WARREN BUFFETT
episode 44
Warren Buffett, the ‘Oracle of Omaha’, has been investing for over sixty years and is considered to be the best in the world. He is also the most prominent philanthropist in history.
Tune in with us as the Moonshots Podcast goes deep on all things Buffet. From his investing strategy to his career advice and life values. It's all here in this epic first part of our great investors series.
CLIPS
Intro - Tour Warren Buffett's office
A BLOCK - BEHAVIOuR
Habits & Heroes
Value of Independent Thinking
Learn Cumulatively to Get Compounding Returns
B BLOCK - BERKSHIRE HATHAWAY
A forensic breakdown of the business of Berkshire by the FT
CHAD BOOK REVIEW
C BLOCK - INVESTING
Buffett's Investing Approach And Charlie Munger Influence
Buffett is always a buyer because stocks always go up
Don't Panic And Stay The Course
Bill Gates and Warren Buffett talking about investing ideas
Buffett On Bezos - GOLD
TRANSCRIPT
Hello and welcome to the moonshots podcast. It is a massive episode, 44. I'm your cohost Mike Parsons. And it was always I'm joined by the man with the plan straight out of Brooklyn. Mr. Chad Owen. Oh, good evening, Mike, how are things in you sound so authentic when you say that Chubb. I wish I could reply in some great Romanian street slang, but I'm just going to say I am doing great.
It's light here in the evening in Bucharest and I am. On the tail end of a big European tour, I am totally energized by all the great people that I've been catching up with and all the hard work that we've been doing. You've recovered. I hope from your massive to her, what's been used. And did you enjoy your Thanksgiving?
Yeah, my wife and I hosted some family that was kind of our first time hosting ourselves, which is a nice unexpected. We might have bitten off a little more than we could chew. I think we made like 10 or 11 dishes. Oh gosh. We went all out. Okay. Well, at least you didn't have to cook for like a week after, right?
Yeah. We're still polishing off the leftovers, but it seems like Amsterdam was on your tour. Right. And you got to say hello to some of our Amsterdam listeners. Yeah, certainly we got a lot of fans in Bucharest in Amsterdam and so a big shout out to them and it's just so fabulous. Chad, we have to start planning our live shows for next year.
So just a production note to you, sir. Any excuse me to get to the land down under I will. I think that should be our new stretch goal for next year. Let's get you and Nicole, let's get the, both of you down to Sydney. Let's enjoy some sunshine in some bright, fresh innovators that are abundant in Sydney, but.
On the theme of food and Thanksgiving, we've got something to chew on this show, mr. Chatto and I mean, we are going, let's say all out, we got a brand new series we've got at Titan of business. Where are we going on this adventure? Well, we thought we would take a turn into the land of investing. Also, just want to give a quick shout out and thank you to Gary Hoover.
For our last episode, it's always amazing to bring guests on the show. He's our first repeat guests. So no, he's the second. Sorry, Simon. I, uh, don't forget. We've got Brendan as well. I mean, we're just going to have to bring them all back. We got Simon banks, we've got the whole crew. We can bring back. We got Lauren and we should throw in some new ones, I think for 2019.
What do you think we've got some ideas on who he might bring back? Yeah, so we're starting off a new series, Mike and I have really enjoyed chunking our land through. Innovation and entrepreneurship and to these kind of four individual series, if you will, who better to start with on investing than mr.
Warren buffet himself? You know, his nickname is the Sage of Omaha. Yeah. And I'm always surprised at how we kind of jump outside of, you know, the traditional tech and Silicon Valley world world, and yet still the same themes and values habits. Isn't it crazy, huh? Yeah. I mean, everywhere we go, regardless of discipline, we find that people love to learn very focused, get up early in the morning thing differently and have the courage to stay at it when it's tough.
Yeah. It's incredible. Isn't it? Yeah. So we're really excited to bring, I believe Warren's the oldest living. Person that we've brought you some insights from not only do we have just, you know, his business acumen, but he's had many years to formulate and hone the insights. So we've got really great. I think we can't really undersell Warren buffet.
I mean, come on this guy, you know, he's net worth is about cool. $88 billion. Yeah. We were recently talking about this, Chad. Is Warren the biggest philanthropic donor in history, or is it bill Gates? I think they're both kind of duking it out for the heavyweight of life I'm giving, but he has given over $35 billion in plans to continue doing so for many years.
And I think a lot of his estate will go to charity. His children run a nonprofit foundation that. That gives to needy. And he does all of this and lives in the same old, simple house that he purchased in Nebraska in 1958. And he is quite the character. Isn't he? Chad? Yeah, it's funny. He joked, you know, I could probably live on a hundred thousand dollars a year.
If I still had my private jet. So it was like the one thing that he didn't want to give up. Yeah.
He is a really remarkable, I mean, the other thing to keep in mind is, you know, he is in most experts point of view, the best investor ever to have lived. When he invests in a stock, there's like the buffet effect it, literally, regardless of the economics and the financials of any given stock, when news breaks that he's invested stocks go up.
And I don't think we can even begin to imagine how good he is. He is outperformed all of the algorithms. He stands alone as an investor, as a philanthropist has given so much. I think he is such. A fascinating, fascinating guy and what a great opportunity for us to sort of dig into the world of investing.
And he brings it in such a down to earth fashion. I mean, you just, Oh, how wealthy this guy is when you listen to it. Yeah. I think actually this intro clip that we have of him giving a tour of his office, Really kind of sells you on that personality that, yeah, he just thinks of himself as a little kid from Omaha that learned how to invest from his father and from reading the investment texts of the day.
I would think that $80 billion as the proof is in the money. So here's a great clip of Warren and giving us a tour of his office. Well, I've been in this building 50 years. They'd move me around a little bit
history on the walls of legendary investor Warren Buffett's office, the formed my first partnership in may of 1956. So this was the year end balance sheet, which I typed myself. In fact, probably find a few typos in it, and these are my. Partners I had at the time and this was my father-in-law. That was my roommate in college.
