Berkshire Hathaway Part I
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Couldn't need some of that you have running like the the gee that you eat.

I should have brought a snack.

Well, great thing about not being alive. We could always just take a break. If be true on the warm, don't break.

Oh my god, step for a part two peno vert and Cherry coca. Yeah Mandatory.

Mandatory. Well, that's okay because we're not really talking .

about very sure today that's right .

that he was intentional.

Welcome to season eight, episode five of acquired the podcast about great technology companies and the stories and playbooks behind them. I am the gilbert and I am the cofounder and managing director of seattle based pioneer square labs and our venture fund, psl ventures.

And i'm David is all and I am an Angel investor based in cant, cisco.

and we are your hosts. Let's talk about the ten most valuable companies in the world, the first nine or tech companies. There's of course, the big five in the us. Plus tesla, of course, because it's 21.

of course.

and then you have ten cent. And alibaba from china, the nth T S M C, the taiwan semiconductor manufacturer, and the tenth, the only non tech company. It's a one hundred and eighty two year old company that started as a test style mill in new england, berkshire, half way.

As most listeners know, berk share is far from a textile mill today. IT is a holding company unique in every way, in by far the most successful in history. A few of the companies that they own outside include the queen, dr. Cell fruit, lum gic, o net jets, sees candies and even Brooks running shoes .

see add company, right?

Oh yeah, oh yeah. I'm super loyal. I, I, I ran up mount sii, where in the other morning.

nice.

They also own large pieces of many of your favorite publicly traded companies, including amazon, Johnson and Johnson, coca, american express, craft, hines, verizon, gm, master cards, snowflake. And now they even own over a hundred billion dollars of apple stock. And somehow, the man behind IT all war in buffer t has claimed that purchasing berkshire hathaway was the biggest investment mistake he had ever made. And for many of you, you probably learning that war and buffy purchased to perche your health way. And that was not something that he founded, which is the first take away from this episode.

He claims we will cover this again much later in the, but he claims that purchasing briganti cost him a two hundred billion dollars, an opportunity cost.

Well, when you compound something over fifty years, you, you can, you can come up with some large numbers. So what the heck is this company? How did IT come to be? And why is that that even at an all time high for the stock, so many analysts think IT is underPriced today.

Well, to do this right, we are going to need more than one episode, even an acquired sized epo de. So welcome to our first part of our two part series on bircher hathaway. And in this first part, most of IT won't even be about burger, the company.

It's about the man warn buffer and his mental iterations and learnings that would shape what bircher would come to be. People always try and reduce what buffett does to a simple strategy, or even a few pithy quotes. In reality, warn has learned, adapted and reinvented his strategy at least four distinct times over the decades.

In doing the months of research to prepare for these episodes, David and I both learned just how much Warren thinking evolved to create the absolutely unreplying able drugging. Note that burchill half way is today. So on this episode we bring you the story of war and buffett, the learning machine.

Are you acquired slack member? If not, what have you ve been waiting for? IT is a Stellar community, discussing all things required, recent episodes, but more importantly, IT is just a genuine, smart group of people having a thoughtful, nuanced and respectful discussion about the tech and investing news of the day. You can join at, acquire data, F, M, slash, slack. Okay, listener is now is a great time to tell you about long time friend of the show service now.

Yes, as you know, service now is the A I platform for business transformation, and they have some new news to share. Service now is introducing A I agents. So only the service now platform puts A I agents to work across every corner of your business.

yeah. And as you know from listening to us all year, service now is pretty remarkable about embracing the latest A I developments in building into products for their customers. A I agents are the next phase of this.

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Now, AI agents proactively solve chAllenges from IT hr, customer service, software development. You name these agents collaborate, they learn from each other, and they continuously improve handling the busy work across your business, so that your teams can actually focus on what truly matters ultimately.

service. Now, an agenda I is the way to deploy A I across every corner of your enterprise. They boost productivity for employees and rich customer experiences and make work Better for everyone.

Yep, so learn how you can put A I agents to work for your people by clicking the link in the shower notes or going to service. Now dcom ash A I dash agents are lastly to keep this short and sweet. If you are not an acquire L, P, you really should just become one.

And aside from all the things that we tell you every episode about the lp program, we just did a really cool new thing. We called to the community Q N. A. With the founder of levels. Josh commented after we had him on on the show and we thought we had IT wouldn't be cool to let all the lp s peppering with questions and interact with them. That was super fun.

If you missed that, you can check out the recording in the lp google drive and a if you are not already eliminated partner, you can click the link in the shown notes or go to acquired dot F M slash lp. Cannot wait to see you in there. All right, David, I think we are ready to do IT listeners.

As always, the show is not investment advice, and you like warn buffet, we would never profess to give you investment advice. All of our best ideas. We will keep a deep, dark secret, maybe until long after we've executed them, so we can sort of tell the world about our wonderful investments. But David and I may have investments in the companies that we discussed.

the show, educationally.

entertainment purposes only. We hope you enjoy IT. And without further a do David rose and all, where are we starting the story?

I have been a proud b hato. Shareholder of the bean at the a for pretty much my by your life. With the greatest things that really gifts that my parents and grandparents gave me was a few shares of birth tub. And I was hold time.

never sold him very smart investment on their part. What's your cell date on? What's your where you exciting .

the position of .

never as as IT should be.

as IT should be. Okay, for four, we dive in the history. In fact, we O A big, big, big. Thank you to Alice shuder and her wonderful book, the snowball, which I at least used is my main source for this episode. Then you read a yeah buffet.

the making of an american capitalist, uh, a great book by Roger lewin stein. I thought this book was awesome. People talk about snowball all the time as the one, as the sort of more popular, uh, buffet biography I thread. Enjoy this books so I think you can go wrong.

Yes, well, we will get to comparing contrast as we go here. But Alice is own story is pretty amazing. I didn't realize to looking this up.

He was an equity research janny st. On wall street covering insurance companies, and SHE wrote to Warren in nineteen ninety eight asking to talk to him. And Warren had never talked to wall street research annalists before, but for some reason he takes her call.

And h. SHE was the first research analysts to energy coverage on pressure. Kind of amazing. And then in two thousand, three, another author approached her about reading a book together on buffet.

SHE talks to buffet and he says, what are you just that instead? And i'll give you full acts a slike thousands of hours with family, everybody. Y's amazing, amazing story.

So definitely go check out both the snowball and buffet. Great books. Highly, highly .

recommend. And listeners love to see how this goes. This is the second time I think the new york times would have been the first one.

But we are, David, I both just read separate books, and I think we both read them covered to cover. Obviously, we've got a few thousand and other sources that we use for this as well. But we may have stories that one another does not know about.

We all see. Okay, so i'll go first and start, appropriately enough, back in eighteen sixty seven with a journey from new york to oma 哈哈， undertaken by a Young gentleman named sydney buffett, who was working for his father's farm in long island. But he quits because he feels like he's not getting paid enough. And like so many Young people, Young men of his generation, he decides to go west to seek his fortune. And he ends up in omaha.

He got part of the .

way west and part of the way west. I think his maternal grandma grandfather was already there and a oaa and I have been way he had IT there. But the other reason was that omaha was a boom town at the time.

So IT IT existed for a long time. I was a kind of pit step on the, uh, the trail west, the organ trail or the california trail for gold prospectors heading out west. But after the civil war, the U.

S. Civil war, lincoln decrease that omaha is gonna the headquarters of the new union pacific railroad and h, which is gonna net up the west coast, the united states, with the rest of the country, and the town takes off. Now interestingly, union pacific is still around and Operating today, ironically, as the second largest real company in america. After.

of course.

is to and pressure .

that way.

But that won't come until party. So sydney gets the town. He decides he doesn't to be a farma anymore. He instead wants to sell products from the farm.

He opens up the first grocery store in oma, and he runs IT and then effectively passes IT onto his son, his son, artist buffet, I think, actually technically set up a different story, but it's like the family business. So earnest, his son is running the legacy of the grocery store in omaha. And as Alice points out in the snowball, earnest was very, very after named as as well safe under earnest management of the store. His quote that he's likes to use his, the hours along the pay is low. The opinions cast in iron and the foolishness is zero .

of hard core.

Yeah, hard work. So typical of this sort of a new entrepreneurial dle class. Earnest and his wife, henrieta, you know, they they're fine with their children working in the store, but they want them to get a good education and become professionals. So most of their children go to the university of nebraska, ding their third on Howard.

Who majors in journalism and works at the daily number and school newspaper while is working there, he meets a freshman who comes in and as applying for a job laa stall, whose father owned a local newspaper in arash a and they meet. They hit IT off. They marry.

Of course, these are words parents that we're talking about. And amazingly, they meet at the college newspaper. The a very fitting the newspaper business is gonna ay.

A large part in Young warns life to come. So how we graduates in one thousand and twenty five, mary and I was difficult of the time. Unfortunately, he dropped out school.

By all accounts, he was like an incredibly promising student, very good at math. Uh, her professors were very disappointed when he drops out to marry howden and become housewife. Howard, of course, he wants to go into journalism m and eventually politics.

But earnest is having none of IT. His son needs a respectable professional career, uh, the no nonsense earnest. So he instead suggests that Howard might want to do something more, more useful, something more like selling insurance. So the just irides continued to mount here.

Boy, we've got ten newspapers already. We've got insurance already. It's like either bircher healthy basically has an index on the american economy or the forces that would then shape or and forever are sort already play.

They're already here. Probably some of both, maybe more the latter because there's one more trip to stack, which is Howard for two years. He's a insurance agent selling insurance.

But we're in the late nineteen twenties now and it's the roaring twenty years at its go go time. And Howard, after a couple years decides, you know maybe this insurance stuff is pretty boring. Uh, you know, my customers here, no, my, how I don't want insurance anymore. They want stocks, baby. So he switched careers two years at a school and goes from a selling insurance to being a stock broker in omaha. I, D, they like click this up talking about this like you here about stock brokers like what what does that mean to be a stack broker in oh haa nineteen twenty seven so you got to remember IT like there's no child swap uh for wp was hugely to right.

So how are you brokering stocks if you're not on the floor.

right? Like so there's the exchange, the new york's stack exchange in new york, but then for all the rest of the retail public in america, how do they get stacks? You've got a local broker who is your sort of like combination financial adviser plus you do exchange access.

You do your you call your broker or more often, he calls and IT was always here at the time, uh, he called you and would say, hey, you know, i've got this great stock that you might want to think about going into you. I know you, your portfolio, your investment objectives. And you had chat on the phone with him for a while.

You go IT was office and then you would sign up and you would buy shares. He would then call the exchange back in new york, get a trader on the line and then buy in your name here. Also.

they would get a trade or on like IT. IT wasn't like the brokers bot these big blocks and then they would sort of like submit was like your broker would like cola trade on the floor to execute your trade.

Well, I think IT was kind of both. I think that was if you wanted a specific trade to happen, but more often, what would happen? Or is the big banks and financial firms and trading houses in new york, they had like product that they needed to move, if you do, they had issuances that they needed to move.

They had trades that they were, do IT they need to counter parties to the trades? And so all these local stock brokers distributed throughout the country, they were like the distribution in sales force leg. Did people talk about sales? And trading back in the day is part of investment banks. The sales part of IT was sales to these eto, an effort to educate all these local brokers to then recommend and push stocks to the clients?

Yeah, pretty fascinating. I mean, and at this point in history, investing isn't really like a profession with a lot of sort of science behind IT. It's kind of looked at as gambling, right?

Like bion stocks. Totally fundamental analysis does not exist here. It's like people think about stocks is exactly gambling is the right word. I kind of like, you know, tickets to bed on a horse lake. Oh, I like the name of this company here.

I like what they're doing, but nobody's thinking about what's the capital structure, this comedy, what are its revenues, what is growth prospects. That's not how this works. So warn would later in life, as we shall see, uh, he would do a brief inner lead, working for his father at the firm as a stock broker himself.

He called what they did equivalent to being a coin quote, prescription ist first is being a doctor. IT would be like if you were, you know, a medical professional and you got paid based on the type and amount of pills that you prescribed to your patients versus actual like outcomes because you just get paid by the commission on every every stock that you sell. The incentives are totally missing land 啊。

You're making me pull for my first player theme already like this is one of born I mean of he's i'm born yet in the story but this will ultimately be one of his very first realizations as what is the point of me researching the crap out of these companies and picking stocks when all i'm getting paid for is just a move product? You know, it's like a total, like you said, total instead .

of missions.

total instead of this. But but let's let's stick on warnings.

father. Like I OK, so how would one thousand nine hundred and twenty seven switches over to becoming stock broker? Things are really great. They are human and families doing great for two years. And then october nineteen, twenty nine, I don't think we talked about this on the show.

Yeah, amazingly, now we've made IT one hundred and fifty plus episodes without talking about black friday by tuesday, tuesday.

Black friday is a much happier a real capitalism vest and is not a capitalism like .

to mark on me. Yeah, yes, it's a black tuesday.

black tuesday. Of course, we're talking about the stock market crash on black tuesday over. I think IT actually wasn't that bad by modern standards.

I think the deal drop in the low teens, maybe percentages unlike tuesday. But I was still shocking to people. The real problem is over the next three years after black tuesday, the market loses ninety percent of its value. Could you imagine that like that I I mean in the in two thousand eight, I think the market lost ly close to fifty percent maybe, but ninety present people wiped out. It's carnet.

Yeah like the way that it's described in in low steam book is that what was unique and remarkable about the great depression was that even the smart money got wiped out because the people who sort of realized things are cheap now that the crash is over, would buy in, and then even they lost all their money. And of course that is the thing um to fear when everyone's screaming by the dip uh and of course, that hasn't happened to this level as you're saying since one thousand and twenty nine but just .

crushed everyone well to grossly oversimplify you know what at least I think happened and what hasn't fortunately happened since is so the stock market crashed and that LED people to panic and that LED to runs on banks. People wanted their cash out of banks. Banks, you not nearly as as as they are now.

And there was an O F D I C insurance that was put in place after the crash. So when there runs on the banks, that LED bank failures. So when the when all these local banks failed, the fed had to, I think, raise interest rates because I was like, borrowing was so hard.

Now there so much less like capital base of the barrow, so interested, had to go. So you ve got an economic shock. H, wow. And then intestate are going up like, I like .

flash .

than zero to two thousand eight. So no is a double wai of like economic shock, plus major interest rate hikes. And that just like that, LED IT was a decade, you know, more than a decade really until world war two, the stock market, the dell wouldn't return to its high before the crash until nineteen fifty four, twenty five years.

That's a quarter century just lost like crazy, crazy, crazy. Okay, so back to Howard in the buffett. How hard does something pretty crazy? I so like it's you know it's bad.

Warren is born, uh, less than a year after black tuesday on August of nineteen thirty. Warn Edward buffet is born the next year I was in until thirty one. Howard was working as a stock broker for union state bank, and the bank fails.

So not at least Howard out of a job, but all the families money at the bank. So they got no money. They got no job.

And Howard in lila now have two kids. So what does how to do? He does the one hundred percent total contrarian move first.

He does try to go to his father to earnest and and get a job at the family grocery store. Earnest ously, I can't. I don't have any money to pay you, like I can't empty you.

So Howard sets up his own stock brokers firm. So where are the middle? Great depression, really after the crash. And he just like a lot. I know to be a stark worker. He's not totally crazy because, you know, the world is building down, but for anyone who does still have some wealth left, they need something to do with IT like they're not going to put IT in the stocks that they were in before the crash. So Howard has the sort of business plan.

He starts going around oma a to anyone who still has any wealth left, and he advises them on hyper conservative investments that they can use their capital for, clic, utility companies, municipal bonds, that kind of stuff. And IT works like there's actually demand for this kind of service. So he's placing all these hyper conservative securities. Uh, he ends up making, I think pretty quickly like way more money than he was making at all job.

Wow, I didn't realize that he sort of broke out his zone there and started on broker.

