#363 Li Lu and Charlie Munger and Warren Buffett
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I sent a friend this text this week. I said i'm working on another leu episode, but this one is about his remarkable investing career. Can be summarized by number one, studied buffer in monger.

Number two, did that in all the talks and interviews at lu gave over the last two decades. He's counselling refections the lessons that he learned from studying warm buffet and charlie monger. And he shares their obsession with finding great companies.

So many times when I was reading the words and listen to the words lu and I was researching the podcast, I thought of this book, which I i've mentioned mottle times. This is the best book on buffet among ger ever read, is called all I want to know is where i'm going to die, so i'll never go there. Buffer among ger a study in simplicity and uncommon common sense.

And as a few sections from this book, I want to read you because it's really about for describing what makes a great business. And he says every day in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary cost and improving our products and services, we gain strength.

But if we treat customers within difference, our tolerate bloat, which is don't watch our cost, our businesses will weather on a daily basis. The effect of our actions are cumulo vely, though their consequences are enormous. Later on in the book, buffet has asked, how should you be running your business? He says, just do what you always do.

Why in the mode, build enduring competitive advantage, delight your customers and relentlessly fight costs. On the same page, monger talks about that most people don't do this, especially companies, after they get successful. So he mongers now describing the other side of this, what happens when you don't do this? Successful places tend to get bloated, fat, complacent.

It's the nature of human life. Most places, when they get rich, they get sloppy. And there's another great line from buffer.

He says a great manager must be a demand on cost. This is something I been talking about with my friend eric, who's the cofounder in CEO of ramp. Ramp is now a partner of this podcast.

I've gotten to know all the cofounder ers of rap, and I spent a bunch of time with them over the last year to they all listen to the podcast and they all picked up on the fact that the main theme from the podcast is on the importance of watching your cost and controlling your spent. That is the reason that rap exist. Rap gives you everything you need to control your spend.

Rap gives you everything you need to be a demand on cost. Sam walton, in his automotive phy, summarized that perfectly. He says our money was made by controlling expenses.

You can make a lot of different mistakes and still recover if you run an efficient Operation or you can be brilliant and still got a business if you're too inefficient, ramp helps you run an efficient organization. Rap is everything that you need to control your spend and optimize your financial Operations, all on a single platform. So as your company gets more successful, you can avoid the fate.

That monger said that successful places tend to get blood fat and complacent, not if they use ramp ramps. Website is incredible. Make history's Grace internews proud by going to ramp up com to learn how they can help your business control cost.

That is, rap dot com. Twenty years ago, a Young student coming to united states. I couldn't have imagined having a career in investing and would have never thought that be fortunate enough to meet charlie monger.

In two thousand and four, monger became my investment partner and has since become my lifelong mentor and friend, an opportunity I would have never dared to dream about charin. I first met at a mutual friend's house well as working on investments. N.

L. A. After graduating from college. The first impression he gave me was distant. He often appeared to be absent minded to the presence of his conversation partners, and was instead very focused on his own topics.

But this old man spoke simply, his words full of wisdom, freedom, moll, over seven years later, at a thanksgiving gathering in two thousand and three, we had a long heart to heart conversation. I introduced every single company i've invested in or researched or am interested in to charlie, and he commented on each of them. I also asked for his advice on the problems that I was encountering.

He told me that the problems i've been encountered were practically all the problems of wall street. The problem is, with the way that wall street y thinks, even though bushra hathaway has been such a success, there isn't any company on wall street that truly imitated. If I continue on this path, my worries will never be eliminated.

But if I was willing to give up this path right then to take a path different from wall street, he was willing to invest. With charlie help, I completely reorganized the company. I found the structure was changed into that of the early investment partnerships of buffet in monger investors who stayed made long term investment guarantees, and we no longer accepted new investors.

I then entered another golden period in my investment career in the next twelve years of the capital grew more than twenty times, buffer t said, despite the countless people he has met his life, he has never encountered anyone else like charlie y and in the years that have known charly and was fortunate to be able to timah understand him, I am also deeply convinced of that. Even from all the biography of people from all the ages, I have yet to see anyone similar to him. Charlie is such a unique man.

His uniqueness is in his thinking and also in his personality. When charlie thinks about things, he starts by inverting. To understand how to be happy in life, charlie will study how to make life miserable.

To examine how what business becomes big and strong, charly first studies how businesses decline and die. Most people care more about how to succeed in the stock market. Charly is most concerned about why most have failed in the stock market.

His way of thinking is, I wanna know where i'm going to die, so I will never go there. That is actually my favourite book. I you know about that on at ten fifteen box on in, about in charly monger. My favorite is episode 2。 It's called all I want to know is where i'm going to die, so i'll never go there buffer and monger a study and simplicity and uncommon common go back to this.

His way of thinking is, uh, I want to know where i'm going to die, so will never go that that up to to ty six charly constantly collects and researchers the notable failures in each and every type of people, business, government and academia, and arranges the causes of failure into a decision making checklist for making the right decisions. Because of this, he has avoided major mistakes in his decision making in his life and in his career. The importance of this on the performance of buffer t and berkshire t way over the past fifty years cannot be emphasized enough.

Charlies mind is original and creative, never subject to any restrictions, shackles or dogless. He has the curiosity of children and possesses the qualities of top noch scientists and their specific research methods. He has a strong thirst for knowledge, and now rereading this again, these are all traits that lu has imitated and adopt.

IT solo tory that again, charley's mind is original and creative, never subject to your strict shackles or dog. As he has the curious ity of children and possesses the quality of top note scientists and their scientific search methods, he has a strong thirst for knowledge to hand with the right approach. Any problem can be understood through self study, building innovations on the foundations LED by those who came earlier.

Charlie advocates setting all the truly important theories in all disciples and building on the foundations of the so called worldly wisdom as a tool for studying the important issues in business. Charley's way of thinking is based on being honest about knowledge. He believes that in this complex and changing world, there will always be limitations to human cognition and understanding.

You must have the correct understanding of knowing what you know and what you don't know. The true insight a person can get in life is very limited. Correct decision making must necessarily be confined to your circle of competence.

A beautiful lady once insisted that charlie use one word to sump up the source of his success. Charlie said IT was being rational. Charlie can see through to the essence of things.

Buffy calls this characteristic of charlie the two minute effect. He said charlie can, in the shortest time possible, unraveled the nature of a complex business and understand IT Better than anyone else can. The process of burch's investment in byd is an example.

I remember in two thousand and three when I first discussed byd with charlie, despite having never met the founder, never visiting B. Y, D. S.

Factory and being relatively unfamiliar with the chinese marketing culture, his questions and comments about byd remains, to this day, the most permanent questions a byd investor needs to ask. Everyone has blind spots, and even the brightest st. People are no exceptions, buffet said.

Benjamin gram taught me only to buy cheap stocks. Charly allowed me to change my thinking that the real impact charlies had on me. I needed a powerful force to walk out of the limitations imposed by grand theories, charlies ideas for the source of that power.

He expanded my horizons. That is the end of buffs. Quote, this is A U talking about this.

I've also had this profound experience. Charly pointed out the blind spots in my thinking. He is not just a partner. He's a role model in my life.

Not only did I learn from him the principles of value investing, but also learn from him how to live life. He made me understand that a person's success is not accidental timing opportunities, of course important, but the inherent quality of people are even more important. Charlie likes to meet people for breakfast, usually starting at seven thirty A M.

I remember the first time I had breakfast for I arrived on time, only to find charlie sitting there, finished with the day's newspapers. Well, was only a few short minutes away from seven thirty. I felt bad letting an elderly man I respected wait for me for our second date.

I arrived about fifty minutes early and still found charly sitting there reading the newspaper for our third meeting. This is my favorite stories to tell us for our third meeting arrived in out a half an hour earlier, and charlie was still reading the newspaper as if he had been waiting there all year around and had never left the seat. For our fourth meeting, arrived an hour early and began to sit there waiting at six thirty m.

And at six forty five A M. Charly leased, walked in with a pilot newspapers and set down, not even looking up, completely unaware of my existence. Afterward, I came to understand that charlie y will always be early for meetings, but he doesn't waste time either.

He will take out the newspaper and read. One year, charlie, I were attending an out of state meeting. After the event, I unexpectedly ly met charlie at the airport terminal.

His plane had already departed, but charlie was not in a hurry. He took out a book and SAT down to read while he waited for the next plane. As long as I have a book in my hand, I don't feel like a wasting time, charlie said.

