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 Monash Pabry. 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 a million dollars. And I for the first time. had money in the bank. That million became worth 13 million. And uh I said, wow, well done, Monish.

And uh so they got seventy percent a year compounded. How the hell were you getting these returns? I'm always looking at what is hated and loved. The key to moving the needle is inactivity. Good afternoon, Mr Buffett, and good afternoon, Mr Munger. My name is Monish Pabry. 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 twelve? Because if they didn't run the emergen stand when they were twelve. they're not gonna be that great at business at thirty. How stupid can you be?

But if you know the big picture you can change the big picture. The most u important thing in life. Are you a fan of uh Bitcoin? Are you a believer? If you put a gun to my head, I would say What do you think about uh Elon Musk? 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 can rule the world, I know I can be what I want to I put my law in it like my day's all on the road, let's travel. 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 uh in both activities. So uh Warren Warren Buffett has a great quote.

He says I'm a better investor because I'm a businessman. and I'm a better businessman if because I'm an investor. And uh And in his case, uh A lot of people don't know, but Warren had done a lot of different businesses in uh different areas

Before he was seventeen. Starting when he was uh I think five or six years old. His very first business was uh Buying um Buying

Cokes from his grandfather's store. at uh at uh nickel apiece and then selling them at a dime piece. Right. By wholesale, sell retail. Yeah. So that that was uh one of his first first ones. And one of the things that a lot of uh people uh don't uh understand about the way our brains work is the human brain actually when we are born, it it is the most underdeveloped organ.

Uh, when we're born because the birth canal is not wide enough. So for the first five years of life, the brain is the fastest growing organ. that we have as humans. The the neuron connections are growing at a Exponential rate. Uh from the age of about eleven

to about twenty. Uh That window is when the brain is set up to specialize. And um the neuron connections get cut.

Uh so they actually go down quite a bit, but the brain allocates areas to hone in and specialise. So you know, if you Think of someone like Michelangelo. or uh Bill Gates or even Warren Buffett. These these guys started Specialising

At ten or eleven. Mm-hmm. And uh if you start writing code. At the age of ten or eleven, for example. Um like like Bill Gates did. By the time he was twenty,

The expertise that he had, someone else starting at twenty. would not be able to match him. Even at fifty. So that tenure window is a very critical window in human development.

And uh Unfortunately, our education system doesn't recognize that. And unfortunately I'm thirty five. So it's too late. We hope there are some eleven year olds listening. Or we hope when you have kids. Tell your kids, yeah. It's not all the the the cake's not fully baked yet. Uh so I think the the thing with Warren was that I think when he was about Ten or eleven years old. He was running uh a bunch of very interesting businesses. What was he doing? I've never heard these. So uh yeah, I like I didn't know this back then. One first businesses was he used to go to this race track in Omaha.

called Uksarbon, which is uh Nebraska spell backwards. And uh he used to publish racing tips called stable boy selections. Basically telling you what what horses to bet on. And uh and then also what he would do is when all the races had been run, He Collect all the discarded tickets on the ground. and he'd go home and go through each one carefully

had thrown out a winning ticket. And 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 eighteen. So he would give them to his aunt Alice. Who would go and collect for him? Around the age of fourteen or fifteen Um

He had a very good friend in high school called Don Danley. And and Dandy was a tinkerer. He was like very mechanically inclined. So one time I think uh Warren went to his home and he saw that Uh Don's working on a pinball machine in his garage. And uh he asked Don what he was doing. He said, Oh, I just bought this pinball machine that

wasn't working, they gave it away. It was paid like fifteen bucks for it. And I think I can get it working. And uh Warren asked him, uh, how much is it gonna cost? He said it's gonna cost like three dollars. in parts and maybe a couple of hours to get it working. And then Warren says uh

Can you find more machines like this? Which don't work. He said, Oh yeah, there's a lot of machines you can buy which people people don't want'em because they don't work, et cetera. So Don and him formed a a company in their minds, and they never actually incorporated anything. They called it the Wilson Coin operated amusement company.

And uh they went to barbershops in D C And these two boys, you know, kind of, you know, uh nerdy looking fifteen year olds, they w went to the barber and said, Look, we work for a Mr. Wilson. And Mr Wilson did not exist as a fictitious character. We work for Mr Wilson and Mr Milson 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 fifty fifty 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 Danley busy Fixing pinball machines. And the two of them would go on weekends and you know Yeah.

barb shelf shit. Every week they're making some money. And and so I think he had eventually something like forty barbershops with with these machines and Warren said that the first week he went back to the first barber shop He thought he died and went to heaven. So there was like Five or six dollars in there.

And uh so their take was about like you know, three dollars. On eighteen dollars of capital in one week. Right. And uh and He was he just told Don, Go as fast as you can. Deadly. What are you doing right now? Exactly. Warren had all these different resources that he was a

senior partner and Whoever he was working with was a junior partner. One time uh Uh Danley showed him an ad for a Rolls Royce. Well say. For three hundred dollars, but it didn't run.