Yes, started on broker. IT would eventually come to be known as buffet and fuck. And so the family, actually, a warn, has no memory of this, of these two years of really hard times. But kind states through the depression.

fairly well off. His dad bought the dip.

His dad about the death. exactly. So aren't, unsurprisingly, to anyone who's heard of him, which is probably everybody listening to this turns out to be an extremely mathematical kid.

So he's like always counting things. As this things count, bottle caps is counting his weight. He's really in all sorts of IT now is even his little kid.

Did you see he like was counting the occurrence of letters in like newspaper articles and then he his friend would like telling them up and make that on which letters were going to appear more often than others like he. He was counting completely arbitrary things just to count them.

You might say that he has some budding ocd developing. And his personnel.

he was writing down license plates that went by, I mean, I was hard core .

IT was hard gob. So then, famously, as the start, guessing actually a picture of this for Christmas, when warm, is six years old. He receives one of those money.

Coin change is like that you wear on your belt, like the oh yeah style. Actually, me too, I get one for my dampier. amazing.

A little like crank that you push down, a little like lever yeah.

And then IT spits out in a one point at a time. And there was the separate slapton er quarters and dimes and nickles and pennies. That thing was so cool.

So warrant gets this and he becomes obsessed with that. This is like, you know, the combination of counting and collecting things, analyzing and and money. He's just like he wants to get as many coins as he possibly can to stuff into this thing.

And then he starts keeping jars and his jaws of all the, all the body to waiting. So he started to think, like, how gna get more money. He goes, I assume, to his grandfather, to the girls.

We start, and he buys packs of gum, like in bulk. And then he starts going around door to door in the nights hood and selling individual packs of gum to mothers, the network for a five cents of of pop. amazing. Uh, then he starts to get this rack go. And then he starts sell in soda door, the door he started seven meter.

didn't he? Like on a vacation, he like goes and buy some coax and he's like wandering around the edge of a lake cell cokes for like twice as much as he bottom .

for I don't think this was in this novel.

Yeah, it's exactly that. And IT was coax. I remember that despite has sued to come pepsi addiction, his earliest childhood sales came .

from cooks of this. So he started to accumulate the beginning of the warn buffet wealth. When he's ten years old, Howard takes him on one of his trips to new york and to a wall street.

And this is amazing. You've finally read this to warrant actually gets to meet the legendary sydney wine berg, who was the head of gold man. Sex at the time is ten years old.

One move is ten years old. And his dad takes him to meet sydney wine berg. And supposedly, as they are leaving a warn sit near star struck the whole time and as they are leaving sydney supposedly turned to and says, what stock do you like warn. And unfortunately in the nobel, like Alice doesn't say what were in response. Like I want to know what the hot pic is um but he's totally start track this makes a huge impression on him and uh before they come home after the wine berg meeting, his dad takes him to the stock exchange, the york stock exchange, the building for lunch and that and if it's great like amazing lunch in the city of guilt building and after lunch a waiter comes up to the table with a tray that has all of these different types of tobacco on IT and rolling papers for scarves and or and realizes that like I after lunch at the exchange you get like a custom cigar made for you like you choose the to bo or is he is like he he has no interest then or ever in in smoking a cigar a or even in these trappings of wealth but he realizes like if this is how they roll at the new to exchange every day, there must be so much money here I got ta find a way to get me some of this you know.

if he got to, like, see the trading floor as a ten year old.

I think so.

I think so. Have you been no have you? Yeah so I went and I was sixteen or something as part of a uh, high school trip with there was someone who had taken a class that I had previously taken who who worked at the stark exchangers and we were on the balcony all and IT leads a mark.

I me looking out at this, this would have been two thousand, five or six, something like that. So was mostly already computers. And the people that are there are, you know, you don't have people make in every trade, live on the floor the way that you did.

What of those days? But even that IT IT leaves an impression, especially as a teenager, how much gravity there is there that that sort of the central clearing house of equities in our nation. It's a impactful experience.

Yeah, it's like it's capitalism there in cornet. So Warren says of this trip, and the wealth that he saw at the stack exchange and a golden, he says he didn't want, he didn't have any desire to have any the fancy stuff, but he says he did want independence. He said, I realize wealth could make me independent.

Then I could do what I wanted with my life. And the biggest thing I wanted was to work for myself. I didn't want other people directing me. The idea of doing what I wanted to do everyday was important to me.

Yeah, that that certain ly happened.

certainly happened. And just like resonate so much, I feel exactly they say what? So when he get home, he decides that he's gona set a goal to a mass, this welt that's gna get him the independence that he wants.

He tells all of his family and friends that his goal is he's going to be a millionaire by the age of thirty five. Being a millionaire in those days would be equivalent to about fifty and twenty million dollars in that worth today. So, you know, got today, I like you like that anybody can do IT.

And it's great in our entrepreneurs start up friendly you to ecosystem. It's probably not totally crazy if a little kids said that they wanted to and asked the twenty million doll fortune by the time there were thirty five in omaha in one thousand and forty. This was like totally nuts .

yeah but I mean, the other IT reminds me so much two of the he would say several times throughout his life and i'm on a perf that he does not want to be rich. To be rich, he wants to you know have a lot of money because it's fun to have a lot of money, and it's fun to watch IT grow. And you can sort of already see that.

And like his ambition here is not to make some specific impact or to get to do a certain thing. He is passion for IT. It's no, I want to be a rich person and it's fascinating how even so early in his life, he's just on a bashed about that. I mean, there's so many like I think we're talking to every founder right now that's going out.

And like fifty percent wants to be rich and fifty percent wants to accomplish the mission that they're on and they're like, i'm here to accomplish the mission that we're on because we all had a browbeat into us that like IT IT is not virtuous to want to be and he's like, no, no, no, no. Like I want to be a rich person and later in his life, he would also decide, like, I want to be likeable. I want to be, you know, an icon america.

I want to be a platform for learning. I want to teach. But at this point, he's like.

I want to be a rich percent. I just want to be a rich yeah it's kind of raise even the fifty percent of you know people and founders out there who like do .

you just want to be read so you would never say it's a very buffet sort of singular focus and like not caring about what other people think of him to just have that yeah just come out with that.

So this is pretty basic. S ten years old, he has this goal. And he figured something out at the age of ten that just drives the entire rest of his life.

And I think it's something that, like, ninety nine point nine percent of people out there in the world never figure out, which is this concept, that money can create more money, which is obvious ly compounding, which will spend most of the rest of you do the next several hours here and several hours on the next deficit of talking about. But he figured this out and get just simple reduce to that, money can create more money. And the way he figures IT out the story goes, he had gone to the library and taken out a book called one thousand ways to make one thousand dollars.

Uh, what that is like books that could only existed like the four and fifties. And um one of the one thousand schemes that IT describes in the book is that you could buy a penny wang machine. So these things used to exist. They are like scales in public that would be an extra corners and drug stores and stuff and um you would weigh e yourself on and I guess cause like home scales h i've seen .

these in like grocery stores .

yeah and and you pay a pending you put put a penny in the slot and then you would get weigh yourself and and so the scheme in the book is that, oh, you just go buy a penny wang machine and then you collect the money over time and eventually get a so warn reads this and he's like, one minute, what if I buy one waiting machine? And then once I earn enough money from IT, I use that money to go buy another wing machine, and then i'll put in a different spot.

And then i've got these two wing machines both earning pennies every day. Well, the rate at which I learn enough to buy my third wave machine is gonna be half as much time. And then I can buy my fourth wing with SHE.

You know, another third is less. And so he figured this out. He apparently literally starts writing out, you essentially compound interest tables in his bedroom, in his nobility, dreaming about all these waiting machines that .

is going to have so crazy.

amazing. Other kids would be like thinking about using all this money to buy bubble gammer.

Baseball cards is up, and he's ten like I knew that later as he gets into his teenage years his you know he's got a little pinball service business said but like at he's ten that's crazy is ten so yeah .

so you'd added to he never does do the way machines but when he's in high school.

yeah he he doesn't actually end up by he just like does the formulas to see what he would be no.

he just does the formulas. He buy used machines and makes money. Fibber shops, it's great. Do you know .

why I got out of that business? The pinball?

No, I seem discuss graduated high school no.

this is a call back to our um uh no ambition episode. Warn found out that this was a business that if you get too powerful in IT, then you start having a content with the mafia for, you know who who's getting a cut of doing that service. And he basically was like, I I want anything to do with that and he his friend got out of that business .

wasn't no and saying something about um that pinball machines were were link to like bootlegging to during provision and .

like bootlegging money laundering and you ve got some of the story story then bleed into arcade games to cause I think one IT was an outcropping of the .

other these these are doing more less scrupulous ly years and he .

had this whole game to that he was running where he and his friend would basically pretend that they work, the guys in charge that they worked for some bigger company. And so whenever they'd get like know her asked for something and they would complain about Prices or something like that, they would say, like, look, we're just, you know, we're the higher hands like we're out. The guys in charge, we got a we don't set the Prices. It's such a good did.

我 这个 so the other pig he does， what he gets back from the new york trip is, uh, of course, he starts buying stocks. You god, is to have the stock broker right there. So he's got the link and go by stocks.

So he he convinces his big sister Doris to pull all of their money together. They're about like two hundred and two hundred and fifty box between them and and he decides he's gna buy shares, a preferred shares in the company called cities service. So they together, you know, he he's the sort of managing partner and this partnership and buy six shares for thirty eight bugs of share and immediately the stack goes down to twenty seven box of share.

So not a not a ospital beginning. Doris is like freaking out about and warm feels horrible. It's like eating them up.

So the stock does recover to forty dollars a share. And warn just unloaded at is like, great, get the body back. Give dars a money back. But IT keeps going like pretty quickly. The stock is to over two hundred dollars a share, but warnitz unloaded.

This is like me and bitcoin and twenty and fifteen you like.

This is exactly what the time old world, if then, if only i'd learn these lessons at age ten. Yeah.

love IT. So I say the incident makes .

an impression on him. He says he could learn three lessons from this. I think he actually only learns one, but the first that he says he learns is, don't fix IT on the Price you paid for something.

It's irrelevant. The second is, don't rush to grab P A small profit. Stay focused on the big long term wins. The irony is he would violate rules one in two, like many, many, many times, until he was about forty years, as we shall see. But the third lesson he does learn, which is that you can't control other people's emotions around money. So if you're gone to take money from anybody, you need to make sure one that you're not gonna lose IT.

Are you talking about his sister is doing about the sister?

yes. And too, that you need to do something to manage their emotions are their ability to affect you so that they don't freak out and cause you to do uneconomic things you one might to sold at forty dollars anyway but certainly that his sister was breathing down his neck two cell reminds me of yeah yeah and apple warn decides its best if the clients don't see how the sausage is made. Speak which would .

absolutely inform his um you know his his perspective on some of the partnerships he would do in the near future where he would not tell people the stocks I was buying on their behalf which like I ever reading those words in being like what this is like A A blind undisclosed pool that he's running but it's so easy to see how you know these early experiences make him realize yeah like if you want to be you know the completely independent free thinker that you are doing your own fundamental analysis and not moved not only by the current Price that things are treating up, but of the emotions of your investors or the demands of your investors for their tax consideration or for whatever reason they want to withdraw funds, and you Better figure out how to hold and manage money on your .

own terms totally, totally. So meanwhile, shortly after the new york trip, how its career takes another turn, perl harbor happens and the U. S, of course, centers world war two. Uh, how IT is a like staunch isolation est and very and define .

that for us like like zena phobic, like anti trade, anti it's unclear .

to me if he was zena holic, and he probably was. I I won't imagine he was the kind of person who love foregone ers. But he was certain very against amErica entering the war.

And he hated F, D, R. And reveled he was like a die hard republican, as apparently were many people in nebraska at the time, because he runs for congress inspired by the U. S.

Century in the world war two, what you think is the worst thing that has ever happened. Uh, and he wins. So the family moves to washington.

And how IT becomes a congressman, warn, no, he hates that. He wants nothing to do with washington. He loves omaha.

He wants to go back. So he campaigns his family to let him go live with the grandfather with earnest back. Ema and I Warren's like this.

Gonna be great. You know, me and graves, we're going to become industrialist. We're going to be partners, body body. We're going to like the rock fills the games to be great. He moves back, lives with his grandfather, and earnest puts him to work in the store as a stocking boy and weren't like great a minute. I thought we were partners.

yeah. I like the business you're running. I don't so much like the work that I have to do inside of IT.

yep. So manual labor stuck in the shelves, extremely low pay waris like this sucks. I got to get out of here.

Did you read to that like his grandpa was withholding a penny to each day to simulate social security, to, like, show, warn what IT was like to have to pay different levels of taxes?

Uh, so great. So great. Ironically, somebody else would feel this exact same way about working for earnest buffer a few years earlier, though they would not intersect one. Charles Thomas munger.

So crazy like, how nuts is that? That charlie munger worked for Warren's grandfather in the same job that warn did a few years later. And they never met til what theythirteen something .

like that yeah until nineteen fifty nine I never met wild crazy. So after this summer that uh warn thought would be his future industrialist summer, he he got hard, take me to watch ted. I got to get out, get out of the storm. He goes with the family to dc where he devises a new way for making money to earn his fortune he gets a paper out delivering the washington post amazing .

like beautiful for shadow wing and um when he can profess that I rose all the way from paper boy to chairman all the with some you know leaving the in, coming back in between yes, it's an amazing journey.

an amazing journey. Of course you later become the chairman of washington to post in partner to k gram IT was more in the chairman who I think he was the chairman yeah in k was the C. E.

O. I think that's right. I think he got a board seat commentate with his and I think SHE gave him the chairman role because he had so much sort of respect for his council.

What will hear more about that in part two to come? But he's got this paper around. Member, he was selling gum.

And so the door to door back, and this is great. Now i've got the way that literally my foot in the door to all of the housewives in washington, D. C. I know I deliver on the paper, but I can sell them magazines, subscriptions, I can sell them calendars, I can sell them all sorts of stuff. So he starts an empire in the streets of the suburbs of washington, dc.

And he's doing a crazy stuff like he's ripping off the labels on subscriptions that I think people had like put out to throw away. So he was basically understanding when subscriptions would expire. So he knew who to go sell what subscriptions to at what time. There is a brilliant strategy.

Warren loves digin in the dirt first stuff you. So by the time he is in high school in washington, he's earning one hundred and seventy five bucks a month, which is more than what his high school teachers are making, and almost as much as the average U. S.

Workers salary at that point in time. wow. And warns in high school tolly crazy, he's a mass. Okay, he's not spending any of IT of course he's a mass over two thousand dollars in savings which you is the equivalent of like I know forty fifty thousand dollars today like high school is do you know that of a map self made almost a full bitcoin and savings.

And how many high schools do you know that firmly understand what the value of that is compounded seven percent every year for another eighty years. Like you know, that warn is looking at that stack, imagining its future potential totally.

So now he's galaxy real actual capital invest. What does he do? He still buying an individual stock, still playing the stock market.

But he really, you know, he wants to be this like industrial alist business man. He's decides he's gna buy an actual business. He's fifteen years old, so he buys a tenant farm in nebraska home for twelve hundred dollars.

Uh, so attend farm. He he buys a farm, an active farm with a tenant on IT that is working the farm because Warren's not going to work the farm like no way. And the deal is with with tenant farmers is the tennant farms, the land and the profits from the crops get split fifty, fifty between the tenant and the owner of the farm.

half the returns to capital, half the returns to labour. And of course, if the tenant also gets to live there in addition to getting half profits.

right? Indeed, indeed.

Well, it's like warns first yelling asset.

it's the first cash ful of business.

huh? So weren't .

graduate high school in one thousand nine and forty seven at age sixteen? I don't he might skipped, agreed, or maybe he was just Young. I certainly sounded that way, sounded that way.

And he goes to where else the university of pensylvania ais warton business school, which then is probably now I still sort of think of IT as, like the premier, you want to be an undergrad. Business major you know in the U S, anywhere in the world like warton is the place to go. But it's really his dad who makes him go.