He always Carries a book on him. As long as he has that book, he'll have no complaint. Charlie spent his lifetime studying the causes of human failures, so as a profound understanding of the weaknesses of human nature.

Because of this, he believes people must be strict and demanding on themselves, continuously improving their discipline in life in order to overcome the innate witnesses of human nature. This way of life to charlie is a moral requirement. He is such a unique person.

But if you think about IT, if monger and buffy t weren't so unique, how could they build burchart s performance over fifty years into one that is unprecedented in the history of investing and one that has yet to be replicated over the years that i've known? Charlie, I often forget that he's an american. He is closer to being the traditional literary, which is the scholar officials of imperial china.

Charlie is the best example of a businessman with a literality soul. He is extremely successful business. However, in the deep, intimate interactions of high, richly ley, I found charlie to be essentially a moral philosophy in a scholar.

He reads widely, is knowledge able over a broad ranger topics, is truly concerned about his own moral cultivation, and is ultimately concerned about society. Charlies value system from the inside out promotes self cultivation and self development to become the sense who help other people. Charly very much appreciated confusion.

I sometimes think that if confused was reborn in amErica today, charlie would probably be the best incarnation. If confuses return two thousand years later to the commercialized china, his teaching will probably be, have your heart in the right place, cultivate your moral character, fortify your family, acquire wealth and help the world. That was an expert from the forward that li u.

Wrote for the chinese version of porto omc. The written wisdom of charlie monger and IT is an expert from the book that I made myself. As you and I covered last week, there's only one book, lu, he was written by lee luu, and IT only covers his early life and his escape from china.

What that versioning ly you that was writing about could never have predicted was what the next few decades of his life was going to turn out. The fact that he, but like, attends lectures from both of the changes his life becomes partners, which charly monger founds a wildly successful investment company that produces billions and billions of dollars in returns. So what I wanted to do for this episode was, okay.

We already covered his early life, his surviving one, the most horrific childhood you could possibly imagine. Now I want to learn how he thinks about business building in investing. And so to do so, I had to make my own books.

So what I did is I I found all the lectures I could find and all the interviews I could find of leu in his own words. Most of them are on video. I would take the video.

I then would then transcribe the video, I then printed out the transcription, then I organized them in chronological order by the year that he gave the talk. And then I treated that giant of paper just like a book. And so the result is I kind of have the like a homemade or handmade, uh almost like autobots phy lu, where he's discussing his investment career.

And when i'm done, i'm going to put this in a binder, three in binder, and put IT up on my book. This is something when I went to charlie monger's house and actually got to see his library. This is something when I realized is like all, i'm still a biography amateur because charlie would make his own biography.

But there's this very hard to find interview that john I rockfeller gave towards end of his life. It's like, I think seventeen hundred pages. Think the transcript seven hundred pages long.

It's the William of english interviews that he did with rock fellow. And on chinese bookshelf you see that he had printed out the transcript and then put into multiple three being binder. So i'm going to put my own version of the autobahn y.

I'm done in a three room binder on my bookshelf. And so the first part of this homemade book is going to be obviously the forward, uh, that lelio for the chinese government peris all meat. The next thing is lu s. colombia. Business school election in two thousand six.

I briefly mentioned this last week because the lectures I can our in forty five minutes that there is like a seventeen minutes section that is just little completely like lighting up and being very disappointed in the lack of effort that the students in the class and the lack of you know just rigger ah that the students of in the class were exhibiting but that all touching leader because he actually goes through and describes his process of how he selects and that the research does he uses to millis an example which is a very successful investment of his, but that comes there. I want to start. He starts out like why he doing this wise.

He even bothering to come to colombia business school and to give this lecture. And his whole point was that the fact he attended a election, byword buffs when he was a student at colombia, when lily was a student, change his entire life. He says, this class, in many ways, is really what made my career.

At the time, I wasn't even a student at the business school, and I was accidentally brought into a lecture. And in the middle of that speech, listening to warn a light, bob kind of just went off, and I figured that I can do something in this business. At the time, I was pretty desperate.

I had recently escape from china. I didn't know anybody. I had no connections whatsoever. Ver, and I didn't have any money. I was horribly worried about how do I ever make a living in this country, and I really didn't grow up with a capital culture eater.

I think this is why last week episode is so important, why it's one that i'm going to relive n any time that I feel like any like self pretty kind of creeping in. We have no excuses. Lu went from one of the most horrific childhood you could possibly experience to a billionaire.

He moves to america, no money, doesn't know the language, no connections. And so right away, you also see the similarities in the thinking we truly low and truly monger. You know, he says, bad thing.

If you live long enough, bad things assured to happen to you. Self pity has no utility. Get up to yourself, up and keep going.

And so we go back to this Young ly leu sitting in this lecture from warn buffet, trying to figure what the how I can do is my life. I was horribly worried about how to ever living in this country, and I really didn't grow up with the capitalist culture either. Well, buffet said about investing really was just so different from my perception of the stock market.

The more I thought about IT, the more I thought, well, g, this may be something that I can do. And so one of the first things that you learn from buffer was that you should really see yourself as more than owner of a business and therefore, tie or fortune do the outcome of that business. Your fortune will rise up and down with the nature of the business.

And if you're on owner of the business, you don't trade all the time. And so that line, if you are owner of the business, you don't trade all time. This is something that Louis going to repeat throughout the lectures that it's really monger's idea of sit on your asp investing, which mongers says sit on your last investing, you're paying lost or brokers you're listening to less nonsense.

And if IT works, the tax system gives you next one, two or three percentage points per a year. This important investment, philo hy, assumes that one is Better off buying a business with exceptional business economics, working in its favor and holding IT for many years, then engaging in a lot of buying and selling, trying to anticipate market trends, constantly buying and selling means constantly being tax, so that something that mongo peat, that is something that lead repeat as well. And so leu is telling the students, hey, uh, turns out this buffet guys, you know, i'm going to read this two quick ah I was texting in front of mine as I was doing research a for this podcast and I said i'm working on another lu episode but this one is about his remarkable investin career.

He can be summarised by number one, studied buffs and monger. Number two did that. So he tells the students, like, I listened to buffet, turns out this buffer guys, pretty mart, kind of knows what he's doing.

I should just do that. And so then he hits on the adversity has, which I think is the most important, I think is the one of the many teams that you and I talk about. Why we read bag fees and our business books is because general business advice is useless.

IT has to be terrible to who you are, has be authentic to you. And so he said, you are interested in investing. Well, guess what? Ninety five percent of the shark market is made for traders.

Five percent is going to think, maybe five person less think like, like blue, like buffy t like monger. You figure, who does this make sense to you? Because if you're not if IT doesn't fit, if you're not authentic to you, if IT doesn't fith your temperament, you're going to fail.

And so he says, if you're thinking like us, you are really not the majority. You are actually a very, very, very small minority. And the stock market is not created for you, and that's really where your opportunities is.

And that is where the chAllenge is. And that is what I first learned when I listen to buffett. That is one of the things that stuck in my mind because I really know I really knew by then what kind of person I was.

Your biggest chAllenge is really to understand whether you're that five percent of people or you're like the ninety five percent of the majority. And I think this is overlooked and really excEllent advice, because this is key to enjoying the game. His soul points like all the values in the long term, if you're building a businesses not authentick to if you don't enjoy, you're not going to last a decade.

And that's where the money is. And in many cases, in in louse case, IT takes an experiment. You have to know what you don't like to do.

So as I guys and I always knew, I was going to run my front. That he knew, but he didn't know how he was gonna run the fund. And so one of his early barkers was drilling roberson, who was the founder of tiger management.

And so he tells his, I K. Come into the office, come like, work out of here with all these other trainers, see they do is going to talk about this a in more detail and another interview later. But this really realized, like i'm not part of this ninety five percent and says Julian invited me to share office with him and invited a whole bunch of other fund managers that he also invest in to share ideas.

And that's when I sort of got a much Better understanding of how the ninety five percent of other people Operated. And so most than we're treating all time, they are shorting stocks. And lu, like, I don't like this, isn't, I don't like this.

Lu is much more like monger buffer. He wants to sit a room, read, think he compares his jobs. Investigative journalist like this doesn't match me.

And so after describing this period of time was like, I don't like this, this kind, this version of the business, he gives excEllent advice again, that I think too many people miss exceptional people don't rebar r for this. So my first point I wanted leave you with is really to understand who you are because you will be tested. You're gonna really have to ask yourself, you're going to have to face yourself whether or a value investor or you're not.