That was his mother. That's my aunt Alice. That's my sister Doris. And that's her husband trauma. That was the gang. Yeah. If they, if they kept the $10,000 investment. And then when I liquidated the partnership, reinvested that in Berkshire Hathaway, uh, they would now have about, uh, 500 million. I did very well with small amounts of money back in 1964.
And when a panic happens with a really good company, I like to buy Buffett's emo for investing this 1901 New York times article reminds him daily of an important lesson. We never get out on a limb. Right? We always have lots of money. We never borrowed a lot of money. First campaign I got really active then was when I was.
10 years old in 1940 and Loki was running against Roosevelt. My dad thought that if Roosevelt got liked that there'd never be another election, a vocal Republican in his earlier years, buffet now leans left and is a big Obama supporter about the economy. And I brought along some figures that I thought would be of interest to him.
That was when I got the presidential medal of freedom, but he's never had political ambitions like his father. That's my dad campaign picture when he was it's 39 years old running for Congress. The first time in 1942, this is my dad's desk. The sat on his desk. When I was a kid, when I was 10 years old, I was, this is my favorite thing in your office.
I need one of these. Yeah. This is the hard box, right? There's a lot of things that belong in there. The real problem is if they will, I'll get there and I don't realize it. And then there are the fun things, like the model Mars Rover given to him, by students at Cal tech. That beats getting a tee shirt and the mock sports illustrated cover.
I think if they ever bring me out a bit was water boy, no fancy flat screen TV, just an old tube. That means no email, perhaps a secret to Buffett's success. Poppy Harlow, CNN, Omaha, Nebraska. The guy making the most money on wall street, doesn't even have email Chad. I mean, he's just like that uncle or that grandpa that you'd just love to chat to.
Isn't he? Yeah, it's really interesting as we get into some of Warren's mental models and the way he thinks and his habits. He doesn't believe that he has any kind of innate genius that isn't accessible to others. He just attributed that to learning and really sticking to what he's doing. So I find Warren is a great example of kind of the, every man innovator in a way.
Yeah. He really paints, I think a better, more realistic picture of the fact that we can all be innovative in our own ways. If we kind of can find our unique ability and really, really focus on it. Yeah. So true. So true. He is a great example of focusing on what you're good at. In fact, he has a ton of. Very powerful behaviors.
And we're very lucky. We're going to have a bunch of those coming up right now. So there's a lot to learn here. And I think, you know, we're going to look at his behaviors, the things that he does every day to really think and behave differently. Um, the other great thing is we're going to break down this success that he's had by really getting a bit of a deep dive into Berkshire Hathaway.
And then the second half of the show, Is going to be all about the mental models he uses for investing. And he even draws on references to some of our favorite shows on moonshots. So there is a lot ahead for everybody on the show. And remember if we're mentioning things that you're really, really interested in, be sure to check out our show notes@moonshots.io, where we will have all the links to every single show.
You can listen to Chad and Mike. Countless times moonshots.io, but in looking Chad at all these behaviors that Warren has, where do you want to start? As we start to decode him and learn from the master himself. So there's a great interview. I found of Warren buffet and Jay Z of all people. And what was really interesting is because you would think that weren't in JZ, couldn't be more or different from one another, the interview, or was really focusing on their kind of shared history in how they overcame some challenges when they were younger and how they have stayed.
So successful Warren, over the course of 70 plus years of investing in Jay Z, you know, 35 years, In the hip hop industry, you know, far out living the kind of expected, you know, life of an R and B and hip hop artist. And I just love the simplicity of these next three clips in how Warren describes how he's been so successful and it's really accessible to each and every one of us.
And so that's why I'm excited to share it with the audience. In this first one is really just about finding role models and picking some heroes and then understanding what their habits are and emulating them seems to have been really successful for Warren. I urge everybody, you know, when I talked to him in high school about this and, and, and, and colleges just do develop, develop the habits, you've got the brain power, you've got the energy, but develop the habits of success and look around you at the people that you admire.
You know, and list what makes you admire them compared to somebody else that looks equally strong or equally talented. And those are, those are things that you can do. I mean, just write them down and, and, uh, you know, people like people that are, or they like them, if they're, if they're humorous and they're friendly, if they're, if they're, uh, if they give credit to the other fellow, I mean, I.
And they don't like them. If they're stingy, you know, or they overstate and over promise and all those sorts of things. Well, that's a decision. That's a decision you make. So, so I, I encourage everybody to build your own motor around yourself. The obvious thing. I think everybody knows who our heroes are.
Cause we tend to do shows on them. Don't you just go back there? All the shows. Yeah. There's no secret there. Just look at the back catalog, but are there any heroes that you particularly have Chad, that you'd like to call out as being people you look at and go, okay. Well, if I can be a bit more like that, life will be good.
Yeah, I'm going to get a little sentimental here, but like I have to call out my grandfather, Vic. I know you're not listening, but if you were, that would be amazing. He's still got his flip phone, so I'm not sure if I'm not sure if he'd be able to listen to it. Yeah. I think, you know, I've been fortunate enough to have a really great male role models in my life, as well as female role models like grandmother, Peggy.
The two of them, I think really, at least in terms of, you know, how to be a good person and live life in harmony with others, they instilled many great habits and meat, even just the simplest thing of saying, please, and thank you and holding doors open for people. They're the little things, but if you do them for your entire life, just imagine how many doors you've held open and how many times you've said, please.
And thank you. So I have to say thank you to the two of them. Ah, that's awesome, Chad. Well, now you've inspired me to do the same. I think outside of the business world on, I would reference a man by the name of Rodriguez who asked, who was the headmaster at my school in Sydney, Australia. And he. Was a tour de force and he had thousands of boys under his care and he took time to know each and every one of us.
And for me personally, he spent way too much time trying to keep me on track as some sort of why would you. But I couldn't tell you how much he was a role model for literally thousands and thousands of young men at Trinity grammar school. And he was phenomenal. So a tip of the hat to him, he's no longer with us, but an absolute Titan of education in Australia and a very special man.
