also meet in person at a couple of really special events. I'm going to cap the group at a maximum of 20 people. So, this is an unusual opportunity to study very directly with me and a small group. What sort of people am I looking for to join the master class? Well, really anyone who's deeply interested in exploring how to live a life that's truly richer, wiser, and happier.

(52:37) This is the second time that I've taught a richer wiser happier master class and I'm planning to do this again because it's really been a totally joyful experience for me over the last year. The group has included an amazing array of 20 people from six different countries and I can tell you that the current members are an incredibly interesting, accomplished and really delightful array of people.

(52:59) They include some extremely successful fund managers, some investment analysts, wealth advisers, heads of family offices, CEOs, entrepreneurs, a management consultant, really renowned physicist turned quant investor, and a friend of mine who's a highly successful professional gambler. The common denominator here, I think, is that they're all united in this desire to live a truly abundant life, and they're also all great learners.

(53:26) One of the most joyful things for me personally has been to see the friendships form between these remarkable people as they learn from each other and support each other. In any case, if this sounds like something that might appeal to you, please email my friend and fellow podcast host Kyle Greve at Kyle, which is kyle etheinvespodcast.com.

(53:50) Thanks so much. Jim Ran once said that you're the average of the five people you spend the most time with. And I really could not agree with him more. And one of my favorite things about being a host of this show is having the opportunity to connect with high quality like-minded people in the value investing community.

(54:10) Each year, we host live in-person events in Omaha and New York City for our tip mastermind community, giving our members that exact opportunity. Back in May during the Bircher weekend, we gathered for a couple of dinners and social hours and also hosted a bus tour to give our members the full Omaha experience.

(54:31) And in the second weekend of October 2025, we'll be getting together in New York City for two dinners and socials as well as exploring the city and gathering at the Vanderbilt 1 Observatory. Our mastermind community has around 120 members and we're capping the group at 150 and many of these members are entrepreneurs, private investors, or investment professionals.

(54:55) And like myself, they're eager to connect with kindered spirits. It's an excellent opportunity to connect with like-minded people on a deeper level. So, if you'd like to check out what the community has to offer and meet with around 30 or 40 of us in New York City in October, be sure to head to the investorspodcast.

(55:14) com/mastermind to apply to join the community. That's the investorspodcast.com/mastermind or simply click the link in the description below. If you enjoy excellent breakdowns on individual stocks, then you need to check out the intrinsic value podcast hosted by Shaun Ali and Daniel Mona. Each week, Shaun and Daniel do in-depth analysis on a company's business model and competitive advantages.

(55:41) And in real time, they build out the intrinsic value portfolio for you to follow along as they search for value in the market. So far, they've done analysis on great businesses like John Deere, Ulta Beauty, AutoZone, and Airbnb. And I recommend starting with the episode on Nintendo, the global powerhouse in gaming.

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Yeah. One of one of Bill's great strengths was that even though he was a great value investor, obviously, he was never theological about it. (56:30) Like he was he he's one of the great freethinkers and agnostics about investing. There were no rigid dogmas for him. And there's a very interesting book that I know you've read by Lewis Menant, the New Yorker writer called the metaphysical club where he talks a lot about pragmatic philosophy.

And the idea that I got from it. (56:47) There's a beautiful line that was one of the few things I really have tried to bed down in my adult brain which was he said that ideas are tools like forks and knives and microchips that people deise to cope with the world. And I love that an idea, you know, he would say, for example, that it doesn't really matter whether God exists or doesn't.

(57:07) It's is your life happier because you believe in God. And and so it's sort of as you said, I think literally that phrase the cash value of ideas. I think James actually literally used the phrase cash value, right? It's is it how is it working for you? Is it paying off for you this idea? And so it's just such an incredibly helpful way to think about markets.

(57:27) But if you look at Bill's value trust, it was never a growth portfolio and never a value portfolio. It was a core portfolio that had both growth and value stocks. In his mind, the growth stocks were mispriced and the value stocks were mispriced as classically defined. But when we were managing money for sovereign wealth funds and the big pension plans and traveling around the world and stuff like that, they were all like, well, is he value or is he grow value, but there's value over here in low PE and there's also value over here in high PE.

(57:54) And so they always stuck him in core. They always made him a core manager. But that ability to be able to navigate back and forth between value and growth was a pragmatic way in which to attack the investing world. I mean, if you said, "I'm only going to buy growth stocks." Well, growth stocks work sometime, but not all the time.

(58:13) Or, "I'm only going to buy classic value stocks. Are you going to be in the doghouse two out of five years? Is that the life that you want?" And he goes, "Why don't we?" He just kind of figured out, "Let's just figure out where value is, and I'm not going to be locked in to only buying lowkey stocks.

(58:26) " And I'm not going to be locked in to buying Tom Marc growth stocks. You know, it's I'll do both. Just tell me where the mispricing is. So that's pragmatism, right? That's just let's just figure out what's working. Let's go after it. I don't know if you want to talk about one of his biggest mistakes was the financial crisis, but actually was a great insight.

(58:43) Sure. About how that mistake was and Bill's cut to the we've all come to terms with it. It was cathartic obviously, but here was a situation where we failed when we did the postmortem on it and stuff like that. As you well know, and you wrote extensively about it, we thought that 2008 was 1992.

You go back to 1992, that was a great savings and loan heating story and all that, and banks in Colorado were failing and in Texas and Boston, stuff like that. And it was really a mess. (59:12) But the government decided that for the health of the banking system, financial system, he would allow the equity to survive to come again.

And so Fanny and Freddy went to two and three state private companies, right? Even though they were GS for the government support, but and so he bought Fanny and Freddy at two and three and four and that was the beginning of the 15-ear track record. (59:34) So the government said, "Okay, that it's fine.

Let's just do it this way and let them work it out themselves." In 2008, we thought that 2008, having the track record of what happened in 1992, the smart thing would have been, let's let them work it out. We'll get through it and through support, they'll come out on the other side and we'll be able to keep the system intact.

(59:57) And of course, the exact opposite happened. They wiped out all the equity and it caused large ripple effects. And so, the answer then was what? We had the wrong description of 2008. 2008 was not 1992. It was something totally different. And the lesson we took away from which is I'd love to talk you know have dinner with Bill soon again and talk about this is when government is involved in the decision-m process no matter what happened 20 years ago what happened 50 years ago.

(1:00:27) But if government and large committees are involved in decision-m process, your ability to predict what's going to happen goes right down because there's so much personality and emotion and the politics of the day was we're not lending money to these fat cats on Wall Street just so they can keep their job and their company and they wiped them out and we missed it.

(1:00:46) And so that was one of those things where I will never forget and anytime I see government playing a heavy hand and God knows how we can get through the day today without worrying about heavy hands. When the government gets involved in decisionm that can affect the underlying value of stocks.

It's almost like the two hard pile of Charlie Munger. (1:01:06) Remember Charlie Mer said I'll do the easy one. This is the no flatout no. I'm not going to do it. And the third one is this is just too complex. I'll come back to it later. I can't figure it out. But it's almost anytime government's involved in investing in a very big way that's in the too hard to figure out pile for me now.

(1:01:22) I don't get involved and I just it's it's just really too difficult to wait. Now you might argue government's involved in AI and government's involved in tariffs and things like that. And yet it makes it a little bit more trickier. But when something is either going to survive or not survive based upon a government decision, we're out.

(1:01:42) We go somewhere else. We're not going to play that game. I thought one of the most striking things when I look back on that period and the and just the pain that Bill went through was yeah that he was able to draw on stoic philosophy to help him. I thought that was really interesting that he that was in your book and I did I got it.

