Turning $1M Into $1B+: A Masterclass From The Indian Warren Buffett
An idea is like an asshole. Everyone has one. Okay. Ideas don't mean anything.
This guy is known as the Indian Warren Buffett. He's billionaire investor Mohnish Pabrai. And last month I went to his house and asked him to teach me everything he knows about investing. How did you make your money?
After taxes, after everything, I got $1 million and I, for the first time, had money in the bank. That million became, what, $13 million.. And I said, wow, well done, Mohnish. And so they got 70% a year compounded.
How the hell were you getting these returns?
I'm always looking at what is hated and unloved. The key to moving the needle is inactivity.
I've met and become friends with Charlie Munger and Warren Buffett.
Good afternoon, Mr. Buffett, and good afternoon, Mr. Munger. My name is Mohnish Pabrai.
How does that happen?
It shouldn't happen. When I look at a CEO, I always try to find out, did they run a lemonade stand when they were 12? Because if they didn't run the lemonade stand when they were 12, they're not going to be that great at business at 30. How stupid can you be? If you know the big picture, you can change the big picture. The most important thing in life is—
If you put a gun to my head, I would say—
Elon is not human.
If I said, what's the number one trait that makes a great investor, what comes to mind?
I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel.
All right, welcome. Good morning.
Great to be here, Sean.
You are a great investor, but you started as a businessman. I'm a businessman trying to become a great investor. Uh, how do those two relate?
In our brains, we actually use the exact same part of the brain in both activities. So Warren Buffett has a great quote. He says, "I'm a better investor because I'm a businessman, and I'm a better businessman because I'm an investor." And in his case, a lot of people don't know, but Warren had done a lot of different businesses in different areas before he was 17. Starting when he was, I think, 5 or 6 years old. His very first business was buying Cokes from his grandfather's store at a nickel apiece and then selling them at a dime apiece.
Buy wholesale, sell retail.
Yeah. So that was one of his first ones. And one of the things that a lot of people don't understand about the way our brains work is the human brain actually When we are born, it is the most underdeveloped organ when we're born because the birth canal is not wide enough. So for the first 5 years of life, the brain is the fastest growing organ that we have as humans. The neuron connections are growing at an exponential rate. Uh, from the age of about 11 to about 20, uh, that window is when the brain is set up to specialize. And, um, neuron connections get cut. So they actually go down quite a bit, but the brain allocates areas to hone in and specialize. So, you know, if you think of someone like Michelangelo or Bill Gates or even Warren Buffett, these guys started specializing at 10 or 11. And if you start writing code at the age of 10 or 11, for example, like Bill Gates did, by the time he was 20, the expertise that he had, someone else starting at 20 would not be able to match him even at 50. So that 10-year window is a very critical window in human development. And unfortunately, our education system doesn't recognize that.
And unfortunately, I'm 35. So it's too late.
We hope there are some 11-year-olds listening, or we hope when you have kids. Tell your kids, yeah. It's not all The cake's not fully baked yet. So I think the thing with Warren was that I think when he was about 10 or 11 years old, he was running a bunch of very interesting businesses.
What was he doing? I've never heard these. So I didn't know this backstory.
One of the first businesses was he used to go to this racetrack in Omaha called Ak-Sar-Ben, which is Nebraska spelled backwards. And he used to publish racing tips called Stable Boy Selections, basically telling you what horses to bet on. And then also what he would do is when all the races had been run, he'd collect all the discarded tickets on the ground and he'd go home and go through each one carefully to see if some drunk had thrown out a winning ticket. And he'd find a few, he'd find a few, but he was too young to go to the window to collect because under 18. So he would give them to his Aunt Alice, who would go and collect for him. Around the age of 14 or 15, um, he had a very good friend in high school called Don Danley. And Danley was a tinkerer. He was like very mechanically inclined. So one time I think Warren went to his home and he saw that Don's working on a pinball machine in his garage. And he asked Don what he's doing. He said, oh, I just bought this pinball machine that wasn't working. They gave it away. I paid like $15 for it. And I think I can get it working. And Warren asked him, how much is it going to cost? He said, it's going to cost like $3 in parts and maybe a couple hours to get it working. And then Warren says, can you find more machines like this which don't work? He says, oh yeah, there's a lot of machines you can buy which people don't want them because they don't work, et cetera. So Don and him formed a company in their minds and never actually incorporated anything. They called it the Wilson Coin Operated Amusement Company. And they went to barbershops in DC. And these two boys, you know, kind of nerdy looking 15-year-olds, they went to the barber and said, look, we work for Mr. Wilson. And Mr. Wilson did not exist, a fictitious character. We work for Mr. Wilson and Mr. Wilson has asked us to present you with a proposition that we can put a pinball machine in the barbershop and we'll come by once a week and whatever coins are in there, we'll split it 50-50 with you, half for you and half for Mr. Wilson. So the barber said, yeah, put it in the corner, right? And so Warren got Dan Lee busy fixing pinball machines, and the two of them would go on weekends and get barbershops set up.
Yeah, every week they're making some money.
And so I think he had eventually something like 40 barbershops with these machines. And Warren said that the first week he went back to the first barbershop, he thought he died and went to heaven. So there was like $5 or $6 in there. And so their take was about like $3 on $18 of capital in one week. And he just told Don, go as fast as you can.
Dan Lee, what are you doing right now?
Exactly. Warren had all these different resistances. He was a senior partner and whoever he was working with was a junior partner. One time Dan Lee showed him an ad for a Rolls-Royce for sale for $300, but it didn't run. It was old beat-up Rolls, and people is giving away like junk, right? And he thought he could fix the Rolls. So they bought the Rolls for $300, maybe another $50 in parts, and Dan Lee had it running. And then they spruced it up, and they would rent it on weekends for $100 to weddings. And then on the weekdays, the two of them would go to school, the high school, in the Rolls. So what happened is, and Warren didn't know this, but he was specializing and figuring out business in that window of time, the 11 to 20. And so by the time he was 19, 18 or 19, I think he went to college when he was 17. By the time he was 17 and went to college, he had $15,000. And he told his dad, I'm going to pay for my college myself. And he also told his dad, I don't need an inheritance. Whatever money there is, you're leaving. Leave it to my two sisters. Right. I'm good.
And $15,000 back then is a lot, you know, it's dollars.
Well, it's about 10 to 1.
So $150 grand, 17-year-old.
Yeah, think about a 17-year-old with $150K, right? And at that time college was cheap, you know? And the other thing is that he got interested in investing. His dad was a stockbroker. So he used to go to his dad's office on the weekends. And he says that at the age of 11, he bought his first stock. And he said, "I was wasting my time till then." But he didn't really have a philosophy. He didn't have an investing philosophy. At 19, he read The Intelligent Investor by Ben Graham. And that was transformational. And he thought Ben Graham was this guy who died and passed away. But then he discovered that Ben Graham was teaching at Columbia. He was a professor at Columbia. So when he finished his undergrad, he applied to Columbia to go to business school there so he could, uh, he could learn directly from Ben Graham. And he joined Columbia's MBA program, must have been 20 or something. And then of course after that, uh, Graham hired him.
And isn't there some story where he tells Graham like, I'll work for you for free, and Ben Graham says, uh, your price is too high?
That's correct.
So he still ended up convincing him somehow.
So actually Graham, uh, at that time Jews were very heavily discriminated against. There was a lot of anti-Semitism on Wall Street. So Ben Graham, who was Jewish, wanted to give the few jobs that he had to Jewish kids and, and young Jewish people because there just weren't many opportunities. So he basically told Warren, look, I got to take care of the community, right? But, but then Warren went back to Omaha, and about a few months after that, uh, Graham called him and said, uh, if you want to come to New York, I got something for you. And Warren never asked him what the salary was, what the position was. He just took the next train to New York with his wife. His experience as a businessman, he was very lucky. It got seared in in that window of time. And both Warren and Charlie, they can crack businesses and business models really fast. So when we start a business, we will spend maybe 3% or 4% or 5% of our time on figuring out the strategy. What's going to be the product, service, pricing. Market, pricing. Yeah, how are we going to make it work? And all the different plans, right? And then 95, 97% is all the blocking and tackling to make it happen.
Right. It's Dan Lee fixing machines.
Yeah, exactly. And so in the case of investing, we use the same brain cells that we use in that 3 to 5% of time. And basically one of the things that attracted me to investing was, that basically that 3% becomes 80%. Because we don't need a Danly. We've got public companies and all of that. And we just have to pick which businesses we want to own partially and which ones we want to ride and so on. And so I think that I always find it strange if I run into investors who haven't been entrepreneurs, because I think they're missing a very key part. And on the other hand, I find that entrepreneurs are very naturally already set up to be great investors if they make a couple of tweaks. And but what ends up happening is that we don't see a lot of entrepreneurs becoming investors. And we also don't see— we see a lot of investors who haven't built businesses, met payroll. And so both have flaws. So if you had the the good fortune of having the entrepreneurial experience, then I think looking at the Buffett-Munger frameworks, it's a very easy transition, right?
It's probably also easier to go business to investor than investor for a long time, then suddenly go try to be an entrepreneur.
Well, investor to business, the problem is the window is closed, right? So you'd be, you'd be at a disadvantage to start with. Uh, and, uh, but yeah, the earlier you start on both endeavors, right, the better off you are.
There's a great, uh, I don't know if you've seen this, but I didn't know. Like, I always heard, okay, Warren and Charlie, great investors. I read the shareholder letters, and the shareholder letters are often, um, they're amazing, but they're very like, they're high level and they're philosophical in a way. Then you have, um, I saw this letter of Warren writing a letter to this, I think the CEO of See's Candy. I don't know if you've seen this, but it's a, it's a letter, and it's— I expected it to be very, again, philosophical, amusing. Instead, he's like brass tacks right away. He's like, I went to the store and I have a few ideas for you. It is a very operational tactical. I noticed this price point.