It was fun for me to think and reflect after being cause Warren holds up his father as a role model for him who was, you know, an investment advisor in Omaha and inspired him to learn at a very young age. I think he was like investing at age 11 or 12, you know, alongside his father, his first stock at 11.
And he filed these first taxes at 13. If you can move it. Yeah, it was fun to kind of hear him validate what you do. And I are doing here on the show. As you know, we're hoping to learn from our role models and heroes here on the show. Another clip from this interview is Warren talking about the value of independent thinking and how we've heard this idea of staying the course from many people here on the show.
And here's warm specific take on just that you don't need a lot of brains in this business. I mean, I've always said if you've got an IQ of 160 giveaway, 30 points of somebody else, cause you don't need it. And investments, what you do need is emotional stability. You have to, you have to be able to think independently and they have to be, you have to be.
When you come to a conclusion, you have to really not care what other people say and just follow the facts and follow your reasoning. And, and that's, that's tough for a lot of people. Uh, that part, I think I was just lucky with, I was born that way. It never bothered me if people disagreed with what I thought.
As long as I felt, I knew the facts. I mean, there's a whole bunch of things I don't know, think about. I just stay away from those. So I stay within what I call my circle of competence. And Tom Watson said it best. He said, you know, he said, he said, I'm no genius, but I'm smart and spots. And I stay around those spots.
Well, I try and stay around those spots. I just don't have a problem if, uh, but he says, you know, you're wrong on something. I just, I go back and look up the facts. And then I think that, I think that really, he is much more important frankly, than, than having a few points of IQ or, or having an extra course or two in school or anything of the sort you need emotional stability.
What I really like about that. Chad is the way he talks of, you know, really thinking independently. And I think if I'm an entrepreneur, listening to him, show a product designer, thinking independently is crucial because then you start creating things that solve problems in a radically different way. And you don't just copy and paste from everyone else.
So I really want to call this one out for the audience. Independent thinking is. Very powerful, but it takes a lot of work. And I think the kind of follow up the one, two punch here from Warren is he focuses on a few. What did he call them? Spots of interests, circles of interest chat. What did he call them?
He's referencing Tom Watson there's spots where I know things and I stick to those spots. Yeah, but I liked that because Warren has been famous in terms of investing in saying I'm not going to invest in any tech stocks, because I just don't understand the business. And he'll invest in very plain seeming stocks because that's what he knows and has been interested in for 70 years.
Uh, huh. And so I think there's a lot to learn there. Not only in the independent thinking, but knowing your strengths and playing into those, him and Jay Z are obviously jamming at this point because he's got another thought for us. And this really touches on one of them. Favorite subjects, Chad, this is all about learning.
So let's have a listen to Warren buffet on learning cumulatively. I will say this about investing. Everything you do learn is cumulative. I mean, that doesn't mean that industry stay good forever or businesses take good forever, but, but learning to think about it, business models, what I learned at 20 is useful to me now, what I learned at 25 is useful to me now.
And so. It's not, it's not, so it's not a field that changes dramatically in terms of the underlying principles. It's like physics. I mean, there's underlying principle now they're doing all kinds of things with physics. I weren't doing 50 years ago, but, but if you know that if you got the principles of, you know, what makes a good business, if you know what makes a good manager, if you know what makes a good product.
And you learn that in one business, you can, there is some transference to other businesses you go along and you learn what things you're not going to understand. I mean, knowing what to leave. Right. Wow. It was just as important as knowing what to focus on and. Uh, I don't think I can win every game. You know, somebody said, how do you beat Bobby Fisher?
You play him any game except chess. I don't play Bobby Fischer chess. And that's, there's a lot of value to learning that over time and, and, and learning what you're good at and what you're not good at. Yeah, I think there's this fascinating subtext here where he's talking about learning almost in like investing terms of compound interest or, you know, spend your time focused in learning things that will provide value over a long period of time.
I just loved them way in which he can sort of combine this idea of math and learning together. And I truly believe it's just. The good old story of continuous hard work, create small gains every day. Then you zoom out and if you've done it for a couple of years, you sit back and go, Whoa, geez. That is a body of knowledge in the case of what he was referencing in terms of learning.
So then you've got to like, there's three things already that we can take from Warren, nominate your here and work out what their habits and behaviors are. And. Mirror them think independently, stick to your spot, sit your strengths and continue to learn cumulatively. And you'll be really surprised about what you get at the end there.
I think those aren't those great behaviors that we could literally all turn up at the office tomorrow, chat and start doing them. Right. Well, I'm going to challenge you and I right now to choose one of these things to maybe focus on here, going forward. I have a reading list. That's a mile long and sometimes I get distracted maybe by something that's, I don't know, trendy or interesting in the moment, but I think I'm going to kind of revisit my, my reading list to see and understand if I can't find something that will have maybe a longer the returns on learning.
If you will, R O L. Going forward. So I think that's what I'm going to take away from those. That's a good one. I don't think I'll take your challenge and I'll look at some heroes and see if I can take a little bit of time to reflect on what they do so well and try and incorporate some of those habits into my life, but what a great challenge.
So thank you for that, Chad. But I think what we need to do just for a moment is just to segue ourselves into talking about that. Company that buffet founded called Berkshire Hathaway, inc. And this is quite a ridiculous story. I mean, this company is now one of the biggest public companies in the world.
And has a portfolio of companies, which is a gigantic. So I'm trying to think of the biggest one that people would probably know. I mean, he, yeah, he's a big shareholder in Coke in Apple, Geico, he's just in so many different companies. Oh, my, the list goes on. We've got American express bank of America, charter communications, Delta airlines, general motors, Goldman Sachs, Southwest airlines, Wells Fargo.
So many more. I was just going off the top of my head. And that was good. Now, if you look at all of those companies, he manages them in a unique way. It creates all this value. And we've got a clip here where the financial times in London does a very forensic. Breakdown of what the business of Bookshare really is.