(1:02:03) You helped me understand that because when he was going through that it was personally traumatic, personally devastating, you know, so many ways and I did not I knew he was hurting and I knew it was a hard hard time. I did not know until you had written about it and you talked to him about it how important the Stoics were.

(1:02:21) And now like you can see why it was a perfect philosophy to embrace in your darkest hour that allowed him to come out on the other side and then still be able to contribute because you know something like that there not a lot of managers that come back from that can't come back. It was an extraordinary thing.

And I've said before, the thing that I really admired Bill for most in my youth as a young journalist was just the thrilling brilliance of his mind, the freshness of his mind. (1:02:51) And then as I got older, the thing that I really admired most was just this indomitability. His ability to come back from that pain with a sense of humor and integrity and honesty and perseverance and the courage to keep buying.

I mean, the fact that he once said to me, "I'm glad that I didn't curl up like a turtle or a tortoise in its shell." Uh but that I kept buying. (1:03:19) and obviously even better than I do that the fact that he managed to keep personally his enormous position in Amazon so much so that he said to both of us I think that he's the biggest individual shareholder of Amazon not called Bezos so there was something stunning about that recovery yeah we don't we haven't covered a lot of this thought about doing something but I don't know if he'll ever come it but like Buffett's a competitor right and for him competition was bridge and probability of Bill was a baseball (1:03:47) pitcher and I read a lot about baseball pitchers and baseball pitchers have to have a strong backbone.

They have to have the ability when they just got knocked out of the ballpark and maybe lost the game or lost the World Series or whatever the case may be. They take a lot of pain. (1:04:06) They take a lot of abuse, but they got to get back up on the mound and pitch again. The whole you got to wave it off and you got to keep pitching.

And you're talking about a guy that playing baseball from little leaguers all the way to college. So, how many of those episodes in his life, and I'm just theorizing now, where sometimes you got your good stuff and you've got the strike zone and you're fine and everything's good, and another day you just you might have lost the most important game and your team is down and it just the chance to go off into the (1:04:33) playoffs, what you as a pitcher, you got a lot of failure that comes your way just naturally by the numbers.

But if you spent a whole life of pitching, winning games, and enduring losing games as he had as a pitcher, you have to think that helped to craft some sense of not only competition, but perseverance, willing to get back up on the mound again, not quit. (1:04:56) Some kid that might have lost the game, might have never would have thrown the glove in the dirt and never come back.

But he was not one of those guys. Yeah, it's fascinating. I often think about what people like Warren and Charlie and Bill have like this strange kind of chemical mixture of weird personal traits that allow them to succeed. (1:05:16) And I I was trying to think of it with Bill this morning, right? There's clearly the extraordinary intellect and the incredible breadth of knowledge.

There is this tremendous perseverance, this tremendous competitiveness and drive, amazing memory, amazing pattern recognition. Then this kind of courage, right, to take bold contrarian bets and an independence of mind. (1:05:37) And then I was thinking sort of the the lack of emotion as well, even though I think he is sort of emotional in certain ways.

I remember him saying to me that he would cry listening to music, I think, but a weird lack of emotion like when there's pain in the market. So I remember your former colleague Lisa Rapano telling me right after 911 what Bill was like on on 911. (1:05:58) And I think her phrase was she said for Bill she said we were all crying and Bill and Terry and Bill's like assess assess assess.

It was very much like the the Bill Miller who had been in an intelligence officer in Germany during the Vietnam War. Can you talk about like that temperamental advantage that he had that enabled him to win because it wasn't just intellect. (1:06:22) There's some weirdness to the temperament right that enables someone like that to be so extraordinary.

You hit on something very important, Will, which I think we're coming in. It's the culmination of it all, right? His father was his baseball coach and so he had that competition spirit early on. I spent a lot of time with Bill talking about intelligence and he was very, you know, he kept the cards close and it's not like he's any information that's now 50 years old that we can't share anything like that.

(1:06:46) I wrote I read a book that he read Sherman Kent who wrote a book about the intelligence services in the US and it's almost built to the tea which is how to handle things like that but Sherman Kent was also the guy that said be multi go find the experts the scientists go find these other people you're an analyst and you've got all this data but go find out what the scientists over here are saying and find out so he was Sherman Kent his hero a guy that he looked up to being an analytical figure at the time in the 40s and50s that was probably somebody he wanted to (1:07:17) emulate, right?

And so, you know, this whole thing about the intell I've got I must have 20 some odd books on intelligence analysis going, "All right, what's there? What's there?" And there's something there, right? And it was his willingness to like you say, assess, assess, assess. (1:07:32) You go through all these layers.

One, two, three. But then Sherman Kent was very much broaden out, see what everybody else is thinking, seeing what they're thinking. I never saw Bill emotional. Not to say that he wasn't. As you pointed out, he confessed that and maybe in private he was emotional. I never saw him yell. I never saw him dress down and analyst.

(1:07:54) I never saw him angry. He just always seemed to be so he might have got in the car and punched the windshield. Who knows? But his decorum demeanor, temperament, and his job as CIO and senior portfolio manager and all of us under it, we couldn't have had a better role model to go through the wicked time.

And he was he just had it all figured out. (1:08:17) But I think to your point, I don't know if we can point to one thing. It's just a lot of things came together in life and bubbled up. But to if we could say if there's anything that you could say what was the one thing it was just that he never quit.

He never quit being curious. He never quit wanting to make money. (1:08:35) He never quit wanting to be successful. And there's some people that just get tired and quit and go home. And gosh knows he earned enough stripes and he had enough things that he wanted to call it a day he could have. He's way back and goes to Bitcoin and he goes to this and now he's an AI and Santa Fe Institute.

(1:08:53) Huge influence on his life and all that. But that's a special person that has this continuous appetite to learn and discover and curiosity and builds what 75 this year and just as much curiosity today as he had you know almost 40 years ago when he started doing the value trust track record.

His enormous bet on Bitcoin in some way reminds me of the bet on Amazon. (1:09:19) And I I think when I had him on the podcast, we talked about the parallel. Yeah. Because there's something about the fact that people like Charlie was saying that Bitcoin was rat poison squared. And here's Bill who's so contrarian by nature that even though he really really admired Warren and Charlie, it excited him almost more the fact that they hated it and that they had a blind spot and he could sort of because he was so obsessed with pragmatic philosophy and he could look and say there's something they're missing because these old guys from the (1:09:52) Midwest don't have a great record of understanding cutting edge technology.

But at the same time, I remember asking Charlie about this if there's any evidence that could come along that would change your mind about Bitcoin. And it was pretty clear to me from the way Charlie didn't engage with that question that he wasn't interested in an as an investment. (1:10:15) And he basically said to me, I'm proud of the fact that I don't own Bitcoin because he regarded as a social ill.

Whereas Bill seemed to look at Bitcoin and say, I didn't think that the that the goal of investing was to buy things with like tremendous returns on investment and return on capital and cash flow generation. I thought the purpose of investing was to make money. (1:10:39) And so it seemed to me there was something like agnostic almost to the point of being a noic.

What do you think? Well, a couple things is I'm not sure. I'd have to think about this some more about whether Amazon equals Bitcoin because the way that he described Bitcoin to me and I think he heard it the same way is that after he read the paper that he basic, you know, the argument was I have no idea if this is going to work or not but if it does work it could be really big and if it doesn't work you should put no more than 1% of your net worth in it.