He doesn't to go to school at all. He's like already know all this stuff. I just want to go get to work and .

he wants to stay in debka. I mean, he doesn't like going east. It's never been a great experience for him. And he's only comfortable doing IT because he's like my dads and washington. So you I have some family sort .

do IT m so he does, he doesn't study, you know, he'd like cases all the test. So ridiculous, uh, after two years, his dad loses his congressional seat, and the family moves back to nebraska and warn, uses this excuse to say, hey, why don't I transfer to the university in nebraska lincoln, be back later at home? He also has something else in mind, which is he knows if he goes to nebraska, he can take a lot more courses, accelerate and graduate three years and just get out of there.

Yeah, I don't think he was like loving the social scene of college, Jimmy. He wasn't a drinker. He wasn't going on lots of dates.

He had his eye on the prize. And uh for him that was making money. And he Frankly thought he was smarter than all of his college professors at warton. So I think.

I mean, probably he was with warm buffer is you know if he's not wrong, he was pretty, pretty obnoxious about IT. So at lincoln, he goes to the lincoln journal newspaper and he gets a job managing the country circulation, which means he now has fifty paper boys reporting to him all across the countryside in nebraska. So he's that his side has.

So he adds up on courses. He finished his degree a year early, so he's sixteen now. He's just graduate a college.

He's ready to started his business career for real. But unlike when he went to undergo, he actually does see some value in some further education. He decides there is a graduate school that he wants to go to that would actually be worth IT.

And that is to go to the prestigious harvard business school. And he's so sure he's going to get he's going to like click I I bought my first business at age fifteen. I met sydney wine berg when I was ten, like there's no doubt i'm going to get in. He writes this application is all about being an investor and he goes the desert interviews. So he's going to get in and he gets rejected.

which harvard business school would forever, forever be regretting.

Now I mean, I don't know I don't know exactly what harvard business was looking for in uh, in nineteen forty seven at the time, but I think kind of sort of either notes or amb notes to warn, I don't care either way. I think this idea of like being an investor was sort of day class say, you know, like what you wanted to do and investing. You know, people still still hangover from the depression and he was more time.

I think what you wanted to do is you wanted to be like, mad man. You wanted to work for, you know, a big firm. You wanted to climb the latter. You wanted the stability, like this idea of like being an investor. And that was not what was proper at the time.

And benham is only really starting to publish the intelligent investor like this notion of how to analytically from fundamentals do investing. You know this still very much looked at as investing equals casino. We're still not quite in the era of that being respected and and Frankly, most people that are doing IT are pretty much huxstable are looking for their just to make your commissions .

on the trades and the people who are not who are good and professionals and fantastic tic at the craft at this point time. Most of them are jewish uh which you know I I assume there are probably some use at our business, but not a lot. And kind of you as a service profession, this is gonna up in a big way in a minute.

Then grams and the metis m that was running rapid at the time, help things totally.

Sydney wish goldshed firm and uh IT was very much, you know, they were outsiders. They were not the establishment. So A A warring ah is shocked by his rejection from H P. S.

He starts looking at the course catalogues for other business schools just to like a man, what what am I going to do? Any happens to see in the columbia of, uh, graduate school business course catalogue e that there is a course taught by his hero Benjamin gram and David dad, of course. And he's like, holy crap, he he would joke later.

I assume this is a joke. He said he write a letter to them to lead this case to get into columbia, saying, I thought you guys were dead. I didn't realize you were alive in teaching classes because he had.

like, just picked up their book and was like, this is that know what the intelligent investor I think is? The he could read him was like, this is incredible.

So grams book, the intelligent investor, had just come out. And Warren was obsessed with IT. Now, grandma, dad together had written published security analysis back in one thousand thirty four, but that was a textbook that was like an academic.

I haven't read IT, but I get super thick dances. It's it's not meant to be readable. The intelligent investor is like the dan economic inking fast and slow you know version of like a know its case studies. It's like to still down for public conception .

and and for a listeners out there who have read the, uh, intelligent investor, you apply thinking, wait, that was supposed to be .

the not dense one different, different so Warren read either the world an investor, he he loves this like this is amazing and and what the intelligent investor and security analysis in a even more dry way before IT. What they did was they expose there hey, you should think about stacks investing in stocks systematically and based on the fundamental of the companies that they represent and as pieces of a business, not like tickets on, you know, horse race bedding here.

and they basically atreus ce. The idea of the discounted cash flow like this is the first notion that like stocks are, you know, the market cap of a company is a representative of the sum of all future positive cash flows or I get all cash flows a discounted at a certain rate back to today and you know this sort of um forcing you to look and say, does the Price of the stock today reconcile with what you actually believe the business will yield or produce in its full lifetime? You know that that was Frankly novel.

He was. And so dad is the chair of the finance department at colombia. But gram, he's an adjective, is a practitioner.

So Warren is just so gaga here because not only is he like a professor, apparently he rote this book. Gram runs essentially like the first heads fund in the world. Uh, he runs the gram newman partnership with Jerry newman. They are a partnership that invest in stacks on wall street, like there is nothing more and wants to do more than be like these guys.

right? I can literally go take a class from a guy who is actively employing at a real investment strategy on wall street mind balloon.

totally. So the deadline for columbia has passed by the time he gets figured this out. So he writes a letter to dn gram.

He's basically just like begging them to let him in. Well, low and behold, guess who at the time was cheering the admissions committee at colombia business school? IT was dad.

So dad, like, gets this read IT is like, all right, well, i'm just going naterally let this kid in. No interview, no discussion, no formal application, they just send more. No, like, you just start in the fall because this is like.

hey, we basically see our self in you like no one is writing us about this thing that we're doing. And here you are crazy excited about this super dry, relatively unrespected thing that we're doing in the world. Yes.

come join us. join. So the fall of one thousand nine hundred and fifty warn arrives in new ork city. At this point, he is compounded his net worth up to ten thousand dollars, which is made a lot of money, five x what I was in high school five years earlier. But he still can't stand apart with any of his money. So rather than staying in the dorms at columbia or renting an apartment, he rents a room at the Y, M, C, A for a dollar a day.

This guy is truly cursed with having a firm grasp of the future value of his money, compounded in the way that he feels he can get a, get a return on IT. I mean, we can we can talk all we want about the virtual compounding and the eighth wonder the world. And Frankly, I feel like I have a new understanding for IT based on doing all this research.

It's only like now that i'm feeling the heft of truly like, what if I just put a thousand dollars in the same count, not the same count in a index fd and access to fifty, seventy years from now, you like, oh my god, IT turns into like A A real big amount of money almost no matter what. And it's like you all know this, but when you're were in and you ve actually done all these calculations and all you're thinking about all the time was singular focus. Is the future compounded value of this money? How could you ever spend a dime? I mean, IT truly is cursing to your lifestyle.

yeah. I mean, how is right about that? Every time he looked at spending money, he would not see the sticker Price for things. He would see at times eight or ten or twenty of what that money would be worth in the future.

I'd just to come back and say, and so we all have a further understanding here. If you took five thousand dollars and you want to invest IT for seventy years, say, getting a ten percent per year return on IT, which would be good, like that would be a very good return. I think it's a little bit out passing public markets.

That's eight hundred thousand dollars seventy years from now. And like you know, seventy years from now, my money has a lot less utility to me that IT does today because I will have not had IT my whole life, which is the course. But if you're warn and all you're seeing all the time, is that money in the future? My gosh.

what I think that's the difference between more and the most Normal people too is that money in the future probably has about the same utility to him because it's not about what he can buy with the money. It's just about the stack of money .

yeah for warn IT is a scoring ard game, not a utility of the cash game.

Yep, totally okay. City shows up columbia in fall one thousand fifteen signs up right away for bending rams seminar um which is in the spring semester. So he's already read the intelligent investor covered the cover, you know he's where and out the pages somebody times he knows everything he really like he's such a go get for this like he really wants to impress gram in the seminar in the spring.

So he sees, I guess in moods and S M P put out like stock manuals at the time. That was the main think that uh people like Warren and and and bend gram in and newman en and and everybody brows to looking for stacks. He sees that the gram newman partnership owns fifty five percent of and grammar on the board of this little company in washington called the government employees insurance company. interesting. Sounds familiar.

I mean, if ben grams, the chairman like.

surely warn wants to know more, yeah, well, surely he wants to know more. But the government employees insurance company isn't mentioned anywhere in the intelligent stor. You know, the arrest of the intelligent investor is full of case studies and talking about different talks, and but they don't talk about this company there.

Why is that? Warn decides, I want to go investigate. I want to find out more about this company, this, uh, guo, if you will, uh, for short, i'm going to go pay them a visit. So he helps on the train.

Compensation goes down the washington on a saturday morning and, uh, he just shows up at the office and he knocks on the door and he persuades a security guard at echo to see if anyone is who around who could talk to him uh, were in sort of presumptuously at this time although I guess he was signed up for the seven years uh, that he's a student of ben gram's and bend gram is determined the board so you know, might want to let me in I body take to me. Uh, eventually the company's head of finance, Laura Davidson, is there that saturday morning and he, like a kid, come on in my office, figured something to do like a good merit indeed. Give his kid ten and its my time here.

Well, IT turns out that, uh, lamer or David, as everyone called him, he wasn't just like a finance do that A I O, not there's anything wrong with being a final. Instead, I guess he was a final. Instead, in a certain respect, he had been an investor in a bond salesmen before joining chic.

So he was like, he was a lot more like bingham, just an employee. Eeo, the story of geo, the founders had thought that they could make auto insurance cheaper by having commercials with geos, and now by selling the auto insurance direct to customers without using agents, and to be as cheap as possible and have the best under rating profiles possible. They also needed very responsible drivers.

So they borrow an idea from U. S, A, A, which targeted military families for insurance. They target government employees for certain sense, the government employees experience company.

It's also amazing that they are hunch that, like government employees are going to be less prone to accidents than the general public was right, that they could actually under right to. We can give these people cheap er premium ums because they're na be less expensive to us like that that worked out for them.

I mean, I guess seemed like a reasonable assumption yeah that if you work for the government, you maybe more less conservative, less likely to drive into the employment of alcohol. Who does either way? I worked so one of the two founders, after a bunch ers wanted to sell, the family wanted to sell and h, they're stake and hired David to help find a buyer. David brings IT to gram, which is how gram the company he ends up negotiating deal add discount to the asking Price, of course.

because IT was fully privately owned, right? IT was not a fully private company here.

So he buyed at fifty five percent stake, the family owned for a million dollars. And any turns around puts lamer in charge of managing guy ozone investments. So warn happened on the motherlode beating the guy here like, he's like a gram disciple.

He runs all the investment to I O. So warrant to start pepper and with questions, alarm super press is like, who is this nineteen year old kid? They talk for four hours that saturday morning.

And David tells one and all about how bio works, how the insurance industry works, telling about this magical thing called float. And Warren is like he has seen, like the real ation. Oh, god is handed down the ten commandments on the mount. And you mean .

you have other people money that they're learning you for free, that you can do stuff with until you need IT hua .

and you may not even .

ever need IT. That's an interesting idea.

yeah. So what is this fat idea? And how does geo and try work the premiums that the customers pay geico for their audio insurance? That cash comes in the door on day one and guy has expenses.

They have to pay out claims on insurance claims later. So you pay the policy premiums up front. But then when they're accidents and even then they go to court and blab a blade can take years before you have to actually pay out any money. If you pay out any money at all.

right? right? Yes, supposing you have a good government employee that never reach the car, you might just make money.

You might just make a lot of money and never have that you sit on and you never have to pay IT up. And if you manage IT well, you can make investments with that. And that's what Laura is doing a gogo. He isn't all this for to make investments and is a there's sort of like .

two things that that weren't realizes this that like I never fully put together before about insurance premiums. The first is this is a loan that someone is making you at zero percent interest. I go at a pretty good loan like I I don't have to the service the debt well, like that means that I basically can make more profits because I don't have to take a cut of my profits every months to pay down the debt.

awesome. It's a interest free that the second amazing thing is, wait, it's not one person that learned me money. It's a gigantic set of thousands or tens of thousands or hundreds of thousands of people are pay me money. Well, then what that means is they're predictable because that's not just somebody wakes up on the wrong side of the bed and says that they want their money back.

Like the worst thing that can happen, save for some hurricanes to force out of the future a little bit, is that like one person recks their car and maybe another person's car, but nobody y's recking all my customers cars at the same time. So that's the second thing that's amazing. And the third thing that's amazing is it's not a collateral ized loan. So you don't have to have something you your business that sort of like warrants you being able to take on this big debt load. It's just a big uncollateralised interest free distributed loan to you that you get to do something with until you need .

to pay IT out. And especially back then, there was much less regulation about capital requirements for insurance companies and well, often into institutions. So they really didn't have to keep any cash reserves. They can do whatever they wanted with the money.

Speaking of, do whatever they want with the money. I think what was happening back then is that, as you would sort of imagine in the early days of insurance, you would want your premiums ms, to basically equal the amount of money that you would need to pay out in the future. What happens now is it's assumed that you can do interesting things to earn money on the float. So and I didn't know this to doing the research, when you pay for your car insurance, they're actually collecting less in premiums than in total. They will oh out to every ones that you need to do something interesting with the float in order to make IT so that the insurance computer doesn't go under which I never I I I never realized that it's kind of like A I suppose that probably happens with competition where everybody is just lowering and lowing their premiums until they realized, gosh, we effectively can sell our insurance below cost because we can invest the food.

You and guy has got the additional advantage, which is still has to this day of they don't implying agents. So they just have a fundamentally Better cost structure than all of their competitors, which means more money they gets play with.

I bet if you call these guys by going direct, they can save you some money in like fifteen minutes or less on your courage.

How much money think they could say you like fifteen percent .

to required product. I imagine what the cost of customer acquisition is through an agent, but that seems like they could at least rebate that to you. Yep, one one fight.

Flash forward here. Before we go back the story, everyone should go to bircher half way dot com one to bask in the full glory of this beautiful website. Uh, but secondly, please observe that there is a banner to purchase gio insurance on the berkshire website. IT is the one thing that they do on that website other than a series of blue links to a shareholder documents. And IT is an add for echo is like the most hilarious use of of web real estate.

We have our current turn on it's cheap. It's great. And of this, uh, so that the next monday is on saturday on monday, warring goes back to new york city and immediately liquids ates seventy five percent of his portfolio and loads up on geo.

Like he's seventy five percent concentrated in geo. He's like in loving things. Show up a gram seminar.

I will tell him about this. I would just easy getting go gaga like, this is amazing. I'm onna be as boy.

It's gonna like you his dreams of earnest back in the day. Well, he shows up at the seminar and he tells her what he's done. Gram is not that impressed. It's like you put seventy five percent or portfolio in the goo.

What are you nuts? Because gram, first of all, is not a one stock guy and distributed, you know, portfolio approach guy. And second of all, i'm sure his next question was, yeah and what you pay for .

IT what you pay for IT? So I go was not a typical investment for the gram newman partnership. They probably only did IT because he was able to with to a deal out of a larmer and the family and there's a reason why IT wasn't in the intelligent investor.

So grams, whole strait is whole monitary basically like he and did you know basic invent kind of free cash, this kind of catch al evaluation, your fundamental analysis, all that and what comes to be known as value investing. But there's like a major problem with what they are doing, which honestly like this conflation the gram had of what between fundamentals and value investing persists this day and is still why there's like religious wars about value versus growth. And that's that he thought there was a very specific way to practice undammed tal investing with he and others called investing.

And what does he mean by scar bets? This is crude, but the analogy is that, like you could be walking along the street in those days in new york, and you might see smoked cigarette ts laying in the street in the gutter, and some of them might still have a little bit of cigar on, and see you could pick IT up for free, not pay anything for the ciar laid up, and maybe still we hold you get a buffer to out of these cigar butts per. Uh, and the energy, the reason why this analysis is used is that grams holic thing that he looked for in companies of stocks that he bought was he wanted companies that were, couldn't quote, worth more and dead than alive. And he actually rates an article by this name. And what this meant was he looked for companies or IT like the book value of the as the cash on hand, the value of their land, property, buildings.