I noticed this.
And I was like, oh, he's a businessman. Like he's just like, today we only think of him as one bucket, but actually he's got both gears.
See's is a wonderful business. It taught them a lot. It taught them more than they ever thought they'd learn from a stupid candy business. But one of the things Warren did when he first bought See's is he told the CEO, listen, You got free rein, run the business like you've been running and so on and so forth. But on December 26th, I'm going to set the prices for the next year. Okay. So he would sit down with the entire Sears price list and he would bump all the prices by 10 or 15%. And inflation might have been 3%. Right. And so he would raise prices significantly above inflation.. And what he would observe is volumes went up. So, and then the year after that, he'd again bump it by another 10, 12% and volume still went up. And so both him and Charlie were amazed that you could have a business where you're continuously raising prices significantly above the rate of inflation and there's no resistance from the customer base to accepting those prices. And that's what gave them a huge lesson in brands. And, uh, you know, he was a dyed-in-the-wool, hardcore, deep value investor. It was really hard for them. They paid 3 times book value for See's. They were choking almost when they paid that amount. Uh, so I think they bought See's for like $25 million. Looking back, they could have paid $200 million and it still would have been a good deal. Yeah. And See's has, uh, sent dividends to Berkshire in the billions. I mean, it's been about 50 years since the purchase and billions of dollars have flowed from Seas to Berkshire, which has then been used to buy a whole plethora of other businesses. And if you look at their purchase of Coke, for example, they put a quarter of the entire book value of Berkshire Hathaway into Coke in 1988. If they had not bought Seas, they would have never bought Coke. So the lessons that they learned about branding and the power of brands is what led to the Coke investment, which was a much bigger home run. And they've made many more brand investments since then.
Yeah. One of the best brands in the world. And I think Warren understood this notion of consumer behavior and how powerful brands can be and how powerful habits can be. And then he went from there. So yeah, absolutely.
And one of the interesting things about See's is that See's wasn't this fast grower. It wasn't, they bought it and then sales exploded. But what I think the beauty of See's, if I remember correctly, is that it was just no additional capital had to go in. So everything was just free cash flow coming out.
Yeah, so See's is very much a California story, right? I mean, it was founded in California, almost all the sales were in California. If you look at See's from the time they bought it till today, about 50 years, the unit volume has gone up on average 2% a year, okay? California GDP, probably at least in the '70s, '80s, '90s, was going up about at least 4% or 5% a year. So they were actually, and part of that might have been the price increases, okay? But even with those heavy price increases, they still got the volume going up slightly. But when you overlay that, you do 50 years of 10%, that's a very big number. And so See's is not cheap today. And now Warren was very excited about being the candy mogul of the world. So they tried really hard to send See's everywhere. I mean, they would open a store in Chicago, and then fall flat on their face. Then they'd open in Arizona and they fall flat on face. They repeatedly tried over and over and over again to broaden See's and expand it. And by and large, those efforts did not work. Even today, the bulk of the volumes of See's is in California, right? And so when the Coke investment came about, they found something very different than C's. They knew C's doesn't travel well, but they could look at more than a 100-year history of Coke and they knew Coke travels really well. There are two countries in the world where you can't get Coke, uh, North Korea and Cuba. Okay, if they opened up to Coke in either of those two countries and Coke did not advertise at all, sales would take off. It's so embedded in the pop culture. So even in countries and places where they've never done any branding before. You know, people in Pakistan or India or Bangladesh, they're having Indian food with a Coke. Right. Right. So it's ubiquitous. And that did not exist with See's Candy. It wasn't ubiquitous. And Warren understood you can't consume infinite amounts of candy. You know, there's an aftertaste and all that. Coke, you can actually consume a lot of.
Right. There's no, what does he call it, taste memory?
There's no aftertaste. Yeah.
Yeah, that's right.
So I think, like I said, I think they, They moved from being hardcore quantitative deep value guys to actually understanding a lot of nuances of brands and consumer behavior, which was very fundamental to how and why Berkshire did so well.
So you talked about specializing kind of that 11 to 20 years old-ish window. Yeah. Today you've done phenomenally well. You manage, I don't know, almost $1 billion or maybe more, who knows, a lot of money and have done incredibly well investing. Did you do that when you were 11 to 20? Yes. Or were you a late bloomer?
So no, actually it was just dumb luck. A lot of things in my life have been dumb luck. So my dad was a quintessential entrepreneur and he was really good. So a great entrepreneur, one of the first traits you need is you need to be able to identify offering gaps, some product or service that ought to exist but doesn't, like Starbucks before Starbucks or McDonald's before McDonald's and so on, right? And so my dad was really good at figuring out that, oh, this product should be there but isn't. And he was really good at identifying these offering gaps. He was also really good at starting businesses from scratch. But his downfall was that he was always very aggressive and he was always overlevered. So when the businesses were going, he was literally taking every last dime of profit coming in and everything that he could borrow and just pounding into the growth as aggressively as possible. And the negative was that when the first headwind showed up, the businesses had no staying power. And so they would run into trouble. So my brother and I, I think after we were like maybe 9 or 10 years old, we were like his board of directors. Okay. And I remember like when I'm like 10 or 11 years old, my dad, my brother and me would sit down in the evening and we had to figure out how to make the business survive for one more day. So all the walls were caving in. There were everything going bad and there were a lot of moving parts. And we put our heads together and we try to figure out how to make it last. Right. And then we'd make it past the one day and the next night, the same thing over. Right. And so I finished many MBAs before I was 12. Yeah, I think at 15 or 16, I was— I don't know why my dad did it, but I'm really grateful he did. He used to take me on sales calls, and, you know, who takes a 15-year-old on a sales call? You know, it just doesn't fit, but my dad didn't care. And that was just incredible for me because I was getting to see, um, you know, I was in, uh, I finished high school in Dubai, so I was in Dubai from the age of 16 to actually 19. And in that window of time, my dad had a gold jewelry business. And so we used to go, I used to go with him to these, he was manufacturing gold jewelry and he was selling it to these retail merchants, right? And so he's going into cold calling, right? And I'm observing him going into a jewelry store. He doesn't know them.
Were you a silent shadow or did you have a role?
No, no, I was very silent. But I was soaking it in. And sometimes when he was traveling, my brother and I would run the business. So they were like all these goldsmiths and all that, and we'd manage giving them the gold and taking the jewelry and all that. So basically, I didn't realize it then, but when I went to college, I studied engineering, and then I joined a telecom networking company as an R&D engineer. And when we were working on these products, I'd ask my boss, so what do you want to sell this for? And who's the customer? And what are you going to make on it? And my boss would tell me, those are all questions for marketing and sales. We don't need to care about that. Just design the product. He didn't know the answers.
That's the poker tell.
He didn't know the answers. He didn't care. And I found that all the people I worked with, the engineers didn't care. I said, how stupid can you be? You don't have the big picture. The big picture is interesting and exciting. If you know the big picture, you can change the big picture. And so what I did after 2.5 years with the nerds is I switched to international marketing. And that was such a breath of fresh air. It was so great. And my learning again skyrocketed. And I had a big advantage because I had a very strong engineering background, but I also had all the background for my teen years. And so what I found is that I was able to connect with customers and figure out kind of what they wanted and how to really get the order much better than guys 20 years more experienced than me because they hadn't had all these experiences and they didn't think like an entrepreneur. It was just a small subset. And later in life when I heard about Buffett for the first time, I found a lot of commonality. I mean, he had a very different experience in the sense that he was his own entrepreneur. But one of the things that's really important is that When I look at a CEO, I always try to find out, did they run a lemonade stand when they were 12? Because if they didn't run the lemonade stand when they were 12, they're not going to be that great at business at 30. Okay. The little itty-bitty lemonade stand has a lot of lessons. And so I think when we have kids, I think it's really important in that window, they don't need to run lemonade stands, but they really need to be doing what's going to be their calling. And I think that's what the biggest responsibility of parents is. They need to expose them to more of what they think their passion is.
You know, I've done like maybe 500+ episodes now of this. And the podcast is named My First Million because when we first started, I would just say I was fascinated by the many different ways people became millionaires. I thought that's cool to hear the stories. That's how the podcast started. And along the way I noticed 3 common things of what you were doing in your teens. Because I used to ask this question, I was like, you know, you're amazing now. If I met you when you were 14, what were you doing? And would I have known that you were going to go on to do things? And most people are very humble. They're like, oh, you wouldn't have known. But then when I say, what were you doing? It's always something that no other 13 or 14-year-old is doing. It's like, oh yeah, I used to go to the shop and I found these, you know, these CDs, Rosetta Stone, that I could go sell for 3x on eBay. And I made an eBay account, or I you know, I started buying shoes and flipping them. So it was always like eBay flipping or sneaker flipping is like a super common one. Another one was competitive video games because a lot of the strategy, you know, communication, collaboration, you know, just extreme competitiveness gets built in there. And there's a couple others. But another one is like a Mormon mission. So Mormons will go and have to sell, you know, Jesus to a bunch of people, get rejected 1,000 times in 2 years. They become incredible salespeople. And so you, you see these backgrounds where, oh, you were kind of forged at an early age to, to do this.
Well, we have a common friend, you know, Saeed Balki, right? And you interviewed him for your podcast. And Saeed was an entrepreneur at the age of 8 or 9, you know, even maybe even earlier than that, right? Uh, he was selling greeting cards. He was making and selling on street corners, right? You know, and, uh, and then by the time he was 11 or 12, I think he was, uh, writing code and Make a website, you know, and went from there.
Right.
Yeah.
How did you make your money? Give me the highlights of your progression in terms of your own ability to, to generate money and then start to invest it.