Now just a heads up. This is a little dry, it's a little serious, it's a little FTE, but look past that and you want, you're going to hear is a very sharp, a very concise articulation of all the value that's been created inside of Berkshire Hathaway. People flock from all over the world to hear Warren Buffett's investment wisdom.
It's why they call him the Oracle of Omaha. After five decades of success is investment vehicle. Berkshire Hathaway is one of the largest companies on the planet. For many years. Berkshire was most famous for its collection of stock market investments shares in the likes of Coca Cola and American express, but it's been buying whole businesses too, since the very beginning, after all, why buy a minority shareholding?
If you could afford the whole company. As Buffett says, quoting my West too much of a good thing is wonderful. The Oracle of Omaha deserves a second nickname. The conglomerate King. Berkshire was actually an historic name in textile manufacturing when Buffett took control in 1965, but he didn't plan to reinvest its profits in a declining industry.
The money went instead into the stock market and into a 50 year acquisition spree. That's accelerated in recent years, there have been insurers chocolate makers, newspapers, retailers, private jets manufacturers. Other conglomerates, giant power companies recently, and North America's major railway BNSF to top it off beyond his investing prowess.
There are a couple of extra secrets to Berkshire success, the power of the float and the power of compound returns. There's a reason Berkshire's first acquisitions were insurance companies. Insurance premiums are effectively a free loan. You don't have to pay any interest, just make sure you don't pay out too much in class.
It means these premiums are known as the float and they act like leverage for an investment portfolio. So for five decades, Buffett has been investing the world's cheapest money. Even today. Insurance is at the heart of Berkshire. It's one of the biggest global reinsurers. It's expanding and commercial insurance and it owns Geico.
Who's cute. Mascot has the most famous English accent in U S TV commercials where Buffett has got after 50 years investing the profits from all Berkshire's businesses. Plus that extra money from the insurance float by compounding returns. You only have to beat the market a little bit, most years to make a huge difference over time.
Beat the market a lot for 50 years. And you too might become a conglomerate King, but Canberra possibly keep growing. Now it's gotten so big and does such an eclectic collection of businesses belong under one roof we'll present or future shareholders turn against its size and its unusual structure and what will happen as Buffett's heirs loosen their grip.
These are the central questions as Buffett celebrates his golden anniversary. Does the conglomerate outlive the conglomerate King. Yeah, thanks for finding that clip, Mike, as dry as the delivery is, I think this story is very, very interesting, and it shows you even more the kinds of companies that Warren has invested in and divested from over the years in some of them are seemingly simple or banal.
But I think the returns of the company show that many of them, if not, most of them were quite wise and shrewd investors. Absolutely. And I think what's exciting for all of our listeners is we're actually going to show you in the second half of the show, we're going to show you exactly the thinking that he adopts.
In order to create amazing returns. And I think whether you want to put on your entrepreneurial hat or whether you want to put on a, Hey, I've got some spare cash. Why should I put it hat either way? You need to June into that second half of the show, because there's a ton. I've really good stuff. And we have an absolute killer clip where he dissects one of our favorites, Jeff Bezos and Amazon, so Pawlenty to stay tuned for.
But before we do that, Chad, I feel that this is time for one of our audience favorites, the Chad book review, and we've got a very special one. Today, why didn't you, uh, unleash us on this very rarefied Chad book review? Sure. It's not a book per se, but a letter instead. I'm sure that many of our listeners are familiar with Jeff Bezos, his annual letters that he sends out to Amazon shareholders.
Right. I'm pretty sure that he was very inspired by Warren and his annual letter to shareholders, which he makes publicly available. You can look to the show notes for a link to that. And I think 30 or 35 previous years letters. And they're all worth reading. Warren writes every single one of them, every single word of them.
And you really get a sense for who he is and how he thinks not only about his investment strategies, but how he's also running this conglomerate. You know, how he sees different parts of the business changing over time. His thoughts on economic outlooks at the time and what that means for not only Berkshire Hathaway as a whole, but different segments of industries, you know, that he has invested in.
So I've read some of them on and off, but I went back and read. We read 20 seventeens letter, which came out at the beginning of this year. And I mean, I think it's. Worth reading alone, just for his kind of folksy wisdom. And again, you really feel like he's talking directly to you. I think that's a power that he has and that Berkshire Hathaway has.
And there were some clips we had about kind of the crazy, I would say, like Warren mega fans that descend upon the annual shareholders meetings in the tens of thousands. It's not just like you get a thousand people that show up at these things. It's like 30 and 40,000 people. And can I just interrupt by saying both Warren and his business partner, Charlie Munger, sit on stage all day.
Both gentlemen are over the age of 80 for like eight hours at a time. Yeah. And they just field questions from like 30,000 people and they just keep going and going and the audience is. Absolutely riveted by just this fountain of wisdom. So I do agree. These letters to shareholders are just full of gold and wisdom about investing in business.
He keeps it incredibly simple and understandable and relatable. Did you go back past 2017? What's it like looking in the archives, Chad? Well, it's fascinating. They all sound the same. It's just like the company names have changed. Like I went back to 1970, I think in the letters are short because the holdings weren't quite as large back then, like I'm looking at the 2017 letters.
He's talking about acquisitions and there's this purchasing frenzy. And he says it's a bit like telling your ripening teenager to be sure to have, have a normal sex life when it comes to why everyone's interested in purchasing an acquisition for like, there's funny things like that, that you find in these letters, but for anyone that has any passing interest, In either investing or in Berkshire Hathaway and how Warren and Charlie and all of them, they're CEOs, it's like 50 or 60 CEOs that warranted, technically manages.
Right. It's really dense. It's like 15 pages, but it's really dense and packed a lot of amazing information. I mean, some things that I picked up specifically, Their acquisition strategy. You know, the, the four types of companies, they looked to fully acquire reports on different industries and kind of macro economic trends, the importance of the insurance business, you know, that the financial times guy was talking about.