And he says, if you want to be like you, if you want to be in the value story, want to be like lye, if you want to be like charly monger, if you want to be like warm buffett, that means that somehow you're probably genetically mutated. You are very comfortable being in a minority, which is not natural to human beings. Most of the survive because we stick with the group.

And if you're likely to invoke in a monger, you would naturally adopt the attitude that you're right, not because other people agree with you, but because your your reasoning and your evidence show you that you're right. When I got to this part, I searched because I was like, I know buffs said something about other people's opinions over and over again. And that's what I was thinking about when I got to this pargraph.

So in book that imagine early, which I feels the best book that have ever read on buffet, a monger, which is all I want to, knows where i'm going to die all and never go there, writing by Peter balin, buff t says two things about this first call for buffet, we don't read other people's opinions. We want to think, we want to get the facts and then think. And then later on, the second thing, he says, uh, but he says, I would say that if truly I have any advantages, it's not because we're so smart IT is because we're rational and we very seldom let extraneous factors interfere with our own thoughts.

We don't let other people's opinions interfere. And so we go back to lu. He says, this is common sense, but of course, common sense is the least common commodity.

That is a great line. Common sense is the least common commodity. Most people don't think that way. And so it's like you have to ask yourself, how do you will spend your time and really Louis, like I want to spend most of you my time or your time a truly being an academic researcher er instead of being a so called professional investor.

Most of the time the job really is to be a researcher, to be a journalist and then he describes the traits that you have to have if you want to go down this path. He is really describing himself here. Uh, you have to have insatiable curiosity.

You have to have an insatiable curiosity to really try to figure out about how everything work. The more you note, the Better off you are. And so you have to be naturally interested in curious. He matches that intense curiosity with the fact that he reads everything as a line in a Young churchill biography that I read. They talk about the difference chain, I think, was like twenty six.

When is in parliament he said the different dream churchill that time and his competitors or I guess his fellow lawmakers was they would contend to rethink today's newspapers where IT said, um there's a line in in the book where the churchill devoured red entire that's how I think about lu devouring entire shells. So like, of course, you have have this natural, intense curiosity. He says, this will help you.

You're always see reading everything. He is help you because then occasionally you will find a few insights. All of your studies would really just give you a handful of tremendous opportunities. And so when he talks about all this reading, all this, thinking, all this, research will only produce a hand full of opportunities. And obvious ly, when you, when you find these opportunities, you want to bet really heavily.

In fact, I have A, I have A A coffee mug of warn buffs, wisdom and IT has like quotes and I just poor expression into the single day long and there's a line uh, that I was signing up because on the on the coffee mug, uh, it's call for more in says opportunities come infrequently when IT rains, gold put out the bucket, not the symbol in the reason I thought about this is because multiple times people ask, because he takes questions in almost all these talks, is like, how much money did you put in his investment? And like, what large percent of what person of europa folio and everything else. And my funny, his funniest answer to this, like how much money did you put in to this? He goes a shit load.

And so I was thinking about that because my first introduction to lel u came when I heard charlie monger describe the fact that he said reading barr's magazine for fifty years made him like four hundred million dollars. And he describe why? Because he's like, I read bear's magazine for fifty years, the entire fifty years, and I red beret magazine, i've found one actionable insight that I could, actually, I could, I could make an investment in that insight gave him eighty million, and then he took that eighty million, gave us a loue and L U.

Turn that into four hundred or five hundred million. And so I think that's a great illustration for what leu the point that leleu trying to make here is like you're going do this reading, learning on this research, and over your lifetime you're going to have a handful of insights. And you know, if you act on those insights, you going to be fabric ly, fabric ly wealthy.

And so he's gonna start walking the students through how he found and how he thought about this investment in timlin, which I think when I think you've turned like six hundred, seven hundred percent, maybe even more. And so he's doing in the research is like OK, you have to find out the opportunity or given is the business a good business? Is there a margin of safety? Is the management somebody that I can trust? And why is this opportunity presented to me? And so the first thing that he tells the students is I guessing I no longer talk about what we own.

Other word's bad boys move in silence, but I can pick a couple examples of something they owned in the past. And he's using this as an illustration, or gets an example of how he thought about how he thinks about investing. And so during this, he's holding this giant books.

So it's the value line investment survey, which is a stock analyst, tracks proxim seventeen hundred or something like publicly traded stocks. This is a giant book. And he trying to walk the students on how to analyze businesses there in this book.

And so again, lulu, just like churchill, just like most of people united, they devour our entire shell. So like, I got hooked on value line, and I would read the entire thing from beginning to end. He says that really the best kind of education, if you want to have an sycophant knowledge base, you have to go through page after page after page.

Doing so is just enormously helpful. And if you really think about the idea behind the idea, like, what is he trying to tell the students he that is, like, how bad do you want? IT that right there, the amount of people are going to read cover to cover this giant book IT looks like you can work out with the thing.

How many people willing to do that right there is going eliminate like ninety five person greater, ninety five percent of people. It's going to limit most of the people are sitting in this columbia. These are M, B, A, students, and they're not even doing IT.

And this is why studying the early lives of these entrepreneurs, investors that you and I starting at the import because this guy had, I don't know, I mention on the pakistan is in the book last week, he had five hundred books in his doro. This guy grows up an unbelievable poverty in the communist country. No, uh, no opportunity at all.

What do you think that kind of person is? gonna. And they get to america, they go to columbia.

He hears buffet speak, and then he realized there's a book that does this indebt analysis on all the stocks. okay? Yeah, i'm going to read every single page, multiple times.

Wait to we see the analysis that he does for timing. This guy is going to do vour entire shelves. So he pulls this up. He shows the value line sheet on timber land. And he's like, lesson, you don't really care where IT traded before.

The first thing I look at, at this valuation and if the valuation doesn't fit, I don't even really, anna, go be on at so he is walking through the class on how he starts understanding a business. And he makes the point, if you've done this work, if you have this psychology, gy, if you read every le, then what happens is this speeds up your learning processing. You're also so you can pull up a page.

He says, listen, if you're skilled, IT shouldn't really taking more in the second to find IT. And then the next thing you want to do is you would says, he, or next thing he does, he says, I always think of myself as a business owner, and he thinks if I could buy the entire business at this Price, then I probably want to own IT meaning by the stock. And so he senses that might be an opportunity with tim.

Tim lin is got a brand name, a good brand name, but the stock is just getting completely killed at the time. There is the the asian financial crisis and all the the shoemakers that were like they were depressed. The Prices were depressed because they thought their sales in asia just going to fall off a Cliff.

Any mention? This is also happening to nike reboc at the time. And so he goes and tries to fine analyst report on timlin was going to timlin.

He says he turned out there's no anal support. Nobody was even covering this. And that didn't make sense.

So because he said the companies is doing about a billion dollars a year in sales. It's a big brand. Why is nobody covering this? And so he walks people to this.

He's like, well, it's always been really profitable and therefore, they didn't have need. The need for the financial market is very limited. Any other reason is contain.

I like you answer one thing and go OK more, more, more. Any other reason? Well, the owners structure.

What's the owner structure? Well, it's family onn. They know about forty percent of IT, and they control ninety eight percent of the vote.

And so leu says immediately, that turns a bunch of people off. And he brings up the point. He's like, you really, you should think of yourself as an investigative journalist.

And he says, you've got to have a very active, very curious mind, a mind that wouldn't be satisfied with any boggess answers, otherwise you can't be in this business. So is that okay? We have the asian financial crisis.

We have the fact that there's no analysts covering timlin. What else could be the reason why he feels an opportunity here? Why are they keep wise?

Are stuck getting absolute Better at turns out there's a whole bunch of lawsuits. So what do you do next? You are you know, we're going to poster here you already.

What do you think lu is going to do next? He says, you'll download every single piece of the document for every single one of the court cases, every single case, and you read them from a page one. If you do not have a curious mind, you're not going to do this.

I am just so curious. I wanna know what's happening. This doesn't add up.

And so you have to dig into every single thing, and you have to read everything as I did. He's talking about effort. There is so many times.

So obviously I like I underlying things that I reading them and I drop down to myself, like what comes to mind, sometimes the past ideas, sometimes to search on h sometimes it's like all this is an idea related something else. He said multiple times, if you would, will see the little handmaid book that I made. You're going to see the word effort in capital in all capitals and a big giant circle because that's what he's talking about.

He's talking about effort, just like monger above, to talk a lot about human nature and human psychology. So does liu member. What said know common sense is the least common commodity, know what else is least common commodity? Effort in hard work over a sustained period of time, most of humanity is incapable of doing so.