So for Bill, those (1:11:10) are great odds, right? Which is all right, I'm going to make a 1% bet. And if I wrong, it's not going to change my lifestyle. But if I'm right, and there could be things that we could think about that could make it right, deficits, inflation, whatever the case may be, the value of the dollar over the last 100 years, whatever you want to go to, if this actually thing works, then it could be a really big deal.

(1:11:34) And I think that's the way he set it up. Now, writing a check for 1% of your net worth that get says I could go to zero and I lose, you don't lose any sleep over it. But when it becomes hundreds of millions of dollars and then a billion dollar investment and you still own it and he's given a lot away.

(1:11:52) A lot that he's given away through his charity has been Bitcoin and others. I don't think he's given any Amazon away. I could be mistaken. But it was harder. It would have been harder in my mind to hold it at a hundred million than to have bought it with 1% of my net worth. But he did, right?

The hardest thing was holding on to it at 100 million and watch it go to a billion. (1:12:14) Not to write a check on 1% of my net worth that's going to go to zero in my mind. So he saw something there. I think everyone is flabbergasted. That's Charlie's word. Flabbergasted at how this thing has evolved.

Now I came about it slightly different and I don't own Bitcoin but I at the same time I thought the argument that it can't be valued because it didn't generate any cash was a poor argument. (1:12:45) I mean a Van Go painting doesn't generate any cash. Yeah. But there's obviously a supply demand issue here and that demand is more than supply.

The price goes up and there's plenty of things to look at that value has gone up that didn't generate cash. So I put that aside. That didn't make any sense. When we bought Louis Vuitton, I would say that we bought Louis Vuitton 11 years ago. (1:13:04) And you go through Madwall's hierarchy of needs.

When disposable income goes up, better tasting liquor, better tasting food, household products, and makeup. And then fourth on the list is fashion goods. You just start dressing better. And so when we drilled down into Louis Vuitton and had that figured out, one of the executives said to us, in addition to Madvar's hierarchy of needs, as you've identified, we've also discovered it's a great sense of stored value that people in difficult countries with fragile banking systems or dictatorships or (1:13:34) things like that.

We're seeing up we can see that there's purchases there and whether it's Louis Vuitton handbags or jewelry or whatever if things go bad they hop on a plane and when they get to Honolulu they open up the luggage and they monetize all their Louis Vuitton bags. And I said okay that's Bitcoin. (1:13:53) I said, "What I see happening with Bitcoin is that if you were in," and today actually there's an article on Bloomberg talking about Bolivia, and Bolivia has roadside stands transacting in Bitcoin because their inflation's 50%, there's no currency, but you know, it could be El Salvador, it could be Lebanon, Brazil, Argentina, go down the list.

(1:14:15) And I gave that talk to a client event and I said, first of all, I said, "Look, if you're going to do it, do it with 1%. That's the right way to do it. two, if it works, Charlie may not be right in that it could be horse manure here in the United States where we don't have a fragile banking system and even though we've got some inflation, nothing like you would see in in very poor countries.

(1:14:35) I said, but imagine if you were in a very dire place, maybe you would have some money in a blockchain Bitcoin that if you had to leave the country, you wouldn't even have to worry about them searching your luggage. you can get out of town, get to the next country and access your blockchain and bring your Bitcoin with you.

(1:14:53) That to me makes perfect sense of why Bitcoin has tremendous value. It's just it has value for different people in different locations. Woman came up to me afterwards. She goes, "That was the best explanation. Our family lives in Argentina. We've been wiped out twice by the government. Bank account to zero twice.

Yes, we're in Argentina. (1:15:13) We have a lot of Bitcoin." And so then I went, "Okay." So then Bitcoin is something that would be a currency that would be valuable to people in very unstable countries, economies, whatever the case may be. I've lost sight and help me, William, understand what's going on today.

Yeah. I mean, I I don't understand Bitcoin either, despite the fact that Bill told me to buy back when it was at like 8,000. (1:15:38) And I think you and I are way beyond our pay grade here. And I can I can tell that people are going to write in and complain, which is fine. But I think that's where I put it in the too hard to figure out pile and I just move on.

I did as well. And I don't think that's a mistake over the course of an investing lifetime to say there all of these things that I don't understand and I don't have to do them. (1:15:58) I don't have to play this game in order to do well. And one of the things that Bruce Greenwald, this great investor and former Columbia professor said to me at one point, we were talking about the fact about Bill's Amazon bet.

And Bruce obviously had thought at the time that it was an incredibly stupid bet and and is very honest about the fact that he was wrong and Bruce had been shorting it back then. (1:16:22) Bruce Bruce said to me that that Bill is a specialist in explosive upside. I thought that was such a beautiful insight that what I love it.

Yeah. What Bill never heard that before. I love it. I love I thought it was a brilliant observation and it goes back to what you were saying about the probabilities with Bitcoin that he could look at something and say if I'm right it's going to be enormous and same with when he was being attacked all those years ago by Bruce and others at the conference that I attended that had all (1:16:53) these guys I think it was like Seth Carman and Bill Ruin all of the legends of the business and Bill got kind of pillared and he said as I recall about Amazon if I'm wrong we'll lose all our money and if I'm right we'll make 50 times our money.

And so that willingness to bet on things where if you're right, the payoff is enormous was it was just very distinctive to Bill. (1:17:16) Yeah. And but he would rightsize the bet. I bet if you and I went back and looked at Amazon, I don't think Amazon in 2001 2002, I don't know. I'm just speculating.

I don't think Amazon was 50% of his net worth in 2002. It wasn't, but it could have been a 5% bet. But when you buy it at nine, I think he had $9 Amazon on Lake Mason opportunity trust. $9 Amazon. (1:17:39) You know, you can buy a few hundred,000 shares and it's not going to be your entire net worth.

You can buy a few million shares and it may not be a big part of your net worth. But once again, so here's the Louis Simpson, one of my favorite lines from L Simpson is it's not difficult to identify, he would say, not identify good businesses. (1:17:55) The hard part is holding on to them for a decade.

Yeah. And that's where I've been spending a lot of time which is once again it's is it going to last a decade? Let's get that part right. Can this last a decade and we can make money for a decade? That's a total different set of thinking models. But then the question that I'm spending time on and I'm talking to Michael about this and other one is what is the ride like when you said okay I got T1 to T 100 I made 100 times my money.

(1:18:21) What was the ride like along the way? And what kind of character, temperament, belief, confidence you needed to have to keep the bet on, right? That to me is a fascinating thing. So Hendrickk beter, the professor from Arizona State University. So, I've been going through his research and stuff like that and he's glad it's one I think he did it's the same thing that he does which is I think since the Great Depression or something he looked at all the stocks and figured out that twothirds of them don't even beat the treasury bills over (1:18:52) time and only a small 1% actually add most of the value of what stock market capitalization is and he updated the paper 1990 through 2020.

So, it was a 30-year look back and he took out the 50 best contributors to the total market capitalization over the period. 35 of them were US stocks, 15 were not. (1:19:16) So, I looked at the 35 US stocks. And then I said, okay, in the last 10 years, of these 35 stocks, what's been the performance?

And there have been 17 underperformers out of the 35 and 17 outperformers. The one oddball is General Electric that the B separated itself. So, we took that. So we took the 17 outperformers. (1:19:35) We said, "Okay, if you had no premonition that these would be the biggest contributors to the stock market capitalization, but these were good businesses.

They're leaders in their industry and stuff like that. And you decided that you were going to buy all 17 equally weighted over the 10 years. What would have been the right, you know, what it would have been like?" And of course, it crushed the market. (1:19:53) I mean, the market was up, I don't know, 200%.