I mean, he even talks about float and how it's kind of one of his principles to not take on a lot of debt and how they've been able to get leverage. In their business is to purchase insurance companies because they have this massive float of all these premiums. And it is essentially free money, you know, as long as you're running a good legit insurance company.
But I think actually my favorite takeaway, and this is. An amazing takeaway. And I, as of this week have implemented this for myself and my own financial planning investments. So 10 years ago, in 2007, Warren made a bet with some of his investment friends that. Essentially investing the same amount of money in an unmanaged asset P 500 index fund.
So for those of you that may not be familiar with stocks S and P 500 is an index of 500 companies. They kind of bundle all up based on the company size and it very well tracks, essentially American companies over time. So he says, if you invest in same amount of money in that completely unmanaged index fund, And you invest that same amount of money with investments, professionals.
These are, you know, managed funds. He bet a quarter million dollars or actually half a million dollars that, that unmanaged S and P index fund would out perform the actively managed funds or funds of funds. So these are the hedge fund managers, and this is the 2007, 2017 came and went and sure enough. The unmanaged S and P index fund had an average annual gain of eight and a half percent.
All of the others were less than 4%, except for one, which was 6%. So there were five funds of funds. Yeah. We're competing against this unmanaged index fund. And it vastly outperformed and the bet was essentially giving a million bucks or prize to the charity of their choosing. And so orange charity, an officiary of the million dollars because the managers lost the bet.
But I just found that one single piece of advice and he back-tested this as well, over many different 10 year periods of time. And again, the SNP outperformed all the rest. So I think. Funds like Ray dahlias, pure alpha are out reach for everyday investors like you and I, but it took me about five minutes to purchase some S and P index on you.
Good on you. It feels like you've just primed us now. Chad, we've all switched into investor mode and I am super fired up. I think one of the key secrets to buffets. Investing success is that he has a partner in crime. I mean, if he is Batman, he's got a Robyn and this man's name is Charlie manga. And these two are just two old cats.
When you hear them talk, it's all dry, straight to the point wisdom. And they're just good guys. And actually let's have a listen to this first clip and it explains a little bit. How Warren invests and the influence that he's dear friend, Charlie Munger has on the process to be that you're looking for.
I'm looking for durable, competitive advantage. I'm looking for something that has a motor rounded for a considerable period of time. And I'm looking for an honest enable management to run it. Cause I don't know how to run it myself. And I'm looking for a purchase price. That's not excessive, but it's better to pay a little too much for something that's a very good business than it is to buy some bargain, but really a company without much of a future.
And I don't know, I don't have a, the ability to predict the, the higher. High probability of success, the future of most companies. So I'm looking for the exception, but the nice thing is if there's thousands of companies out there, I really want to have to be right on a couple. I mean, it's exactly the opposite of baseball, where you have called strikes and the pitcher's trying to throw it to at the worst part of the strike zone for you.
And. If he succeeds in getting into that corner three times and you don't swing you're out and investing, it's an, it's an old called strike things. I can sit there all day and somebody confirming one company after another. And finally, I got one of my sweet spot. Both of you have chosen both wives and partners.
Well, um, Charlie Munger added what Charlie monger changed. My views. He refined them in a huge way, in terms of looking for the quality companies and looking for the ability to make an investment that would work out well for five or 10 or 20 years, as opposed to something that might, there might be one, I call it a cigar, but investing where there was one puff left in the cigar, but the cigar was free.
So you picked up these disgusting looking things and got one puff out of it. And one onto another one and that worked okay, but it was small scale. And it really doesn't build something satisfying. So, so he, he forcing me in the direction of saying, you know, is this really a business we want to own for forever?
And do we want to get us like a marriage? I mean, do you want to get associated with this person forever? And it's a great way to look at things. Looking at business deals, like, do you want to marry them? It's not the time horizon that most of us are operating on. Yeah. And that is really one of the key investing philosophies that set some about, they are literally a buy and hold for the long term five, 10, 20 years.
And they're so reluctant to sell because they just. Look for big longterm winners. And I think, I think what we can take out of that is obviously there's some good investing advice, but I think one of the themes that you and I really love Chad, is building up business for a long time. I believe it was Tim Riley who talked a lot about building a company for forever or beyond his lifetime, because everybody seems to be building something for the next year or two.
I really like this idea of just. Taking a breath and building something that has a bit of a legacy. There's a bit more longterm than that sort of instant business that we all seem to do these days. I'm wrestling with this idea now of how can I create my business in such a way that, you know, while I may be doing slightly different things and working with different clients, but like, how can I design my business for the longterm?
Which is very different from some entrepreneurs thinking, you know, many serial entrepreneurs are looking to have, I have massive impact very quickly, and then they sometimes move on to their next venture. Others live and die with their companies. It's not to say that one is wrong or the other, but yeah, I think I'm definitely more in the Warren camp of how can I design my business and how can I find the collaborators that maybe I wouldn't mind getting married to.
It's a great litmus test. Isn't it? It kind of follows, you know, the like Silicon Valley, like no assholes rural that you often hear. I really think that there is a value in that and yeah, I think Warren and Charlie's partnership speaking to the value of that. They have been so much more successful together over the longterm as opposed to being a part.
And, you know, Warren does. Directly attribute much of Berkshire's success to the additional thinking that Charlie offers, they're going to be lifelong friends, you know, they're in their eighties and nineties. So, and they've known each other for, for decades. It speaks very highly to, to them making that choice.
Yeah, in a certain way, their relationship reflects their investment strategy. Doesn't it, you know, mates for the longterm. And actually here's the really interesting thing. They've got this really sharp investment strategy, which anchors itself in this longterm thinking and the longterm thinking is you buy a new hole because stocks always go up on the longterm.
So let's have a listen to buffet now talking about why he's always. A buyer of stocks. I never know markets are going to do. There's never been a time in my life when I know what markets are going to do over a long period of time, they're going to go up. But, uh, in terms of what's going to happen in a day or a week or a month or a year, even, uh, I never felt that I knew it and I've never felt that it was important.