I actually never, ever wanted to be an entrepreneur. I never wanted to start a business because I had seen so much turmoil, trauma in my, in my childhood. Right. And I remember I was like 24 or 25 years old and my dad was visiting me. I was living in Chicago. And he tells me, it's time to quit and start your own business. And so I said, you know, have you forgotten? Have you forgotten my childhood? And, you know, all the ups and downs. So my dad just said, oh, that's what makes life great. But he says, look, the company you're in, the business I work for had 2,000 people. He said, you're such a tiny cog in such a big wheel. You could drop dead tomorrow. They won't even miss you. Okay. You don't matter. And what you really want to be doing is figure out something where there's an offering gap and go for it. Right. And I was actually getting a little bit frustrated at work because the company had been growing. It would get more and more bureaucratic. And so I actually started to think about what might be possible. And I didn't have any money. Basically, I was 24, 25. So what I did is I came up with some IT services offerings that I thought would be pretty unique because at that time client-server computing was just getting going, early '90s. And so I had about $30,000 in my 401k. And I said, okay, we'll worry about retirement later and we'll pay the penalty. I pulled that out. Nice. I applied for every credit card I could get my hands on. And so I had $70,000 available to me in different credit limits in credit cards. And so I said, okay, we've got up to $100,000 that we can play with. And the third thing that I did is I basically did both. I was going to my job and I had started my company at the same time because basically what I would do is like from like 6 to 9 in the morning, I'd work on my business. And then from 6 PM till midnight, I work on my business again and weekends. But somebody was paying the rent. I still had a paycheck and all that. And I said, okay, once we have enough revenue, clients, profit, I can quit, right? And I always tell people that basically, if you think about it, there's 168 hours in a week. Your employer needs you for 40, right? And if you live close to work or work remote, the commute time is not that much. And even if you take out time for eating, sleeping, everything else, you have at least another 40, 50 hours that you can engage on something other than work. And I used to always get great reviews when I was starting my business. I said, okay, look, the plan is to not get fired. The plan is not to be employee of the year. Right.
I don't need to overshoot.
So I said, I'm going to give them just enough. So I'm just above firing level, you know, where it's not so bad that they call me in and terminate me. I need to be above that. Okay. And I did this over 9 months and then I had clients, revenue and all that. And I went into my boss and his boss and I resigned. Right. And they said, you know, Mohnish, We really couldn't figure out last 9 months, like you checked out. I said, exactly. I said, my goal was to just do enough so I didn't get fired. But she said, yeah, we saw a big drop in the old Mohnish and the new Mohnish and we talked about it. And we actually said, it's not so bad that we would fire him, but there's something off. We couldn't figure it out, right? And then, so I explained to them I was going into a business, my own my business was not competitive with theirs. And so they said, look, when your business fails, not if your business fails, when your business fails, you can come back. We're going to give you more money. We're going to promote you and you're going to do great. So I said, you know, my plan was that if I failed, when I was going to my business, if I failed, I said, look, I got my degree. I can look for a job. I can apply for personal bankruptcy, clean everything off and start over, right? I said, this is even better. I don't have to look for a job. I get more money. And so I actually felt like the people think there's a, people have a false mental model. People think entrepreneurs take risk. Entrepreneurs do not take risk. They do everything in their power to minimize risk. If you think about Buffett's pinball machine business, what was the risk those two 14-year-olds, Connie's 14-year-olds took? Nothing. Okay. It's $15 in a pinball machine, which they could use themselves.
Worst case scenario.
$3 in parts. So the second pinball machine will only get bought when the first one's already producing cash. Right. And the third one after the second one. So basically there's no risk, right? If it fails, they sell those machines for more than they bought them.
Entrepreneurs are actually great risk reducers. They start with something that seems risky, but—
So that's the other thing that is a commonality between entrepreneurs and value investors, which is why the same brain cells get used. Both are trying to minimize risk. We as value investors want to go low risk, high return. And great entrepreneurs, that's exactly what they're doing. They're going low risk, high return. Nobody is doing high risk, high return. The only, only, so if you look at the United States, probably around a million businesses, more than a million businesses a year get formed in the United States. Venture-backed businesses are less than, much less than even 1% of that pie. Might be in most years less than 1/10 of 1%, right? So if there was no venture capital and no venture-backed businesses, it would make no difference to the landscape, okay? We'd still have the million businesses being formed. Venture-backed businesses are a different animal because they are high risk, high return, right? What the VC wants you to do The VC's got 10 bets. He doesn't care whether your bet works or not. He just wants one of those 10 to work. So he wants you to step on the gas as aggressively as possible. If you blow up, you blow up, right? When you're an entrepreneur who's not venture-backed, that is not how you go. You don't put just foot on the gas. You're very careful about downside protection. So what happened—
Even some of the big entrepreneurs, Richard Branson, I think is the— people see him as this free, risk-taker, reckless sort of guy. But you've pointed out that that's not true about Richard Branson in this case.
One of the stories I love about Branson is when he had the idea to start Virgin Atlantic Airline, right? The minimum that you need to start transatlantic service is a Boeing 747. Okay? A couple hundred million dollars, right? And Branson got Virgin Atlantic off the ground with no money. So what he did is he calls directory assistance in the United States, 555-1212 in Seattle, 206-555-1212, asks for the number for Boeing, okay? Gets the number for Boeing, calls the main switchboard and says, "I'd like to lease a 747 that you guys might have hanging around that you're not using." They hang up on him.
Right.
Okay? He keeps calling them. And finally, the lady at switchboard says, let me transfer you to someone who can get rid of you properly. So she transferred him to someone who's head of commercial sales. And so this guy tells him, listen, Mr. Branson, in every country we have one customer and you are not the customer in the UK. It's British Airways. And so therefore there's nothing to talk about. So Richard tells him, listen, I agree with you, that's fine, but just humor me for a second. Do you have an old Boeing 747 lying around that you're not using? And he says, yeah, actually we do. And if one of your customers, like the one in the UK called you, like British Airways called you and they wanted a plane, what would you lease it for? So he says, well, I really don't need to have this conversation, but we would lease it for about $200,000 a month., okay, $200,000 or $300,000 a month. And Branson was able to convince Boeing to lease him that 747 because it was sitting and doing nothing. Then when he set up Virgin Atlantic, he said, you get paid for all the future flights in advance because people buy tickets. So the plane's going to fly in April. People already bought tickets in February. So you say, I got cash coming in. 2 months, 3 months before the plane's going to fly. And I'm going to pay for the fuel 30 days after that plane lands. Okay. So he had negative working capital and the lease payment is also in arrears, right? So basically he was able to get Virgin Atlantic off the ground with zero equity, right? Now, the way I look at it is that if you can start an airline with no money, You can start any business with no money. Right. Okay. You just have to replace capital with creative thinking.
Right. How is it possible that 0.1% of the population owns almost 70% of all the motels in America?
That's right.
This is an incredible story. Can you explain? How is that possible?
In the early '70s, a dictator came to power in Uganda, Idi Amin. And Idi Amin noticed that in Uganda, most of the businesses were controlled by East Asians, Indians, Patels. They controlled like 80% of the economy. And these Patels had come to Uganda. They were brought to Uganda about 100 years ago to work on the railroad almost as slaves. But because they're natural entrepreneurs, they went from railroad builders to eventually owning and controlling his whole economy, and he was pissed. So Idi Amin said, Africa is for Africans, and you guys are not Africans. And these Patels had been in Uganda for 3 or 4 generations. That was their home. They were Ugandan citizens, you know, born and raised, right? And what he did is he nationalized all their businesses. And he threw them out of the country.
Which just means took their businesses, right?
He just took them. Yeah, yeah. He basically confiscated all, not their businesses, homes, everything, confiscated all their assets. And he told them, you got 90 days to leave the country. So these Patels in Uganda were stateless. Okay, you're being thrown out. You know, you're a citizen of a country, the country's throwing you out, right? And they lost all their money. So they were able to convert a very little small sliver of their assets into gold. And the The United States took some Patels as refugees. The UK took them. Canada took them. India, surprisingly, refused to take the Patels, refused to recognize the Patels had any right to return to India because they said, "You haven't been here for 100 years." And India was at that time dealing with the Bangladesh refugee crisis, so it couldn't deal with anything more. But a small number of Patels, a few thousand of them, came into the United States in the early '70s as refugees. They didn't have skills there where they could get great jobs. They spoke English with a funny accent. They realized that, look, if we buy a really small motel, 10, 12, 14-room motel, the family can live in 1 or 2 rooms. Motels are labor-intensive. The family can do all the work.
It's a job and a house together. Yeah.
So basically cooking, cleaning, front desk, laundry. And so what, what they started doing is they would buy these motels and basically fire all the staff and move in into two of the rooms. And because they had no costs, they were able to charge nightly rates that were lower than all the neighboring motels. So what would happen is that the Patel-owned motel would be running 100% occupancy. The other motels couldn't match that rate because they'd lose money. Right. Right. Because they had—
Staff and—
Workers' comp and staff and all that stuff. Right. And what the Patels started to do, and the Patels were very frugal. They basically were vegetarians. At that time in the US, if you were a vegetarian, you were really hosed. You couldn't really eat out anywhere. So by— they were forced to just cook themselves, which was cheap. Right. So there wasn't much of a grocery bill. And, uh, what they started doing is as their nephew came of age, for example, they would help him out to buy his own motel, right? And then the nephew would get that going, and then the next one, the next one. And you run this for 50 years and you end up with 70% of the motels in the country under Patel ownership. Not only that, they've actually gone upmarket now. So a lot of the Hiltons, Marriotts, Westins, if you really look, you'll find it's under Patel ownership, right? Same, same math. They always are very good operators. And then they went into 7-Eleven, laundromats, Dunkin' Donuts, all of it, you name it. And, um, but boss, bottom line was that these were entrepreneurs that were low-cost producers, right? Low-cost produce producers have an inherent advantage. And I remember when I first met Charlie, he had read my book and we were discussing the Patels. He says, yeah, I got some friends in the motel business. I just tell them, don't ever, ever try to compete with a Patel. If you ever find yourself in competition with a Patel, just find another game to play. Just move on. It's not worth it.