It was a old beat up roles and uh you know, people is giving away like like junk, right? And he thought he could fix the roles. So they bought the rolls for three hundred. Maybe another fifty bucks in parts and Danley had it running.

And then they, you know, spruced it up. And they would rent it on weekends for a hundred dollars. to weddings and uh and then on the weekdays the two of them would go to school the high school in the roles. You know, so so what happened is and Warren didn't he didn't know this, but he was specializing And figuring out business.

In that window of time, the 11 to 20, right? 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 seventeen and went to college, He had fifteen thousand dollars. And he told his dad, um I'm gonna pay for my college myself.

And he also told his dad I don't need an inheritance. Whatever money there is, uh you're leaving Leave it to my two sisters. Right. I'm I'm I'm I'm good. And fifteen thousand back then is a lot you know, it's a it's about ten to one. So 150 grand. So just think of a 17 year old. Yeah, think about 17 year old with 150K, right? And at that time college was cheap, right? Uh and uh And the other thing is that

He got interested in uh investing his f his dad was a stockbroker. So he used to go to his dad's office on the weekends and he says that at at the age of eleven he bought his first stock and he said I was wasting my time till then. And but you know, he didn't really have a philosophy, didn't have an investment philosophy. At nineteen he read The Intelligent Investor by Ben Graham.

And that was transformational. And he thought Ben Graham was this guy who, you know, 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 uh Columbia's NBA program. Must have been twenty or something. And then of course after that uh uh Graham hired him.

And isn't there some story where He tells Graham like I'll work for you for free. And then Graham says, uh your price is too high. That's correct. So we 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 uh and young Jewish people because there just weren't many opportunities. So he basically told Warren, look I gotta take care of the community. Right. But but then Warren went back to Omaha and about a few months after that, uh Uh Graham called him and said, Uh if you I 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.

Uh with his uh with his wife. His experience as a businessman Uh 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 when we start a business uh we will spend maybe three or four or five percent of our time. on figuring out the strategy. you know, what's gonna be the product, service. Marketing. Pricing. Yeah. All the how we're gonna make it work. Right. And all the different plans, right? And then ninety five, ninety-seven percent.

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 three to five percent of time. And and basically uh one of the things that attracted me to investing was That basically the

Three percent becomes eighty percent. Mm because uh we don't need a Danley. We've got public bunk companies and all of that and uh we just have to pick which businesses we want to own partially. Uh and which ones we wanna ride and so on. And so I think that

Um I I always find it strange if I run into investors who haven't been entrepreneurs. Because I think they're missing Uh very key part. Right. And on the other hand, I find that entrepreneurs

are very naturally Um Already set up. to be great investors if they make a couple of tweaks. And but what what ends up happening is that we don't see

a lot of entrepreneurs. And we also don't see uh we we see a lot of investors who haven't built businesses, met payroll. And so both uh both have flaws. So if you if you had the Um

of having the entrepreneurial experience, then I think looking at the Buffett Manga frameworks. It's a very easy transition. Right. It's probably also easier to go business to investor than investor for a long time than suddenly go try to be an entrepreneur. Well, investor to business, the problem is the windows closed. Right.

So 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, 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 C'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 tax right away. He's like,

I went to the store. But 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 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. C's is a wonderful uh wonderful business.

it taught it taught them a lot. It taught them more than they ever thought they'd learn from a stupid candy business. Uh but one of the things Warren did when he first bought Cs is he told uh he told the CEO, listen, you got free reign Run the business like you've been running and so on and so forth. But On december twenty sixth. Uh I'm going to set the prices for the next year.

Okay. Okay. So he would sit down with the entire C's price list. And he would bump all the prices by ten or fifteen percent. And uh inflation might have been Three percent. Right.

And so He would raise prices significantly above inflation. And what he would observe is volumes went up.

Mm so and then the year after that he'd again bump it by another ten, twelve percent. And volume still went up. And 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 on 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

Died in the wool. hardcore deep value investor. It was really hard for them. They paid three times book value for Cs. They were choking almost when they paid that amount. Uh so uh I think they bought Cs for like twenty five million. Looking back. They could have paid two hundred million. And it would have been a still would have been a good deal. Yeah, and C's has uh

sent dividends to Berkshire. in the billions. I mean it's been about fifty years since the purchase. And billions of dollars has flowed from Se to Berkshire, which has then been used To buy

a whole plethora of other businesses. And and if you look at their uh their purchase of coke, for example. Um they they put a quarter of the entire book value of Bokshahatway into Coke in nineteen eighty eight. If they had not bought C's. They would have never bought Coke. Right.

So the lessons that they learned about branding and the power of brands is what led to the quok investment, which was a much bigger home run. And they've made many more brand investments since then. Half the portfolio is an Apple right now, right? Yeah. So and Apple brands in the world. And and I think I think Warren understood this notion of consumer behavior. And how powerful brands can be. And uh how powerful habits can be.