I will say that. In 10 or 20 or 30 years, I think stocks will be a lot higher than they are. Now. You look at things like that, but I also know that you look at stocks and try to decide if they're fairly valued. If they're overvalued, if they're looking cheap at this point, and we have been waiting for a correction for an awfully long time, that's finally come, the stocks look cheaper to you just based on where we've come.
Well, anytime stocks go down, as far as I'm concerned, I like it because I'm a net buyer of stocks. I've been buying stocks ever. Since I was 11 years old. So when stocks go down, it's good news. Just like when hamburgers go down, it's good news or Coca-Cola's out as good news. It turns up anything I buy, but in a stocks you're going to go down and you can probably look it up as to what percent of the days of the law, since I was born, they've gone down and maybe it'd be a 30% or something like that.
And you can't predict what stocks will do, but in the short run, but you can predict that American business will do well over time. And. Um, just take the 20th century. Stocks went from 66, the dollar average, 66 to a one 11,497. And you were getting three times as much in dividends as the whole average was selling for the start.
And you had two world Wars and you had a great depression, flu epidemics, all kinds of things. Uh, uh, American business will do fine over time. And if you own a piece of it, and if you don't beat yourself, the only, the only person. That can cause you to get a bad result in stocks as yourself. Yeah.
Unfortunately that's the biggest problem is trying to fight yourself in some of these situations. Have you been buying more stocks lately? Just because prices have come down, have you upped your percentages and other things just, I was always a buyer of stocks, so we have bought more stocks since the end of the year.
Uh, but. We had, we earned 17 and a fraction billion last year, and we had our float go up 4 billion, which is additional money available. And so we're almost always a buyer of stocks. Then we're a more aggressive buyer when they're going down. I mean, I, I feel much better when they're going down, but, uh, it's hard to think of very many months when we haven't been a net buyer of stocks.
Hi, this is a fascinating idea to me because he never mentioned like selling the stocks. It's just, he buys them the value goes up, invest that money or stocks, which is like a really interesting counterpoint to the three or five year exit strategies that so many options for launch businesses with today.
So true. And he always talks is with great regret when he has to sell a stock. And it's just so powerful because he has such a longterm view and the market has become more and more short term. And essentially he is demonstrating his independent thinking. He's looking. For great companies that are undervalued and he loves it when prices go down on the stock market, because then more opportunities present themselves.
And this thinking is really key. He has this great thought around, you know, when the market is in fear, you should be greedy. And when the market is greedy, you should be in fear. And what he is so powerful at doing is actually adhering to his own ideas of independent thinking and learning it like flies in the face.
Of kind of, you know, the mainstream traditional thinking. Yeah. And at the heart of this chapter, which I think all Allison's are gonna love is that he doesn't mind the ups and downs of the market because he has a clear philosophy. And I think if you're a founder of a company or whether you're investing your own money, you have to accept that businesses will have ups and downs, but in the end you have a.
Good bunch of people and they create a product or service that solves a problem and they work hard at it all the time. This company will always in the end do well. And so whether you're investing in them or whether you're creating the company, there's some great advice that we can listen to from buffet to kind of frame our thinking about the world.
And here he is talking about staying the course. The last word, Warren is a sort of free word association game that we've been playing lately. I say a word. You tell me what it makes you think of. And the question we get most frequently from people about you coming on is what should they be buying right now?
So if I say buy you, say, I say, basically hold, I mean, the idea that the European news or slow down in this or that or anything like that, that would not cause you if you'll own. A good farm and had it run by a good tenant. You wouldn't, it wouldn't sell because somebody said, here's a news item. You know, this is happening in Greece or something.
It was started if you owned an apartment house and you've got to raise your rent a little as well located, you had a good manager, you wouldn't dream of selling it. If you had a good business, personally, I'm the local McDonald's French. You would, it wouldn't be thinking about buying or selling it every day.
Now, when you own stocks, you own pieces of businesses and they're wonderful business. You can pick the best businesses in the world and. To buy or sell on current news is, is, is it's crazy. You're in a wonderful business. You got people running up for you. You know, you're going to do well over five or 10 years.
And to think news events should cause you to try and dance in and out of something. That's a wonderful game. It was a terrible mistake. So. Get into a bunch of wonderful businesses and stay with them. You said, I said, bye. And you changed it the whole, does that mean, don't say, well, I mean, if you haven't, if you haven't got them yet, you buy them consistently over time.
So you sort of average over time and I've been buying all my life. I bought my first stock, you know, when I was 11 years old and it was about three months after Pearl Harbor and Corregidor was falling and they had the death of Marsha Baton and all the news was terrible. It was a great time to buy stocks and I should have held that stock forever.
And I've been buying stocks ever since. Chad D D here that, Oh yeah. My first time I bought stocks was just after Pearl Harbor. Oh, Oh my gosh. Did you? Well, it's funny because I bought stocks after nine 11, but my time horizon was weeks, if not months. And so I was swept up in the swings of the markets. I was like a senior in high school.
Freshmen in college I was working with, I don't know, maybe $300, but I think I bought Apple at like $40. If I had taken Warren's advice. Oh Lord. Don't even do the math. Don't even do it to yourself. It would be too hard. I mean, one thing that I thought I knew about Warren was I thought I understood his investment advice, but listening to all these clips, and I hope that your listeners are taking this away to his like minimum timeframe is five years.
So like, what if you and I, Mike had to commit to our businesses or our current ventures for five years. And would that change what we're doing? You know, how might we approach things differently? If every hire we hired where, you know, worked with us for five years, it's a really fascinating thought experiment to me.
And I just, I love how he's taking this contrarian point of view and stuck to it for. Decades like 70 years. And, you know, it's just paid off to the tune of like almost a hundred billion dollars. I know, I know, I know. And this compounding, when it happens means that when they make a move at birth, when Buffett is putting capital to good use, the kind of effect both directly and indirectly is massive.