These guys were up 800%. If you took out Nvidia, which was amazing, up 28,000%, I think the portfolio was up 600%. So clearly home run territory. Then we looked at it, as I was saying earlier, we said, "All right, with the frequency, the outperformance on a monthly basis, these 17 biggest contributors to market wealth capitalization underperform monthly 50% of the time.

(1:20:21) Quarterly, kept this off to the side, 60% of the time, yearly, 63% of the time. draw down the draw down actually they had 102 period different periods of 20% draw downs over the time period that once twice on average then we looked at the worst percentage draw downs from trading high to trading low average 41%.

So here you have a portfolio that's going to kill the market. (1:20:47) You basically are only going to win 50% to 60% of the time monthly and quarterly and along the way you're going to have 40% draw down. Who holds that portfolio? Who holds those individual stocks? And that to me is the missing piece of our puzzle to figure out which is there's some good businesses out there but I think we cut them loose too fast because they've either underperformed for a while or there's been a big draw down or something and here's modern portfolio theory and variance and launch aversion diversity all this stuff all (1:21:20) the way down the line that once again Simpson was right it I don't think the difficulty lies in making these individual bets as much as it is hanging on to them when the road gets bumpy and that's and here's Bill.

How many bumps did he go through a lot of bumps in Bitcoin? He go through a lot of bumps in Amazon. (1:21:39) He go through a lot of bumps and we can go down the list. What was it about him that he said stay the course? Yeah. 28 years of holding Amazon. I mean it's it's a stunning thing. And same with Nick Sleep and Gay Sakaria who came to it a little later obviously but the last time I chatted with them they still basically almost their entire net worth was still in Amazon, Costco and Berkshire.

(1:22:06) So just three stocks and I remember at one point going to Nick and I'd interviewed some legendary investor who had said something really negative about Burkshire that was really quite worrisome. almost made me sell my Burkshire and I told Nick and he was like yeah great culture and he just didn't do anything and just kept it and all these years later it's incredible temperamental ability to hold and then at the same time Bill Nyron who I had on the podcast recently was really irked by this idea that there are these compounding machines that you (1:22:34) should just keep holding and his view is no there comes a time he was happy to I think he'd held Apple or something for like 12 years but he's like no at a certain point you have to because the valuation isn't where you need it to be.

How do you think of that kind of quandry? I you know what I will do and I'm not saying any of these guys are wrong. (1:22:54) They're much smarter than I am. But I would say I go through this iteration. The first thing so you were saying let's just make it easy. A 25 stock portfolio. 4% is the average bet.

2% is the entry bet that goes to four. Four or four is going to two is zero. And then you have your overb. (1:23:13) So today, Nvidia is an over bet, Amazon's an overb and stuff like that. But if Apple was an overb for me at end of last year, at the beginning of this year, and so it was 7 8%. You know, now it's a three.

And I wasn't selling it just because Warren I I was we were selling it because we were concerned about the app store and what was the revenue growth of the app store. (1:23:32) We knew AI was an issue and stuff like that. So there was a point in Apple that you basically felt that it wasn't an 8% overb.

So I get that. I mean that made pretty sense. So it's still down there. We saw Paul Johnson out at guys conference as well. And he did a presentation on Apple and he's working on a book I believe that'll be out soon. (1:23:55) I hope on on how to value growth. So when we bought Apple 2014 and I guess that was about the same time that I think Ted Wexler bought it 2016, but you could have bought Apple and it was discounting zero growth.

The said basically the handset business is flat. But you looked at the service business that was growing at 30% 40% per year with returns on capital that were 100% and that was 20% of revenues. (1:24:20) And you can say to yourself, well geez, if just the app store works out and the handsets don't move, we still can make money here.

And that's the way we thought about it. What's gotten to be trickier though is now that the price of Apple is really about 15% growth and it's struggling to get there. And so that it's a harder puzzle today than it was 10 years ago when we were buying the stock. (1:24:42) Today it's a little bit trickier than how to think about and but it's all about right sizing the bet.

I very rarely go from 0 to four or four to zero. I work it up and then I'll work it down looking for disisconfirming evidence along the way. And we're always looking for disisconfirming evidence. Who else has an idea that, you know, you can go on Bloomberg and get all the analysts and these are short-term type things, but I'm looking for the outlier.

(1:25:07) Who thinks this is going to the moon and what's your thesis? And who thinks this is going down 50% from here? What's your thesis? And then we try to block those off and then start working into the middle to try to figure things out. So, you know, Bill says it's art and science. It is a little bit of the art side to it.

(1:25:26) And will AI figure that out? Maybe there'll be a model that tells you how to do that. And I actually wanted to show you that because when you say Bruce Greenwald, I'm reading this for about the 10th time. Competition demystified. Yeah. AI can't write this book yet. Yeah. But this is where I think the secret and moan's competitive advantage period and porters fight horses.

(1:25:45) AI can't get there yet. Yeah. AI is not yet as smart as Bruce Greenwald. No, not yet. play some part but yeah he's a pretty smart dude but yeah I wanted to talk a bit more about this whole topic of concentrated investing because it's clearly a really central part of your focus over over your career you wrote a book titled the Warren Buffett portfolio which is subtitled mastering the power of the focus investing strategy which is all about succeeding with a concentrated low turnover portfolio and there's a great quote that I think (1:26:17) is in the Warren Buffett way where you quote something from Warren where he talked about how if you're a no nothing investor, yeah, it's fine for you to diversify on dollar cost average.

But then he said, and these are his exact words, on the other hand, if you are a know something investor able to understand business economics and to find five to 10 sensibly priced companies that possess important long-term competitive advantages, conventional diversification makes no sense to you.

And I wonder if you could (1:26:45) talk a bit about this because you gave an excellent speech at Value X BRK Guy Spears conference. Yeah. I think this was two years ago. You gave a very good one last year as well, this year on private equity. Yeah. But you gave a very good speech about the general failure of active investment strategies and then this curious fact that concentrated low turnover value strategies seem to have worked really well and yet almost nobody does it.

(1:27:14) Could can you talk more about this? Tell us for a start make the case for why this actually is a good strategy. Okay. Well, as I said, when I wrote the Warren Buffet Way, I don't think I even mentioned portfolio management. I think I said something like Warren buys and holds for a long period of time and he never sells.

(1:27:32) So, after we wrote the Warren Buffet Way, which was all about stock selection, I remember watching the days when I was probably watching more financial news networks than than I ever do today. You'd have these people come on and say, "Well, I'd really like to buy companies with favorable long-term prospects, simple and understandable.

(1:27:48) We like cash earnings and good returns on capital. want management that looks after our interest and we're all buying them for less than they're worth. And I go, that's great. That's a Warren Buffett warning. They got it. This is perfect. And then you look at the portfolio and it's 100 stocks and 100% turnover ratio.

(1:28:03) And you go, wait a minute. This isn't right. You're talking the talk, but you're not walking the walk. And so when I told Warren we were going to do the book, he was one of my first interviews and he was very plain spoken about it and said, you know, he said, "Robert, we're just focus investors.

We just focus on a few companies. (1:28:21) " And so he didn't give me the answers. He just said this is what we do and go for. So the the thing that we did was we started looking at those people that were doing it. And you go back to John Maynard Kanees at the chess fund and you had Charlie's track record.

You had Sequoia fund track record. You had L Simpsons track record. (1:28:37) And you put it all together. All of them fantastic long-term track records. All of them except Buffett had periodic underperformance and frequency magnitude issues and stuff like that. But clearly it was an optimal strategy.