So you said you met Charlie. Um, that's got to be kind of a surreal thing for you, uh, to have met and become friends with Charlie Munger and Warren Buffett. Uh, how does that happen? How does that come about?
It shouldn't happen. You know, I was this scrawny kid who grew up in the suburbs of Mumbai, and, um, I accidentally heard of Warren Buffett in the mid-'90s, and it was a big aha moment for me. At that time, I was lucky the first couple of biographies on him had come out, uh, and what I realized is when I read about how Warren was investing. I said, all these models are the same models that an entrepreneur uses. It's the same. Exactly what I was saying that, you know, Better Businessman because I'm an entrepreneur and vice versa. So I said, you know, but the big advantage he seems to have is that 4% of time of strategy is 80% time for him. And Even in the business I had created, the IT business, which had grown and scaled, I always enjoyed the 4% more. I was happy doing sales calls and building teams and all that. That was great. Do it once. I said, wow, if I go into investing, it would be 80% of my time because there's no blocking and tackling. Someone else is doing that. And so for me, that was a big aha moment. Moment that I should switch. I was lucky in the mid-'90s, someone bought a small portion of my business. After taxes, after everything, I got $1 million. And I, for the first time, had money in the bank. And I didn't really need the million. So I said, okay, what we're going to do is we're going to take this million, we're going to invest in the public markets, and we're going to find out if we can actually do this. An idea is like an asshole. Everyone has one. Okay. Ideas don't mean anything, right? So you really have to execute. It's really execution on the idea that has value. You know, entrepreneurs get kind of hung up on, oh, I need to get a patent and all that. One of the things you have to understand is you can go to your most direct competitors. You can tell them all your trade secrets. They will listen to you really carefully and they will not change behavior. Okay. So You don't need patents for anything. You don't— the ideas don't mean anything. It's really the execution. And so basically I said, okay, let's take the million. Let's start investing it. Let's figure out what happens. And I was surprised we did really well. I think that from like '95 to 2000, a 5-year period, that million became what, $13 million. And I said, wow, well done, Mohnish. And so they got 70% a year compounded. Yeah. And so I was getting, I was doing investing part-time while I was running my IT business. I was much more interested in the investing side, losing interest on the business side till that point when in 1999, I didn't even feel like going into work. I said, this is, I just want to just focus on investing. And so I made a couple of big changes then. I looked for and found a CEO to run my company. And basically, $13, $14 million I felt was enough to retire, do nothing. I could do investing full-time, right? And so my plan was, okay, someone can run the business, whatever value is there is there, it doesn't matter. I can go off and just now do investing full-time. And I had a few friends who had basically, I used to just give them stock tips in the mid-'90s. Find some company and make the investment. After that, I didn't care who bought the stock, right? I mean, I already bought it, right? And so I tell my friends, hey, you know, I found this company. You ought to see if you want to take a flyer on it and buy it and so on. And they did really well on the stock tips, right? But, you know, some guys worth like $5 million, they would put $10,000 into what I told them, right? And they would triple their money. Wouldn't make any difference, right? So a bunch of these friends came to me and said, look, "We don't like this randomness of these stock tips. We don't see you sometimes and you may have sold. We don't know. We want you to manage some money for us." And so they were proposing giving me $100,000 each and it would be a million dollars in all, right? And I said, "Okay, I'll do it." I thought of it as a hobby. I didn't even think of it as a fund, but I want to do it in a format that works for me. So I love the Buffett partnerships where he didn't charge management fees. He only charged performance fees.
So what's a normal structure and then what did Warren do?
So a normal hedge fund would be a 2 and 20 structure. They would take 2% of assets as a management fee for breathing. Every year? Every year. And then 20% of the profits, right? So if a hedge fund, for example, let's say has a billion dollars under management, right? The general partners would take $20 million a year.
For breathing?
For breathing. And then if it went up 10%, So they would make $100 million, for example, on the billion. They'd take another $20 million on that. So basically what would happen is the investor who put up the money on a 10% return gets a 6% return, right? Below the S&P. Right. Because of all these frictional costs. So Buffett had run his partnership by saying that there's no management fee. The first 6% returns go to you. And above that, I'll take one-fourth and you take three-fourths. So in the same situation, if the fund is up 10%, in Buffett's case, the first $60 million goes to the investors and the remaining $40 million is split. So it becomes $10 million to him and $30 million to the investors. So it's half the fee basically. And you're paying for performance. If he's not up that much, you don't pay anything. So I like that structure. And so I told them I want to set up a fund., so it's all legal and we will do it with that structure. They really didn't care what structure it was. And, uh, so Pabrai Funds really started in '99 as a hobby, uh, with me and my buddies. And I had $13 million on the side, which was my main focus. And I said, yeah, there's another million here. It's okay if I find something I can buy for both, right? It makes no difference, right? And, um, about a year, a year after that, there was about $2.5 million. We were up like 70%. The first year and some more money had come in. And I said, you know, why do I treat the fund like a stepchild? Why don't I think of it like a real business? And why don't I basically grow and scale it like a real business? And so I started to do that. And Pabrai Funds, we had a very good run for the first 8 or 9 years. I think we were doing like mid-30s a year on average, no down years. And the assets grew. We were at about, I think in 2007, we were at about $600 million in assets under management. And I had made a lot of money, the fees and the compounding and all of that.
So in like a 10-year period, you turned the million dollars of managed money into about $600 million of assets under management, including new money coming in.
Yeah, yeah, yeah. It wasn't just organic, but the original money had almost tripled. Tripled or quadrupled in that period.
I had asked you yesterday when we were hanging out, I said, there's really two questions when you hear the story. Number one, how the hell were you getting these returns? So what did you know about investment? What was that part? But the second part is, how'd you— what'd you do on the fundraising side? How'd you get so many— so much more money to come through the door? And you've had a great line about that, uh, about how you get more money to come through the door, because you didn't strike me as a guy who wanted to be out there fundraising and knocking on doors and trying to raise funds. So how does it happen?
Buffett has a great, great quote. He says that if you are in a rowboat in the middle of the Atlantic They will swim to you in shark-infested waters to invest with you if you have beaten the market. Right. They will find you. He says you could be a leper and they will invest with you.
That's what happened.
And also one of the things that was very difficult for me was that the SEC has a lot of rules and laws around hedge funds. One of those is you cannot solicit the general public. Right. So when I was running my IT business, I could call on any CIO and say, hey, you know, would you like to use our services, et cetera? I could literally call anyone out of the phone book. When you're running a fund, you can't just get a list of dentists in North Carolina and pound them. That's not legal. You can't do that. So the SEC said you can only talk to people you know. Okay. I said, the people I know, I'm going to run out of my Rolodex in like 5 minutes. You know, there's very few people I know. So what I did is I started to meet my investors once a year for an annual meeting where I would give them their results and take their questions and all of that. And I told them, listen, there was one reason and one reason alone you were put on planet Earth. And that is to bring assets to Pabrai Funds. Okay. Humans are always looking for a calling. They are looking for some cult leader to follow and be part of cult.
Okay.
So you gave them one. So yeah, you know, they were wandering in the wilderness. They needed purpose. Okay. So I said, here's what you need to do. You need to go talk to your friends and family because I can't talk to them. The SEC won't let me talk to them. You can talk to them. Okay. You talk to them. You tell them about me. You tell them to contact me. Once they contact me, I can engage with them. Okay. So Go out and spread the word, okay? And send me more of your assets too, okay? So basically what, like I said, I started with a million, a year later it's 2.5 million, 2 years later it's 10 million and it's growing. And part of it was that the annual returns are adding, but part of it was that, so I had 8 investors when I started, a year later there were 17 and 2 years later there were 25. So now I had an audience of 25. To proselytize and spread the word, you know. And of course, the results. Now, the other thing that was happening is that when I started the funds in 1999, we were 9 months away from the biggest bubble about to burst that had happened in decades, the dot-com bubble, right? And I was able to see the bubble not very much in advance of the rest of the world, maybe just 2 or 3 months ahead. I knew the internet was transformational, but I also knew that the euphoria was too much. We had pets.com trading at multi-billion dollar valuations with no revenues. I mean, it was just common to have a lot of companies, people were counting eyeballs. They're not counting dollars and they're not looking at net income. They're not even looking at revenue. They're just looking at eyeballs, right? And so I said, okay, this is bad news. It will blow. At some point, the bubble is going to burst. I didn't know when. So I had always been a tech investor from like the mid-'90s and I'd done really well. Tech had had a great run from '95 to 2000. It had just done really well and I'd ridden that coattail. But what I did in '99 when the fund started and also with my own Capital is I did a 180. I switched completely to classic Ben Graham deep value, what Buffett had started doing in the '50s. And one of the things that was happening in the equity markets at that time was the day the NASDAQ peaked, I think March 8th or March 9th, 2000, was the day that Berkshire hit a multi-year low. And literally people were pulling money out of their Berkshire stock and buying pets.com., right? I mean, then that goes to zero eventually. And so I said, okay, basically there's a lot of basic businesses that had become really cheap because nobody was interested. So I was buying funeral homes at 2 times earnings and buying steel companies at 3 times earnings. And so a lot of basic businesses which are very predictable and doing well, trading really cheap. And so Pabrai Funds did really well. In fact, the NASDAQ imploded. Basically, it hit 5,000 in March 2000. By the time it bottomed out the next 2 or 3 years, it was at 1,200. It was a 75% drop. And the Dow and the S&P didn't go down as much, but they also went down a lot. And so it was a traumatic period for investors. It was a great period for me. And so it was very easy for me to talk to my investors because I was the only guy making money for them. Okay. If they had like 5 accounts, they just moved it all to me because everything else was going down.