And uh and then he went from there. So yeah, absolutely. And uh one of the interesting things about C's that C's wasn't this fast grower. It wasn't uh They bought it and then it sales exploded. But what I think the the beauty of Cs, 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 so Cs is very much a California story, right? I mean it it w it was it was uh founded in California, almost all the sales were in California. If you look at Cs from the time they bought it till today, about fifty years,

Um The unit volume. has gone gone up on average. two percent a year. Okay. California GDP

probably at least in the seventies, eighties, nineties was going up about at least four or five percent a year. So they were actually and part of that might have been the the price increases. Okay. But even with those heavy price increases, they still got the volume. going up slightly. Yeah. Uh, but when you overlay that, you know, you do fifty years of 10%. That's that's a very big number, right? And so C is not cheap today, right? And now Warren was very excited.

Abo being the Candy Mughal of the world. So they tried really hard. To Scents everywhere.

Right. 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 in place. They've repeatedly tried over and over and over again. Broaden sees.

And expand it. And by and large Does uh those efforts did not work. Even today the bulk of the volumes of Cs is in California, right? And um

And so When the Coke investment came about. Uh they discover they they found something very different than C They knew

C's doesn't travel well. But they could look at more than a hundred 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. Um people in Pakistan or India or Bangladesh they're having Indian food. With a coke. Right. Right. So it's it's ubiquitous. And that did not exist

with C scandy. It wasn't Ubiquity then and Warren understood uh You can't conf You can't consume infinite amount of candy.

You know, there's an aftertaste and all that. Coke you can actually consume a lot of. Right. There's no uh what does he call it, taste memory. There's no after taste. Yeah. Yeah, that's right. So so I think like I said, I think they they Move from being hardcore quantitative deep value guys.

to actually understanding a lot of nuances of brands and consumer behavior. Which was very fundamental to hope. How and why Boksha did so well. So you talked about

uh specializing kind of that eleven to twenty years old ish window. Yeah. Um Today you've done phenomenally well. You manage I don't know, almost a billion dollars, maybe more, who knows? Uh, a lot of money, uh, and and done incredibly well investing. Uh did you Did you do that when you were uh late twenty or or were you a late bloomer? So uh no, actually

It was just dumb luck. A lot of things in my life have been dumb luck. Um, so my dad was a quintessential entrepreneur. And um he was really good. So, you know, 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 ho 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 over levered. So When the businesses were going, he was literally taking

Every last dime of profit coming in and everything that he could borrow and 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, uh I think after we were like maybe nine or ten years old Um we were like his board of directors. Okay. And I remember like when I'm I think ten or eleven 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'd try to figure out how to l make it last, right? And then we'd make it pass the one day. And the next night the same thing over, right? And so I finished many MBAs before I was twelve, yeah. I think at fifteen or sixteen 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

15 year old on a sales call, you know, 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 um I finished high school in Dubai, so I was in Dubai from the age of sixteen to actually nineteen. And In In that window of time, my dad had a gold jewellery business.

And uh so we used to go I used to go with him. uh to these um uh he was manufacturing gold jewelry and they were selling it to these uh retail merchants, right? And so he's going into Cole calling, right? Right. And uh and I'm 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 in the No I was very silent. Okay. But I was 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 I didn't realize it then, but when when I went to college I I studied engineering.

And then I joined a uh telecom networking company as an as a R and D engineer. And when we were working on these products. I asked my boss. So What do we want to sell this for?

And who's a customer and what kind of like what are we gonna make on it? And my boss would tell me Those are all questions for marketing entails. We don't we don't need to care about that. Just design the product. Right. He didn't know the answers. He didn't know the answers, he didn't care. Right. And I found that All the people I worked with, the engineers didn't care. I said

How stupid can you be? You know, you 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, right? And um So what I did after um

Two and a half years with the nerds. is I switch to international marketing and That was such a breath of fresh air. It was so great. And I 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

Uh 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 twenty years more experienced than me.

Because they hadn't had all these experiences and they didn't they didn't think like an entrepreneur, right? It was just uh uh a small subset. And and later in life when I Heard about Buffett for the first time. I found a lot of commonality, right? I mean, he had a he had a very different experience in the sense that he was his own entrepreneur. Right. But one of the things that's really important is that. Uh when I look at a CEO.

I always try to find out. Did they run a lemonade stand when they were twelve? Because if they didn't run the L M stand they were when they were twelve they're not gonna be that great at business at thirty. Okay. The the little itty bitty lemonade stand has a lot of lessons. And and so I think uh

When uh when we have kids, I think it's really important in that window they don't need to run Neminage stands, but they really need to uh be doing what's going to be their calling. Right. And uh 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 five hundred plus episodes now of this. And

the podcast is the name 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 three common things of what you were doing in your teens. Cause 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 gonna go on to do interest 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 uh you know these CDs of Rosetta Stone that I could go sell for three X 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 uh competitive video games because a lot of the strategy to you know communication, collaboration, um You know, just extreme competitiveness gets built in there. And um And there's a couple others, but uh another one's like a Mormon mission. So uh Mormons who go and have to sell you know Jesus to to a bunch of people get rejected a thousand times in two years. They become incredible salespeople. And so you 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 you interviewed him for your podcast. And Said uh was an entrepreneur.