Then we did 3,000 portfolios for 250 stocks, 3,000 for 150, 3,000 for 50, and 3,000 for 15. And ran it through the computer through the S, you know, I think it was 2,000 stocks. (1:29:04) And sure enough, to the degree that you reduce the number of stocks in your portfolio, it increased the likelihood, the odds that you would outperform.

It also increases the odds you would underperform. So stock picking becomes critical. And so it it started to all add up that the optimal strategy is to own fewer stocks than own more stocks. (1:29:23) And right then, so that was kind of 1998 going into 1999, we came out with that said this is the way based upon these facts, very simplistic facts, this is the way you ought to do it.

I think where it then jumped a big notch in my mind William is that when Kmers Martin Kmers and Pedaga wrote the high active share papers in 2009. (1:29:44) So 10 years after we wrote War about the portfolio they come out with high active share and they do an academic rigorous study of a gazillion mutual funds and break it down and say sure enough that the fewer stocks you have in the portfolio the higher likelihood that you're going to outperform.

Couple years later they do high active share and low turnover and say that's the sweet spot. (1:30:03) high active share, low turnover, there's your excess returns. And so it's all laid up. But they also found the same thing you mentioned, right? Which is that you also increase the probability of underperforming.

That's it, right? So you've got to be a half decent stock picker. So if you just say, okay, if you can give us that, we can do a average job of picking half decent stocks. (1:30:26) What Charlie said, I think it was back in 1997, I wrote it down again. He said right in the end of meeting he's talking about the Bergkshire system of managing concentrated low turnover portfolios.

He said if we are so right in the Bergkshire system why are so many imminent places so wrong? Then that opened it up, right? All right. (1:30:43) So, let's get to the heart of the matter. And that's when I drove down into modern portfolio theory, which basically hoodwig everybody into thinking, we've got the perfect strategy for you to get through a bumpy ride, non-correlative, broadly diversified, you won't have to worry about draw downs and we're going to give you good performance.

(1:31:01) But then when you look at the performance and you go through the, you know, the SPA, you know, data, the S&P versus active manager, it's atrocious. It's just absolutely atrocious. We all knew it intuitively. Long only managers, it doesn't matter if you're big cap, mid, small, value, growth, core, it doesn't matter, international, domestic, it's atrocious, horrible.

(1:31:24) So you say to yourself, okay, if modern portfolio theory, broadly diversified portfolio, low tracking year, low correlation, but they can't beat the market and the focus investing can beat the market, but it has the baggage of high tracking error and standard deviation and periodic underperformance.

(1:31:40) Why wouldn't you just a rational person say, "Let's do the focus investing and put the rest of it in an index fund." And as simple-minded as that, you would be shocked at still how many thoughtful consultants still can't wrap their hands around it. And when I talk to people, and I leave them out of the conversation, when I talk to people that actually recommend it, they want to recommend focused portfolio.

(1:32:01) They want to recommend concentrated low turnover bets, but they and the client understands the mathematics of doing so, but they still freak out on draw downs. They still freak out on standard deviation. They still freak out on volatility. And it is that it's the kryptonite. It's the kryptonite of our industry which is people cannot handle volatility.

(1:32:24) And then we get back to okay volatility is the nemesis. Maybe private equity is going to take over the whole world cuz they don't have volatility, right? They're going to be able to sell it to anybody. But it warrant what was so brilliant about Warren. I said this in the book is that I think two things happened that bless Warren of many things that have blessed him over life.

(1:32:43) One is that he was never raised on modern portfolio theory. So he didn't have to unlearn it. Same with me. I wasn't raised on finance and accounting. I never had to unlearn modern portfolio theory. And secondly, he both owned private companies and public companies at the same time. And he chose to treat his public company in the same way he chose to treat his private companies and analysis and performance evaluation and management.

(1:33:09) the the lessons learned in private companies were the same lessons learned in his public company and he treated them both the same. Nobody else has had that kind of experience. And Warren says, "I think we'll just do it this way." And Charlie says, "I think we'll just do it this way." But there are other people that are very, very smart that basically say, "Yeah, that makes all the sense in the world, but when the price shows up, they just go weak knee.

(1:33:33) They just go weak at the knee." And William, I have no idea how to solve a prospect theory. I mean, it is a fact of life that people wait a unit of loss twice as grievous as they do one unit of gain. And it and I don't know I think at the end of the day, this is our kryptonite. We just can't get over this.

(1:33:52) And I don't know I don't know what happens from here. I think some of it is just wiring, right? Cuz I've told this story before where I was with Bill right after 9/11 with Bill Miller and he calls the office in Baltimore. He was visiting his alma mater and he calls the office and they tell him that AES, which he had just bought the day before, had just massively missed earnings and he just lost like $50 million.

(1:34:17) Um and and he just immediately said he got like really serious and he's like, "Where's my cash?" And he's like, "Let's just double our position." And he hadn't really done his work yet. And he just said basically that because people feel the pain of loss twice or two and a half times as keenly as the pleasure of gain.

(1:34:34) He just had this assumption that people were overreacting. And you write about this in the psychology chapter of the investing the last noble art book that there's this kind of foundational paper from 1985 where I think it was Richard Thaylor. Yeah. Talked about how Yeah. how people overreact to new information whether it's good or bad.

(1:34:55) Oh yeah. Um and so I think there are just a few people like like Bill or Charlie or Warren who don't really feel those emotions. Like Charlie Charlie said he didn't feel the emotions at all. He just could see that the odds were great. He and he writes about that he was never bothered by draw downs.

(1:35:16) He was he said you know I was raised by a family who had to deal with bumps. We dealt with bumps in life and that's that's who we were. And I was trying to think his dad was a an attorney. His grandfather was a judge. I'm trying to think what bumps in life did you have that prepared you for the psychology of having bumps in the stock market.

(1:35:32) But that was Charlie. Charlie said and he said something like if you can't handle the idea of going down 50% somewhere in your career as an investor, then you deserve the mediocre results that you're going to get for trying to avoid it. There it is. I think it takes a weird type of person to be able to handle it.

(1:35:49) In reality, you can, you know, theoretically all of us can say, "Yeah, yeah, yeah. I understand that these are great opportunities when there's tremendous volatility." But when it hits the fan, most of us don't really think that way. And I I don't know. I sometimes wonder if there is something a little bit emotionally defective with a lot of these people that that it's connected.

(1:36:10) I know it's a little bit too glib and I I don't know. It's a there's something directionally correct about it, but I think it's connected to the fact that so many of them end up divorced. There's a sort of there's a lack of emotional intelligence that allows them to look at probabilities. I don't know.

But then Bill has a great deal of emotional intelligence. (1:36:29) I, you know, I, you know, I don't know. I feel I don't know what I'm going to say this year when we go see Guy. I feel William and this is me on the couch talking to my therapist. You know, I'm getting tired of swinging at the windmills.

I mean, you go at the windmill so many times with all the facts and defense and the the obvious things that you can then and basically people are just saying, "No, I can't do it. I just cannot do it. (1:36:52) " Then the argument is there's your excess return. But you got to find you've got to find those people.

I didn't tell you the Bill Ruain story yet, did I? No, I've heard you tell it before, but it's an important one to tell. He's a fascinating guy. Yeah. This is my solution to how to deal with the fact that people can't embrace focus investing. (1:37:11) So, it was right after the Warren Buffet Way was published and on those days when you might remember the meetings were on Monday because there weren't that many people.

I think there were 3,000 people that went to the Holiday in Convention Center and the baseball game was on Saturday and Warren would go out and the the Omaha Royals get up and he would throw out the first pitch and we were watching the game along the first baseline and here walks up Billy Wayne who I never met but I certainly recognized him and I said, "Mr.