Everything else was red.
So that's how we got going. So in 2007, I think my net worth at that time was like $84 million. And Warren had been running these charity lunch auctions where once a year you could bid on eBay to have lunch with Warren Buffett and the money would go to the Glide Foundation, which was doing, you know, feeding the homeless and all that in San Francisco. So I said, you know, I am using this guy's intellectual property and making all this money off him. I really have a big tuition bill I need to pay. So I said, I said, the lunch is a great way to do that. I said, I can bid for the lunch and I'll meet Warren. I'll be able to thank him in person. And it goes to a cause that he supports. So I thought about it. It's okay, $84 million. What's an appropriate tuition bill? I said, $2 million is good. I think if I gave him $2 million, I'd feel good about that. So I said, okay, I decided in 2007 I was going to bid for that lunch and I decided I would go up to $2 million. And you can bring up to 7 other people to that lunch. So I was going to take my family, but there still were a couple of seats empty. So I contacted my friend Guy Spier. He lives in Zurich. I said, hey, Guy, I'm going to bid on this lunch, blah, blah. And I said, do you want to come in with me? And I said, if you and your wife want to join us, because there'll be 4 of us and 2 of you, you can pay one-third. And I'm willing to go up to $2 million. So Guy says, whoa, that's too rich for me. I can't pay one-third of $2 million. He says, "I'm good for a quarter million." So I said, "Okay, whatever the bid ends up at, you're capped at a quarter million." And so I bid for it. It settled at $650,000, much less than what I was willing to pay. And then one-third of that got paid by Guy. And so my only agenda in meeting Warren was to just say, "Thank you, Warren." I didn't have— And of course, I was a big fanboy and meeting him and all that. Warren's agenda when he has these lunches is really different. His agenda is he wants the people who want that lunch to feel like they got a great bargain. So he would take all our, what I would call our lemonade, lemon questions and turn them into lemonade. So he's always, is exactly what he does in the Berkshire meetings is he's a great teacher. And so he was trying to give as much value as he could in that lunch. And like he told us when we met him, he said, look, I got nothing going on all afternoon, right? So when you guys are sick and tired of me, you just let me know and I'll leave, right? We kept asking him questions for 3 hours and then we were exhausted. And so we said, born, we just don't have anything else to ask you, you know. He said, okay, I'll, I'll take off, no problem. And, uh, in that lunch, um, I told him, I said, look, Warren, my wife then, Harina, I said, she's a huge fan of yours, but her true love in life is Charlie. Okay. And Warren got competitive. He said, Charlie is a very boring guy. He's a very kind of pessimistic, always says no to everything. I'm the guy who's really interesting. So he said, what I'm going to do is you guys live in California, in LA. I'm going to set you guys up to meet Charlie for lunch. And then when you meet him for lunch, you're going to find that he's useless and I'm the guy. So I thought he was joking about that, right? And 2 days later, I get an email from his assistant to Charlie's assistant copying us, basically saying, hey, I met this wonderful couple in California and they seem to think you're more interesting. I think they just don't understand. So I want them to meet you so we can set the record straight, right?
And so this is really what he was saying.
This is exactly what he said in the email, right?
Was he joking or was he not joking?
And then Charlie's assistant sets us up to meet Charlie for lunch. Now, Warren, you can bribe and have lunch with. Charlie, there's no bribing. This is great. And so we met Charlie, my wife and I, we met Charlie in 2008 at the California Club in LA. And I actually found that lunch a lot better than the Buffett lunch. It was great because I think Charlie is just so direct. And I never expected these lunches or any of this to lead to anything. It's a one and done. But it led to a friendship with Charlie. He started asking us to come to his place for dinner. And I would meet him like 4 or 5 times a year for dinner. And then we started playing bridge together. Usually on Fridays, he would play bridge at the LA Country Club. I'd meet him about once a month or something to play bridge. And that used to be lunch and then about 4 or 5 hours of bridge after that. So it was a wonderful, deep friendship for 15 years, which was unexpected. Just never expected that.
So let's go back to the lunch. You asked him questions for 3 hours.
Yeah.
What were the interesting questions and answers? I know you've said one that I want to hear you explain because I didn't fully— I've heard the tidbit, but I want to hear the full story, which was he said something about being a harsh grader of people.
Yes.
What does that mean?
Well, I told Warren, I said, Warren, both you and Charlie are such good judges of humans and human nature. Were you always that good at figuring people out? So he says to me, Mohnish, you're mistaken. I am useless at figuring people out. He said, if you put me in a cocktail party with 100 people and you gave me 5 or 10 minutes to meet each person, I could tell you 3 or 4 people exceptional. And I could tell you 3 or 4 people you want nothing to do with. And the remaining 92, I would have no opinion on because not enough time to figure them out. So, but he also said that, look, what you do in life is those 3 or 4 people who are exceptional, you bring them into your inner circle. And obviously the 3 or 4 people who are, you know, not the great humans, you're not going to have anything to do with them. But the third thing you do is you treat the 92 just like the useless humans. And you exclude— so he says, be a harsh grader. So he says that when you have friendships and when you have people you work with, your peers and all that, he says there's a gravitational pull. If you hang out with people better than you, you're going to get better. If you hang out with people worse than you, you're going to get worse. So he said that one of the things that most humans are not willing to do is loyalties get in the way for them, right? So they may have a friend who's kind of weird or quirky or has ethical issues, but they've had a long friendship. So they'll keep that person going with them, that has detrimental impacts. So basically, I really took that to heart. And I said that I'm really going to try to see if I can focus on the great relationships, you know, the great people. And that's actually been a journey I've been on now for like, you know, 16, 17 years. It's been tremendous. It's great. Now, it's unfair, right? Because you're treating the unknown the same as the useless people. But that's the way life is. I think that sometimes you have to make these difficult choices. Because if you don't do that, then the impact of that is significantly negative. And one of the things I realized when I started to get to know Charlie, I got to meet Charlie's friends. So I would play bridge with his friends. I'd meet his friends. And what I realized is his friends were so off the charts. They were so exceptional. I said, wow, this is like a different world, right? And I said, I'm going to take a shortcut. I'm going to make Charlie's friends my friends because he's already done all the work.
He did the filtering.
You can't get a better filter than Charlie Munger. Younger, right? And so I worked on building relationships with Charlie's friends and some of his family. And that's been beautiful. I mean, some just great friendships. And I realized that there's such a huge delta in off-the-charts, top 0.1%, top 1% of humans and the rest. And we talked about this, Adam Grant, wrote this wonderful book, Give and Take. And, he categorizes people in 3 buckets, right? The givers, the takers, and the matchers, right? Now, the takers, you don't want anything to do with. They're just going to want to extract whatever they can from you. So, they're just not people you want to have in your life. The givers are people who are selflessly trying to help the planet, not really concerned about what comes back to them. Those are the ones you want to be with. And then the matchers, they're kind of doing math in their heads. Oh, you know, Sean did this for me, so I'm going to do something similar for him. And so even the matchers aren't that great. So what you really want to do is you want to seek out the givers. And more important than that is you want to be a giver. And so the interesting thing that he pointed out in that book is that when you're a giver, The universe conspires to help you. And I found it magical how, and Warren and Charlie are great examples of givers. Everyone's trying to help them in any way they can. And so that's the funny thing is that the matchers who are trying to do this equalization, they end up losing. The best way to get the most is not ask for anything. It'll all come to you. And so these are wonderful models to incorporate.
Yeah, there's even some game theory with that, which is the cost of excluding somebody who might be good or might be great is actually quite low to you. But the cost of accidentally including somebody who might have some toxicity, it's quite costly to you. And so I think even in investments, he has the good pile and then the too hard pile.
The fat pitch, right?
The fat pitch. And so the thing is that we live in a world with infinite humans. If there are infinite humans, it also implies that there are infinite number of good humans. So basically, making of excluding a good human from your circle because you can't figure them out, there's no penalty for that, right? Because there's an infinite supply, right? Just to put it in a mathematical way, mathematically. But when you bring in a substandard person, it just there's so many drains, it's just negative.
I want to hit you with some of your big investing philosophies and give me the kind of the punchy version of like, what does the phrase mean and how you use it? So let's do one. Heads I win, tails I don't lose much.
Well, I mean, I think this classically comes from the Patels, right? It's the dhandho philosophy. But this is how we want to do all our bets with people, with stocks, with everything. Asymmetric. Yeah, basically where we always want to look for things where the odds are so heavily in our favor. And so in investing, we do get these anomalies where you take—
What's one that you've benefited from or what's an example in your portfolio or your career investing where you felt like you recognized asymmetric upside, your downside was capped, your upside was high.
Well, I mean, I think that if I look at my first business, for example, right, I mean, I, I'm taking $30,000 from my 401k, which I can make up. And at that time, the credit card laws were very different, where if you declared personal bankruptcy, you got a clean slate and actually didn't affect your credit because you couldn't file again for 7 more years. So everyone would give you money after you filed. Okay, so actually they've changed the laws now, but at that time what I had— I realized that starting a business has high rates of failure, right? And so I said, how do I minimize the risk on that? And this is what all entrepreneurs do. And I said, okay, so basically, if this thing blows up, which there's some probability that could happen, I got my job already. They want to take me back. And I clean up the slate. And I'd also de-risked it because the company was already cash flow positive by the time I quit my job. And so there was already a pipeline and such. And so repeatedly what I've found is even in investing, I mean, I'll give you an example. Like for example, I think in 2003 or 2004, there was a steel company in Canada, Ipsco. And I noticed that they were trading for 3 times earnings, right? And the stock was at $45. They had $15 a share of cash on their balance sheet. They had no debt. And they had contracts over the next couple of years where they had said our earnings for the next 2 years are going to be $15 a share each year. Because these were not forecasts. These were hard contracts, right? So I said, okay, so the stock's at $45. If I just buy the stock and I hold hold it for 2 years. I got $45 cash in the company. Now it was cyclical business. Third year could be zero, could be negative. But I said, I own all the plant equipment, everything for free. So I made the investment. I put 10% of assets into Ipsco. And I said, all I want to do is I want to see what Mr. Market does with this stock in 2 years. Just going to hang out and see what happens. So we make the investment. And then a year later, the company announces that We're going to have one more year of $15. Okay. So now you're going to have $60 versus $45, right? And by now the stock has kind of gone up and it's sitting at about $90, double in one year. So I said, okay, it's still a very cyclical business. Maybe we should take our chips off the table. And while I'm thinking about all that, one day I wake up and the stock's at $155. Some Swedish company came and offered $160 to buy them. 5 minutes later I sold the company and moved on, right? So what I'm saying is that that's what we're looking for, right? We— and in the equity markets, because these are auction-driven markets, when you look in areas which are hated and unloved, you will find these anomalies. Um, last year, for example, I spent about 7 or 8 months, uh, studying the coal industry. 4-letter word. Hated and unloved more than anything else. I mean, a lot of endowments and funds are not even allowed to invest in the coal industry. There's so much hatred for it.