Quite, if you shut the company down today, stop taking money from customers, paid out all your liabilities.

stop the business and you just sell off in a fire sale. Everything in the building would you make more money from what you're selling off than what the market cap of the company is trading ahead? That was what he looked for.

which in that era, I mean, you could find those because you tons and tons and tons of people whose eyes were always these stocks trying to figure out, hey, is anything trading below the book value that that should be trading below? And you know you could find them pretty .

often you could find them not only there were far fewer people participating in the market and far less data available, but the people who were participating, they were mostly, you know, hand cabin horris is they weren't thinking like that. So stocks that weren't hot, there are a lot of them out there. And so gram referred to he he had kind of three big insight he endured that revolutionized investing. One was this concept that a stock is a piece of a business, uh, with cash flow profiles and going concerns and you should value IT as such. Two was that Price and value are two very different things, and the Price of a stock at any given day mayor may not reflect the actual .

value Prices. What you pay value is what .

you get exactly. And you can you can use this to your advantage. He has this concept of mr. market. And mr.

Market comes to you every day and quotes Prices for what you own and what you're looking, what you're contemplating ting owning. But he schizophrenic. And one day or quite high, one day quite low. But the value stays the same.

right? It's uh, IT is the notion that it's he's your business partner in the venture and every single day he comes to you offering to buy out your steak at a Price that is either too high or too low, almost never exactly reflecting the the actual intrinsic value and a every single day you have the option to decide to sell or buy more yep.

very too. So points one and two. great. I totally agree with point three. I also agree with but I disagree with the interpretation. And that's this concept of a margin of safety, the famous but graham n, about a charly monger margin of safety.

And of course, the way that graham wanted to apply that is by companies that are so cheap, they are literally free of risk.

Yep, yep. And so you know that makes sense, like investing involves risk, as every disclaimer in history has told you, and involves uncertainty ah you don't know what can happen. So ideally, you want enough downside protection built in that you'll do OK no matter what that makes sense.

And yes, you do want that. But grams were looking at this, as we said, was i'm only gonna buy things where if we literally shut down the business and sold off everything on hand, we would get our money back or more. There's two problems with that, both on the downside and on the upside.

On the downside, as we shall see, sometimes the liquidation value of the assets of a corporation aren't earth as much as you think they are. So you can try to sell off the property plant equipment. But if there are no buyers, are no buyers at the Price that you want.

Well, just because he says it's or something on the box doesn't it's actually worth that. So that's one problem. The bigger problem though is that, like this is the ultimate mobile way of making money. Like your upside is so fundamental capped when this is how you're looking at the world. Like you could go to a hundred of these sugar buts or you could buy one guy co and just hold IT for twenty years and make way more money.

Yeah, it's fascine the way that I have been thinking about this. I think the closest analog is basically to gross margin in an Operating business where if you're running attack business with super high growth margin and high fix costs, like yeah, you gotta spend on the fixed cost, but then you get that gross margin forever without having to change what business is in. But if you're in the business of selling lot, then every single time you need to go in polar new is. And so for gram.

this is the like stock equivalent of that analogy.

Yeah, he's in a high velocity business of constantly needing to go and buy a new security, sell IT for more than its worth, go buy another one, sell IT for more than its worth. And you're going to make his notion has never count on making a good sale. Have the purchase Price be so attractive that even a mediocre sale gives good results, but you're going to encourage transaction costs every time.

You're going to need to pay taxes every time, like you're going to have to do the work of actually identifying what you want to buy and sell every time. It's a high cogs business. yep.

And IT takes a long time. So sadly, tragically, by the next year, Warren has to come to grams exportations here. And, uh, Warren sells all of his geo stuck in one hundred and fifty two early in one thousand fifty two for fifty one thousand two hundred and fifty nine dollars, he makes over a fifty percent I R R on IT, which is amazing. But if he just held under the day of thing, he would have made, you know, hundreds of times more of his money.

But of course, the grand way to analyzed that business is like, hey, it's actually now trading in a high Price, right? Yeah, that its Price is at or above its value. So it's time to get out.

Yes, is so interesting.

I just want to take a step back for a second here and just reflect on that for me because this whole growth first is value. You think if you think about value in this narrow ly defined concept of like let's just keep using the saga analogy, you pick up the sugarman t you smoke IT and it's done and I throat away like there's all the work we talked about to identifying this a garbo, the transaction cost of picking IT up, of puffing yet, of paying attacks on your gain of the puff and then discarding yet, and having to go through that whole process again.

But the whole notion of growth investing is, well, wouldn't IT be nice if that cigar actually got larger and larger and larger faster than you could smoke IT. And like, not only do you have to not increase this transaction costs there, but if you're willing to take some risk and be smart about analyzing what risks you're going to take, the business could sort of grow the value of the business could even grow faster then the way that is being Priced in the market. That sort of this like completely novel concept that exists outside the universe of what bin gram was willing to consider an investment totally.

Now to be fair to gram, we know he was doing all this through the depression. Like if you live twenty five years and the stock market is flat to down for twenty five years, of course you're gonna this yeah.

And of course, we are all a pride of our environment. And uh, I think one of the phrases that is A A buffett sm, that sort of applies to this is, you know, we've talked about as the market, uh, a waiting ing machine, a where the market basically, if you think about a weight machine that IT effectively equates value to Price, whatever you are spending is what it's worth.

Or is that a voting machine where people are sort of in Price and voting on the Price independent of the weight or the value of the actual underlying security? And this is where the realization sort of comes in, that in the long run, IT is a way machine, but in the short run is a voting machine. The stock .

market totally and sometimes the short run less longer than you would think .

yeah so .

all that is scarby investing was still a sound strategy in the one thousand and fifteen uh canali c in the land of the blind, you know the one I D person is is king of quito, whatever. You know the gram approach works. And Warren is just like laid up so he takes the seven year orn becomes the first and only student to ever receive an a plus in the class from gram signo.

Also in that same class with Warren is one bill ruin who was a stock broker at the time at kr p body and was auditing the class. And he realize, like, man, this buffer guy league, he's go in place. I'm a become friends with him that would pay off handsome men, as we will see at the end of the opposite.

So after graduation, warn he wants more gram, he can't get enough. So he goes to ban and and to ju man and says, hey, can I get a job at grand newman? I can.

I work for you guys? And IT was a pretty small place. They were only like six or seven people working there. And they talk about IT. And h.

Gramm, though, turns them down and says, you know, i'd love to hire you, is the best do you have ever had? But jerrie and I have a have a restrict policy here, and that is that we only hire juice and, uh, he would later can't this and would hire buffer t in a couple years. But that makes sense, like the gram was british, I think.

And this is effectively like an affirmative action type comment, right, where he say, totally, we want to make an opportunity here for those who have .

been sort of persecution against where were two ended four years ago. And graham was, I believe, british, european. I used burn europe. You know this is like it's a small firm, but they're like take you know we're pretty committed to given to an opportunity here.

So Warren is heartbroken but not deterred he goes back home to oma hab decides, okay, well, if I can't join the grim newman partnership. Just going to set up my own partnership. I gonna do IT myself.

But both gram and Howard were instead talk him out of IT. They both say, hey, you need some experience first, working for someone else before you go and do your own thing. And the natural thing to do is when you go work for your dads old, broken, firm buffalo fuck.

So Warren does, and he becomes the treated prescription ist working for his dad. And he just hates IT, hates IT, hates IT, hates IT. He's get paid on commission and stocks.

The whole idea of there's a roomful of people who are text with moving a stock and all other customers to say you should buy this thing, it's about the most entire warm buffet thing I can possibly imagine.

He's just like it's like organ rejection. So he's you know he's making his calls. He's doing what he has to do.

He's moving trying to move the product, but he gets on the phone with people and he's like, you'll do whatever you ask you if and he's like, hey, but there's this company called guy o. There are agent list insurance company. You should really consider buying that as well.

And people think is not spilling c insurance company that doesn't have agents. I want to talk to my agent like that's weird. So he doesn't have a lot of success.

do you to see baby, you've got this great website.

yeah. So there are two good things though that come out of his to your interviews.

Actually, I am curious, how did guy co work back that with that as IT by male as a byproduct? One presumed ly, the whole things done by phone.

That's actually good question. I assume phone there might have been some time in with the government agencies that you know maybe there was like marketing that went out to agency employees. I don't know .

exactly right. Have to have to do a spin out bio episodes some point.

Yeah we will come up again in party doing, uh, warring gets another bite at the apple, so to speak. So two good things that come out of this little interlude back in omaha. One, he reconnects with one suzy thomson, whose father, dc thomson, was a dean at the university of omaha and had managed Howards political campaigns. And warning somehow persuade susie to marry him, which shocking given a what warn buffet was, uh, his personality and what he was like back then. And too he also, after due to fleg, you know, working for a while at the burker, persuades his dad to set up the first of the warm buffet t partnerships with him called buffer and buffett and basically Warren puts some his money in and his dad puts some of you to the family's money in, and Warren just gets like some more capital and management to invest here. That's the first sort of taste of being being a principle.

yep. And I just had a little more color to that comment you made on on sort of what buffet was like back then and got susie and maria, you know he wasn't is a person of singular focus in his life. And he's sort of, in his old age, started to do more things.

But he was never a social life. He was never someone that was, you know, deeply diving into other people's interests and you know, socializing to be social. He he was a person that has always wanted to invest, make money. And so, of course, he did set his eyes on, hey, you know, I want to make susie, and i'm going to make that happen.

Well, there are all these stories about, I like family dinners, even like they have friends over and heat warm, which just wander off upstairs and start go reading annual reports in the middle of, like a dinner party. Yeah, he was like a, like a wild man who all he did was investment stacks. However, uh, the flip side of this, these personality courts of warn are he is very singularly focused and he's very persistent so despite the rejection from gram newman, Warren continues to write letters to benin.

Jerry constantly talking about his idea is talking about taxes like he travels to new york frequently just go see them and drop in after two years of this, Jerry finally sits down with band and is like, you know, we've got this anti anti semitism rule here, but maybe we should make an exception and and higher. This kid, he's pretty special. So bene al and he he calls up warm and he's like, you really want to come work here fine, we can make that happen.

We don't need the square and toys he accepts on the spot. I know they even talks to susie about IT even though they have their daughter little suz at this point uh, and they are living in know, ha, he just accept s on the spot. They moved them back in york at a moment's notice.

He literally shows up at the gram newman office a month before his identity starting. He just like, yeah, you not pay me this month. That's fine. I'm I come here. I'm working on a once again, he doesn't want to pay in new york city housing practices. He moves the family into a crappy apartment and White planes even though, you know, hey, pretty rich already from everything he's been doing and he's now working at like the most prestigious hedge fund in the world and you know, he's paying like, no, god knows how much, like fifty bucks a month for an apartment way outside the city.

That's crazy. Is IT fair to call IT a hedged fund? Like what differentiates a hedged fund verses just like institutional money manager? That's a good question.

I mean, I don't think really I mean.

I don't think they're taking like huge short positions or anything like that at this point in history.

I don't think so. I think they would sometimes short stacks and Warren would actually famous. Ly, I was going to put in the script, but he was a real pain in the ass in high school, arguably real pain, the aspect of all life. And in high school he hated his teachers so much that, uh, he knew that they all had the teacher's pension, was mainly invested in A T stock and so worrying when out shorted eighteen t stack and brought the short the slips in and like put him on his teacher's dastick to show betting against their retirement fun.

And in high school they would have like he was already sort of seen as sort of a save so that probably would free people out yeah uh, what like, what does he know that I don't yeah.

he was. He didn't really care about people's feelings, at least when he was in high school. So he land his act.

Gram newman, unsurprisingly, he just like crashes IT pretty quickly within another two years. You benjy consulting him on everything that they do. Warren's coming up with most of the investing that they're doing.

He's involved in every decision that the firm makes, and he's really hitting his stride. So much so that bandit, when is we're going to get super IT? He's a very colorful character, shall we say?

Uh, had uh, three wives I think and then the story goes, I think he he started up a relationship after his last marriage with the girlfriend of this, the end of his life, with the girlfriend of his son after his son died, his character. So he is really retire. He wants to move to california, live the good life.

So he and newman has also get no jays annoy. He's talking about the same. They offer to make Warren a general partner at the firm and have him essentially continue.

Gram newman, I assumed this would sort of stay as like, you know, partner maritus or something like that. But this time, warn shocks them and he's like me. No.

remember that home on my terms thing that I really care a lot about.

Yeah he's like I don't I don't want to run your i'm going to run firm. I wanna run my firm. And you know i'm just here in new york to work with you guys.

I don't actually like IT to new york. Susie wants to be back in oha. I would do IT in ooma.

So the end up linding down the firm and Warren and susie and little susie, uh their their daughter move back to omaha in one thousand fifty six, this time for good. So here's the plan. Tell me how how will you think this is going to work? Warren's network is about one hundred and seventy five thousand dollars at this point after working a krem new man for two years.

So is like a few million dollars by today's.

So the average yearly salary for a worker in the united states at that point is four thousand eight hundred dollars, and he has one hundred and seventy five thousand dollars. Wow, saved up in the backyard. And he's twenty six years old.

So the plan is they have two kids now. Uh, how he's ve been orn. So the plane is he's gonna retire and he says, you know made my fortune a suzie really wants me to like, you know be a father of that, be involved home.

You know, small requests, right? I think I can retire. And um if I said a budget that we can live on in omaha, you know, going to enjoy the good life.

This is so not warm, he says. I think we can all set a budget of twelve thousand dollars a year. Remember the annual comes x that's .

yes yeah like close .

to three x that he would be spending every year who buy a nice house, Norma, this is huge. We live like kings. And then you know also of the rest of money that will be compounding, IT will grow great. Well.

i'll be five. And how much is having the bank again?

One hundred and seventy five k so that .

ah what six point eight percent that's probably about what he thinks he can generate passively by just leaving in an index fund of sure .

he thinks he can generate more, right? He's still gonna able to do a little Better. Active management just done, you know his own capital.

Why do I feel like this didn't happen? I don't remember this part of the book.

So he's despite his retirement, you know he's hanging out with family, friends and staff and they're talking to him and all if he can talk about his money. And so eventually some of these people are like, well, you want to manage my money and and weren't like, o OK twist my ARM.

I have some. I yeah, I got some ideas.

So he started set up these little vehicles around oahu with family, first like immediate family, and then a few close friends to manage their money, in addition to his own money that he's managing. And he structures these things, actually, ever. I really like the way he structures this is.

So he says, remember, these aren't, these are people he really cares about those in in his own more and way he structures them as partnerships where there is a four percent in your return hurdle. And any returns that he generates above four percent, he is the general partner. And these partnerships keeps half of the upside of those returns.

Half I thought is twenty .

five percent h no is half at least according to the snowball. Wow so that's pretty huge. I mean that's like fifty percent Carry effectively, but there's the four percent benchmark return.

So IT under performs four percent, then he gets no no money and he's not paying there's no fees, right? He's not paying himself.

This is but bad. This is why I think it's actually pretty fair. And I really like the structure. He personally puts himself on the hook for a quarter of the downside. So any money lost, I think between zero four percent return, it's like a neutral zone where nothing happens. I think if there is any capital lost, he will personally cover twenty five percent of the losses of his partners, which is this pretty good incentives yeah .

he's so good at instead of .

alignment totally and he even met charley. So he's finally live in a dream. He's fully independent. He doesn't work for anyone else.

He's got the so ative has a partnership like grim newman, but it's it's all part time media. He has no employees. There are all separate partnerships.