So this continues. And like, have a big smile on my faces. This continues.

Go on because just the effort that this guide is going to do, member when he pulls the trigger is he's not like doubling around, you know a great line where says what? Disney seldom doubled. Everyone who knew disney remarked on his intensity.

When something intrigued, he focus himself entirely on IT as he was the only thing that mattered. That's the same description. Fully look to OK.

So this point is right. I found all that all is also cool. I going to print out every single case and read IT front to back and what he realizes.

This is fantastic. You see the owner of the business, right? It's kind of like getting pissed off. There is like this fight between him and some are some other investors.

And lu says you get a sense of his personality by reading those documents because you convivially see his defense. And so is the owners. Like, i'm not going to talk to the street anymore.

I'm not going to give you any guidance. Uh, I don't need a damped dollar from anybody else. This business is wonderful. And so the people they didn't do the work right to how many people let's say there is one hundred people that knew about the lawsuits, the scare bunch people away.

How many of those hundred people actually read to dot every single word and every single document? Likely, I don't know, one, two, maybe. And so this is beneficial for people like me, you, because these lawsuits served the purpose.

They scared. They scared the superficial people away, and so at least starting to get live in more comfortable. I mean, I go here.

Well, that's nice. We to find out, are they actually good managers? How do we know that their decent people on this way goes back? So I view this job as an investigative.

Most people have built businesses, have also have a big personality. Yes, they do. And they have a history. They can go on IT. They've left a trail of evidence of what kind of person are, what they've done, how they deal with different situations.

And so this is, I mention week, he goes to their community, he goes to their church, and he says, you go visit everyone. You spend a few weeks there. So that uses that example again, because one hundred people may be interested in this potential investment in timlin.

How many people out of the hundred are doing what I you did now it's not even two or three. IT is one and leu doesn't stop there. He says the fellow actually that I think this is the founder of title in, uh, he says this fellow actually only graduated high school.

He is a relatively simple guy, but he's a nice, decent guy. IT turns out he has a son who actually went to business school. Now i'm going to have a hard time not laughing at this.

It's expect inspiring to me. This is like I want to be the best in the world that I want. I'm doing.

I want to be a full effort, always everywhere. Like, would like, I would not even think to do this. Listen to this.

So turns out the turbine founder, right, he's a son. His son actually went to business school. His son was actually my age at the time.

So I go and find out all the boards that the father and the sun's sit on. And I find one of these boards that the sun is on is run by a friend of mine. So I gave herself invited onto the board, I joined the board along with the sun, and we become very close friends.

And then I really know what's going on in our family. IT turns out to be one of the most admiring families i've ever met. They are wonderful, and they also happen to be brilliant businessmen.

This is incredible. This is also related when I got to this part, like think charly monger will talk about the dangers of multitasking for decades. And this is a perfect example list, because this is why multitasking is so dangerous.

You don't have time to go to the extremes and the values found in the extremes. So in addition to this, he goes to all the different stores, he talks to all the storage managers and he he does the word for us. He summarized as as for us, think about how much effort you put in to get the damn thing right.

And so now he realizes his a margin of safety. He understands he's a very indepth throw understanding of the business from a to c. And he makes his investment.

And they ask him, well, how much should you put in? He goes, I put a ship load on them, and over the next two years, the damn thing went up seven times. That's charly mugger charly manger said, you should remember that good ideas are rare when the odor greatly in your favor bet heavily.

That is the same idea that buffet has on my coffee mug. Opportunities come and frequently when IT rains go put out the bucket, not the temple. Go back to the text me suggest that my friend and working on another lu episode, but this one is about his remarkable western career, can be summarized.

Number one, study buffet monger. Number two, did that mongo buffer t said up, good opportunity. Rare when I find one go on in louse versions is I found a great opportunity.

I put a ship load on him. And then over the next two years, as done thing one up seven times, he talks about, talks about the begin, makes the investment okay. This is before this giant increase in value. He goes the CEO goes and search, doing animals meetings.

K, so leave is gonna are, you know, leve? O, who is going to show with the endless metall? OK, you know how many people are the first anal meanings is the CEO lulu and one other guy, three people.

And then after the increase in value, which is like think the end of, uh, I think this happening in the year two thousand, he says the room was just absolutely filled and he says, so that's when I know I have to sell, so I sold everything. Think about that. The stack goes up seven hundred percent, whatever is.

And then the meetings are packed. And then he summarizing exactly his inking and this thinking it's coming out of you lose mouth but these are you know both amongst ideas. You you just have to sit on your ass.

You don't have to do A A damn thing. That's the good thing about buying a really good business. The business will take care of itself.

The op opportunities, like I don't come very often. So when IT comes, you have to sees IT. When opportunity comes, you have to jump on IT.

And that's what I did when out. He uses a few paragraphs later. When opportunity comes, you can tell you can smell IT.

He's assuming you did the work necessary, right? You can smell IT. How can you really develop that smell?

The only way to do that is just reading page after page after page. And then he's asked again. He was asked, what percent of your fun did you put in timlin?

He said, a shit load of money. So then we get to the park. This is when they start.

Analysts keep on. He just went through how he analyzed temple, right? So we're going analyze business.

This is when they started analyzing together, and this is when he absolutely lights them up. And so we started, think of yourself as an owner. This is something he tells over over again.

And he asked, like, very simple questions, really like, what is the market cap? And he goes, come on, it's simple. Come on.

I thought you guys, that all your homework, did anybody do homework? Not one hand. Raise your hand. If you did homework, one person in the class one hand goes up. And I think that guy even gets the next question wrong.

Well, we have the question, if you even did get work and he says, how the hell are you onna, make IT in this business? And I wrote in the caller in the margin, they would not be one of three at the analyst meeting. So continuous, i'm i'm going to just talk just going to talk about his reaction to them, right? Because this is effort.

How bad do you want? IT, come on, guys, use the columbia of business school. What do we pay you for? Come on, guys, you have work to do.

This is not good. Bruce, the teacher, you know, I don't know what to help. You are teaching them.

Come on. This goes on for pages, and pages going to skip over. This is so bad. This is his response. This is why all my employees, I had never went to business school. They never worked in an establish managed reform, and some of them never even had accounting, because I find it's easier to train them than somebody who did.

This is something that pops up on the biography a lot that in many times if you run your business is differently loser, you know, from where I hate says but like very much like first principles thinking it's Better no experience than bad experience, Better no habits than bad habits. And so they are going back through uh, this stock. There's just one thing I want to pull out that I think is a really important um point that you shouldn't be fooled by what things are called or what things how things are described.

But you should be asking how do they actually function. And so there is this business of their analysis has a bunch of other businesses. And one of the businesses that they own is like this department store.

It's called the department store, but it's not like you. And I would think about department store has holding mental. Therefore, the book value of this department store, it's worth more than the book value, uh, in his opinion, says it's not a department store that like we understand here, they don't take any inventory. It's more like a shopping mall that would take a percentage of the top line of all the merchandise and all the stuff that they sell there. So it's clear from his description, money when he's talking about this section is like, oh, I don't care what you your I don't care what you're describing IT.

Like what you describe is like what does that actually do? How does that actually function? And so after, like struggling through this and kind of know criticizing them or just, you know, chastize ing, I guess for a lack of efforts away, I would put this he makes appointing on this type of approach is not natural.

However, if you come to the conclusion that you personally somehow will fit this muted gene pool, this is something you might really be looking to do. The only thing I can add to this is that there's a lot of money in IT, as has been repeatedly proved by people from bench gram to buffer in everybody else. I took this class and IT really changed we fundamentally.

But one thing you have to do is you've got to do IT. That's why I was somewhat disappointed with the amount of work that you've put into this. I made hundreds of thousands of dollars just taking this class, just listening to the fourteen or fifteen people.

But I did a lot of work. I'm telling you, you can make a lot of money if you're really into this, not only just listen, but do IT. I benefited a hugely just by listening and actually doing IT.

That is the difference. There is no bulls shit theory. All everybody y's telling you is what works.

What works? You guys have a terrific opportunity. And if you don't really use this, then shame on you.

You've got to do IT. You've got to use IT. You've got ta do IT. I mean, you're Young, you have energy, there's nothing to lose.

And he starts talking about what he becomes his his mantra that other people describe as his montreal in his investment company. You want to provide accurate and complete information, accurate and complete that. This is mantra.

Most people will fail on both of those scores big time. And you have to go that extra link in order to get IT done that the extra length describing the timberland, right? If you can succeed on that, you cannot succeed in this business because most of the time you're going to stand alone and you're going to be against just about everybody else.