So you got excited.
The math was like this. If there's a business that is going to exist for 50 years, on average, it's going to produce a billion a year in cash flow that's going to be distributed to shareholders. Available to buy for less than $2 billion. Where do I sign? Okay, that was a coal industry. Okay. And so it's like you, you in auctioned markets, you repeatedly run into these things where things, you know, there's companies emerging from bankruptcy, there's things that people just don't like. There's Different reasons why things get mispriced.
Right. You talked about private markets versus public auctions and why you think public auctions present more of these dislocations, more of these opportunities.
Well, I think that— let me put it this way. Let's say this home of mine was a publicly traded company, listed on the NYSE. Every day its price would change. It would be wiggling here and there. And if I look at the average public company on the New York Stock Exchange, the 12-month range of the stock might be 70 to 140 in 12 months. If I just throw a dart at any company in the New York Stock Exchange and I just look at the 52-week range on that stock price, it's going to be 60 to 100. $70,000 to $130,000.
So like a 50% swing.
It's a big swing, right? My home, which maybe might go up 4% in a year or in a good year, maybe 3%, would be vacillating in value. It would be sometimes trading 20%, 30% more than it's worth and sometimes trading 20%, 30% less than it's worth. And if I had a realtor friend and I said to him, listen, "Can I call you every day and just tell me what my house is worth?" The guy would think I was stupid. But I would call him on Monday and say, "Hey, what's my house worth?" He'd say, "It's worth $2 million." I'd say, "Oh, thank you." I call him the next day. He'd say, "Still worth $2 million." Okay. Third day, he said, "Listen, idiot, it's $2 million." Okay. And after a month, he would tell me, "Oh, it's moved to $2,030,000." Okay. And then again, he would be at $2,030,000 for a while. Okay. It wouldn't move. Because it's an intelligent buyer facing an intelligent seller. And so you're not typically going to get a company like Ipsco available as the whole company for the price you can buy some shares. Because the whole company, there's an intelligent guy, the Swedish company paid 4 times that price to buy the company. And so that's just the nature of— so reason I like the I've always liked public markets is because there is so much irrationality. And if you're just willing to be patient, in a year, if I can make 2 good investments, it's a good year. Okay. So we don't need a lot of activity. We just need to be patient and wait for the times when something weird is causing a mispricing.
Right. So let me ask you a few questions. So number one, should, in your opinion, should somebody just buy the index, low-cost index fund, or actively invest?
The index is a really good way to go. The index is too dumb to know that it owns NVIDIA. And it's even more dumb, it's even more dumb that it won't, it'll never sell NVIDIA. Or it's owned Apple the last 10 years and never sold it, for example. So I would say for the overwhelming majority of humans, probably more than 99% of humans, you're best off just buying an index. And I think that the US equity markets and the US financial services industry is so efficient that the frictional costs for owning an index through an ETF is single-digit basis points, less than 1/10 of 1%, less than 0.05% or 1% or so on. So it's very small. And so I think it's very smart to go with indexing. Absolutely.
Yeah, for the vast majority of people.
Yeah, for almost everyone.
And for whom— who shouldn't do that?
Well, if you have the talent and the patience to figure out what a business is worth and then have the ability to buy those businesses well below what they're worth and patiently hold them. Those sliver of humans that can do that would be better off just doing it that way.
If I said, what's the number one trait that makes a great investor?
What comes to mind? Patience. If you are a guy who loves to watch paint dry, You know, you paint a wall and just sit there and watch it dry. You will do very well. Did you ever watch Seinfeld?
Some episodes, not religiously.
The thing is that Elaine is on a flight with her boyfriend. Okay. I forget the name of the boyfriend. And I think if you pull up Google, you can probably find this clip. The boyfriend is just staring at the seat back in front of him. Okay. And so Elaine says to him, Would you like something to read? He keeps looking at the seat back and says no. Do you want to talk about something? And he says no. He's just doing nothing. He's just looking at the seat back in front of him, right? By the end of the flight, she's broken up with him. He would have made a great investor.
That's what you need.
If you can be happy Or like, you know, Pascal, Pascal had a great quote. He says that all man's miseries stem from his inability to sit quietly in a room alone and do nothing. Right. Right. And so if you have this ability to watch paint dry, watch the back of an airplane seat for a few hours, and just be in a nirvana state, this is the work you need to be doing.
I don't know if you know this, but you have fans in a subreddit on Reddit. I don't know if you've ever— have you ever been on.
I haven't done much on Reddit.
So I went, when I was doing my research for this, I'm seeing what do people think about you and what questions do people have. And I go and one of the best comments, I thought was such a great compliment. They go, the day I knew that this is my guy I want to follow. He's on CNBC, he's on a TV show and they're asking for stock picks. So give me a stock pick. And they go around the horn and everybody gives their stock pick. It's going to be this, it's going to be this, it's going to go up. And they go to you and you go, I don't really give public stock tips like this. And they're like, well, you got— you're on TV, you got to do something. And they're like, the comment was he refused to just like randomly name a pick or tell people to go buy something. And the TV hosts were like, why are you on TV? And he was like, that's not what I do. And he just stayed steadfast. And I thought it was such a great compliment, but also so, so big of a contrast from you go watch Kramer or these guys and it's like you go on and it's like overstimulation telling you you got to do something right now. The opposite of patience basically. Is that— Should people avoid that?
Yeah, I mean, I think that it's a big red flag if you're taking stock tips from some guy on TV. I think that's just not going to end well. You know, the guy on TV is not going to be there when he's down 30%, right? He's, he's off somewhere, not available.
Have you seen the Reverse Kramer Index? Uh, it's not the same. People just— whatever he said, do the exact opposite, and you're up like you're crushing the market if you just did the exact opposite of this guy.
Yeah, so I mean, I think, I think that, like I said, I think indexing is a great way to go for most people. I mean, so, you know, I wish in high school, so even middle school, compounding was part of the curriculum from an investing point of view. And, you know, just, it's really simple, but, you know, the people don't pay attention to the math. You know, there are 3 variables that matter with compounding, right? I mean, one is the starting capital. You have. The second is the annualized rate of return you get. And the third is the length of the runway, right? Now there's something known as the rule of 72, which is a kind of mathematical— A very helpful rule.
Explain it. It's a beautiful rule. I learned this. Luckily, one teacher in college, she used to be a student. She came back to teach because she's like, I wish we actually taught things that were relevant in the real world. So she took it on herself, became a teacher to come back and teach personal finance. And And the one thing she did was she's like, you know, compounding is the 8th wonder of the world. And let me just tell you the rule of 72, very simple math, but explain.
So the rule of 72 is just a mathematical quirk that happens to work. So for example, if I'm getting a 7% return a year and I want to know how long is it going to take for this money to double, I can take 72 divided by 7. It's approximately 10.
10 years to double.
It's going to take 10 years, right? Now, if I have a 10% interest rate that I'm getting, and again, if I do 72 divided by 10, It's 7 years. So you can switch between the years or the interest rate and it tells you the other one. And this is the most important thing in life is how long does something take to double? Because that basically leads to everything else. So for example, if you look at someone like Warren Buffett, he started his compounding journey when he was like 10 or 11 years old. I think he would say it's when he was 7 years old. He's going to be 94 this year. Okay. That's an 87-year runway so far. Right. Now, the thing is that if you have a really long runway, then a low rate of compounding would still get you a big number. Or if you have a shorter runway and a higher rate would again get you the same result. So it's very important in life, and that's why I think that I wish they do this in high school, is to start that engine early. So for example, let's take a situation of someone who's just finished college, right? At 22 years old, they got some job, maybe like making, you know, $70,000, $80,000 a year or something. And they put away $10,000 in their 401 $10,000, right? They're 22 years old in an index, right? The index has done 10% a year. Now what that means is the 10% a year means that that $10,000 will double every 7 years. So let's take a situation where the person is now 64 years old, right? Now they started at 22, it's 64, so it's 42 years. 42 years is 6 doubles, right? I do this to make it easy. Right. Okay. So 6 doubles, right? That's 2 to the power of 6. 2 to the power of 6 is 64. So that $10,000 that the person saved at 22 is $640,000 at 64. But that's not all they have. At 23, they save $11,000. That's again sitting at some big number and you keep going. And sometimes we see these news articles, there's some guy who's a janitor of some college and he gives $4 million to the college and lived in a one-bedroom apartment, whatever. Why are we surprised? If you actually run the math, he actually didn't even save that much and he didn't even have such a great compounding engine. It's not like he found Apple 20 years ago or something. That's not what happened. What happened was that there was a consistency. And so actually my pushback to my dad when he was telling me start a business is I was telling him at that time, I said, look, I got a 401k. I got $30,000 in the 401k. I'm continuing to put 15% a year. My employer at that time was matching the first 2%. So it was becoming 17% tax-free basically. It's tax-deferred and my income's going up over time. So when I first started working, my salary was $31,000, right? So I'm saving $4,500 a year, right? But if I was still working, my pay would have been hundreds of thousands or more. And I'm putting away a lot of money. So by the time I get to retirement, it's like, it's game over. Lots of extra cash available. No problem. And I never missed the money because it was pre-tax taken out. So it's just great. So I think I wish that young people understand that, yeah, listen, you can pursue lottery tickets, you can pursue entrepreneurial dreams, you can do all of that. That's fine. But on the side, keep this going.