It's all friends and family is a little over one hundred thousand dollars total and outside money, so not much money and he does everything everything himself. So the investing, the accounting he files on the taxes himself for the partnerships has no employees um no outside services. His total expenses for doing all of this in one nine fifty six you ready for this .

ban late .

on me amount to twenty two dollars and seventy one cents.

That's like our accounting and acquired where are the labor's free?

Yeah totally. And that's between all of the games that he generates and taking in some more money by the end of the year, he's managing over half a million dollars for less than twenty three dollars cost. That's pretty good, pretty good fellow ed on that. So word starts going around omaha that lik warrants back in town.

It's a, let me understand, real quirk here. So this twenty five percent of the downside is that, like G, P, commit, where he was putting his own money in and that money was just at risk? Or was he sort of like, additionally on top of that, saying I will reimburse for like A H yeah.

So he actually, at this point in time, at first I thought this was weird, but then I understood IT later. He does not really put in any of his own money. He only puts in one hundred dollars into each partnership.

H he's keeping his own money separate, which at first like, well, that's weird. But and he did that because these are friends and felix, the goal is to make returns for our friends and family. He's essentially making the same investments separately with his own pool capital ice. And then later, when he consolidates at all, he puts in all of his family's money as well. So I don't think he really thought of IT as like, uh, this is A V .

generating scheme, right? It's just, yeah, each one of these is the pool of capital for my .

friends yeah so word sites going around omaha that warrants back in town. He's taken on money if you want to invest with them so he can help himself. He started his love that she's going around down.

He's meet with everybody. He can't stop pitching his raising money for his retirement activities. One family he gets introduced to is the Davis family in omaha, the husband of which is a prominent doctor in town.

They decide to invest one hundred thousand dollars in this venture after discussing among st. The family. Uh, well, well, warm is there saying, you know, warn you, really remind us of a really bright Young man who actually grew up a next, now lives out los Angeles.

You guys like the spitting image of one another. A really bright guy. We remember he was the smartest kid we ever knew.

He's left a maha now he lives out in less Angeles. We have to, we have to introduce you when he's back in town some time. Uh, charly monger is his name .

more more on .

that to come in the next.

But IT was a while right like this was the was planted but went meet for years.

So was in nineteen the dinner that the Davis would organize would not happen until one thousand and fifty nine. So yeah, three more years before warn and charlie would meet. So this all goes pretty. And a couple years later.

Do you know the one other term that he asked of the Davis, and then he would ask for everyone else going forward after that who no. So this gets to his desire for doing business his way and not having other people sort of influence. When he does distributions, something like that, he is open for business one day of the year to his clients, and that day is december thirty first. And on that day, they can either take money out or put money in. But other than that, IT is managed by Warren and secret, and so he does not have to what he is buying or selling nor can they take money out.

Ah interesting. I knew that he obviously and disclose what the holdings of the partnerships were, but uh, I didn't know that there was only that one day that yeah could take money and interesting. So um this goes pretty well, pretty quickly. Warrants rounded up uh nearly a million dollars across seven different partnerships. And after the first year, so of running this his stake of his intention with this effectively Carried interest that he sets up to half fifty percent of the profits above the four percent benchmark threshold is um he wants to essentially grow his equity ownership of these pools. He's not gonna take that money out in cash.

Of course he's not. There's transaction costs, there's taxis.

There is is warm buffer, is wearing buffer. So um he does so well within the first year so that his fees are on paper eighty three thousand dollars, which is what like almost half of what his network was as when he started this thing. And due to that he owns nine point five percent of the combined partnership uh starting from essentially zero. His hundred dollars study put in he now on almost ten percent of these pools.

And that, of course, because in that very first year, when the dow finished the year down eight and a half percent, buffett made ten and a half percent that year for his his partners.

Pretty good, pretty good. So he now has enough capital under with the million dollars at his control that he can start to do the kind of things that gram newman used to do. So we didn't really talk about this, but there is another aspect to the cigar bt style of investing. IT wasn't just the ban and and Jerry and then warn when he joined, would look for companies with book value above trading value. They would then a mass big positions in those companies trying get themselves on the board like grammar with eco, although he didn't need to be agitated with geo over with the other with the scarborough ies, they would then like agitated actively to get the company is to liquid assets and distribute the cash out to.

oh, that does sound like a hedged fund.

Yeah, these guys are like, uh, h. They are like bobbi ax or right readers. So now with a million bux at his disposal, warring can start to do this.

So the first of a the companies he does this with as a company called sanborn map, he puts thirty five percent of the capital, the partnerships into IT, gets control of the company, forces IT to split itself into, and makes a quick fifty percent profit on the spin off. But, but, but IT is a student. Fashioner bai can do this all day. By the end of nineteen sixty, total capital is up to two million and warrants share is worth a cool quarter of a million dollars for a thirteen percent of partnership in thousand nine hundred and sixty one. And let me pause before you go in.

in one thousand nine hundred sixty one, just to recap a few of the return here year every year. The second year, he made forty one percent. The third year, he made twenty six percent.

The four, three year in thousand nine hundred and sixty, he made twenty three percent all. Well, the door is having some good year, some bad years. So it's losing money sometimes.

It's making money sometimes. Ward hasn't lost a dollar. He's outperformed every single year. He stayed positive every year. In fact, the partnership results as a whole so far, if you compound over those four years, are one hundred and forty one percent compared to the doors, forty three percent. So uh you know whatever one is doing is working.

So then thousand nine hundred and sixty one I don't have the day numbers in one thousand nine hundred sixty one, so I don't know relatively how good this performance was.

The the double numbers in one thousand nine hundred sixty one are twenty two point four percent twenty.

Pretty good year, pretty good. Warn does forty six percent in sixty one, which not only, you know generate a bunch returns, compounds the capital the partners are like, please take more of our money, bunch more of money for us in the partnerships are managing over seven million dollars in total, which is larger than gram newman ever was. wow.

And let me start to quoting from some buffett annual letters here, because this is is an interesting phenomenon. He was a wonderful writer. He he had sort of trained himself both in public speaking um and and take us some classes in that end in writing and he wrote these uh as them sure many people would guess some prolific shareholder letters to his partnership every year.

That actually is not something that he did in the early brochure years. He took him years to start doing that again, but he really felt like he was in coming upon him to when he was running these investment partnership. So let me just read from you a few of these one thousand nine hundred and sixty two.

If my performance is poor, I expect the partners to withdraw one thousand nine hundred and sixty three IT is a certainty that we will have years when we deserve the tomatoes one thousand hundred and sixty four. I believe our margin over the dw cannot be maintained. One thousand nine hundred and sixty five.

We do not consider IT possible on an extended basis to maintain the sixteen point six percent point advantage we had over the dw. This goes on and on and on where warn continues to caution. I don't think this is sustainable. I don't think we can keep crushing .

IT as hard as we are. And he does this to this day every year in the first letter, fifty years later and one sixty years later on, real. So at this point in one thousand hundred and sixty two, when he's now bigger than gram newman ever was, he finally gets an office.

He'd been working out of their spare bedroom at the oma a house all these years, doing everything himself. He gets an office. He hire a couple of people.

He consolidates all these various vehicles into just one vehicle, the buffett partnership limited. And this is when he puts all of his own money in as well. So it's got a single vehicle. He's now you know I don't know he ever said he officially unretire.

but like he's in business.

he's in business. Um he also qualifies in these letters sending out a few official quote, ground rules for the partnership uh just like down valentine back uh in sickos in the early days to their limited partners. Uh there are few rules in there.

Uh the last one kind of like you in hallmark of the buffet style for years to come, I cannot promise results to our partners. What I can do promise is that, a, our investments will be chosen on the basis of value, not popularity. B, we will attempt to bring a risk of permanent capital loss, not short term quotational loss, to an absolute minimum by maintaining a wide margin of safety.

And see, my wife, children and I have virtually our entire network invested in the partnership, pretty good ground rules. By halfway through that year, uh, one thousand hundred and sixty two, we consulted everything. Warn is thirty one years old, and his nett ork crossed ses the million dollar mark. So he's .

achieved his dream.

He made IT. He made IT four years early the next year in one thousand nine hundred and sixty three. Buffet finds the second great investment of his lifetime and also the second great mistake that he would make on the back end of IT.

Uh, the first, of course, being geo american express. So this is great. Some listeners probably already know this story here.

And before we dive into this story, I think the framework that I would use for if you're listening to this and hearing lot of this for the first time, you know you heard about guo, you know you're sort of hearing these puzzle pieces where there's a lesson learn from each of these companies that buffett was sort of the first to figure out that these businesses are each interesting in a puzzle peace way that fits in with other businesses that in the sum of its whole could create this kind of unbelievable capital efficient fly wheel.

Uh, and I don't know, fly wheel the right term puzzle pieces put together into a beautiful puzzle or mosaic might be the right term, but IT really is like him. Understanding all these unique types of businesses that have these characteristics that he can then use in the future. And american express, I feel as sort of like the second big lesson for him after he learns about the insurance business that put the first one.

I think you're totally right about the puzzle piece fitting together aspect. He learns that in his third great investment, which will be the last one, will cover on this empty. So that's that's 看 没 看。 okay. So back to american express in one thousand nine hundred and sixty three you know above, is he still under the gram spell here? He's looking for cigar but that's what he's doing ah he's looking for deals and M X is no cigar as .

charly monger with later put IT, he's looking for fair businesses at good Prices.

great Prices. Yeah fair businesses at great Prices.

not great business.

Fair Prices yeah exactly which is the charly way of doing things that buffet would later wisely adopt. So wouldn't think that M X, M X is at this point and it's still widely respected today. But back then, american express is like the most trusted financial services company in america, had been around already for a close to one hundred years.

The traveller's checks business, some many listeners are probably not familiar with. Travel age checks was IT just absolute jug nut and an amazing business. The idea as if you are traveling.

And this is before I go up. Yeah, me too. Even when I was in college, when I studied abroad, my parents got me M.

X. Travelers checks. The idea was you would go to your local american express office, give them money, cash.

They would, in return, give you travellers checks, which were sensually like a guaranteed paper for that amount of value, who, backed by m. max. And then you could take those checks anywhere where you traveled, and if you like, lost. And you could go to m expert, more importantly, when you're traveling internationally, you could use this as a way to get funds in whatever the local currency was, right?

Because whatever your traveling doesn't know about your hometown bank and may not even know about your home country bank. And so this is the way to have your credit accepted everywhere.

right through no, A, T, ms. And credit cards are still early, early days. Although M, X. Was a pioneer there and had the american press credit card. Anyway, it's this killed institution in one thousand nine and sixty three.

They have a small subsidiary of the company that issued Operated warehouses and issued warehouse receive, uh, so what does this mean? It's like the equivalent of a travellers check for warehouses. You would have warehouses full of a commodity of something, say, salad oil, in this case.

So I being oil, to be exact, and you would get M, X to come in, inspect the warehouse and issue paper that says, like, oh, yes, there are X, Y, Z tons of soybean yal in this warehouse. And then you could take that paper and you could colorize IT. You could borrow against IT, you could trade against IT.

You you essentially financialization. This product is pretty brilliant business that I also, but he was small. This was much smaller than their consumer business.

So all this is great until a pretty, uh, shady commodities trader, Anthony t. Know the Angeles in new jersey, of course, of all places, decides that he's going to pull one over on M. X.

He has his wear houses with them. He decides to fill his tanks, which were supposedly filled with. So I been oil with seawater instead, and defer the inspectors and color ized IT borrel against IT and uh you know, run upon the scheme .

til you like trying to bet with IT like he then took IT and made some risky investment with his check fit, said, hey, this is where so many tons of salad oil and then he ended up like basically losing IT all yeah.

there is something about, like, had to do with the futures market. And like, this is great if you can make this stuff up. There was something with, like russia and the soviet union, their soybean craft failed that year, and people thought they were going up to buy U.

S. Soybean oil, and then they didn't. So the raise collaged, anyway, ridiculous stuff.

But anyway, surface to say he's now got A A piece of paper that someone's coming and saying, okay, gave me what that piece of papers worth. And of course, not only does he not have IT, but there's nothing in the warehouse you back IT up either.

So the piece paper words, zero h so all in IT comes to over one hundred and fifty million dollars worth of fraud that happens. And theoretically, M X is on the hook for this. Now legally it's debate like t to float them.

So you know whether they should actually be on the hooker or not is debate. But like the american express, their the C E O says, like we're gonna say we're going with the creditors, we're going, we're going to cover the scandal like rocks M X stock on wall street. So the share Price dropped by over fifty percent and analysts and people out there think the company is not gonna survive.

If buffet, though thinks otherwise, he sees an opportunity. So he and his new employees, they go around omaha, new york, get to butch other places, and they just start like interviewing consumers and to the banks and say, like, hey, what do you think of IMAX? We heard about the soyb oil scandal, the salad oil scandal.

Are you still using the travellers checks? Are you using the credit card? And consumers is like I and heard of this scandal.

What are you talking about?

Of course, I trust the traveller's checks. So a buff of figures that IMAX can easily absorb all of these losses, even if they covered the whole thing. Add a cash on hand. They have over two hundred million dollars of cash on hand, plus over five hundred million dollars of flow from the traveller's checks business.

And this is a similar lesson that he learns from kiko, which is, look, all of this debt that the company has that, that they owe out to these people with travellers checks, as long as there's not a scandal, they're not going to have a run on us. They're not going to come at us all at once. It's a sort of portfolio distributed liability. And so as long as I do my diligence and I assume that there is that consumer confidence has been been rocked and there is not run on amx, hey, we're actually in good shape.

So he makes a huge bet on M X. At this point time. The partnership B, P, L of a partnership limited has over seventeen million in capital buffer, puts three million into m max right away, like a huge position at this time.

And eventually he puts thirteen million in total into M, X, and owns five percent of the company. M, X, ends up settling the case the next year for sixty million dollars. The stock goes through the roof and they make two and a half times their money on the thirty million dollars invested. So amazing when second great investment to of his career, and similarly second incredibly stupid decision once he gets up to and a half X, Y sales at all.

A brutal, brutal.

brutal. He did not listen to our scope capital, part one.

so he did not. And this is something that he sort of saw too. That is a departure from gram and wouldn't really come about until later with like coca cola. But this is the first sort of twinkle love IT of buffett really recognizing the defensive ability, the moat that comes from brand because bryan doesn't show up on a baLance sheet, but it's a huge asset. And so it's one of these things where I think buffer t starting to you know flex a little bit and say, hey, I actually can analyze these businesses a little bit beyond the black and White numbers there shown up on the financial statements by doing a little bit of A A different form of diligence and assigning value to things that are a little bit less tangible than than previous value investors have in the past.

Yeah, I mean, this bending ham. I could you imagine talking to bingham about brand and the value of brand. He would like kick you out of his office.

Ben gram wouldn't even talk to you about product like he's is like if you're talking me about Price, i'm not interested in hearing your opinion on the how the company's product blow blow blaw show me that is under press relative to book value. I can't imagine take that a brand.

I want to know how many machines they have in the factory and what I can sell them for. Yeah, totally. So that's the M. X story later on. The same time, in parallel, buffer t finds another cigar bet that he is just over the moon excited about. And this one he hears about from a friend, uh, I think in new york then, cohen, it's fAiling the england textile manufacturer whose stock was selling for well less than the book value of assets.

I think about fifty percent .

yeah I think the I have the number zero to the book value of all the property plant equipment in cash on hand at this company is twenty dollars to share, and the stock is trading at seven fifty. So Warren is just like his eyes get real big, real, real big here. So what is the company we are talking about? We are talking about berkshires half way.

The worker, the company was really half way, had its origins way back in new england. The wAiling times, like, like mobile dick style, which I know. I tried to read that but once, and I was like, all this will be cool. It's like a whaling adventure, an american classic that is the most difficult book i've ever tried to read. I got like fifty pages as like now it's .

your intelligent investor.

a total IT IT IT was the security analysis. If I needed the intelligent investor version of IT.

there you go. Yeah I mean, I think the the way to think about new bedford was like they were an industry town and their industry was wheeling and whaling oil. And then when they sort of pivoted as a town and needed a second industry, text style sort of cropped up based on all the competency and talent, labor and stuff they had in the town.

the business leaders in town are collectively decided that textiles was gonna think and know, we think about wAiling. Now that seems Barbara and IT totally was. But IT was the biggest industry in america.