And if you're not really confident about what you know, you can't possibly putting that kind of money into something. If you want to do the buffet and monger type, which is more of the kind that I want to do, he's describing necessary, and you want to be that way. Your return is gonna come from a handful.

Great ideas are rare. There's to be no more than the number on two hand your entire life. He says, over the course of fifty years, he might get tremendous insight.

You know, no more than ten insight, essentially tremendous insight. And what he means by tremens insides were just going to bet the entire house, how do you really build that insight? There's no other way than, other than basically continuous curiosity, intense curiosity and continuous study your entire life.

I would also say this is why founders that still run to control their company to sorrow of a long que time have such a massive, massive advantage. Could think about it's like same world talks about, you know, I never really had to invest in, I never really invest much out of walmart. And how many people understood warmer the way and walter did?

Probably nobody on the entire planet. And so therefore he can direct all his money. But was time and energy into this thing, because he knows that Better any else. And by, just by getting that one, getting that one a that one fundamental, this company didn't need anything else, even if you never invest anything, never bought a stock, never made investment another company, still fabulous, rich. That idea, that fundamental truth, this gets me fired up.

And then he talks about the other side of this, that his mistake, because his hounds on the margin of safety raise, like you know, he's lost some money, but in very rare cases. And he says his biggest mistake is actually not making a big bet when he had that tremendous opportunity. He says the biggest opportunity， uh, came are the biggest mistake of the most opportunity came for this company that I had an absolute inside on, uh, had the absolutely site I knew the management, I knew that they were trading below cash and subsequently that went up fifty to a hundred times.

And I missed IT. I couldn't bring myself into IT. That was the biggest, biggest mistake I made.

The biggest mistake is not how much money I lost IT was how much money I forgone. That is the biggest mistake I cannot forgive myself for making that mistake. And so then lily is gna elaborate on why.

And this is going to sound a lot like warm buffer TTS puncture idea. So leu said, you go to your life, you might not have more than five or ten and sites. You develop that over many, many, many years of study.

Some of the things i'm doing, I really found myself doing first fifteen years ago. So what he means, I studied an american company fifteen years ago, and now I found the asian counterpart. But I studied that business for fifteen years in between.

I know everything about that industry and what really makes that business tick. You need to have that kind of insight in order to really swing with conviction. And if you cannot do that either psychologically because you're ill prepared, you would just never really make any real amount of money.

So I guess to that part, and I I go, that's another one of you buffs ideas. Monger's ideas is actually coming out of, no, lu is just echoing what you learn from them. And so buffer goes.

And I think he speaks to university of florida M. B. A. Students, but this is from the bike phy. snowball. And so he says to the students, buffet explained his twenty punches approach to investing. You get very rich.

He said, if you thought of yourself as having a card with only twenty punches in a lifetime and every financial decision used up one punch, you would resist the temptation to double. You make more good decisions, and you'll make more big decisions. I need to actually read something to, I watch this video of charlie monger.

It's like ninety seconds long. And h, it's titled charlie monger on what's a different about the newly D I watch IT twenty times this week, but I senate to about your friends and I transcribed IT and I this really is in now. It's like making me pause this week and really analyze how spreading my time and really making sure that analyzing everything through opportunity cost and only taking the best opportunities available right to charlie murder, says lu.

I'm i'm getting off of the the text that we have, uh, the lu book that I have in my hand going to this transcript of the charlie monger video because I I really do believe in ninety seconds he gives us like a lifetime of of lessons of a bunch great ideas. And so he says, lu is not Normal. He is a chinese worm buffet.

He is very talented. In ninety five years, I have given monger family money to an outsider to run once, once in ninety five years. And that is li u, and he is hitting out of the park.

And that's pretty picky. Once I have lu u, if I am comparing to him, who else am I going to pick? By the way, that is a good way to make decisions in.

That is what we do, meaning him, and warn if we've got one great thing to do more up. We are not interested in anything that is not Better than that. That simplifies life, a great deal.

And so when I hear that, when I read the transcript, I know mongers talked about this over over again, talks about making all of your decisions to opportunity costs. And if you would do so, you're always going to be your bets and you invest in your time. Energy can be heavily concentrate.

So I go and I search, and I I O K, I know, talked about before, i've got a founders notes on a search opportunity costs. First thing I find is a quote from monger from that book I keep mentioning. All I want to knows where we going to die, so I never go there.

absolutely. He says, decisions. This, a mugger speaking. Now, decisions in your life for all about opportunity costs.

And wise people think in terms of personal opportunity cost. In other words, it's your alternatives that matter. That is how we make all of our decisions.

The genius and buffs advice to the students of you. Think about IT. He is like, well, what's a good way to make sure that you are thinking through opportunity? Costs have to limit your higher life.

You have twenty opportunities and no more that forces you to wait them against the alternative that are not. So now we go back to lu. He's talking about the fact that hey, if you don't if you didn't do the work, if you're not psychologically, you don't have the temperament to IT, you're not prepared.

You're never going to make any real out of money. You're not going to make the outside returns above IT has been able to achieve. Why should I be easy opportunity that gives you ten thousand times your money? And he says there are bigger ideas mining monger buffs.

Their bigger ideas really gave ten thousand times their money. An opportunity like that, if done once in your life, in your set, why should I be easy? And then he tires that back to how we started.

This is like, you gotto build something that is authentic to you, because if you're not a deeply interested, if you're not obsessed, you're not gonna do what what he did. They just go back to the time and examples, like downloads. Everything goes to church, gets minds, our boards they are, and then gets elected to the board.

Like you just not going to do that. He says, this is what really drives me in the business. It's exciting.

It's uteri exciting. Any extensions, everything he treats the really the lu treats the world like a classroom. He like s interest in physics and mathematics, in history and economics and law and politics.

I like everything. I'm interested everything, and that's what you need. You might need models from biology.

Some of them help my investing. You have to be intensely curious about everything. On occasion.

You're gona stumble into a big opportunity. You want to go through everyday learning something. It's a good mental discipline to have.

And as time goes by, you have learned a great deal. So when I read biology, when I read physics, when I read history, it's all searching for ideas. He even talks about the development of his kid of his daughters, like seeing them.

Let's seeing how human cognition develops. He found enormous importance, says it's important to understanding psychology. I guess it's all work anyway, essentially saying the entire world is his classroom.

Any goes back to the fact that people like ham, people like monger, people like buffs, they don't belong to the stock market, meaning they don't want to trade all the time. People describe them as investors, but they really are their business builders. And so then he's ask a question like what drives your decision to sell?

And so I need to be clear when the terminal invest, me made a lot of money in these seven, six, seven, eight x investments. He's like you, you'll find a bunch of those maybe. But what he's really going to for is like these things that you return five thousand, ten thousand, the ones that one of those can make you unhealthy.

So when you find one of those, you don't so so he's going to talk about his evolution of thinking on this. So he's ask question like what I should decision itself. I used to have a philosophy, if I don't want to buy at the Price of offer red, then I sell.

And so he talks about how you volt away from this in the fact that if you're a really great business, my first all, there's just not many truly phenomenal out there. And if IT is a phenomenal business, that leader is going to take a disproportion amount of the capital even more so in the future than you could possibly guess. And so there's like an indirect way.

He kind of ants continues, answers question. He does that why he leads the students on a way to analyze the business of bloomberg, even though bloom work is a private company you can invest in, but he's going to talk about the is now he is a lot of respective in fact, he mentions the business of blooming work multiple times after years and later on. When he tried to compete with them, he even realized that they have been Better than he expected.

But he's really trying to to educate the students are like, well, you know, how do you know you have a business situ shut, sell? And part of this exercise, like serious a question to and ask yourself, like, is there a natural mote here that this is defensible for many decades to come? So they go through, uh, bunch of questions, why is IT so sticky? And a lot of things answer he doesn't like, but one of them he loved.

And they said, well, they have high switching costs. And so they started about people that use machine have a high opportunity cost for their time, and IT takes a long, long time to learn all the functionaltiy of bloomberg. Anything that is hard to learn and that is highly, highly, highly relied upon to do your daily work once you learn that damn thing, you do not want to learn that again.

And besides that, they had another, uh, advantage. And besides, everybody else uses the same thing. You have to go to communicate with your partners, with your colleagues, anybody you collaborate.

IT is using IT. This business is winner take all. And he talks about when the genius marketing ideas that bloomberg had is that they would introduce them.