And start it early.
Let it be boring. Let it be a stupid index fund, Vanguard and whatever. That's it. The tortoise is going to win the race. Right.
You know, what's the circle the wagons philosophy?
Well, the circle the wagons philosophy actually came out of when I was thinking about Buffett's letter last year to shareholders, the 2023 letter. He pointed out that in 58 years of running Berkshire, there were only 12 decisions that he had made that had moved the needle for Berkshire. Berkshire had a tremendous run. They've compounded, I mean, till recently were compounding at 20%+ a year for 58 years. If you're doing 20% a year, you are doubling every 3.5 years. And that means after 35 years, it's 10 doubles and 58 is another 23 years. So you've got another, what, 1, 6, 6 times, so 16 doubles, 2 to the power of 16. Now the way to do 2 to the power of 16 is 2 to the power of 10 times 2 to the power of 6. 2 to the power of 10, round numbers, 1,000. It's 1,000x, right? And 2 to the power of 6 is 64. It's 64,000 times what you started with, okay? If you started with $100, it's $6.4 million. $100 to $6.4 million. So he's saying, I would calculate in the last 50 years, 58 years, Buffett's made 300 or 400, at least 400 different investment decisions. He's saying 12 are the ones that mattered. The god of investing has a 4% hit rate. That's the god of investing. That's why we should index. Right.
What are the rest of us mere mortals supposed to do?
Now, the thing is that I was thinking about his 12 bets, right? And I thought about, okay, which were the 12? And I think he never mentioned that, but you could guess which one. Sears would be one of them. Coke would be another one. Amex, Gillette, Cap Cities, Washington Post. You can come up with the names, Berkshire Hathaway Energy, Ajit Jain, hiring Ajit Jain, probably the biggest bet for them, paid off huge for them.
What's the story with Ajit? There's something about the recruiter for him.
So what I realized when I thought about these 12 bets was it wasn't the buy decision. The buy decision is important. The important thing was they never sold. See's stayed in the stable for 50 years. Coke has been in the stable for 40-plus years. So it wasn't the buy decision. It was the paint-drying decision. Okay. That was the important thing. So When you find yourself in the happy position of a small ownership in a great business, just find something else to do with your time. Play bridge or whatever.
Have you considered golf? I have.
Golf is great. And so if you ask Charlie, he would say the single best decision, best investment Berkshire Hathaway ever made was the search fee they paid to hire Ajit Jain. Okay. Now Ajit Jain walks into their offices in 1986, 1985 actually, never having worked in the insurance business, right? From scratch without them putting up venture capital or anything, the business he's created for them today probably has a value north of $100 billion. Okay. I mean, it just gets lost in Berkshire because Berkshire is so big. But I'll give you an example of a discussion I had with Charlie. I think that's maybe 2, 3 months before he passed away. So he was telling me that Berkshire Hathaway writes super catastrophe insurance, like insurance against hurricanes. Earthquakes and so on. And many, many years when people are looking for earthquake insurance in Florida, hurricane insurance in Florida, Ajit will look at the rates being offered and just take a pass. Basically, he would find it's too competitive, whatever else, people are not giving enough. What he did in 2023, and they mentioned it at the meeting actually, is that He wrote hurricane insurance on Berkshire's behalf, reinsurance with a maximum payout of $15 billion. So if these hurricanes had hit, now basically the math is like this. I just want to explain how Ajit's mind works. Berkshire would pay out on a big catastrophe like hurricanes 3 to 5% of the total insured loss incurred. So for them to have a $15 billion payout, you would have to have had an event with insured losses in Florida of $300 billion. It's beyond Andrew and beyond Katrina. It's beyond all of those. So it would need to be a really big event for them to have a $15 billion payout. The premium he collected to write that $15 billion policy, take a guess. Take a guess.
$5 billion.
He collected $5 billion. Oh. Okay.
I was sweating that guess.
No, no. But he collected— that's exactly what he collected. How much did he pay out in '23?
Zero.
There was one that came through. My guess would be they might have paid out $300, $400 million. Okay. You know, some $300 million.
Collect $5 billion.
And what Charlie said to me is, Ajit's done this about 6 times, okay, where he's picked the years that he's written these policies because what was happening in most years is the premium offered was $2 billion. He just took a pass. All the other insurers wrote that policy. Berkshire took a pass.
No call strikes.
Now, for example, we had some unusual losses. For example, that ship in Baltimore. Now, that's going to end up being about $3 to $5 billion in losses. And it's the biggest maritime loss in global history. It's going to change premiums for ships in the future. Berkshire will probably be writing when everyone else is saying, "I don't want to do that." It's like the cat who sat on a hot stove and doesn't want to sit on any hot or cold stoves ever again.
You have a thing over there I saw in your office that says, it's like a placard, it says, "Trouble is opportunity." Absolutely.
That's a quote. What's the story of that? It's a quote by John Templeton. And actually, there's a good friend of mine, Prem Watsa in Canada, they call him Berkshire Hathaway of Canada, Warren Buffett of Canada. And I had seen that plaque on his desk and somebody sent it to me. And so it's a great quote. I mean, I think that that's what What we are trying to do as investors is we want, we need to be fearful when the world is greedy and we need to be greedy when the world is fearful. And so basically when the world is running away from coal, we need to run towards coal. So I'm always looking at what is hated and unloved. And usually you will get a lot of mispricing when something is hated and unloved.
Are you a believer?
Why is that?
It's in the eye of the beholder. There is no intrinsic value, as I understand it, to Bitcoin. Now, you can argue that there isn't an intrinsic value to the dollar, but it has the full faith and credit of the US government, which is then backed by the hardworking American people. So basically, I think that it's— for me, it's in the too hard pile, but I think for most people, I would just say take a pass. Most people who have invested in Bitcoin couldn't really tell you why it's, or what it's going to be worth and why it should be worth that.
Okay. Fair enough. So one of the reasons I wanted to fly here is because it's fun to meet these kind of outlier investors or even just hear the stories. And I've heard you tell a couple stories about guys I've never heard of that I would love for you to tell the story because I think most people have never heard of these people. So tell me about Nick Sleep. Who's Nick Sleep? Or, Junjun Walla, whichever is your favorite. Give me one of the stories that—
Well, I think Nick is a wonderful guy. And there's a book called Richer, Wiser, Happier that came out maybe 2, 3 years ago. And there's a chapter on him. Nick is very— he's a recluse. He doesn't do interviews and such. I was actually surprised he even talked to the author, but it's worth reading the book. And, you know, him, he and his partner Zach, they would come into their office and basically just sit and read annual report after annual report till they were blue in the face. I mean, they were just— and they would want to see if they could understand different businesses. And that exercise of reading those annual reports led them to the annual report of Amazon. And For example, I've been a customer of Amazon, known Amazon for a long time, et cetera, familiar with the business. But every time I would take a cursory glance at Amazon, it looked very expensive. On an earnings basis, a PE basis, it looked really expensive. And the reason it looked expensive is they were investing so far ahead of the curve on the growth that what should have been categorized as CapEx was just categorized as expenses. So the US government was really funding their growth because there were no taxes being collected. Now, what Nick and Zak were able to do because they were just sitting in their office with no distractions reading year after year of Bezos's letters, and the Bezos letters are worth reading. I mean, I think they're very clear. He clearly laid out in those letters what he was up to, right? And that he's basically that he wasn't completely candid, but you could tell that the business had very high returns on capital and he was investing, he was throwing a lot of things against the wall, but basically they were very low-risk bets. If any single bet didn't work, it wouldn't sink the company. And so for example, one of the bets they made was AWS, which became a huge, and they didn't know it was going to become as big as it did. But basically, They also made a bet on Fire, Amazon Fire, which didn't work. But basically, I think what Nick and Zak realized is that here was a very gifted capital allocator who understood all the different facets of building a team, going after different markets. He actually disrupted multiple industries. And so they had placed a bet on Amazon. And And because Amazon was doing so well, it was becoming a larger and larger portion of their fund. And in the UK, there are more regulations on hedge funds than we have in the US. The UK regulator was telling them that we see this position as very high risk and you guys need to diversify. So they were getting pressure. And they felt that they understood the business so well. So they looked at each other. They were managing, I think, $2 or $3 billion. They had made hundreds of millions for each of them. And they said, look, we are independently wealthy. We never thought we'd be here. We're young. Why do we have to listen to some regulator? We could return all the capital. To all our investors. And what Nick said is that when I return the capital, I'm going to put everything into 3 stocks. And these are 3 stocks. He owned maybe a dozen stocks, but he was going to go into 3 stocks. The 3 stocks he was going to put 1/3 each into was 1/3 Berkshire, 1/3 Amazon, 1/3 Costco. And so he said, I'm very comfortable with these 3 stocks. They're very built-to-last businesses. And he did that. And what happened a few years after they hung up their boots is, it's really funny, Amazon still kept, you know, it's a juggernaut. It still kept going. And so it became 70, 80% of the pie. So instead of them being one-third each, it was 80, 10, 10, for example, right? And Nick decided that, oh, maybe I should take some chips off the table here. And so he cut the Amazon position in half and bought another business, which has not done well. It went sideways. And that goes back to Buffett's point of 12 that worked in 58 years is we are not going to— if Warren Buffett has a 4% hit rate, the rest of us are going to have a 2% hit rate. Okay. So, but you also need to get rich just once. So I think that what worked really well for Nick and Zak was they took the Buffett lesson, which is that once you have a great business, just leave it alone. Now, even after he was sloppy and he took chips off the table from 80% or whatever, still done very well. And I think one of the things that investors forget is that If you look at the Walton family, none of them are running Walmart. Sam Walton passed away a long time ago. It's been several decades