Wayne," I said, "I'm Robert Hackro. (1:37:36) I wanted to introduce myself. I just wanted to congratulate you on everything that Sequooria fund had accomplished, the very first focus fund, whatever. He said, "Rob, you're very kind. I congratulations on your book." And I said, "Thank you." And and he said, I said, "I guess you're going to try to manage money.

(1:37:50) " I said, "Yeah, I guess I'm going to try to manage money and, you know, do this one thing." And he said, "Listen, can I give you some advice?" I said, "Absolutely, Mr. Wayne." He goes, "I'm going to give you some advice, but you're not going to take it." I said, "No, I assure you, Mr. Wayne, any advice that you give me will be under careful consideration.

(1:38:07) I will certainly take it to heart. He said, "No, you won't." I finally said, "Look, just give me the advice and we'll go from there." And he said, "You're going to start this, you know, portfolio and you wrote a good book and everybody loves Warren Buffett." So, you're going to get a lot of people say, "Yeah, I want to do this.

(1:38:21) " And you'll get a lot of money. And then in about 6 months later, about half of them are going to start yelling and screaming at you because you're underperforming or you don't own oil stocks and oil stocks are going up or you don't own this and that. And they're all going to be complaining at you and I want you to fire every single one of them.

(1:38:38) I said, "Okay, I'll fire every single". He goes, "No, you won't." I said, "You're a young man. You've got a family. You got a mortgage. You're saving for your kids. You're not going to sell those assets." He said, "You're going to try to convert them thinking that you can bring them to salvation and doing this stuff.

But I guarantee you if you don't, your life will be miserable because you'll be spending half your time trying to convince people you've already convinced want to stay in the game with you and it's just a horrible thing. So make sure (1:39:04) you pick the right partners. And so my strategy now is if somebody calls and says, "We're going to put a million in." I say, "I tell you what, I'll make a deal.

Put 250,000 in, but don't bother me for three years." If that's a deal, I will take that deal, right? But I don't want a million and all of a sudden if AI is not working in the fourth quarter of this year because it didn't work in the first quarter of this year when you know everybody was going in a de-risisking way.

(1:39:30) I don't want you calling and yelling at me about sell this, let's get out of this. I said I don't do that. So give me 10% of your money. Give me 5% but give me something that you can handle and I'll take that and then the rest you can farm out to somebody else and do something else. I'm beginning to think that maybe that's the only strategy I have left, which is you almost say, "I don't want your money, so they give it to you, but take less than they would otherwise give you or take less than the amount of money that would cause them discomfort." It was JP (1:40:01) Morgan.

Guy talked to him on the street and said, "God, I'm so worried about the market and it's going to go down. I know it's going to be raised and I can't sleep and what should I do?" And JP Morgan said, "Sell down until you can sleep." It's like you should fill down your portfolio and get to a focused portfolio to some level that you can sleep.

(1:40:22) And maybe the strategy, we'll see what others say. Maybe the strategy is to say that this is always going to be a satellite unique different type thing. You diversify by styles, you diversify by market caps, you diversify by US and international. I said, "Why don't you diversify by running a concentrated low turnover and the rest of it you can run modern portfolio theory and just let them run side by side for the next 3 to 5 years and let's see what happens.

(1:40:46) " I'd love that bet. It's about finding the right opportunity with the right people. You can make this happen. But it's a, as you point out, William, it's very hard for most people to get comfortable with a focus portfolio. It's just a fact. You have some great statistics in your various books where you make it pretty clear why it's so hard.

(1:41:07) I mean, you talk about Ruain's Sequoia fund, how it underperformed 37% of the time and he got off to a terrible start right in 1970 to74 where he was 36 percentage points behind the market. Same thing with L Simpson who generally had less than 10 stocks. You said he underperformed the market basically about a quarter of the time.

Manga crushed the market over 13 years. (1:41:31) Yeah. But huge draw downs and particularly 72 to 74 when he got really clobber but and he never wanted to manage money individually again. Right. I think so. So I think it was very well by that time they were doing the blue chips and the seeds candies and I think the future was was the closed end fund Barkshire Hathaway.

(1:41:52) And a lot of people I think have it wrong. They say Warren's got it easy. He doesn't have he's got a closed end fun. doesn't have to worry about redemption. You underestimate how emotional Warren is about his partners and that he wants no harm to come to them. He wants now harm to that it's permanent capital loss, not short-term quotational loss, but even though he runs a closed end fund, so to speak, he has an emotional emotional dedication to his partners to do the right thing.

(1:42:22) Now he did I think remember that when he did the annual report might have been 2017 when he did the Rudard Kiting poem of if and he went back from 7374 and there were four different periods of time where Bergkshire Hathway went down at least 50% maybe one of them was 39%. 7374 87 it was 2000 2000 but it was actually 99 to 2000 during the tech thing and then the financial crisis where Brookshire Haway went down 50%.

50%. (1:42:53) And he pulls out Rud Kipling and says there's the temperament that you need when stocks go down 50%. And he's just saying and he said it to him again the light doesn't stop at yellow. It goes from red to green or green to red. It doesn't stop at yellow. And it's going to happen again in the next 50 years.

And when it does, just think about Woodri Kipling. (1:43:14) So it is a temperament thing is self-confidence. But it may be I'm thinking at this point if we could run 5% 10% 5% of modern portfolio theory money and generally speaking and focused strategies. Maybe those strategies would demonstrate over time their performance characteristics that people would look back and go, "Okay, they made more money than the S&P 500.

(1:43:37) Yes, they had a bumpy ride. Yes, there were draw downs, but boy, this worked out fine. So, why don't I make that my private equity bet?" And so, you heard Warren talking about private equity. He goes, "I don't get it. I just don't get why would you buy private equity? Not only is it illlquid, the menu set that you get to choose from in private equity is nowhere near as grand as the opportunity set of public stocks that you can look at.

(1:44:02) The economics of public stocks in most cases are far superior to what you can get in private equity. And three, the market gives you these opportunities periodic to buy these things at huge discounts, which you no longer get in private equity because they're all long cash and short deals. (1:44:21) And as Warren says, I can't compete in this space anymore because private equity is purchased the prices of.

So private equity gives me illiquidity. It gives me a menu set that is not as big as a public market. It gives me economic returns that in aggregate are lower than the market. And two, I can never buy them at a cheap price. (1:44:39) Why would you sign up for that? And oh, by the way, the performance returns in private equity in the last 10 years are really bad.

You know, if you look at what it's no longer the Swinson market in the 1990s when he was killing it and there was an illquidity premium, right, that you made huge money back then. (1:44:55) If you look at the private equity, whether it's the cigar butts, it's the growth companies, the venture capital, they're all underperforming.

So, what do they got left to sell? Once again, the only thing they're selling is no volatility. They've gone to the Achilles heel of where the client is most at emotional risk and says, "I'll solve that problem for you. (1:45:14) " and they're coming. So my thesis for guy this year is if you can't beat them, join them.

And what we need to do with focus portfolios is treat them like private equity. And if you don't give them anything but price returns to judge their performance, then they're always going to judge you by your price returns. (1:45:30) But if you give them their price returns, which we're obligated to do, plus the economic returns of what we own and the progress of the economic returns of what we own, maybe they can glam on to that to say, okay, the price is doing this, but the economics are doing this.