At the age of eight or nine. You know, um even m maybe even earlier than that. Uh he was selling uh greeting cards. He was making and selling greet on street corners. You know, and uh And then by the time he was eleven or twelve, I think he was uh writing code and making websites. You know, and uh went from there. Right. Yeah. 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 in my in my childhood, right? And I remember I was like um Uh twenty four or twenty five years old. And my dad was visiting me. I was uh living in Chicago.

And he tells me it's time to quit. And start your own business. And uh so I said, you know Have you forgotten?

Have you forgotten my childhood? And uh, you know, all the ups and downs. He so my dad just said, Oh, that's what makes life great. But he says, Look, the company you're you're in, my the the business I work for had two thousand people. He said, You're such a tiny c cog in a 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 to be doing is figure out something where There's an offering gap. And um

Go for it. Right. And and I was actually uh getting a little bit frustrated at work because the company had been growing, it will get more and more bureaucratic and Um, so I actually uh started to think about Um

what might be possible. And I didn't have any money, you know, basically I was twenty four, twenty five. So what I did is I keep I came up with some

Uh uh IT services offerings that I thought would be pretty unique because at that time client server computing was uh just getting going early nineties. And uh so I had about uh

thirty thousand dollars in my four one K And I said, Okay, we'll worry about retirement later and we'll pay the penalty. I pulled that out. Nice. And I I I applied for every credit card. I could get my hands on.

And uh so I had seventy thousand available to me. In different uh credit limits in credit cards. And so I said okay we we've got Up to a hundred thousand.

that we can play with. And the third thing that I did is I basically did both. I uh was going to My My job.

And I had started my company at the same time because basically what I would do is like from like six to nine in the morning I'd work on my business. And then from six PM till midnight I work on my business again and weekends. Right. 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

And I always tell uh tell people that Basically, um, if you think about it, there's a hundred and sixty eight hours in a week. Your employer needs you for forty. 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 forty, fifty 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. Right. 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 nine months, and then I had clients, revenue, and all that. And I went into my boss and his boss. And I resigned, right? And uh They they said, you know, Monish, uh, we really couldn't figure out Last nine months like

You checked out. I said exactly. I said My my goal was to just do enough so I didn't get fired, but she said she said, Yeah, we saw a big drop.

in the old monish and the new monish and we talked about it. And we actually said it's not so bad that we would fire him. But there's something off. Right, we could we couldn't figure it out, right? And then so I explained to them I was going into a business. My own business was not comparative with theirs. Yeah. And so they said look, When your business fails. Not if your business fails. When your business fails.

You can come back. We're gonna give you more money. We're gonna promote you. And you're gonna do great. So I said, you know, my 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. Right. I get more money, right? And so I actually felt like the you know, people think There's a People have a a 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 fourteen year olds, Queen's fourteen year olds took? Nothing.

Okay, is fifteen dollars in a pinball machine, which they could use themselves. Three dollars three dollars in parts. So the second pinball machine will only get bought. When the first one's already producing cash. Right. 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. uh which is why the same brain cells get used. Both are trying to minimize risk. You know, we as value investors wanna 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. uh 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. Um are less than much less than even one percent of that pie. might be in most years less than one tenth of one percent.

Right. So If there was no venture capital and no venture back businesses. It would make no difference to the landscape. Okay, we'd still have the million businesses being formed. Venture back businesses are a different animal because they are

high risk, high return, right? The what the VC wants you to do. The V C's got ten bets. He doesn't care whether your bet works or not. He just wants one of those ten to work. Yeah. So he wants you to step on the gas.

as aggressively as possible. If you blow up, you blow up. Right. Uh when you're an entrepreneur who's not venture backed. That is not how you go. You don't

But just You know foot on the gas you're very careful about downside. Protection. So what happened some of the big in uh big entrepreneurs who Richard Branson I think is the

People see him as this free, you know, r risk taker, reckless sort of guy, but you you've pointed out that That's not true about Richard Branson in this case. One of those stories I love about Branson. Is When he had the idea to start uh Virgin Atlantic.

Airline, right? the minimum that you need. To start Transatlantic service. is a Boeing seven four seven. Okay.

Couple of hundred million dollars, right? And uh Branson got Virgin Atlantic off the ground with no money. So what he did is

He calls um directory assistance in the United States five one two one two in Seattle, two oh six five five one two one two. Ask for the Number for Boeing. Okay. gets a number for Boeing calls the main switchboard. And says um

I'd like to lease a seven four seven that you guys might have hanging around that you're not using. They hang up on him. Right. Okay. Keeps calling them. And finally the Lady of Switchboard says uh Let me transfer you to someone who can

Get rid of you properly, right? So she transformed him to someone who's head of like commercial sales. And so this guy tells, Listen, Mr. Branson. In every country we have one customer. And

You are not the customer in the UK. It's British heavy is. And so therefore there's nothing to talk about. So Richard tells them, Listen.