And the wealth creation stories is really quite phenomenal. In fact, we could probably do a whole nother show about all the investing strategies. Of buffet, but we actually have this great clip, which is a bit of a blitz through some of the ideas of Warren buffet. And what's really cool about this upcoming clip is he's actually sitting down and chatting with bill Gates and these two guys have become really good buddies.
And what do they pay to get? Is it bridged that they're both like breed your addict? So something like this. Yeah, well, and Warren spearheaded the giving pledge to sign a pledge to give the way most or all of their forms. Right. Right. Warren's foundation has given the most money to the bill and Melinda Gates foundation.
So I think their friendship kind of started there, but yeah, the bridge playing as well. Um, so here's this clip of the banter between bill and Warren.
but I met Bella on July 5th, 1991. I think we probably spent 10 or 11 hours talking. Then you had two things that I picked up. After meeting you because bridge was one in golf was another, I was never a good golfer and it was an excuse, uh, to talk. It certainly wasn't about golfing. Whenever I see something, you know, take these veins very low interest rates, even negative interest rates.
I'm always thinking, boy, I am looking forward to talking to Warren about that. One thing that's fun is you have a very. Optimistic view about things. I think if I'm sort of neutral in terms of optimism or pessimism, and I look at the facts around me, I look at what has happened in my lifetime, you know, put three of me and end it.
And you're back before the declaration of independence was written that progress in three lifetimes, like mine is it's mind blowing. None. You've always been good at taking finance things and making them simple. Do you think he, that came naturally? Or did you learn over time? Just answering questions about finance a decade after decade, I started teaching a course when I was 21 years old at the university of Walmart.
I did that because I was terrified of public speaking earlier and I'd taken a Dale Carnegie course and I felt I just had to get out there and start talking, standing up for two hours in front of a class, helped me in learning to explain things to me. Amazing how you've gone through market. Periods that are utterly different.
And yet your basic rules about what, what to do, uh, remain on change. Yeah, the rules work. And if they're not the easiest to apply, they won't tell you exactly when to buy or sell, obviously, but you'll never do anything stupid. If you follow some fairly simple principles, when you get the chance to buy something extraordinary value, whether it's a farm or an apartment house, or a piece of a business or an entire business.
The time to do it as that and not worry about whether you could do it a little cheaper a month later, or two months later born makes unique compensation agreements for the people who work for them and having thought through how do you insent good behavior. What's the best thing for the long term. I've learned a lot of how you think about compensation.
Basically. I want them to, I want the paintbrush to be in their hand and then when they paint something. That they think is beautiful. And I think it's beautiful. I want to cheer like crazy for him.
He wants to cheer like crazy for them right now. That's a really interesting tale to how he manages. Or you might say how he doesn't manage. He actually likes to get fiercely independent, autonomous people who take incredible degrees of ownership. And so a lot of the business kind of takes care of itself, which is just mind boggling.
When you think about the wealth that they managed to create. And isn't it cool, Chad, just to listen to bill Gates and Warren buffet, just to the greatest minds of our time, just hanging out and chatting. Yeah. And to the richest people as well, but you don't get a sense of that in the tone. They're both like still quite nerdy and geeky, aren't they?
Oh yeah. If you do a little bit of biographical investigation on both of them, they spend an inordinate amount of time reading and they don't read in their respective fields. Usually bill Gates kind of famously publishes his. Eating list, but you know, Warren buffet doesn't have a computer in his office and he spends most of his time reading instead annual reports, Chad, that's what he loves.
Like apparently he sits there and we'll read six annual reports in a day back to back, like front to back, like right through. Yeah. It has pulse, you know, on what's happening, you know, he can slice and dice those things cause he's been reading them forever and that's how he gets to know the companies.
There were five or six, you know, messages there in the banter between the two of them. But I think the biggest takeaway for me is just how similar in thinking styles are in aside from they're both rich, you know, there are seemingly couldn't be much more different. Right. Yeah. High tech and low tech. It's very inspiring.
And you know, what's really cool is buffet has thoughts on some of our other show favorites, Fred Smith, Jeff Bezos. And he's got such a fresh point of view when he looks outside of virtue, Hathaway and shows you just a little glimpse into how he sees the world. And what's really interesting is that we did kind of our own take and interpretation on Bezos, kind of using our experience and expertise.
I think Warren's genius is coming through here because while Warren's not trying to build the same kind of company as Jeff Bezos, Warren knows why Jeff Bezos has been successful with Amazon and he really delivers on it. He also slips in Fred Smith. You know, another show favorite in this as well.
Berkshire is not going to out bayzos Jeff Bezos, for sure. What did you mean by that? What were you talking about? Well, I mean, there's certain people that you do not want to try and beat at their own game. And certainly Jeff Bezos would be number one. I mean, that'd be like me playing chess with Bobby Fischer, you know, 40 years ago to be all over on the first move.
Jeff. Now he's just shown amazing talent in figuring out. How to please customers and in a very short time, and what's interesting to some extent about him and the same. Thing's interesting about Fred Smith of federal express. It isn't that they've had some breakthrough and, you know, found some molecule this or that, or, or come up with some incredible invention.
They've taken fairly ordinary things. I mean, starting buying books, but Fred Smith took the airplane and. A delivery truck and the postal service, but then they just put it together in a very imaginative way, you know, with a central hub and all that, and came up with a whole new industry out of components that were known to everybody.
And in a sense, basles has done the same thing. Now he's building big distribution centers and employing the latest technology. It, Kendall came out of there and there's some products, but overwhelmingly. He's taking things that you and I were buying before, and he's figured out a way to make us happier buying those products either by fast delivery or prices or whatever it may be.
And that's remarkable when you think, I mean, a lot of that comes down to just focusing on what the customer Oh, wine, it's, all these things about his is he, he wants the customer to have a smile on their face and that that's been true of other retailers. I mean, that is not something that. RH Macy doesn't think or Marshall or Bernard gimble or all of them, but he knew how to do it, you know, in 1997 in a way that nobody else had come up with.
And I'm sure his ideas even evolve as he was doing it. But he laid out his objectives in his first annual report. And even to read up, I mean, his competitors could read them. And he has changed the world in a big way. Talk about his game. I mean, it's, it's harder and harder to really identify what his game is.