I'll think we'll just hang on and maybe that would be the saving grace. I don't know. (1:45:48) I think it's always going to be hard to deal with the volatility. I don't know. I'm a heavy proponent of concentrated funds and I own them myself, but I I don't know. It's hard. I worry. I mean, I feel very happy with it lately because they've been great for a few years, but when they start getting crushed, I mean, I um you know, I own three concentrated funds, one of which has maybe nine stocks, one has eight stocks, and one one has 70% of its money in seven stocks, but owns probably more like 20 and all.

And so, I'm a big but then I (1:46:23) also own a couple of index funds and one diversified fund. And I don't so I'm a big believer in this stuff but I feel like smart at the moment but then there was one I remember one of those funds went down 46% in 2008 and I didn't feel so smart then when I simultaneously lost my job and I was down 46%.

That's a hard one. That's a hard one. (1:46:44) It was really painful. My when I do these client events someone would say to me they say oh gez the market goes down and we got these wars in the Middle East and God this is happening and the deficit that's happening. I just I really feel like it's all coming to an end.

And I said, "You think this is it?" He goes, "Yeah, this is it. (1:47:00) " I said, "How much bottled water do you have in the basement?" Well, no. I said, "Can soup, peach preserves, AK-47, anything in the basement?" And he goes, "No." I said, "Well, I guess you don't think the world's coming to an end because if you thought the world was coming to an end, you'd be batting down the hatches and getting ready.

(1:47:15) " And I think Warren here's once again Warren believing in the American tailwind and the love of this country is we've taken so many body blows that his viewpoint is we can take pretty much any body blow that comes and the worst one would be as Warren has said his worst fear is the nuclear but you know we we've taken body blows for 250 plus years and we always seem to be able to come back.

(1:47:36) So that's a pretty good frequency distribution right how many body blows have we taken and we still seem to wait to get to the other side and come out a little bit better. That's his personal philosophy about it. I think in rereading the Warren Buffett way over the last couple of days, I also found it really reassuring to pound into my brain some of these very fundamental foundational tenets that you talk about there that it's really easy to forget.

(1:48:00) Like I was very struck by this central idea where you just said these are your exact words. You said when Warren Buffett invests he sees a business. Most investors see only a stock price. And then you had this quote that I'd kind of forgotten where he said that the nine most important words ever written about investing with a sentence from the intelligent investor where Graham said investing is most intelligent when it is most business-like.

(1:48:25) And so for me that was like a really good reminder that with these focused funds that I own, you know, it's like I'm an investor in things like Amazon and Meta and stuff like that and they're Alphabet and they're whatever happens to the world over 5 10 15 years some of those companies going to do pretty well I think.

(1:48:50) And I think just a reminder that we own businesses here that this is what's really extraordinary about Buffett. One of the many things is just this sort of elementary idea that you're owning businesses that you know are growing and making money. I don't know does that raise any 100%. When if we go you know go back and way we talk about markets.

(1:49:11) I mean here was this you know kid. I mean, he's just a fine young man, but liberal arts major, never owned a business, never owned an individual stock, never invested in the market, just had this view about the economy and risk and return and stuff like that, and took it upon himself to define return as expected yield, which is Buffett's coupons.

(1:49:29) And he read John Bur Williams, I've got that, but he said there's not a really firm definition of risk. And so, I think a suitable definition of risk is variance of return. and he put it into his dissertation, put it into the 1952 paper. Now, what I find interesting, I think we talked about this, which is that's not what Graham said.

(1:49:46) Graham said risk gets margin of safety. And he wrote about that in 34. He wrote it again in 49. 51 was the third edition. He wrote about an intelligent investor and he said no. Now, as we both know, nobody gave a crap about Murkowitz and modern purple theory for 30 years until we had the 7374 blow up.

(1:50:06) And then the value guys were gone. Warren was gone. He didn't come back to 84 when they did the security analysis 50th anniversary. There was nobody to pick up the pieces except these academicians who'd been sitting in the hallway waving their hand saying, "Hey, you want to try something new?

How about broadly diversified low volatility portfolios with minimum draw downs and we'll try to give you a good return on your money. (1:50:27) And everybody said that sounds good. They didn't want say that's a business. It was all about building a portfolio of stock prices that were non-correlative that wouldn't bounce around a lot and over time would give you a good return.

They totally divorced investing from the business and it became managing a portfolio prices not managing a portfolio business. (1:50:46) So I'll give you the last one. I'm keeping an eye on the clock. and we're running. When I do a seminar, I say to my people, my best partners, my best investors and global leaders have always been business owners because we talk the same language.

When I talk to a business owner, I say, "What's most important to you?" He goes, "Cash. (1:51:04) I got to pay the I need my money, right? I need money to come out. I need to pay my bills." Whatever the case may be. I said, "Yeah, I get it. That's what I do." And we talked about if you borrowed money, you better earn more than what you borrowed, blah blah blah.

And I said, "By foreign and business owners are my best clients because we're talking the same language." They get it. (1:51:23) They seem to say, "Yeah, it's a stock, but I get it. I own a business. You own a business. We talk a common language." Then I ask the people in the room, "How many of you business owners?" Maybe a dozen hands go up.

And then I'd say, "How many of you in the room own common stocks?" The other 88 hands go up in the air. And I'd say, "Okay, you 88 people own common stocks. (1:51:45) What do you think they are? And they have no answer. Those the things that you own are businesses, right? People do not think that a stock price, as you said, they have not yet made that connection that I bought Meta.

It's a business. It's a publishing business, right? Amazon is an online retailing, advertising, data center business. These are businesses. (1:52:10) But you ask people that own common stocks, how many of you own businesses? They cannot put that two and two together. They don't feel it. And Warren felt it because he did both simultaneously.

He owned private businesses at the same time. They own public companies. Now, what'll be interesting through this now they want to do privates and they're going to do tokenization on privates. (1:52:31) How are you going to determine what is the value of the tokenization? Well, at private equity, they should tell you what the revenues are, what the margin, are we making progress economically speaking.

So, there could be a way that you could pick up on the experience of owning a private company. You could buy this, you know, Elon Musk Rocket Company. (1:52:52) I'm having a moment here. All these different private Yeah, thank you. all these private businesses you can now own in mutual funds and you'll be able to own them in Robin Hood and different places and you'll be able to trade them through this tokenization process.

But then how do you think about those? Are those different than stocks or you going to treat them the same way as stocks? We'll probably treat them in the same way as stocks. (1:53:12) But if we can find some way to connect people that stock is a business, how do you determine what is a good business?

The same way you determine it's a good stock. And if we can get them to figure that out, but we've been trying for 50 years and for 40 years they said, "Don't write anymore about Warren Buffett giving away all the secrets." It didn't seem to matter. (1:53:28) It didn't seem to matter at all. I think that gets at such an important point, which is that however much we study this stuff, and you and I have both written a lot about the greatest investors, right?

We spent much of our adult lives studying these guys and then writing about them. There is something ultimately inimitable about them. (1:53:48) Like we can internalize their principles and they definitely by internalizing their principles it definitely helps us do less stupid stuff and we're more likely to do well.

But I still think when you look at people like Warren and Charlie and Bill Miller, there's some weird X factor that ultimately makes them inimitable. (1:54:09) I And I don't know, there's a part of me that sometimes feels slightly sheepish about this, right? because I write a lot and talk a lot about these guys and I'm saying here are the ideas you need to get from them and I know those ideas will help people because I know they've helped me but there is a kind of gap between the theory and the practice and I I wonder if you've thought about just that fundamental problem that there's some X factor that's ineimitable because they're just brilliant and yeah I thought about it a lot and I just finally came to the realization I will (1:54:40) never be as smart as Bill Miller I will never be as smart Warren or Charlie and I'll never have their X chromosome whatever the case may be that gets them to a level but I have always argued in the books and stuff like that you'll never get the there was a guy Allan Sloan wrote a article in Newsweek way back when called a pig and a poke they said Robert wrote this book we don't know it's like a pig in a gunny snake you don't know if it's a little bitty pig or it's going to be a big pig right and he argued that nobody just because you (1:55:09) wrote a book about Warren Buffett no way you're going to be able to achieve the same returns as Warren Buffett.