So new bedford massages setts was the wealthiest town in. Yeah, this was not like some little thing. There is a reason why melvill wrote his novel about whaling. So in eighteen eighty eight, after the whaling business was in decline, thankfully because I was horrible, horacio healthy and Joseph noles found healthy. Manufacturing company, which would then go on to acquire emerge with a bunch other meals over the years.

Um there's just sort of one problem with this business plan that the elders of new bedford come up with, which is that building textile mills in new england was a really, really dumb idea, really done idea. Why is that? Because you know, if you think about IT, what what do textile meals do? They take carton .

from the south.

from the south, and they turn that into, you know, your own finish products that at bertier healthy eventually would become, I think, the largest or one of the largest producers of mens suit linings.

Yep, synthetics too, like polya sa yeah synthetics.

So you you're importing this cotton from the south, right? Means the cotton s got to get on ships and come up to new england. Are you going na put a bunch of cotton on ships? You can also send IT to places that have a cheaper cost in the former wealthiest town in america.

or just not put IT on ships. Well.

not not in the beginning. In the eighteen eighties, he had to put in on ships because the climate in the south, the humidity was such the you couldn't like there were problems with with producing that.

Uh, so need a decended to some cooler client .

to send IT to a cooler climate. But you didn't need to send IT to new bedford. Mh chasez.

It's so like, okay, it's not great off the bed. But then in the early tony a century, industrial air conditioning is invented. And now you don't need to put IT in ships at all.

Like to just build the factories, the texas mills there, which people did. So the business is onna lip IT along, but it's been Operating for a long time. So there's like a lot of meals, a lot of plant equipment.

There is a decent amount of cash on hand by this time in the sixties, is run by a descendent of nodes named severi standing. And then he's like the donkey hote figure of, like the new england textile business industry. He is all that he sees himself as, like preserving the legacy, the wonderful institution of great textile le manufactured in the doing one. And he is going to do everything he can to protect and bring the industry back to his days. So he is every year just spending millions of dollars outfitting all the mills with all the latest technology, doing everything he can tell you, bring back the glory days.

Yes, he he is not once heard of the sort of like buffy s notion of, you know, what's you're return on invested capital .

in the business, capital spending .

just pour into the business por .

he he's like a no blessing bleach. So Warren, here's about this from calin and he's just like, oh, this is GTA be amazing. I want to make so much money here.

He started buying the stock seabury once he finds out that buffer t is is buying the stock, he started buying the stock himself, uh, he's like, oh, I don't want anybody taken my baby O A from me and little one you know, these guys that have a reputation of being corporate raters and at first buffer is happy about this because he doesn't really want to own this company. He's like, good the Prices going out once he gets to a certain point itself. And if I sell the sibery like all the Better, I don't really care.

So he goes, he meets with Steven. They discuss the company making a tender offer to buy outstanding chairs, in particular warrants, shares. And they have, according to Warren, they have a handshake deal at eleven dollars and fifty cents a share.

And warn says, great, if you want to tend their offer at that Price, I will sell my shares. He goes back to maha, gets a letter in the mail. Tender offer is announced at eleven dollars and three, eight, eleven and three, eight dollars. So eleven point three, seven, three, eight.

something like that. yeah. So twelve and a half cents a share less .

than what they talked about. And this is like, I still don't understand that i've read a lot about this. Nobody, including Warren, can really seem to explain why warrant gets so worked up about this because it's not in his personal like he cares a lot about money, but it's not in his personality to get worked up about things or to get emotional about stock. But he goes off the debt. He is like the best extension i've seen his sadly, his father Howard was was dying around this time and passed away right around this time and must have been affecting worn .

well and and buffer t is also uh you know he's he's built a lifetime reputation on doing right by as word and in dealing in good faith and have to imagine that you facing off against someone who is not dearly good, good faith in a sort of reneging ing on an agreement that can set well totally.

Although you know the monger version of what to do here would be when somebody deals in bad faith, you just don't deal with them, warn you, I would have been completely understandable to say, like, are fine, whatever I am just going to sell my stack at seven, three minutes.

Get out of this, be done with that, still make a lot of money if you want to, you know, fight IT would be also totally rational to just hold the stock and say i'm not selling instead, warrant says, grew you, i'm in a launch a tender offer for your shares. Um which is so uncharacteristic for him he starts canvas the entire shareholder base trying to get anybody to sell them shares. He is on a mission like a man possessed that he wants to get control of birth hathaway and kick standing out of his comment.

And this is like a big ish company at this point. I think it's something like fifteen thousand people work in the meals.

Yes, IT. IT is not a small company that .

would become a small company, but IT is currently a large company now .

and not existing company. Uh, expected name. So by April one thousand and sixty five, Warren gets enough shares to get himself elected to the board.

The next month, he stages a board room. Q essentially also very uncharacteristic of him, he forces standing out and installed himself as chairman. His one and his prize is the super crappy company.

And it's not late. Like what he gonna do, he can shut down the mills, but he got to lay off like fifty thousand people and have the whole town of new bedford hate him. But then what you going to do with the buildings he's gona sell, the buildings to whom he's going to sell the equipment to whom.

right, the whaling industries is done. Every other textile le manufacturer also not doing great at this point, like it's a pretty terrible asset to own other than if he really could have liquidated a ferber value than awesome. But Frankly, he could enough and he's got this reputational thing, which I think were seeing come in to play here. And we'll definitely seem more of IT in the second episode in the series, which is but IT deeply cares about his reputation and will ultimately derive a tremendous amount of value from his reputation. And so he doesn't want to be seen as this radar who comes in and destroys the local economy and shut down the mills. And so he basically doesn't like he makes a deal with himself, with the rest the company with others and he's like, look, we're just going to I think like you provide no bad and then I do but basically not continue to invest like crazy, only make very smart investments eventually make no additional investments in the company, but at least keep IT running.

yes. So um he would say to Alice in the snowball about this about picture quite so I bought my cigar and I tried to smoke IT the way you walk down the street and you see as a garbage and it's kind of sagging and disgusting and repels you, but it's free. And there may be one puff left in IT bircher didn't have any more puffs so so all you had was a soggy cigar bot in your mouth that was brito hathaway. In one thousand nine hundred and sixty five I had a lot of money tied up in that sugar, but I won't been Better off if i'd never heard of IT in .

the first place. What did you say at the top of the show? IT costs me in terms of compounded opportunity.

ital. So yeah, in twenty ten, he did the math and claimed that not only was purchasing pressure the worst, biggest mistake of his investing career, but had he taken the money that he put into and instead just invested IT directly in an insurance company by twenty ten, he figures he would have ve made about two hundred billion dollars incremental returns. But like Steve jobs said, you can only connect the dots looking backwards, not looking forward.

And now there's an energy company that bears its name and real state break age that bears its name and on, on and on.

So not only that, but I do think if he had bought berkshire, I don't think he would have figured made his third great investment, or at least one to made IT in the same way and figured out the same last son from IT that really drove the entire rest of his career and and what pressure hathaway would become. So the next couple of years, despite all this picture non set, things go great. Thanks to american express. At the end of sixty five, the partnership has thirty seven million dollars in assets. Buffet nett orth is about seven million dollars.

And that year, in thousand nine hundred and sixty five, the doubted fourteen percent and of course buffett partnership did forty seven percent. So still um not only beating the double but positive every year of its existence so far crazy.

So all this success is sort of building up and and weighing on on warrant. So in january of sixty six, thanks to now knowing from you that on december thirty first was the day the partners could take money out and put money in, on december of thirty, first of sixty five partners invest another six point eight million dollars in the partnership, wouldn't you? H, yeah, all in, baby.

So for the first time, warn doesn't know what to do with all the money. He starts sitting aside some cash reserves. He's never done this before. He's always been one hundred percent invested. And he starts to worry that he might not be able to find enough good investments for all the capital he now needs to play.

as he is cautioning in his letters .

every year. Yep, so he closes the partnership to new capital at that point is not going to take any more capital continue invest this in compounding, but like there's danger in getting too big, I might not be able to perform in the same way.

This is like a disciplined seed stage venture capital saying, no, I don't, anna, grow my fun size. I don't want to have to change my strategy and invest in different things I want to stay true to think good at yeah.

So this is a before we get to his third grade investment, I think maybe in part because of this mindset of like i'm stay true to do what i've got up, he makes like the biggest this opportunity ever, maybe in history. This is, I was teezle been every last couple of texting him, saying, i've got something in this officer that I, I don't know if you know, but is just the most unbelievable thing that you will never imagine laid on me.

In one thousand nine hundred and sixty seven, he writes his partners, saying that he is introducing a new ground road to the partnership. And this one is quite literally the opposite of don valentine. He says, we will not go into businesses where technology, which is way over my head, is crucial to the investment decision.

I know about as much about semiconductors or integrated circuits as I do about the mating habits of the ranched. H is a polish, where that means beedle in polish difficile. You know, a war and way with words here. This is very unfortunate.

Very, uh, what was the company .

very unfortunate decision .

to see nineteen sixty seven IT predates microsoft by seven years, predates apple. Um uh way after I be um what's around this time deck or not post deck?

Oh no, you'll get IT if you think about IT enough.

I mean .

really we talked about .

in literally sqa investment.

a just preciozi started in seventy two. But this is all the the crew that down.

down rock investment .

IT is an arthropods state .

is IT intel.

We're talking about intel here or no way get this. So buffet at this point is on the board of gino college in iah. He's a trusty of gruntal college, which by the way, he was introduced to by susie.

Uh, susie became an incredible civil rate activist and Green al college was involved in the civil zh moment and uh martlet the king spoke at Green al college six months before he was killed. And susie brings to the college till listen to king speak and like, warn is like, wow. Incredibly moved by dr.

king. And so we decide after that to join the board. They were turned to recruit him to join the board. And so he does do you know who else was on the board? One of good nal coley's most famous alumni ongc warn buffet.

uh, noise or more, or .

bingo, Robert noise, wow, a one night. Have good college inventer of the integrated circuit part of the trade acy who left sharky semiconductor to start fair child and then cofounder of intel with grandma and any grove is on the board of Green l with warn not only that but Warren of course and damon investment committee ec ronel right of course that would make sense um when noise leaves to start, intel and Arthur q is put in the deal together to finance intel.

Noise brings IT to the investment committee at kernel college and says, hey, there's one hundred thousand dollar peace. I think coronel should invest in this company. I think this is really good to be big. I know what i'm doing.

He saw the deal, warn approves .

the investment, and grill does invest one hundred thousand dollars in the intel seed round effectively, but warn never goes near IT for the partnership for himself, and in fact says, I will never invest in technology companies. Unreal is unreal .

and basically held to that for another forty five plus years.

totally. Not until apple. And I think i'm done the research yet. I think apple bubbles up within from, not from, warm. I mean, talk about sins of a mission like this is before. Imagine if warrant had financed intel wear n buffer t could have been, warn buffett, plus the choya capital.

wow. And what realistically what would he have done with IT if he did invest in IT like he's never invest in, in business. So the first was never investing in technology business to this point. He's never invested in something that early, right. Everything he's bought has been yup these public you know there their pieces of public companies yep established .

on go cash flow businesses yes the buffett partnership .

doesn't holly own any businesses so IT doesn't even know anything private right every single thing is A S.

C, C registered while burger is now private OK I point okay.

I'm just trying to do a little bit of math on like what he have held IT how long would he have held IT?

You know, all of these things. But here's the thing like this, this whole like where now is justifies not doing technology investments by, you know, a whole circle of competence thing that really is a charly monger thing, but that weren't adopted vely. I stay within what I know, my circle of confidence, I know the boundaries, my confidence IT doesn't make any sense to me because he invest in plenty businesses that he doesn't know anything about IT to be getting like textiles, like uh injured you like retail yeah and the question is.

like are the dynamics and those businesses more closely relate to each other than they are? Two technology businesses like our are high growth pre product market fit or like pre scale technology businesses just so completely different.

I think that's what maybe what warn thinks, but he's got some kind of mental block here because like with intel, you got noise and more and any growth coming from fairchild, like you know what fairchild is, it's a staff like it's an amazing business and theyve like we've got the thing. We're gonna basically d throw, I don't know. Anyway, I just read this and I was like jaw on the floor.

IT also goes along with his notion of independence of thought that like he doesn't really care what other people think about the company. If he doesn't understand that from first principles in a way that he's sort of gonna build IT up from fundamentals, then it's not his cup tee and he's not investing. I mean, that is a very all of this sounds like warm buffet to be, but IT turned out to .

be a bad decision. IT does. I mean, that's wearing for him. So anyway, back to the story. I just thought that was so amazing.

Yeah so a burger, meanwhile, unlike intel, is quite ly becoming a major problem. Buffet, of course, stop stand o investing in the business. But once you stop investing, they're already uncompetitive. Now they're holy uncompetitive and they're just, you know, losing money. So he says, like, got, I gotta do something like breakfast.

Ture is gna burn through all of its millions of dollars of cash reserves if I don't do something here, and I don't want to shut the business down as we were saying, right? So he starts to thinking of alic, well, could I just buy something else within burchill, use the money that sitting there and essentially just kind of transform the business around IT. So he starts looking around and there's a company right there in ommen that he's been iron for a while called national indefinite. And this is the third great investment. And where we're essentially live, the investing portion of this story.

a national indemnity, David, to me, sounds like an insurance company.

Would that be right? That would would be right. IT is run by jet jack or ringold.

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Okay, so back to national independent and j jack ring world. So what national demining does? They're very different than gao indemnity national. They ensure super eeta risks like, you know, garko wants the boring, safe driver, you know, low risk, wide aggregate insurance.

These guys won't like the whole in one policies, right? Like what we are talking about on the the virgin galactic tic epo de with the express.

they would be ensuring the express. They want the risky est crazy st a wildest stuff out there. As jet jack was famous for saying there is no such thing as a bad risk, only bad rates. And of course he's right.

You can buy anything the Price, right? So and they were very good at praising risks and and jack famously, like he would personally go dig into they wants there's some story about there were once ensuring like a settle on a murder case or something like that maybe a murder case or maybe there was something and uh like he went personally and like did a bunch of detective work to figure out like how likely IT was that the case was going to go to wear the other and then he praised the risk. So and they happened to be like right down the street from warrants office in, oh, I feel like .

half of like the berkshires orbit companies are like warn happened upon them in omaha and they happened to be these like best in class businesses. And this is unbelievable.

Little next is so foxy. Yeah, it's a areas, and differently in how they did this thing. Echo, but similar to guy co national, got to use its float for a super a long time because most of the policies they are rating never cash in.

Like there are the type of things they are ensuring where like he was long tail stuff, like stuff that was very unlikely to happen. So they just get used the money for a long, long, long time. Jack, though he's get older, he's considering selling the business.

But this is baby, his super, super facile about IT. Like, so he wants to sell, he doesn't really want to sell. And he make noises about IT every now then one and knows all this. So in february, in thousand hundred and sixty seven, he catches him in sort of a dour mood ah they only having lunch with something at at somebody.

I weren't accounting him and they work out a deal in five minutes, fifteen minutes or less to sell your company and warns like i'm going to buy this company for breakfast, ture, not the partnership. This is that I want to transform the pressure into and try again. So they, having out a one page deal at the Price ringo wanted, no audited financials, a promise to keep company in omaha, promise not to fire any employees every literally gives jet tech everything you wanted, like no reason to say no and they do IT. And jack even sticks around and continues running the business because he can't like disengage, uh, he's obsess which weren't wanted anyway.

So it's great puzzle peace. That's like a little little learning more is going to a employee later.