I I I agree with you, that's fine, but uh just humor me for a second. Do you have a old Boeing seven four seven 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 Avers 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 two hundred thousand a month. Okay, two or three hundred thousand a month. And Branson was able to convince Boeing. to lease him that seven four seven.

Because it was sitting and doing nothing. Right. Then when he set up um Virgin Atlantic, he said you get paid for all the future flights in advance. Because people buy tickets. So the plane's gonna fly in April.

People already bought tickets in February. Right. So you say, I got cash coming in. Two months, three months before the plane, plane's gonna fly. And I'm gonna pay for the fuel. Thirty days after that plane lands. Okay. So

He had negative working capital and the lease payment is also in arrears, right? So basically he's he was able to Get Virgin Atlantic off the ground. With zero equity. Right. Now

The way I look at it is that if 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 point one percent of the population owns

Almost seventy percent of all the motels in America. That's an incredible story. Can you explain? How is that possible? In the early 70s, a dictator in Uganda, Idiomin. And Idi Amin noticed that in Uganda

Most of the businesses were controlled by East Asians, Indians. Potels. uh they control like eighty percent of the economy. And these Patels had come to Ugand Uganda. They were brought to Uganda about a hundred years ago.

to work on the railroad almost as slaves. Right. And But because they're natural entrepreneurs. They they went from

railroad builders. to eventually owning and controlling his whole economy. And he was pissed. So so Edi Amin said Africa. Is for Africans. And you guys are not Africans.

And These patels. had been in Uganda for three or four generations. That was the 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 through them out of the country. Which just means took their business, right? He just took them. He basically confiscated all not their businesses, homes, everything, confiscated all the assets. And he told them you got ninety days to leave the country. So these these patels in Uganda was stateless.

Okay, you you're being thrown out. You know, you're citizen of a country the country's throwing you out, right? And uh And they lost all their money. So they they were able to convert a very little small sliver of their assets into gold. And uh the United States took some potels as refugees

The UK took them, uh Canada to 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 a hundred years. And uh 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 hotels, a few thousand of them. Oh

came into the United States in the early seventies are refugees. Um they didn't have skills there where they could get great jobs. Um they didn't have they spoke English with a funny accent.

And um They they realize that look if we Um, buy a really small motel, ten, twelve fourteen room motel. The family can live in one or two rooms. Motels are labor intensive. Um, the family can do all the work, you know 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 uh basically fire all the staff. And move in into two of the rooms.

And because they had no cause. uh they were able to charge nightly rates that were lower that all the neighboring motels So what would happen is that the potel owned motel would be running hundred percent occupancy.

the other motels couldn't match that rate because they'd lose money. Right. Right. Because they they had staff and workers' comp and staff and all that stuff, right? And what the patels started to do, and they were patels were very frugal. They basically were vegetarians. Uh at that time in the US, if you were vegetarian, you're really host. You couldn't really eat out anywhere. So by uh they were forced 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 by 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 fifty years. And you end up with

Seventy percent of the motels in the country under Patel ownership. not only that, they've actually gone up market now. So a lot of the Hilton's Marriott's Westerns. 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 seven eleven laundromat, dunk and 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 uh

When I first met Charlie Uh he had he had read my book. And uh and we were discussing the patels. He says, Yeah, you know, I got some friends in the motel business. I just tell them Don't ever ever.

try to compete with a potel uh 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 gotta 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 squawny kid who grew up in the suburbs of Mumbai. And um I accidentally heard of Warren Buffett in the mid nineties. 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 uh all these models are the same models that an entrepreneur uses.

It's the same. Th exactly what I was saying, that, you know, uh 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 four percent of time of strategy is eighty percent time for him. And

Even in the business I had created, the IT business. uh which had grown and scaled. I always enjoyed the four percent more. I I I I was strategy, the figure. I was happy doing sales calls and uh you know building teams and all that. That was that was great.

uh do it once. I said, Wow, if I go into investing it would be eighty percent of my time. Because There's no blocking and tackling. Someone else is doing that. And to me that for me that was a big aha moment that

I should switch. I was lucky in uh in the mid nineties, someone bought a small portion of my business. after taxes, after everything, I got a million dollars. And I for the first time. Had money in the bank. Right.

And I didn't really need the million, right? So I said, Okay, what we're gonna do is we're gonna take this million. We're gonna invest in the public markets. And we're gonna find out. If we can actually do this. You know, that's you know, um

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, uh entrepreneurs get kinda 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 um So basically I 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 ninety five to two thousand five year period

That million became what thirteen million. And uh I said, Wow, well done, Monish. And uh so they got seventy percent a year compounded, yeah. And um 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 nineteen ninety nine I didn't even feel like going into work. I I said This is I I just

want to just focus on investing. And uh so I made I made a couple of big changes then. I uh looked for and found a CEO to run my company. And basically uh thirteen, fourteen million I felt was enough. To retire.