It's retailing, it's online retailing, but so much of Amazon's huge profits from the last go round, came from AWS from the cloud credible because he, he developed that over a six or seven year period, and everybody else sat and watched him. And here was a guy that was a business genius. And he's coming out with something big and the world is competitors to a large extent, just sort of ignored it.
Customer obsessed and wants to put a smile on their face. I think Warren hit it on the head. Yeah. The customer obsession thing is big, but wasn't an interesting in the second half of that clip, how you start to see basis also has a very longterm view of the world. Like you will remember that. Amazon famously in the first 10 years of their life, reinvested all their profits into the business, or they forewent profits in order to offer cheap prices and acquire customers, almost buffet esque in the way that they built that business.
If it says, Oh, and by the way, like Bezos told us that in his first annual report, again, going back to his daily reading his annual. Yeah. And it shows you how much data is actually sitting in his mind that he can just randomly recall a specific edition of the report, some information that was in it. And what we've just seen in those five clips.
Is that Buffett works closely with Charlie manga. So he's got a great partner in crime. He's always buying because he knows the fundamental truth that stocks will always go up. And when things go down, he doesn't panic. When things get tough, he doesn't pending. He stays the course and. Really the special thing that he has in all of this is great on independent thinking.
And I think Chad, the biggest thing I'm taking from this is that all of his independent thinking and he's smart investing comes from learning, sitting down and ripping through those annual reports, reading books, and hanging. Yeah. With guys like bill Gates, I think Warren Buffett is a great Testament to this lifelong value of learning.
Yeah. I think the biggest takeaway for me is the value, not only in contrarian thinking and, and kind of staying the course, but also a longer term. Yes. Yes. I think there's some changes going on in my business as I'm working with new and different clients, you know, offering new, hopefully innovative services.
I think even this week, I'm going to take a step back and think, what might I be doing differently if I was committing to this for five years or 10 years or 20 years, what might I be able to learn from those thought experiments as I really expand time horizon, it's very easy just to not be able to see past the next Friday.
But that time horizon just seems like such a brave countermove to the immediacy of that flash trading based on machine learning and AI that dominates the market. Now, basically buffets. I am going to stick to my things in him. Do you remember one of the clips that I like? Yeah, well, you've seen so many different ups and downs in the market, but your rules never change.
Isn't that so powerful. Yeah. You know, he spent his early formative years, you know, coming up with and trying and testing those ideas. And once he found out that they worked, he just stuck with them. I think that really fascinating, changed a bit. And there've been some new rules that have been created, but I would love to like travel back in time and follow him for those first, maybe five or 10 years.
I think he always knew that he would be successful. Probably not as successful as he actually is, but, you know, I think he was a fairly confident investor at first, but yeah, going back and figuring out how he was testing out and iterating and going into this build measure, learn loop that we learned from Eric, what that process was like.
If I had a time travel machine that might be a place I would go back to and learn from. Without a doubt. You know, what we see in buffet is a great learner and what's so exciting, uh, is that he, he writes and shares all of these learnings once every year. And that led it to shareholders, which all of our listeners can go out and read.
And we've got a link to that in our show notes. It's at moonshots IO. What I think we just had was a real treat. Chad. I don't think there are many better wisdom share his knowledge share is then that of Warren Buffett. He is not the only great investor that we're going to deep dive on. Oh no. Who else have we aligned in our little portfolio?
We've just done Warren, but there's three others. Chad. Yeah. So we kind of started with the folksy Oracle of Omaha, and we're working our way towards the flashy, a Silicon Valley investors. So we're also going to be learning from Ray Dalio of Bridgewater, the largest and most successful hedge fund. Paul Graham aimed Silicon Valley investors and just great thinker.
And then R last in the series, we're turning to Peter teal. Who's been quite controversial in many ways. But relates all the way back to our first moonshot or that we profiled Elon Musk in that he's also part of the PayPal mafia indeed. And Peter teal has probably invested in, or I think a number of the companies of the people we've showcased and none other than Mark Zuckerberg and Sheryl Sandberg at Facebook, he was the first investor.
We've got three more incredible investors there's to showcase here on the show. I thoroughly enjoyed kicking this series off with Warren. I think he was a great entree into the world of investing. Yeah. Yeah. And something for the investor, mine and power of his ideas. And I think they can easily be applied to the entrepreneurial mindset, the business mindset.
So I think there's a little bit of something for everyone in Warren buffet. And we really do hope that everybody takes the time to check out those show notes at moonshots. But I, uh, Oh, go on to iTunes and just leave us a fabulous review. I think how many reviews have we got now? I think we've got seven reviews or something we need to get into double figures.
Chad. Yeah, I haven't, I haven't checked, you know, me, I don't check our metrics. I'm the one who loves the metrics. You surprise me. So we've almost crossed 3000 listens with Simon Sinek, which was amazing. We were shooting for 10 K listens in episode. Right? Mike, that's the goal. So get in there, start clicking, start listening people.
It's been a pleasure kicking off this investment series with you again, just really looking forward to going into a world. I've been interested in since I was young, like I said, I invested in stocks in high school. I even did a bit of day trading point, nothing too serious, but I think my experience and not making any money, it was a net zero.
It really tried to tell them the fact that I'm just going to be putting all of my investment money in an unmanaged S and P 500 index fund. Just take Warren's advice, the proof from his tenure bet. And have that play out for me. Hilarious. Hilarious. Yeah, I'm sure we've all got great investing fails somewhere in the closet.
So a lot to learn from not any Warren, but the next three shows. So a big thank you to you, Chad, for being such a great host of the show and kicking around ideas. It's really. The so much fun. And thank you to you. All of our listeners, we love all your feedback or your emails or your social tweets and whatnot.
We love to invite you to moonshot, start IO, to check out everything that's moonshots related and stay tuned because we have another great investor coming. So thank you to you all. And that's around all of the moonshots podcast.