Yeah, he's just added to is a added to his quiver of tricks of the trade here. So IT becomes part of bircher. And in doing this deal, it's unclear how much more I D thought about this head of time or more like he was just looking for something to buy for burchill.

But he started stumbling es upon. This is probably like the single greatest insight the buffet has across his entire career of marrying an insurance business with first one in bircher, but then many Operating companies. And so how works is so he know here, he knows going back to I go, that within the insurance business, you have flow. You can invest the flow that's great, and then you can compound your capital for free. Essentially, the problem though, not that is a problem, but the limit on this is that you do need to keep some cash on hand as an insurance company because, like you gotta pay out some policy is like, you know, any given month, you might need to pay some stuff out so you can just go invest all of your capital into other things. But if you actually combine an insurance Operation with other, you know, non insurance Operating businesses, you can invest all of your capital, all of your flow.

Cause an Operating business both consumes capital, but also spits off cash.

also produces the capital. And so you can keep the capital from the flow tied up in the Operations of Operating businesses and then buying more Operating businesses to attach. And then if you ever need to pay off claims where you just pull little capital over from the cash flow every month that's coming out of, say, our real road or say, like, you know anything that's very predictable, like I can be store or a dairy free or you know what have you?

This is brilliant because this now enables, but warrant, through this insight, to start building up A A two sided fly wheel of more and more insurance businesses and Operations that generate more and more float. That he can then invest that capital in more Operating businesses, which generate more monthly cash flow, which enables him to take on more and more float. And you can start to see how this pink pgs back and forth, he actually writes a paper after the national acquisition where he talks about the capital requirements for insurance companies.

In this insight, he says, by most standards, national indemnity is pushing its capital quite hard. IT is the availability of additional resources in burger health way that enables us to follow the policy of aggressively using our capital, which on a long range basis should result in the greatest profitability with the national indemnity burker could put additional capital international should underwriting turn sour to boom. Picture is still a dog, but the insight was huge. He can go out and just to run this playback all day long. It's amazing.

right? So this is the beginning of burger morphing from a series of textile mills into a holding company that has all these incredible cash flow fly wheels happening .

inside of IT. yep. And it's not just a holding unlike the you know fifty congal's, its of the sixties, which we are just like holding companies for the sake of being holding companies. It's a hosting company with a purpose.

right? Like these companies actually benefit each other rather than just, hey, we have a whole bunch of capital. So we're onna roll up companies that never really interacted all.

Yep, yep.

And and I should say it's not like the products interact. It's not like the managers meaningfully interact. The way that and this a little for shadowing here, but the way that burchill will eventually run is capital is managed by the central head office.

And when a business you know needs cash or produces cash, IT goes to the head office and the capital allocation is done there. But all the actual Operations of the businesses are done inside the business. So is inside that the cherries or the fly whales or the commotio ity with everyone to call IT don't have to happen from the managers of the business, is actually dealing with each other. IT can happen at .

the capital allocation level yeah and IT also gives foreign Warren is already of what's in a generation talent when IT comes to capital allocation. But IT gives them this huge margin of safety because back to the bank M A concept, he doesn't have to chase the gar baz anymore because his cost of capital is way lower than. Anybody else out there.

he's got all these policy holders lending in money for free in a non delude way like it's not really dead. It's not really equity. It's just free cash that he gets to .

play with you so he can go buy business. And under this fly wheel, and we has this margin of safety, really, even if he does not you know he doesn't make great investments in great purchases. But even when he doesn't, is he still benefiting from IT because he's adding on to this capital fly wheel?

Yep, yep. And it's a national device. Such a good pickup for buffet too because he's the master of probability. I mean, if we go back and look at M, X, you know, the market was scared off because there could have been a run on amax.

But warn looked at IT probabilistic ally, figured out the probability of that actually happening was low, assess the expected value, multiplying the probability by the sort of potential outcome, and was like, oh, this is an expected value positive bet with a margin of safety. And he's just a genius, probable isc thinker. And so when you apply someone like that to owning an insurance company, not only can see a brilliant probes, tic thinker and individualism decision maker who doesn't need their parties to give him social proof, that is, something is a good idea.

Now there's this third like of the stool also, which is sort of this um master capital allocators. So the capital allocation, the problem alister thinking and the individualism decision making, he's now got these like three crazy tools at his disposal. And owning an insurance company is awesome for someone like .

that yeah easily he needs playing with a stack deck here like he can't lose you. So no wonder he becomes the best investor of all time.

Well, so we're about to see some pretty excEllent returns here. Three thousand nine hundred and sixty seven and thousand nine hundred and sixty eight, the doubt as well。 In sixty seven it's at nine percent a one thousand nine percent return that year. We're starting to to see some go go action go on in the market. Nineteen sixty eight is a little cooler, but at seven point seven percent um across those years a warn did thirty six percent in the buffet partnerships in sixty seven then had its best year ever with a fifty nine percent return in one thousand nine hundred and sixty eight. Like he's untouchable.

He's just he's like steff curry. He's just drain and three here.

I mean, if if we look all the way from fifty seven, three, sixty nine, the doll, the compounded results of the doll were one hundred and fifty three percent. The compounded results of the partnership were two thousand seven hundred ninety five percent. It's a twenty eight x of that part did over the twelve years of the buffer partnership.

He's just like playing out of his mind yeah unreal. wow. But as hofus ly we've painted on this episode, you know there's um probably the best quote uh I don't think we said this at the top of the officer, but probably the best quote about buffet that has ever most up quote that has ever been said about him was in a forbes piece that came out, I think right around this time which and IT says buffet is not a simple person but he has simple tastes and so how fully we paint a pictures here of like he's a really complex dude like you know, he comes across, spoke sy. He drinks his coke's is p of brittle but .

he doesn't use a computer for his analysis but like there is deep, deep analysis yeah and .

there's a lot of there's a lot of psychology go on in is ad. So you can think like, I mean, this insight, this whole thing about insurance, the for the fly wheel, the Operating businesses, this insight should have and did drive the entire rest of his career like the next five decades is this. But he doesn't see IT like he's really worried at this time. What started a few years ago of I don't know that I can invest all this capital in the partnership. I don't know that I can keep generating these returns, close the partnerships in new capital.

I'd have to go buy really big businesses or buy businesses out, right to deploy this much capital. And I don't have access to that. You know, these are the types of businesses we can buy and we buy small shares of job.

So in sixty seven, he writes a letter to the partners saying, quote, I am out of step with present conditions. On one point, however, I am clear, I will not abandon a previous approach, the sugarbush investing strategy, whose logic I understand, although I find IT difficult to apply in the current environment, even though that may mean for going large and apparently easy profits to embraced an approach which I don't fully understand, have not practice successful and which possibly could lead to substantial permanent loss of capital. You'd like his is like mentally struggling here with this like like times i've never been Better and he's never been more worried.

Yeah his I mean, he is bent gram thread through at this point of his life. It's a real number one, don't lose money. Real number two, see real number one.

And then you also have this thing going on where because everything is so tied to the purchase Price rather than the bedding that you'll be able to generate a positive outcome, his mood is tied to purchase Prices. So even though everything's going up, he's looking at IT like this sucks like I can't find any attractive to buy and it's all you know. He's almost his mood is very much inverse of the market and he's feeling.

I think like i've got so much to lose now yeah I got all these games you he's not playing like he's got nothing to lose anymore is play and like he got everything to lose. So he's in such a bad place that even after this brilliant national indemnity pick up for berkshires in one thousand nine hundred and sixty eight, he tries to unload berkshires, he tries to wholesale sale to monger. And David got IT was an investor in the partnership and fortunately for Warren there, either too smart or too dumb to take him up on IT a difficult charly fashion charly looks just like you're telling me you wanna sell this thing and you want me to buy IT knowing that you want to sell, why on earth would I buy something, knowing that you want to sell? The mutual admiration.

respect there is so telling, so telling.

so telling. So by mid one thousand nine hundred and sixty nine, violence like he's done, uh, he starts making plans to wind down the partnership. He's he's like dejected. He's going to hang up .

his spurs after his greatest year ever.

After his greatest year ever. You know, definitely there were some tension with sue as well or you were worth like many, many millions of dollars, like what are you doing? And .

interestingly, many millions of dollars. But he's still kind of an unknown person like wall street, doesn't yet know the name or in buffer t the way that they would in the next couple decades. And he's not sort of being called on.

He's not a celebrity investor. He's not informing the public on investing. This is very much just about staying private.

making money. Yep, yep. So on memorial day nineteen nineteen sixty nine, he raids the letter to the partners and he says, if I am going to participate in the investment business publicly, I can't help being competitive.

I know I don't want to be totally occupied without placing an investment rabbit all my life. The only way to slow down is to stop. And then he says he's giving notice of his formal retirement at the end of the year.

He's gona wind up the partnership, distribute out all the securities to the partners in the beginning in one thousand nine hundred and seventy. That's IT. He's done. He's smoking away. He's like Jordan going to play minor baseball.

It's a very act logy.

It's exact. This is the last thing, except not really the last years. The partners are shocked. They rightly never thought warn could give up the game.

Of course, you can give up the game as we'll see next time they ask more on what to do. He thinks about recommending them to charlie, but charlie at this point is like, I don't I don't want to punch a new investors there. I'm worried about the market too.

So he sends the big investors to David gatti's man at first manhattan bank. New york is big farm can manage big clients and the small one, the small investors he ships ever to build ruin uh, who had back from his class? Yes, ben gram bill had just left title p body and was setting up his own fund, the sqa fund.

Not to be confused with scope capital, but equally incredible performance over the last sixty years. And that's kind of war he leaves IT. So january one thousand, nine and seventy, he liquidates all the public securities.

He unwind the partnership. At this point, he wants twenty six percent of the partnership. He gets sixteen million in cash, eighteen percent of burger, twenty percent of diversified retail company, which was a joint venture. He had literally owning department stores, ill advised place to invest.

And we keep mentioning charity here. Do not worry, stay tuned. We will have the full monger story in part two.

in part to and uh two percent of blue chip stamps, which was another charlie J. B. And that IT. He also wants the amah son, which was like a vanity purchase, to get newspaper routes, and the partner's have to decide with these private companies, burger, diversified, blue chip and the sun, whether they want to to sell their stake. And buffer says he's happy to buy their stakes from them if they want to sell, they, anna keep so he reads a long FAQ to the partners including should I hold my stock in the private companies to which he writes all I can say is that i'm going to do so, hold the stock and I plan to buy more. Um so with that cryptic statement, he drops the mike, he's out out of the game and he owns .

how much of future pathway at this point.

eighteen .

percent .

as he rides into the sunset.

And I think that little Cliff hanger is probably a great place to leave IT on history and facts for this first half of burger health way.

I don't know what about three hours? enough.

Should we go another hour? We could talk about the part after this where he tries to figure out what to do with his life while the market is doing crazy things you know, the little bit of warm water that he gets into with Charles and the the feds um but maybe maybe let's hold on that will start part two off with some of that wandering pre going all in on virtually healthy .

a back lake Jordan where in the four five yeah well.

boy, do we have some fun playbook things to dive into this episode. The first one that I have, I actually, I decided to leave burger land for a moment to illustrate the point. So the point that I wanted to make is.

sure. Warn buffett is really into compounding. Like I think that would be an understatement. And everyone the audience is probably chuckling if you've made you with us that far. Another fascinating thing is, David, you just mention he took this distribution in cash at the end of the wine down.

And what i'm thinking is, oh, that's got to kill him to have to take these transaction cost, these taxes, like he must really wanted to wine down the partnership to make that happen. And to illustrate the point of how much transaction costs and and taxes can interpret the beautiful thing that is compounding, I went to a paper that was written in may of twenty twenty from the yale school of management by A J wasserstein, mark ag new and bryan o. Conner who are uh collaborators with someone that we have had on the lp show. David, do you know who that person is? Milton will.

Thorndike will.

the author of the outsiders who came on on our body. And they did some great analysis in this paper called on the of long term holds where they basically read a little simulation and showed what would happen if you held something that had continuous compounding for twenty five years and you pay taxes once in your twenty five, or if you had continuous compounding happening where you paid taxes every five. Basically, if you withdraw in cash and reinvested in the exact same or an equally producing asset and IT.

is this assuming taxes are all long term .

capable gains? P. P, it's assuming twenty five percent, which would be some combination of federal capital gains and some state tax as well.

So if you invested one dollar and just let compounding do its thing for twenty five years, you would end up with twenty four point nine dollars at the end. And this is uh, assuming a compounding rate of fifteen percent. So you you you take your dollar twenty five years later, it's worth twenty five dollars.

Now if you pay taxes every five years, that same dollar is worth sixteen point eight dollars. So it's a fifty percent increase in the amount that you are left with at the end. If you just don't intercept compounding by doing the thing that all humans want to do, which is manage the money, do stuff, be active.

And I think that it's this brilliant insight that warring has sort of like begun to have here. I think of the buffet partnership. He moved stuff for around much more than he later, wood in bircher, half away. But this sort of uninterrupted wer of compounding, you know, taxes, transaction cost, whatever the things are, if you can find yourself betting on a winter and just let IT ride, that is the very best strategy you can possibly employ. And IT feels to me at the end of the story, he's like he's really starting to grasp that yep.

it's kind of like, um so there's this great this is me a way out there in the field but you here we're three hours into the same who knows how many people are still listening there's this great book called transitions by William bridges and it's wonderful and it's about psychologically dealing with transitions in your life even if it's like a good transition, like getting married or or having a kid or you bad transitions to like big changes in your life.

And the whole theme of IT is that when you have transition, like the old, you needs to die before the new year can arrive. And somehow I can't taking about this to this story here. In this part, one of, like Warren was so successful, he was the most successful background discipline that there was more successful than bend himself.

But that wasn't a work anymore. And he needed to get to start to understand these things that you're talking about. And he needed to symbolically, you know, die the old Warren to have the new warn arrive.

And I think that's what happened here with the closing down of the partnership, whether he knew IT or not, almost. Thirdly, he did not. He needed to close the chapter on like that part of his life to start to embrace some of these very different philosophies.

Yeah, fascinating. That's a really good point. I ve never thought about that sort of like literal at the old you die think that way.

it's really recommended anyone.

While speaking of benham, this notion of independence of thought, there's A B gram quote that the stock investor is neither right nor wrong because others agreed or disagreed with him. He is right because his facts and analysis are right. And this is something that I think as A A venture investor is so difficult because so much of the success of a company when you're investing in IT depends on its ability to, in the near term, raise future capital from someone who is not you. So that encourages this sort of heard mentality.

Do other people perceive this to be a, you know, hot company in the in the same way, whether what the gram is looking at, at the complete opposite side of the spectrum, no growth at all, exclusively looking at cigar. It's like you have to hang your hat exclusively on your independent analysis, which is way easier to do when you have a book value staring you in a face. And you're only going to do basically a one time transaction on IT.

But IT is I think I think this sort of independence of thought and is something that we can all bring a little bit of band gram into our lives. And it's funny because the positive and the negative hit you in different ways. When other people are telling you you are right, it's very easy to accept the idea that you are right. What other people are telling you you are wrong, you know that hey, maybe what i'm supposed to do is be contrarian here and trust my god and it's funny how you wanted say, well, look, just because other people are telling me i'm wrong IT doesn't mean i'm wrong. But if other people are telling me i'm right, i'm definitely right.

A totally, I think you raise a really good point in there. Two, two good pots. One, yeah, we could all use a little more bingham in our lives. But people talk about value investing in venture and ba ban, like you are.

Some people try to do IT other people be and why IT doesn't happen, he raisa, really, really good point, which is the a kind of can't because you need other people to believe to and unless you're gonna be willing to just hold finance a company yourself. But even then like that, that's A A slippery, slow, but but b, the company needs to recruit employees, needs to recruit partners and needs to recruit customers. You can just be, you gotta be bringing people into the fold. You gotta be a missionary to succeed and start .

up for world, right? Yes, funny how uh you basically in in a growth company and in a very small growth company especially, you cannot be the only believe or otherwise IT .

won't work yeah which maybe is a reason why as painful as IT is to go back and talk about IT maybe is why buffer investing in intel and technology never went to worked in the first place. He just wasn't in a mindset to be able to think like that.