Do nothing. You know, I I could do investing full time, right? And so my plan was okay, someone can run the business, whatever's value is there is Is there, it doesn't matter. I can go off and just now do Investing full time. And um

I had a few friends who had uh basically Uh I used to just give them stock tips, you know, the mid nineties. I'd find some company and make the investment. After that, I didn't care who bought the stock. Right. I mean I've I already bought it, right? And so I tell my friends, Hey, you know, I found this company, you ought to

I see if you want to take a 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 five million. They would put ten thousand to 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 talk 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 uh so they were proposing giving me a hundred thousand dollars each. and it'll 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 wanna do it.

in a format that works for me. So I love the Buffett partnerships where he didn't charge management fees. He only charge performance fees. So So what's a normal structure and then what did Warren do? So a normal hedge fund would be a two and twenty structure. They would take two percent of assets to the management fee for breathing. Every year. Every year. Yeah. And then uh twenty percent of the profits, right? So if a if a hedge fund, for example

Let's say has a billion billion dollars under management, right? the general partners would take twenty million dollars a year. For breathing. For breathing. And then if if it went up ten percent. So They would make a hundred million, for example, on the billion.

they'd take another twenty million on that. Uh so basically what would happen is the investor who put up the money. on a ten percent return gets a six percent return. Right. below the S P, right, right, because of all these frictional costs. So Buffett had run his partnership by saying that Uh there's no management fee. Um, the first six percent returns go to you.

And above that, I'll take one fourth and you take three fourth. So in the same situation If uh if the fund is up ten percent In Buffett's case the first sixty million goes to the investors. And the remaining forty million is split.

So it becomes ten million to him. thirty million to the investors, right? So it's a it's a better it's a half the fee, basically. And you're 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 a fund. Uh so it's all legal.

And we will do it with that structure. This they really didn't care what structure it was. And uh so PubRai funds really started in ninety-nine as a hobby. Uh with me and my buddies. And I had thirteen million on the side.

Which was my main focus. And I said yeah, the There's another million here. It's okay if I find something and buy for both. Right. It makes no difference, right. And um About a year

A year after that there was about two and a half million. We were up like seventy percent the first year. And uh some more money had come in. And I said, You know Why do I treat the fun 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 uh and so I did I started to do that and Pobreye Funds Oh we had A very good run. uh for the first eight or nine years

I think we were doing like mid thirties a year on average, no down years. And the assets grew. We were at about I think in Two thousand seven. We were at about six hundred million in assets under management. And I had made a lot of money. Uh, you know, the fees and uh the compounding and all of that. So in like a ten year period you turned

The million dollars of managed money. into about six hundred million of assets and management, including new money. Yeah, yeah, it wasn't all it wasn't just organic, but but but the original money had almost tripled. Right. You know, tripled or quadrupled in that period. I had asked you uh yesterday when we were hanging out. I said, uh you know, there's really two questions when you hear the story. Number one How the hell were you getting these returns? So what what what did you know about investment? What was that part? But the second part is How do you what'd you do on the fundraising side? How'd you get so money, 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

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 Uh they will swim to 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 um difficult for me was that

The SEC has a lot of rules and laws uh around hedge funds. One of those is you cannot solicit the general public. Right. So when I was running my IT business, I would call on any CIO and say, Hey, You know, uh would you like to use our services, et cetera. I could Uh When you're running a fund, you can't just get a list of dentists in North Carolina and pound them. That's that's not legal. You can't do that. Um, so the the SEC said you can only talk to people you know.

Okay. I said, the people I know I'm gonna run out of my roller desk in like five minutes. You know, there's there's very few people I know. So what I did is I started to meet my investors once a year. uh for an annual meeting where I would give them their results and uh take their questions and all that. And I told them, Listen, um There was one reason and one reason alone.

You were put on planet earth. And that is to bring assets to Pablo funds. Okay. Humans are always looking for a calling. they are looking for some cult leader to follow.

And be part of cult. Okay. You gave them one. So yeah, you know, they were 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 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 I like I said, I started the million a year later, it's two and a half million, two years later, it's ten million. And it's growing, you know, and and part of it was that the annual returns

are adding, but part of it was that so I had eight investors when I started. A year later there were seventeen. And two years later they were twenty five. So now I had an audience of twenty five. uh to proselytize and spread the word, you know? And uh and and O of course the results. Now the other thing that was happening is that Uh when I started the fund in nineteen ninety nine

We were Nine months away. from the biggest bubble about to burst. that had happened in decades, the dot com bubble. Right.

And I I was able to see the bubble not very much in advance of the rest of the world, maybe just two or three months ahead. I I knew the internet was transformational.

But I also knew that The euphoria was too much. You know, we had Pets.com trading at multi billion dollar valuations. with no revenues. Right. I mean it was just common to have a lot of company the people were counting eyeballs.

They're not counting dollars and the th they're not looking at net income. Yeah, they're not even looking at revenue. They're just looking at eyeballs, right? And so So I said okay, this is bad news. um it will blow. At some point it's gonna the bubble's gonna burst. I didn't know when. Uh, so I had always been a tech investor from like the mid nineties and I'd done really well. Uh tech had had a great run from

Ny five to two thousand it had just done really well. And I written that coat tail. But what I did in ninety nine when the fund started and also with my own capital. is I did a one eighty. I switched completely

to classic Ben Graham deep value. You know what Buffett had started doing in the fifties. And one of the things that was happening in the equity markets at that time was the day the Nasdaq peaked, I think March eighth or March ninth, two thousand.