I think you get free or unbelievably cheap to every business, the school student. So then you're in college and you're learning how to use the machine. And lee luu talks about what you can expect happen after he goes, okay, I have this thing available cheaply to me.

I'll learn this thing. But once I graduate, I go to the world. I don't want to to learn that again. And besides, everybody else is using IT.

And so he makes the point that at some point, bloomberg had stacked the bodies advantages, and at one point he crossed the line and IT, once you cross the line where everybody is using IT, that they have high opportunists. Sts time, high switching costs, takes ever work to to learn everybody else. A too, which just like he stuck in there.

And so this is suppose that was a public company. I suppose you we'd had developed that inside. That insight is worth a shit load of money.

That's the kind of insight I was talking about. That is a virtual monopoly business. He's telling them, look through this kind of insight, do you even have a choice today of not using bloomberg question?

What is the cost of bloomberg? What is the cost? Nothing you can almost call that zero. Now obviously he knows it's you know three thousand a year, whatever the number is, it's a very expensive. This point is every trade to these kind of people to use IT can mean millions of dollars gain or loss.

So they don't care if you if you charge them thirty thousand dollars a year and if and they don't really care or they don't really have a choice, if you decide that next year, the Prices is going to be ten percent a year, uh, ten percent a year more, they don't have a choice. That is why it's a fabulous business, a fabulous business. He repeats that over and over again.

And i'm going to pause here. I'm going to come back to what he's saying here. This is very important.

But like the point of his his hounding on this that you need, I wodge all businesses should read all the time because you realize this is not. He has nothing to do with financial services. Technology is a type of business that has pricing power because there is no other alternative.

And again, this sounds a hell of a lot like charly mugger. I when I just did, uh, I was epsom three forty five. It's on very interview the same and they talk about the fact that pororo bought Tiffany y says raising Prices.

I think the average customer use to spend five hundred dollars per like visit to the story now like four times, they immediately start raising Prices. And when I got to that right, I thought of that when I got to this and you, when I got to that, I thought of a charly monger i'm to pull from charlemont stood. Analyzing, bloomer says, is actually businesses.

You'll find a few times in a lifetime where any manager the business could raise the return enormously just by raising Prices. And y'd haven't done IT, so they have huge on tap pricing power to do not using that is the ultimate no brainer. Disney found that he could raise Prices a lot for the disney parks and attended state right up.

So a lot of the great record of icon and walls came just from raising Prices at disney in a disney world. And so monger continues a bircher had the way, warn and I the Prices of these Candy, and of course, we use in cola, which had on tap pricing power. And so back to lu.

That is why it's a fabulous business, a fabulous business. That's what I mean by inside you study every business. When you have things like that, you do not sell.

And then finally, he ends this lecture where the vast majority of my highlights in the little handmaid box can come from because he's remarkably consistent and how he looks at things and what he talks about. So obviously, he'll repeat some of the suffering in future conversations and future transactions and economy. I not going to go over over again.

So he says nothing really talks about business is change and you need to welcome that because change is equal PPT unity. So business is change and change equals PPT unity. Nothing is consent.

That's interesting thing about business. Nothing is concern. That's why you have to keep relearning things. And that's a good thing. That's a good thing.

That's why people who who have an active mind and are actively prepared and have the psychological temperament to be able to act when they see an opportunity will always, always have a chance to be fabulous, rich. And that is a good note to end on. okay.

So the second talk is electorate colony again with this one happens four years later, and i'm not going to repeat the ones we just went over. But he does tell slightly different stories in this weh after discovering, watching that lecture from warm buff. It's not conscript.

Read every single thing he could about buffet, all of the year, whole litters, every single book, every single talk. He says the embark on a two year intensive study, learning everything about buffett. And so he says, after I graduate, colombia worked in investment bank for year and realized that was a mistake.

I try to start a fun. The first year I manage money. I lost nineteen percent. That's when he goes into building the business of, uh, life that's authentic to you.

If you can ever find something you can do well that you really like, this will be your best investments. You will do Better than competitors. If you can do IT with intrinsic passion, that really, over time will add enormous value to you.

And again, I need to point out, I I don't know name this episode may be we should legal and monger more about this because it's like they all have the same ideas we losing hey, find something you have an interest question charly monger in poor choice and and another thing they found is that intense interest in any subject is spending ble. You're really going to accept I could force myself to be fairly good at a lot of things, but I couldn't ex on anything which I didn't have an intense interest going back to loud. The game of investment is really continuous learning.

I cross that out. I really think the Better way to say that is the game of entrepreneurship is really continuous learning and excessively profitable because finding an edge really only comes from a right frame of mind in years of a continuous study. This is really difficult, but on the other hand, the rewards are huge.

Warren says that only come up with ten good investments in your forty year career, you will be extraordinary rich. That's really what IT is with this idea. Finding an edge comes from years of continuous study.

Okay, so one of the crazy things that that kind of smack me in the face is when I read that other biography, same walls. So I think I i've read some wallonia ottowa y choice. And then I read this biography by advances trimble him choice.

So I think my fourth reading really smacked in the face of the importance of like fast and then are slow and then really fast. So he's talking about, you know, studying companies, reading about them, figure to manager featuring our opportunity, like you need years, continuous study for a founder that can user gender studies is obviously to happen inside and outside your business. So like same wolton had seen more retail stores and on the planet and and the edge came from he was relatively slow, right? You like about the same grade retell ever live.

He had one store, a single store, for five years. And then you look at how fast he learned. So that was, you know, this is, this is prehistory.

Warmer was called mr. Is like a five, and which we would think of like a dollar short today. okay? And then you have no success of one more.

And then he sees the success of uh, what he wants to like like a costco, like I said when he start sams club. And so is at the beginning of his career before we had these years of continuous study, one store for five years. This is faster because like the fast you learn and the faster you compound your knowledge, faster you can actually move in real life.

So then four decades later, he started sams club. He goes from zero stores to a hundred and five and seven years and five thousand years in sales. And the edge came from this like slow, continuous study, because sam walton said the key was that they started out under finance, undercapitalized and these remote communities.

And IT turned out, by running these experience or experience in these small remote communities, that there was much, much more business out, these little communities of, like six thousand, you know, people, ten thousand people, and they could have ever possibly imagined that one insight is the foundation of the walmart financial empire. That is volta's version of louse. Idea of finding edge only comes from the right from mind and years of continuous study.

And so lee has some advice for us. How do you understand, again, that great inside, pick one business any and truly understand IT. I tell my interns to work through this exercise.

Imagine a distant relative passes away, and you find out you have inhered a hundred percent of a business that what you going to do about IT. That is a mentality to take when looking in any business. I strongly encourage you to start and understand one business inside and out, just like obviously, and walton understood walmart, that is Better than any training possible.

IT does not have to be a great business. IT could be any business, but you'll need to be able to get a feel of how you would do or what you would do as a hundred percent owner. If you can do that, you'll have a tremendous lake up against the competition.

Most people don't take that first concept correctly, and IT is quite sad. If you did, you would really seek out knowledge on how IT should be run, how IT works. If you start with that, you eventually know how much that business is worth.

And then he talks about the temperament you need to have he go, he's like me. I saw my first business and ninety seven that was in the middle of asian financial sis. Then we had the internet bubble.

And then a few years after that, I was the a great financial catcher. Two thousand and seven and two thousand eight. As these are built, these financial panics are built as once the century disasters, but they happen every few years.

This is really where the insight and temperaments come in. You have to have a certain confidence in your own judgement and not be sweet by other people's views. IT is not easy, but that is life that sounds just like charly monger.

IT is a given IT happens to everyone. Berkshire has had at least three times when the stock was down fifty percent. IT happened to Andrew carney.

IT happened june rockfalls. IT happens to everyone. This happens to even mighty companies. Look at the top fifty companies in amErica every ten years.

By the time twenty or forty years go by, two thirds of them are gone. By the time he goes two hundred years, there might be only a couple left. That just the way IT is miss why kept saying businesses change, change equals opportunity.

He says capitalism rewards people who are talented at capital allocation. IT is a great game. He loves IT.

He refers to IT as a game, as a passion, as an session over over again. He just absolutely loves what he does. And so then he continues.

Once you understand a single business inside and out, then you start examining the entire industry. If you can understand your business society out, then eventually you can extend that knowledge to understanding an industry. If you can get that insight, it's enormously beneficial.

If you can then concentrate that on a business with superior economics. In an industry with superior economics with good management, and you get IT at the right Price, the chances are you can stay for a very long time. And then he said something in passing that I hope I never forget, in that superior businesses produce a lot of positive surprises.