And I my retort was I agree with that and I would argue that if I wrote a book about Mozart, I will never be able to compose or play the piano like Mozart, but maybe I get to be a little bit better piano player than I otherwise would have been. (1:55:29) And the way my I've settled in life and my viewpoint is I'll never be as good as Bill or Charlie or Warren, but by studying him have I become better than I otherwise would.

Or better yet, am I better than the index that I'm competing against? No, I didn't generate the same returns, excess returns that they did over such long. (1:55:50) But, you know, the 14 years we did with Bill, we at one time the number one growth fund in the country. The last 11 years running the global leaders portfolio were ahead of index.

That to me is the ride has been worthwhile. Not that I will ever achieve their level and I will never, but by studying them I get just a little bit better. (1:56:11) that'll get just a little bit better. That allowed me to be a little bit more than average. If you got that, then you know, I'm okay. I'm okay with that.

And is there anything that you feel you've learned from observing Warren and Charlie and Bill that's actually really helped you to lead a happier life? Like when you think beyond making you a better investor, is there stuff where because I think of some of the quotes in your books where for example that there's one bit where you said you quote Warren saying it's not that I want money, it's the fun of making money and (1:56:42) watching it grow or you talk about the way Warren and Charlie invested in a way that fit their personalities and as they put it the way we want to live our lives.

I'm wondering if seeing those examples of how to live in a kind of harmony and a kind of alignment with one's own interests or personality, did any of that stuff actually change the way you live your life? Well, certainly handling periodic underperformance and tracking error and tough clients and stuff like that, you can look back at some of these great (1:57:12) investors and go, "Yeah, they probably went through the same thing." Bill Ruain and all of them, right?

So, I'm in good company, right? I'm in good company. I think what I take away from Warren and this was just a few years ago. Warren will be 95 in August 30th when I wrote the Warren Buffett way he was about so that came out in 94. (1:57:33) So he would have been 64 right back then if I got the math right.

Wow. Yeah. 94 1930 64 years old. So when I wrote the Warren Buff away he was 64 years old. I'm just a little older than 64 years old and I'm looking at a guy up until this last year and he'll still be active in the market for 30 years. He stayed in the game to me and Bill not he's not in the game like he used to be when he was with opportunity trust and value trust.

(1:58:02) But for me and Bill and even Charlie, it's the idea that you can stay competitive, stay in the I love this business, William. I love this business. I love solving puzzles. I love thinking about odds. I love the competition. I can't think of anything more fun to do over the next 20, 30 years than what I'm doing now, whether I do it in this capacity or another capacity.

(1:58:24) And I look at Warren and go, Robert, you're a puppy. This guy's been doing it 30 years longer than you. And if there's no reason why you can't stay in the game in some form or fashion over the next 30 years. And to me, that is the most uplifting of it all, which is I can stay in this game as long as it works between the ears healthwise and all that other stuff.

(1:58:44) It this could be a great ride for the next 30 years, and I'm looking forward to it. I think it's just I can't imagine not doing. I'm a horrible golfer. I don't like to gamble. This is what I love to do, and it worked. And I love writing and investing work together. You talking I'm a better businessman because I'm an investor.

(1:59:00) I'm a better writer because I'm an investor. And I'm a better investor because I'm a writer. So, both of them work in helping me move my craft forward. And I just love it. And when I look at Warren, I go, man, he could have retired anytime he wanted to, but he loved it. He kept in the game.

He was active. (1:59:15) He was active for 30, 40 years after I wrote the book. And I'm going, that's a pretty I could do that if I wanted to. So, that that's fun. That's good. Yeah. The longevity of these guys was amazing. I remember seeing Marty Whitman many years ago interviewing him and he came into his office wearing tennis shorts and stuff and he was like the secret of what we do as value investors is it's not that exhausting like it's not you know we're like we buy some stuff and then hold it for a long time but I always felt like he lost some of his intensity towards (1:59:43) the end and took his eye off the ball and I every it's going to happen to us all once you cross 90 if we can live to 90 I talked to more people who observe 90 is A tough one.

90 is a down shift and you but if you've got it figured out and you got too much pressure on you. I'm more worried about not working than I am about working. Yeah. (2:00:04) I don't know what I would do with myself if I wasn't working, writing, and investing. And I just love it. And Warren is a poster child and Charlie is a poster child that they stayed in the craft well into their 90s.

God bless them all, you know. So when I look at them, I go, "Yeah, I'll stick around." You did. I'll stick around. (2:00:20) That's how I think about it. Well, I wish you much continued success, Robert, and I along with many, many other people who have benefited greatly from your writings, and it's been a great pleasure catching up with you today after all these years.

And so, yeah, you've helped an enormous number of people. (2:00:38) We may not have become Warren ourselves, but I think probably I always figured there was some people who read my book, Richard Wiser Happier, who was not and just not really internalize it. But then there would be a few people who would read it and would become like billionaires and would actually really get it and would then give money back to society and would be extraordinary.

(2:00:58) And so I'm sure people like Mish Pabry when he read your book it was totally and utterly transformative and you know he read the annual reports you know did I tell you the story I know we got to quit Tommy never liked the Warren Buffet way he said in the annual meeting he goes I didn't think much of the book is it didn't do anything new really if you think about the Warren Buffett way it wasn't new I just rearranged it and then I put the case studies in there to say if everything lines up the reason why he when he recommended the Warren (2:01:25) Buffet portfolio at the annual meeting and he put it in his book, his recommended reading.

I said to a friend of mine, I said, "Why do you think Charlie liked Warren Buffett portfolio so much more than Warren Buffett way?" And he goes, "I'll tell you why. You barely mentioned Charlie in the Warren Buffet way. (2:01:39) And all you did was talk about him in the Warren Buffett portfolio." That's funny.

It's like we got new stuff to do tomorrow. We got a new puzzle tomorrow. We got new things to think about. And to me, that's it's glorious. And William, right back at you. I've learned so much from you and your writings and the fact that you do these podcasts. (2:01:56) you come to the conference, you speak to the young people.

I think we've got to keep it going this year more than ever. We've got to keep the momentum going because there not many of us out there left, you know. Well, I actually I have ideas for an event that I want to host on May 1st that I will invite you to the night before to keep some of these ideas alive.

(2:02:16) And so hopefully we'll have you on a panel and we can discuss it then. It'll be right after Value X, so you won't be exhausted yet. Yeah. No, you count me in. It would be my honor and I would love to repay all the favor that you've shown me over the years. So, in I'll be wonderful. It's been a great joy chatting with you and I really appreciate it.

(2:02:34) Thanks so much and I wish you a great ride from here to 95 with much compounding and many more successful books. We'll be at like the 12th edition of your your books by then. I look forward to it. Thanks so much, William. It was great to be with you. Thank you so much. Take care, Robert. Okay.

a really important investing lesson, which is the importance of focusing on our best ideas. (2:02:56) And Warren said at one point during the Q&A that Charlie and he would often talk about the fact that, as he put it, we made most of our money off eight or nine ideas over 50 years. And he said, "Every now and then you get extraordinary ideas and most of the time you don't have an edge.