Yeah, that is a completely different way of thinking. Well, speaking of, uh, not being in the right mindset, you know, buffer t spinning down the partnership in its very best year ever or after its very best forever. This is sort of like there is A A boom time going on, and that's a terrible time for warn to be buying. And I think that the classic warn buffer t efforts m be fearful when others are greedy and greedy when others are fearful springs to mind where it's easy to say this guy shut down his investment partnership when everyone else was being greedy, you know.

like he did not when he returned fifty plus percent.

It's crazy like what what most people would say, let's go raise so much more capital to deploy y IT is like A A really adherent to principles approach of a you know, if you truly do believe the fearful when others agree to invite first comment, there is no Better illustration than that.

Yeah and interestingly though, I bet he would probably also say was the wrong decision. You know I mean, like the right decision in the long run because IT enabled burger but like in a vacuum like this is crazy. He should have .

god yeah maybe I mean, that's the whole sort of bill, geri, uh, enjoy every last minute of the upside. You never know when the downturns going to happens. You have to invest through all cycles. That's true unless you're warn buffet and you can actually pick the cycles like so far he has proven and we will see in future years too. He is remarkably good at having a lot of cash when he needs a lot of cash, being fully invested when he needs to be fully invested.

Yeah, that is true. That is true.

Don't tie the market last year. The oracle of omaha, I think is the second part of that phrase.

Um well he does have saying that um I actually first heard from chmagh of all people very different afraid then they warn all they're great in in his own way but the question is not timing the market, it's time in market, which do you think would be like do as I say, not as I do? He also says invest in index funds and goes out and is incredibly concentrated himself, right? Yeah.

I think it's it's funny listening. I was watching the flash ford here a little bit, but I was watching the first recorded in your meeting the ninety four and your meeting with chi and he's marking on um well, sure. If you have no conviction, then you're any Better than any fool at picking stocks.

You should go on as many stocks as possible. You've got to be diversified. You've gotten, you know, uh, be covered in case of downturns.

If you feel like you're investing in managers who are excEllent and have fortified their businesses so that they'll be excEllent through all cycles, then you should own as few with businesses as you possibly can. I own one. I I trust the managers implicity.

This is a very warm buffer. quit. But for all of us who are taught diversification, that's another way of saying that we should all be reverting to the mean. And um if you believe you actually have a gift and I have an edge, then a bet on your ability to perform superiorly, which he has done .

incredibly well. A couple .

others here that I think are worth highlighting, and i'll save a lot of these that are Better illustrated in part too. I think the one that I really want to harp on here is, but its singular life focus and obsession is getting as much money as possible and watching IT grow at doing IT in the most ethical stand up way possible on his own terms.

And what we're witnessing is just the result of that singular focus, of that complete manic singular focus when applied by someone who is a genius savant at that and also has trained himself to become a master communicator. And I think there's just very few examples in the world where someone truly is world class at something and is singularly focused on IT. And I think that when you have that that is when you have these you know ten sigma events were alright.

Don't know how many other deviations from the being this is, but IT is this performance is uh, a remarkable and enduring and we will talk about this interesting, but this is a twenty nine point five percent compounded return every year for twelve years. But if you mentioned Michael jorn, that's a ridiculous analogy. And I I think Jordan singular focus on winning, I think is a very uh a very reasonable comparison.

He's naturally the best in the world. He is the hardest working and singularly focused on IT. So I think that's .

very apt totally. There's a um I just pulled up there's a wonderful quote from h mike merits that I love that I was in the book leading that he wrote with her alex ferguson and says the great ones. Eliminate all distractions and focus only on what matters.

Shut out the things that don't matter and don't let their time get stolen away. People forget how a few hours there are in a year. You must focus on what's important and not do what's not.

I mean, we haven't talked about is a work cap. It's bit like Warren is the singular embodiment of the lake. He sits in his office all day and he reads annual reports period, right? Like six plus hours a day. He's just reading and the other hours he's talking at early, right?

And there is massive life tradeoffs to that. Like if you've decided that that's the thing you want to do and that's what makes you happy, great. But do not pretend that IT doesn't come without trade because for someone who wants a well rounded life.

yeah that's not IT .

you're not GTA get IT totally uh the last .

one that all .

highlight here and that i'll save the rest for part two because there are so many other things here worth discussing, but I think they'll be Better illustrated by the full embodiment of birth. Hathaway, as IT is today, is the secrecy of his ideas not to get too much into power. But I think he was actually counter position to every other stock picker who got paid to look smart in the short term.

Warren did not care about looking smart in the short term. His business was not that he wanted to make the most money long term. So he stayed quite about his ideas to like a religious extent.

And he never ever wanted to move the market or canabal ze. That rare, really good idea that he had by sort of showing his hand too early and trying to appear smart. And he didn't have that national brand. He was never paid on commission or transactions. He aligned the business model with his long term goal, and that was totally counter position to the market.

Yep, totally agree. Lending the business model.

Yep, huge.

Only one I throw in there, which will probably also come up in part two. But but I think IT really came out here in part one is slick them. I say there's all the time.

It's the security capital. Let your winners run like selling I O, selling a max. Those were massive mistakes. As brilliant as all the things that weren't did, and as brilliant as his performance was in this first part of his career. It's just impossible for me to look at IT. And I think man IT could have been ten times Better had he not made to very simple mistakes. And when you're saying just like A Q.

you're talking about like the hard learned in the lesson of selling apple and making a six million dot profit on IT.

Yep, yep.

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Yeah, fanta is the perfect example of the quote that we talk about all the time here and acquired jeff basis, this idea that the company should only focus on what actually makes your beer taste Better. I E spend your time and resources only on what's actually gone to move the needle figure product and your customers and outsource everything else that doesn't. Every company needs compliance and trust with their vendors and customers. IT plays a major role enabling revenue because customers and partners demand, but yet IT add zero flavor to your actual product that IT takes .

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And David sent you, and thanks to friend of the show, Christina anta CEO, all acquired listeners get a thousand dollars a free credit venta com slash acquired, well, are right as a little precursor of grading. Here, let's do a quick value creation, value capture. On these episodes, we always compare, how does the value that they create compare to the value that they actually capture, you know, is a very little like wikipedia that they capture a lot like google does.

And then, of course, the second part, how does the value created for the world, not just for shareholders, compare to any value destruction? So sort of talking from like an ethical, moral perspective, how on the first one, David might say well worn buffet is a peer play investor so that by default means he's just capturing as much value as he's creating like he's not out. They are innovating and creating a new product for the world.

Is that a value creation type person? So i'm curious your thought on that. Like on part two, that will definitely not be true like I think but ture health away from this point for a of lots of value creation to talk about.

But what about up to this point to one thousand nine hundred and seventy? You know what? Companies created value for the world that otherwise wouldn't have created net new value because Warren was involved yeah.

what I mean. An even a stepping back in looking at the whole bench. M on her eyes.

End cigar. Bt investing, like you can think, a super real argument. That is all that is value, destructive investing coming after companies and breaking them up and liquidating.

There was a going concern providing value to customers that is no longer .

going h and not employing people. And like, yeah, there is definitely some value destruction here. Now I think you could also argue about the cigar, but investing in benham that before him. And then there was just rapid speculation that was happening, and that's ultimately value destructive for everybody, too. So he did lay the groundwork for fundamental investing, value based investing in the pure sense of the word value, not as antigen th, but as like true investing in value as opposed to speculating. So that's all agree for the world.

right? If you think about all the like pensions that invested from the gram area through today that you know generated money for, or they are the the people whose pensions they support IT. Like that's awesome. To the extent that they had access to public equities that were no longer sort of just treated as lotteries.

So yeah and then Warren, of course, I don't know. I was felling neutral to burch. Hathaway, his involvement like he stopped investing in the business, but the business .

was gonna die die any faster. To get question IT is interesting because I the least charity of you that you can take on investors like pure investors is that you're just reallocating piles of money so you're not creating new value for the world. And that's like the least charitable and lots of ways. I mean, if you think about the ways that great venture investors are value add, like, yes, there's something there to bringing a lot more than capital. If you think that some of the things will talk about in part two, where someone with a really strong reputation can sort of come in and save a business who sort of in the midst of blowing up like a Solomon brothers or something like that like that is much more than reallocating money from one pile to and others, you are legitimately creating new value for the world. It's interesting though, in up to nine, nine seventy where we've sort of covered here, i'm not really sure you could make an argument that what the boat partnerships were doing was in any type of .

value creation and not really thinks oh IT laid the groundwork for a lot of value creation. But um yeah .

it's actually very interesting to examine, like in the financial sector, peer play investors, what else is value create of all you can if you increase liquidity and markets that's value creative if you come up with more innovative instruments that allow for I guess it's again companies to get funded faster or companies to get funded with fewer fees that provide value .

aren't not really doing any that said this point, though.

no, no, not at all. Yeah, not at all. It's just coming at IT. From the other side is Normally when we're talking about a new tech product that's created, we start from a place of all they created all this value.

Did they capture IT? And with pure investing in pure finance, you starting from this place of like, well, are right, they definitely were moving value from one place to another. But where did they grow the pie?

Yeah, I don't think they really did at this point.

no. okay. So grading the buffet partnerships returned thirty percent for twelve years compounded. So that's a twenty eight x David. How do you think about that? Yeah, is is that is that to see?

Well, it's IT just right. We were talking before the show about how we're gna approach this question. And I think IT depends like everything, the lens through which you look at IT.

If you look at the buffer partner ships like a fund, which they essentially are, is essentially a hedge fund. Any fund that returns twenty eight ex over you twelve year standard dish, lifetime of a fun. That's incredible. That's one of the greatest of all time. You know that I there may be some sequence and benchmark funds that are approaching that, but I don't think any them hit that number.

No, I think the super fantastic recent benchmark fund was like a twenty .

five x so even that and that had what like uber and we were we work and snap in the same fun. I think.

yes. yeah. So yeah.

From a fun greeting IT to that lands a plus, no doubt. Now interestingly though, if you were to look at the relative to a individual company investment, which I think would be a stretch, I think IT is much more like a fund IT is a fund d to the company. It's not that impressive these days. You know that you would, uh, return twenty eight x on an individual investment over twelve years. I mean, their individual investments in cyp to these days that are returning twenty eight x in six months a well.

I mean been twelve years since bitcoin was invented and its return sixty to no, i'm so six point two million x. So clipton is a whole different.

right? So that just blows IT out of the water. It's really interesting though, like I don't back in these times, the brady wasn't anything that was returning on this level. An individual statement, intel, for sure. But like the concept of the venture, investors are investing in private companies we were talking about like maybe fifteen people in the world that did that.

Yeah, it's a great point. Yeah so it's I hadn't thought about Normal alizon for the time period because I mean, I thought about when I look at this, the number sort of jump out at me of like, oh, I have an I R R number on a twelve year fund. Like, cool, let's compare IT to venture oh, I have a cash on cash on a twelve year zo.

Like a twenty eight ex on a ten year fund with a two year extension. Like, this is a top point one percent venture fund. You know, this is like people say I want to be top, just so I want a three X, I want to five x.

Like funds don't twenty a dex, especially with the inflation adjusted millions that buffs was investing them. So it's a it's a crazy impressive feet. I mean to like just assign a letter, this is an a plus.

And Frankly, the fact that a they never lost money, they they not only beat the doubt, but they had a positive return every single year, crazy impressive and a positive return with the option to take your money out. So there is not an illiquidity premium unlike venture, you know, it's just crazy and actually beats the no credit bircher. R healthy has been around a lot longer and IT today, and their aging way more money than the buffet partnerships everywhere. But you know, this thirty percent or twenty five percent definitely beats the pants off of pictures. A returns ever since were in went full time, which will talk about in the next next episode.

What is full time? I think warn was just a man ahead of his time. Yeah, a plus. What did around trying to figure that isn't a plus, no doubt. Yep.

alright, covets .

carvel. Mine is a very, very, very different way of thinking, investing, looking at the world. But fascinating blog, shrine of asia on the ten fair show, another three hour podcast that came out a few weeks ago.

A wildly fascinating villa is, uh, a very interesting character that many people in tech know. He was a partner at injuries and horror. For a while he found IT council.

He was, uh, founder of a company called earned up com. I think the coin base acquired than he became the city of coin base. He's a crypto. Eventually st trends human, eventually st trends national. You know, anyway, very interesting podcast, lots of seemingly out there ideas discussed but uh, all is worth considering these things I really enjoyed IT.

I I it's like next on my q to check out it's like right after all of the stuff that I was listening to to do the virtue research .

yeah we haven't had a lot of time for other parrots recently.

I will say this is the first time I ve started research like months in advance, just like gei to do this episode.

So now this was so fun, right?

Mind is also something that I listen to a via audio. You can read IT via text as well. But in time as such, a big audio consumer, I chose to listen, and a hearing IT straight from the horses mouth.

I much prefer IT to reading, especially in this case, packing. Y mommy wrote a wonderful piece called not boring one year in and I can't recommend reading IT and especially the narrow and here in his voice enough. I don't know if I just particularly resonated with with me because, you know, we're friends for packet e and we ve been watching his journey or if his journey is just like remarkably similar to acquired.

So just reading IT. I like the screaming in my car while listening to IT. Yes, I get certain moments um but IT is the most awesome open book telling of his first year.

I capably it's only been a year what is the crazy thing he's accomplished? And the biggest thing that resonated with me is that, like there is both a process and not a process. And he's like I have certain things that I do because I need to get the content out once a week or twice a week.

And so I I have a set schedule that I need to follow, but I I never actually know like what the contents going to be. And I need these lightning bolts of creativity. And I would say that David and I aren't quite as wide in the game that that we run off like where the you know are not boring.

Peace can look quite different than these sort of what acquired mall is, although recently, who knows? But I definitely know that thing of like, okay, there's a set of activities that I need to do to go generate ideas and then I can at some point, I need a narrow and pick one, and then I need to run with one of those ideas. And I think that's a for a person who is creating on any sort of regular schedule, yet creating in products or making creating in the blog stuff, if you're writing, creating in whatever is like that is such a real emotion to identify with and package is such a great job writing about IT. I think anyone who makes stuff should go read boring.

One in a was so good. Love that .

piece packing, my friend. You are .

gifted indeed.

Well, as we wind down here, we should say there is A A burger hathaway, twenty, twenty one and you al shareholder meeting that will be coming up on may first so if you like David hi are becoming sort of a converted buffet head that is a great thing to tune into and watch on a that lovely saturday on yahoo finance uh, we will have part two coming out here in the near future. We definitely look forward to talking about all things picture with you, both past as we've covered on this show, up to the present as we'll you on part two and looking into the future with the berki annual meeting. So um tune into that if if it's interesting, it's warn early on stage, just field in questions for hours and hours and hours on end.

So IT should be pretty good. We should totally in post over times a go go next year. B B, like all you know artists steal and just do the same thing.

We like, we should totally do this. We should just like get up on stage. And then we should have our sponsors, all our partners.

Oh my gosh. Sh out the concourse.

out in the concourse, uh, will have bronze bus of warning. Charles .

thinking, our good friends .

at tiny yeah. And what does have have a bigger, quiet.

fast. amen. Let's do IT. I am to keep the wine down brief, everyone, if you like this episode, share with your friends um if you have a friend who's a value investor or not a value investor, or you talk about the stuff with share IT, feel free to share IT from social media.

If you're getting excited about the annual meeting coming up for bircher, feel free to point people to this as a resource and it's definitely one of the things that inspired David night to do IT. Become an L. P.

We love our L, P. We love everyone, but we love our L, P. S. The most. Join the slack.

A great conversation there, and i'm sure they'll be much discussion of this episode there. I think that's all I got. Listeners take you so much, and we will see you next time.

See next time.