You know, bad business is going to throw up one headache after another. And so he talks about such analyzing byd. And the crazy thing I think byd is, I don't know, eighty billion market cap, something that maybe more, but he started his position of byd in two thousand.

two. He's going to mention the founder of byd and B Y, D. A. A lot throughout the talks. But this is lu on byd in two thousand ten.

And so he says, when you get into situations like byd, you see a lot of good surprises. And so he says, the founder in his team have this fabulous culture. This is not, I didn't know this, that the founder only raised three hundred thousand inventory capital before the IPO.

He raised money in an IPO and then buffer t gave him two hundred million dollars. And so at this point, they had one hundred fifty thousand employees, sixty seven billion in revenue and five hundred million in that profit. IT is amazing.

He has his ability to adapt in a competitive environment. He is demonstrated that the ability, again and again, the way he does automation is far cheaper than anyone else and more reliable. He continues to surprise me with his ingenuity to figure out ways to do something Better than anyone else.

But you cannot truly understand everything about business. In one week, IT took me ten years. He saw him.

A, B, O, I, D. Still, IT took me ten years, and i'm still learning new things about B, I, D. IT is a continuous learning process. You build this knowledge based by continually learning.

And it's during the section, he's asked a lot of questions from the students in the audience, and he talks about the importance of staying within your circle, competence of not being intellection arrogant and so a bunch of time. So they are giving them like here we in a bubble, like some kind of macro economic call. And so I just want to pull out a couple things.

He's asked a question. The questions irrelevant is outside of his circle content. He companies, he says that's too big of a question for me.

I don't know. Few questions later asked another thing like this. That's just not my game. I don't know.

And any is back to just not taking short cuts and just realizing you would have to build the space knowledge, the process and progression is like compounding money. In fact, you can compound knowledge faster than money. If you truly love this game, I would suggest that you don't take shortcuts.

IT might take longer, but it's more rewarding. And then he ends this with saying, you know, the truly great businesses in many times will grow even bigger then you could possibly expect. And he gives example of microsoft with truly great companies and only looks logical and retrospect.

Think about bill gates, how bill gates, certain microsoft, I don't think he knew front that he would take the entire market because at the time, the market didn't even exist. okay. So the next talk he gives in two thousand and twelve, he gives IT at some Francisco state university.

And I found this, and I thought the quality was terrible. So I went looking for like another recording of IT. Turns out somebody had like remasters IT and made IT sound Better.

IT doesn't sound fantastic, but enough that I could transcribe IT. And on that, the remastered diversion there is a fantastic comment that I think tells you a lot about lu. This is the comment on the youtube video.

Thanks for creating a higher quality version. My team and I actually host this event in two thousand and twelve. Not only is lu a fantastic investor, he's also a great and humble person. We had reached out him over a cold email asking him to speak at a student conference in same for cisco.

Although he didn't know who we were, nor he had, nor did have any connection to the school, he flew the same as o gave this speech and then went right back after L. A. After his speech.

He's a remarkable person. And so I just want to put out a few of the ideas he had he spoke for like thirty years to questions. And you know, IT starts with really this is just about the fact that general business services is useless.

IT depends on who you are, depends on the personality, depends on it's hugely important to build a businesses authentic to you. And usually that requires experimenting with things and realizing what you don't like first, which is obviously ously lose entirely y monger and warm buffer s case. And so he says, why is the practice that is being publicized by tremendous successful examples such as mr.

buffs? Why do more people not follow what they do? IT turns out he has a lot to do with human psychology.

And he says, IT is human nature to love gambling, even if everybody knows the author stack against them. That has never prevented gambling from becoming a very big business, is also endured throughout the centuries. But he says, this goes against the track recorder that loue truly monger of.

But virtually all the successful investor dishes do not bet. often. I need to applause. I found another quote from him where I think relates to what he saying here. So he says in the short term.

There will be winners and losers, but in the long term, there are very few winners. If someone can produce outstanding results over fifteen years or more, we can probably say that there are something exceptional. So his own points is like, you should just study the grades and then do what they do.

So back to this, many of the very successful invest investor relations do not that often. Most people really do not have the necessary discipline, mental discipline, to do that. I would strongly encourage you to study successful practices in real life and in examples of history.

What you are looking for, what he is looking for, is you're talking about an enduring earning, generating franchise, a compounding machine. In other words, to know what to look for. He says, I would have first studied all the great examples in the past, and so we just found over and over and the same idea, like hate only go for the best.

You might only have five to ten shots the entire life makes you you all the work, make sure you you have the and one of the students. God bless som just god blossom but he goes, I have to say that's a pretty high whole way. Come on.

And you just got done explaining why there's this flaw and human nature, why so few people able to do so and you just prove this point. And I wrote in the column, yeah no shit, yeah, no shit is a high hole rate that the entire point. And he's trying to explain why this is so important because if you actually have a great opportunity, you only need one.

When you turn out to be right, the upside is just enormous. IT could really surprise your wildest dreams. Hey, repeats. IT is extremely rare to find no brainer, great opportunities. You certainly do not want to diversify away from the opportunity that you've been waiting patiently for a long time to discover. For some really other opportunities, investing is essentially opportunity cost does not not sound like that ninety second video from try monger, right?

So any other alternative, you really have to justify itself by comparing what the one that you are already have charly mongers is not going looking to to run monger family money with other people that are infected lu. And when you make that comparison, you tend not to really diversify too much. All decisions ought to be looked at to the concept of opportunity cost.

So I go and summarized this is I left on this page, right? Because, you know, I may never read this entire page again, but i'll go back and look through them under my notes and highlights. And I want a summary like a quick way to understand.

What did I learn from this page? Number one, all decisions should be looked at through the concept of opportunity cost. Number two, if you do that, you will not diversify too much.

Number three is how you should make all of your decisions. okay? So the next year he gives an view with gram and dodge fill, and this ones written out, and to an ordinary to repeat what we are discovered in the other talks.

When the switch, the second pinch of the part of the game is to come into your own, you must find some way that perfectly fits your personality. IT is a competitive games. You are going to run into a lot of very intelligent, hard working fellows.

The only way to gain edge is too long and hard work. Do what you love to do. So you naturally do IT or think about IT all the time. Even if you are relaxing over time, you can accumulate a huge advantage.

If IT comes naturally to like this, the one who really figure out their own style and stick to IT and let the natural temperament take over will have a big advantage. This game is a process of discovering who you are, what you you're interested in, what you're good at, what you love to do, then magnifying that until you gain a sizable edge over all other people. One of my favorite sentences, that every single thing that we've talked about so far, and even though that's one of my favorite sentences, I feel he does not even a great job of summarizing the idea behind that.

With another sentence that's one of my favorite ite. I let my own personal interest define my circle of competence. So then lee talks about the influence, the same influence of monger head on buffet monger head.

Only when charlie died, buffet was writing about the fact that Charles, the architecture of bircher, so he talks about as good. And I started out looking for cheap securities. But over time, I really fell in love with strong businesses.

And I think that's super important. He mention earlier strong businesses, wonderful businesses, great businesses. They produce positive surprises. You want that you know, a city business as you get for a good Price. And so I want to read from of the biology that post on burch's website that warn rote after charlie died.

And so he says charlie, in nineteen sixty five promptly advised me, warn, forget ever buying another company like bircher, but now you control burch, are add to at wonderful businesses, purchase at fair Prices, and give up buying fair businesses at wonderful Prices. In other words, are ban in everything you learn from your hero band? Gram and truly said, because ben's ideas only work in practice at a small scale with much backslide ting, I subsequently followed his instructions.

Many years later, truly became my partner and running bircher and repeatedly drink me back to sanity when my old habits surfaced until his death. He continued in this role. And together we, along with those who early on invested with us, ended up far Better than charlie N.

I ever dream possible. In reality, charlie was the architect of the present berkshire, and I acted as the general contractor to Carry out the data day construction of his vision. Charlie should forever, and they bold, they bolted this on the website.

Charlie should forever be credited with being the architect. So leu continues. I become more attracted to looking for great businesses that are currently superior.

And actually, he mentioned this because he's going to talk about bloomberg again, which again, he we are ready, you know, he thinks is an inherently superior business. So he was the first investment company called capital I Q. But what was fascinating is the insight that he learned about bloomberg through capital I Q.

Because they started capital I Q compete with bloomberg. We wanted to create something just like bloomberg. And in the process, we grew to appreciate bloomberg much more because he was so hard to compete with them.