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. And then then 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 two times earnings and buying steel companies and three times earnings. And so a lot of basic businesses which are very predictable. And doing well. Trading really cheap.

Right. And uh and so Pabry funds did Really well. In fact. uh the NASDAQ imploded basically it hit five thousand in March two thousand, uh by the time it bottomed out the next two or three years.

It was a twelve hundred. seventy five percent drop, you know, and uh the Dow and the S P didn't go down as much, but they also went down a lot. And uh so it was It was a traumatic period.

for investors. It was a great period for me. And 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 five accounts, They just moved it all to me because everything else was going down.

So that's how we we got going. So in two thousand seven Um I I think my net worth at that time was like eighty four million.

And Uh Warren had been running uh these uh uh 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. I'm making all this money off him. Um I really have a big tuition bill, I need to pay. So I said

The lunch is a great way to do that. I said I can Um 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. Eighty four million, what's an appropriate tuition bill? I said It's good.

I think if if I if I gave him two million, I'd feel good about that, right? So I said okay, I I decided in uh two thousand seven I was gonna bid for that lunch and I I decided I would go up to two million dollars. And you can bring Up to seven other people to that lunch.

So I was gonna take my family, but there still were a couple of Seat's empty? So I contacted my friend Gryce Guyspeer, he lives in Zurich. I said, hey guy, I'm gonna bid on this lunch, blah, blah. And I said, uh Do you wanna come in with me?

Uh, and I said, if you and your wife want to join us. uh because there'll be four of us and two of you. You can pay one third. And uh And I'm willing to go up to two million. So guy says, Well, that's too rich for me. I can't pay one third of two million.

He says, uh I'm good for a quarter million. So I said okay. Whatever the bid ends up at. you're capped at a quarter million, right? And uh so I bid for it.

Uh it Settled at uh six hundred and fifty thousand. Uh much less than what I was willing to pay. And then one third of that got paid by Guy. And uh so my only agenda In meeting Warren.

was to just say thank you word. Right. I didn't have and I of course was a big fanboy and you know meeting him and all that. Warren's agenda when he has these lunches. is really different. His his agenda is He wants The people who won that lunch.

to feel like they got a great bargain. So he would take all our what I would call our lemonade uh lemon questions and can turn them into lemonade. So he's always d is exactly what does in the bookshow meetings. Is

He's a great teacher. And so he was trying to uh give as much value. as he could in that lunch. And like he told us when we met him Dice 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 three hours. And then we were exhaust it.

And so we said porn, we just don't have anything else to ask you. You know, is it okay, I'll I'll I'll take off, no problem. And uh In that lunch, um, I told him, I said, Look, Warren Um

My My wife then Horina, I said she's Oh 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 says what I'm gonna do is you guys live in California In LA. I'm gonna set you guys up to meet Charlie for lunch.

And then when you meet him for lunch, you're gonna find that he's useless and I'm the guy. So I thought he was joking about that, right? And two days later I got an email from his assistant to Charlie's assistant copying us. uh basically saying, Hey, I met this wonderful couple in California and They seem to think you're more interesting. I think there's 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? And then I I Charlie's assistant sets us up to meet Charlie for now, Warren You can bribe and have lunch with. Okay. Charlie, there's no bribing. There's this is great. And so Oh

We met Charlie, my my wife and I, we met Charlie in two thousand eight. uh at the California Club in LA. And uh I actually found that lunch a lot better than the Buffett lunch. Okay. It was great. Because I think Charlie is just so direct. You know. And um And I never expected

these lunches or any of this to lead to any anything. It's a one and done. But It led to a friendship with Charlie. He started uh asking us to come to his place for dinner and uh uh I would meet him like four or five times a year for dinner and then

Uh 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 was be lunch and then about four or five hours of bridge after that. So it was a it was a uh

Um Um Wonderful deep friendship. For fifteen years. Uh, which uh was unexpected, you know. There's never expected that. So let's go back to the lunch. You ask him questions for three hours. Yeah.

Uh what were the interesting uh questions and answers? I know you've said one that I wanna hear you you explain because I didn't fully I I I've heard the tidbit, but I want to hear the full story, which was he said something about being a Harsh. greater of people. Yes. What does that mean?

Well, I I told I told Warren, I said, Warren, um, you know, you are 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, Monashio Bistaken. I am useless. at figuring people out. He said, If you put me in a cocktail party With a hundred people. And you gave me five or ten minutes to meet each person.

Uh I could tell you Three or four people are exceptional. And I could tell you three or four people you want nothing to do with. And the remaining ninety two I would have no opinion on, because not enough time to

Figure them out. But he's But he also said that look. What you do in life is Those three or four people who are exceptional.