since Sam Walton passed away. The Waltons have, for the most part, kept the Walmart stock. And for most of them, it's almost their entire net worth in a single stock, right? So more concentrated than even Nick Sleep is, right? And It's not a business that they control. It's not a business that they run. It's not a business that they're on the board of. None of them gives them sleepless nights. And so, for example, in 2018, I started visiting Turkey. And I was just looking at things hated and unloved at that time. And I saw that the Turkish markets was screening really cheap. Everyone and their brother was just exiting Turkey. And I have a really good friend of mine in Istanbul, very good investor, kind of classic Ben Graham investor. And I told him, hey, Haydar, I'd love to visit Istanbul and I'd love to, if we could visit all the companies in your portfolio, starting with the company with your strongest conviction, biggest position to the smallest position. And I said, don't take me to see any companies where you don't have money in. Okay. He said, morning should be a blast. So I went in 2018, first time to Istanbul. The blue fish on the Bosphorus was great. And all these different businesses we saw were great. And I didn't really do much work. He told me what places we were going to, but I just said, let me meet the companies first. I went back in 2019. We are driving to this company and I, like I said, all these Turkish names and companies, I said, I will do the work on the back end. I'm not going to spend time. So as we're driving over, I said, Haider, remind me what company are we going to? What's the, what's the Cliff Notes version? He said, okay, he says, uh, this company you're going to visit, uh, Reysas, has a $16 million market cap, $16 million market cap. And he says a liquidation value of the the business if you sold it today is $800 million. So I said, is it a fraud? He said, no, I'm invested in the company. And so I said, you're telling me the company is trading for 2% of liquidation value? He said, yeah. I said, why? He said, it's Turkey. Everything's cheap. I said, but this is outlier cheap. Okay. And Reysas basically is a very simple business. They're the largest warehouse operator in Turkey. They rent out all these warehouses. These are 99% leased, inflation indexed, and they lease to Amazon, IKEA, Carrefour, Mercedes, Toyota, like blue chip clients and all of that, right? So I went and met the father and son who run the company and the founders. And then after that, I went and visited a bunch of the warehouses. And I couldn't find anything wrong with it. Basically, and he was absolutely right. If you just went to any realtor in Turkey and said, this is their 80 warehouses, give me a value on each one. He would just look at the rent and he would tell you, okay, you're looking at about $70, $80 a square foot for each warehouse. They had 12 million square feet. It was about a billion dollars and there was $200 million of debt. So $800 million liquidation value and $16 million market cap. Okay. And so then I thought, okay, this thing probably trades by appointment and maybe can't buy the stock, but Turkey has very high trading volume because they're all gamblers. And so I found that when I started buying the stock, that huge volumes are available. And I spent $8 million to get a third of the company. Okay. Now, the way I look at it is that when you look at Buffett's letter with the 12 positions or you look at Nick Sleep with Amazon, the family that runs the business, they have maybe 40%, 45% ownership. I'm an outside investor at 33%. I have no board seat. But the way I look at Reysas is the way the Walton family looks at the Walmart stock. I said, and what I've noticed since then, since 2019, is they have increased the value of that business. So I would say that probably today the business might be worth $1.5 to $2 billion, somewhere in that range. And I think they'll continue, because I've never seen them make any decisions that were stupid. They're very smart about the decisions. It's very well run. So I say, okay, basically we are done. We will keep that business. I don't care about the stock price. So the $16 million market cap now is about $500 million in 4 years. And the Turkish lira, which when we were investing, it was 5 lira to the dollar. Today, it's approaching 33 lira to the dollar. Turkish lira has collapsed. In dollars, we are up almost 30x. Right. Right. But the business is worth more. Right. And so the thing is that it's exactly what Buffett says is that basically just leave it alone. And as long as that family and that father and son are running the business, We will just keep our stake and let it keep running. So basically the idea is that I'm also going to, when I look back, gonna find there were a few things that moved the needle big time and the rest didn't. And the key to moving the needle is inactivity. And so that's what you gotta be just, you gotta be very patient and be very inactive.
You talked about Bezos being a capital allocator. Buffett, obviously capital allocator for Berkshire. And what, you know, who are the other, I guess like if I just throw some names at you or some companies at you, like I'm curious to hear your take on how well they allocate capital. Because we know how maybe how good their brand is or their product is. But we were talking about this yesterday. There's a transition from you're a product manager where your focus is building product and you're a people manager where you're building an organization. And then you're a money manager and you're now, you know, you're sitting on $100 billion. You have to figure out some way to invest it. This is like, you know, so tell me, Meta or Facebook, what do you think? How do you think they've done with capital allocation?
Well, I think, I think it was really surprising to see how he did a 180. I mean, I think Mark basically moved from being a spendthrift to being a Patel. You know, he— I mean, literally, I just can't— I think it was remarkable to see an entrepreneur pivot that way, right? So, you know, Meta was a country club. You know, they had all this spending going on in all these areas, and he really tightened it up. I mean, I was really— I mean, and it showed up in the numbers. They— I mean, Facebook is a great business, you know, all the different brands they have and different properties they have are tremendous. Um, it is the norm in capitalism that great businesses will be sloppy with how they execute. I think normally it's very rare to find a great business which is also tight-fisted, and Meta wasn't tight-fisted, but it is now. And, uh, so that was just wonderful to see. So I think Yeah, I think their capital allocation there is excellent now.
The United States, this is one of the most beautiful things about the United States is Elon wasn't born here, okay? And he wasn't educated in his first 20 years of life over here. We, the United States, got a finished product basically. And he's created tremendous value tremendous jobs and disrupted multiple industries. I think Elon is an exceptional allocator of capital. Yeah, it's terrific actually.
And Tesla gets a lot of, there's a lot of conversation. Is Tesla overvalued? Is it undervalued? Is it too frothy? I guess what's your take on when you look at a business like Tesla, how does your mind analyze a business like Tesla?
It goes into the too hard pile. I would say this. I would say that Elon is not human, okay? He's beyond human. If you just think about all the things he's done, I mean, now that Neural Net and, you know, Boring Company and, you know, what he's doing with SpaceX and all that, it's just really very remarkable. The execution is off the charts. And I think, like I said, I think he's just unbelievable in terms of what he's been able to accomplish. So I have a lot of respect. I think Elon understands capital allocation really well. And I think all the businesses that he gets involved in or he founds, they do so well because he gets so much out of the people, which basically means he gets so much out of the capital, right? I mean, his hiring is so good. The teams that he's building are so exceptional that, I mean, when you're hiring a software engineer, uh, they could be an engineer who's worth $10 million a year, and there could be another guy worth $100,000 a year, and he can tell the difference, right? And so he's— that's, that's a great skill to have.
Yeah, I love that. Uh, we'll end with this. We have Charlie, uh, you know, here, and he passed away, and you were friends with him. What's, uh, maybe your favorite story or lesson from, uh, from Charlie Munger.
Yeah, I mean, I, I obviously I miss Charlie. I think, uh, he, he was one of a kind. I think he was just a— and I've been thinking last several weeks, several months about so many of the lessons and things. But one of the things Charlie said in one of the last interviews, uh, he gave, uh, someone asked him, I think, what would you like on your gravestone? And he said, uh, I tried to be useful. And I think those words, I tried to be useful, encapsulate Charlie really well. If you look at Warren Buffett's tribute to him that he did this year in the letter, Charlie selflessly helped Warren a lot. I mean, without Charlie Munger, there's no Berkshire Hathaway, even though you had a Warren Buffett there. And I Twice I went to Charlie when I was facing difficult personal situations, nothing related to investing, right? Extremely helpful to me, on point. I just did exactly what he told me to do and those issues disappeared, right? And so Charlie always was trying to see how can I help the world in all the institutions that he touched. You know, his memorial was at the Harvard-Westlake School in California, in LA, transformed that institution. He was at the board of the Good Samaritan Hospital, transformed the hospital. Berkshire Hathaway transformed. I met so many partners he had in different businesses, always gave them the better deal. And I think in every way possible, I think that was just absolutely correct. He selflessly tried to be useful. Charlie, I don't think Charlie believed in God. I don't think he believed in religion. I think he didn't believe in legacy. I think he believed that when we are gone, we're gone. It's ashes and dust. Till one day before he passed away, he was in the hospital. He knew he was dying. He was trying to get one last grant done to a nonprofit. No upside to him. He's dying. 6 days before he passed away, he was buying a stock. Okay. You know, a stock we discussed, you know, and I'd sent him a write-up on. So I'm just saying that I think Charlie extracted everything he could from his mind and his body. The other thing was that he never complained. Lost sight in one eye many decades ago. He was almost blind in the other eye. He cared most about reading, right? That was most important to him. And I saw him one time when the second eye was giving him a very serious problem where he could have gone blind. This was maybe 10 years ago in the second eye. Even when he was facing the prospect of complete blindness, he was so stoic. Never said, "Oh, poor me." self-pity, his response to me was, "I'm going to have to learn Braille." That's how he was going to deal with it. And so I think it's just great. We have such a big rich body of work that he left, Poor Charlie's Almanac, and I think a lot to learn from him.
Well, thank you for sharing that. And thank you for doing this. This is hopefully your process of sharing some of your wisdom. So thank you for doing this.
It's a pleasure. I really enjoyed the session. Thank you.
Right on.
Okay. All right. Sounds good. Thank you. I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel, never looking back.