We learned quickly that we couldn't really compete with bloomberg. I think one of the best ideas for figure out who was a really great inside of an industry, you identify who was really great by asking who I do not want to compete with. And I think was mark injuries. Since somebody said one time that you could survey the industry and it's said the one bullet theory, I think, is what's called is you sell all like those ceos in the industry.

If you have a gun with one bullet, who you which one computor of you shooting and that's a good indicator that you know, I don't want to compete with that guy and and if everybody like they want to complete that person, that's an idea that's who's truly great inside the industry. So what we run quickly is that we really couldn't compete, compete with bloomberg. And maybe that insight is transferable to his byd investment.

So talks about you know how are you able to get he's as a question like how we able to get charmond in company. B. D, because burch are half away, shies away from technology.

You are answered. Companies keep minds as two thousand and thirteen. The interviews happening and lease insight on that is different.

He says, I don't think warn and charlie are ideological. They are not ideological, neither of mind. It's really how much you know, the story of the idea is relatively simple.

The guys are really terrible. Engineer started the business with three hundred thousand dollars, takes no additional money until the IPO. He creates a company that has a bill, revenue, thousands of engineers.

He saw the whole bunch of different problems. The engineering culture there consistently demonstrates its ability to tackle big, difficult problems. Byd plays in a big field with open ended possibilities and have a and has a reasonable chance of being successful.

Berkshire is not ideological against technology stocks. They're just against anything they don't feel comfortable with. There's a line buffet has on that. Buffet says that their individual, individual opportunity driven, individual opportunity driven.

And I was lee Lewis too, because multiple times like he's asked questions that I can like, are you only investing in asia? You're only this. You're only just like I go where the great test opportunities and individual he is, use a word, but that's where I describe individual opportunities.

ven. Lu uys on byd, the company is a learning machine. And by this point i'm so deep, obviously been deep above the moga for years, but so deep penalty I would realize like this, companies like learning machine, okay, that applies to B Y U, B U I D, but that applies to both chair too.

He applies to monger lies, the buffet and applies to leu guys, a learning machine. He also has a great line hidden in here that I really think speaks to the the importance of focus. I don't invest anything outside of the fund.

I put all of my investment capital into my funds. They you going back to focus, really concentrate on the ideas where you truly have the time and energy to fully understand the situation Better than anybody. And I believe the best founders know know this instinctively.

That is why walton was sam walton is not doing a bunch of investing outside of warmer. why? Because he's concentrating on the ideas where he truly had the time and energy to fully understand the situation Better than anybody back to the importance of being a learning machine and constantly adapting.

There is not a single business that I know if that will never change. Business is change. That's the fascinating thing about business. Successful businesses have some combination of things that enable them to adapt to changes Better than anyone else.

I think you could reach out that definitely refer businesses, right? Let's what about successful people? Let's let's run that sentence backers on side.

business. Successful people have some combination of things that enable them to adapt to changes Better than anyone else. I think that statement still true.

E, he hits this again on the next page. Successful companies are able to deal with change consistently. And then remember several, he's repeated, you know, the fact that monger buffer t are rare, great up to these are rare.

It's not supposed to be easy. In fact, he repeats over again and that the future is excessively hard to predict. And he he has a bunch of examples in in turn to illustrate that point.

You know, it's obviously want ant because he repeats IT throughout almost every single one of these talks. But this is the best way that he framed IT I think wow, this is agree with a summarized that idea about, you know, the future is hard to predict. He says, if you went through the american civil war, the country killed two percent of its population, and yet not only was a rebuilt, but he was rebuilt at a furious st.

pace. After that, he went through two great world wars. After world war two, if you thought japan and germany were doomed, boy were you wrong.

IT is hard to predict the future. okay? The next talk he gave in two thousand and twenty one and IT is the thirteenth colombia china business conference fireside chat. And you mentioned earlier, the more like foundational, like the psychopath psycho logy have, the faster you can identify things any was using specifically, like the more you revalue line, the easier IT is to spot the opportunities and the fast you can do. So it's also true if you're study this person.

So by the time I get to this, I think the the transcript or runs out on thirty pages, something I had an understanding of lilo and how he thinks to that, where there is only one insight that I want to to share with you from this talk that we haven't already covered and IT deals directly with focus. But I think more than that, it's like once he obviously do, that has to build a trusted on judged and he knows his path in life. A lot of what he's telling you is like you have to learn to think for ourself only way you can trust me.

You do the work that you should be able to. And so he's ask a question like, what other dimensions do you do things differently than other investors? He says, I don't spend my time studying other investors.

We spend our time studying industries and studying specific companies. In other words, he's keeping the main thing, the main thing, he is focused. He knows that if he he does if he studies great companies in great industries, he will develop those rare in five, ten, fifteen insights and entire lifetime, that's all.

And if he does that and only does that, he will be successful and doing things that are not that spending time that is not that the up what is, you know, that said, he makes his decisions to up to us. So studying other investors instead of the way he makes funning and the main his main business, which is studying great companies, identifying insights for great company, is great industries. The opportunity cost to the other services too high.

So therefore, he doesn't do IT. okay. And then the final thing is he turns when he turns fifty years old, he writes this post about reflections on turning fifty. And I think this, a perfect place to, I could never imagine my life would turn out this way.

IT takes countless bridges, roads, means of transportation, in years of effort to travel as far the counts, people in my life kind hard to strangers, well wishers, mentors, partner's friends or my bridges. My road is my transportation for getting here without your help. Friendship, in constant encouragement.

I simply could not travel as far. If I have anything to do with that journey is simply that I took IT. Woodie island is right.

Ninety percent of success is to show up. At various stages of my life. I could have stopped or took a long rest, but for some reason my heart told me otherwise.

I just kept going half of the time. I wasn't sure where I was heading the other half. I was probably taking the wrong terms no matter, but I was on high alert to correct mistakes along the way.

I was careful not to be influenced by emotions that I know are poisonous and counterproductive to journey, things like envy, resentment, hatred, jealous y greed and self pity. Again, that's very much monger buffer t ask mongers says, self pity has no utility buffer t says that the world doesn't run on greed. IT runs on envy.

They both said that you need to cure yourself of envy. My early life experiences may require me to work even harder than others to guard against these human vulnerability. And when I did faul to their prey, I was fortunately to be able to correct them quickly.

Socket tize was right. The unexamined life is not worth living, certainly not living well. Every once in a while, I would sit down alone to figure out where I might be wrong. In my experience, every five to ten years ago, I had to change so much about myself that at times I felt like almost a reinvention. And when I fail in self examination, i'm even more blessed to have some strong friends who could point out my blind spots.

I would have been lost in life of various amazes if I not gotten that hope so through the tumbling and the zig G, I kept going, while at the time insisting on sitting in the driver seat. IT is my life in my journey. After all, according to confuse, at fifty, one should know his purpose, life, what your life was meant to be.

I believe in confuses, dictate. Having done relatively well in addition of my life, i'm slowly learning the art of subtraction and focus. I would have failed in a lot of professions. For example, I wouldn't be good at ballet or basketball, but my temperate and experiences prepared me well for a career in investment. I have to post that.

I really do think one about the main teams that reappears that the teachings of lilo is you pick a career that you have an immense passion and that suit your personality and how you want to spend your time. I was extremely lucky to be introduced into the field by the greatest investor who ever lived when I accidently stepped into the lecture by Warren buffet at colombia nearly twenty five years ago. And IT was even more magical thirteen years ago when charlie monger became my investment partner, mentor and lifelong friend.

To this day, I don't know to what I would attribute this extreme fortune IT is something even the wildest imagination or the best fiction could not conjure. Now that i've compiled a record of my own for over twenty years, I still enjoy the game even Better than when I started. I have three lovely children.

They're beautiful, talented and kind hearted. I'm most proud of them. Reaching fifty probably makes me closer to the end than to the beginning. Regarding my age, my favourite quote comes from Norman lear. And ninety four years old, he is still active in so many different things, collecting fans who are in their eighties, their sixties.

And although you down to the chinese, I once ask them, how old does he think of himself without missing a beat? He said, i'm always the same age as the people I talk to. Now that is a cool answer.

Now that officially cross the half time line, I really need to make more Young friends as my new teachers so that I can stay fresh. So my friends, may we all grow wiser with age and Younger at heart, always. And that is, well, leave IT for the full story.

I will leave links to all of my sources. You can watch the talks, read the interviews that will be linked down below in your packets player, and also bear what founders packets a come. That is three hundred and sixty three books down one thousand ago. And I started again soon.