You bring them into your inner circle inner circle. And obviously the three or four people who are You know, not not the great human, so you're not gonna have an anything to do with them. But the third thing you do

Is you treat the ninety two Just like the useless humans. And you exclude so he says Be a harsh creator. So he says that when you have friendships

And when you have people you work with, your peers and all that. He says it there's a gravitational pull. If you hang out with people better than you, you're gonna get better. If you hang out with people worse than you, you're gonna 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. Uh that has detrimental impacts. So basically um

I really took that to heart. And I said that uh I'm really gonna try to see if I can Oh Focus on the great relationships, you know, the great people.

And that's actually been um What journey I've been on now. For like you know, sixteen, seventeen years it's been tremendous. It's'cause it's great. Now it's it's unfair. Right.

Because you're treating the unknown The same as the useless people. But but that's the way life is. I think that sometimes you have to make these difficult choices. Uh, because if you don't do that. Then uh the Impact of that.

is significantly negative. And one of the things I realized when I started to Uh 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 gonna take a shortcut. I'm gonna make Charlie's friends my friends because he's already done all the work.

You get the filtering. Right. And and so I 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. Uh and You know, uh I realize that there's such a

Huge delta. In off the charts, top point one percent, top one percent of humans. And the rest. And you know, we we talked about this, Adam Grant uh wrote this wonderful book, Give and Take, right?

And he categorizes people uh in three buckets, right? The givers the takers and the matchers, right? Now the takers you don't want anything to do with. You know, they're just gonna like want to extract whatever they can from you. So they're just not people you want to uh 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, right? those are the ones you want to be with. And then the matchers, they're kind of doing math in their heads. Um You know, Sean did this for me, so I'm gonna do something similar for him. They kinda 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. Right. And uh and so the the interesting thing that he pointed out in that book is But 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 uh the funny thing is that the matchers who are trying to do this, you know, equalization.

They end up losing. Yeah. The best way to get the most is not ask for anything. It'll all come to you. Right. You know, and so so these are wonderful models too.

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 quite it is actually quite low to you, but the cost of accidentally including somebody

who might be have some toxicity or it's quite costly to you. And so uh, you know, I I think even in investments, he has the the good pile and then the the too hard pile. Warren has a lot of baseball analogies. He says that in investing there are no call strikes, right? So in baseball uh you're at the pitch, you're three strikes you're out, right? He says I can let a thousand balls go by, thousand stocks go by and not swing. Right. Right.

I c I only need to swing when eight moons line up. Right. And so the fat pitch, right? The fat pitch, right. 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 uh Making of Uh. excluding a good human from your circle because you can't figure them out.

There's no penalty for that. Right. Because there's a infinite supply. Right. Just to put it in. Mathematical way. Mathematically But but when you bring in a substandard person. It just Th there's so many drains, it's just negative. I wanna hit you with some of your

Big investing philosophies and give me the kind of the the punchy version of like what is that what does the phrase mean and how you use it. So um Let's do one. Heads I win, tails I don't lose much. Well, I mean I think this is classically uh comes from the patels, right? The it's a the the Dando philosophy.

Uh but but this is this is how we want to uh do all our bets with people, with stocks Uh with everything. Asymmetric. Yeah, yeah, basically where Uh we always want to look for things where the The odds are so heavily in our favor.

And uh so in investing Uh we do get these anomalies where you you take low. What's one that you've benefited from, or w what's an example in your portfolio, your career investing where you felt like you you s you recognize asymmetric upside, your your downside was cap, but 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 thirty thousand for my four one K, which I can make up. And at that time the uh credit card laws were very different where If you

uh declared personal bankruptcy, you got a cleate. And actually didn't affect your credit because you couldn't file again for seven more years. So everyone will give you money after you filed. Okay. So actually they've changed the laws now. But at that time, uh what I had uh I realized that starting a business has high rates of failure. Right. And so I said, How do I

um minimize the risk on that. And 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. Um I got my job already. They they want to take me back.

And I I clean up the slate. And and I'd also de risked it because the company was already cash flow positive. By the time I quit my job. Right. And so there was already a

pipeline and such. And so repeatedly what I've what I've found is Uh even even in investing Um I mean I'll give you an example. Like for example, I think in two thousand three or two thousand four, there was a steel company uh in Canada. Uh Ipsco.

And um I noticed that they were trading uh for three times earnings, right? And They the the stock was at forty five dollars.

They had$15 a share of cash on their balance sheet. They had no debt. And they had contracts uh over the next couple of years. Where they had said our earnings for the next two years are going to be fifteen dollars a share each year.

Um given because these were these were these were not forecasts. These were hard contracts, right? So I said, okay, so the stock's at forty five, if I just buy the stock and hold it for two years. I got forty five dollars cash in the company. Now it was a cyclical business.

Third year could be zero. Could be negative. But I said I I own all the plant, equipment, everything for free, right? So my

My I made the investment, I put 10% of assets into Ipsco, and I said, All I wanna do is I wanna see what Mr. Market does with this stock in two years. Just gonna hang out and see what happens. So We make the investment and then a year later the company announces that

We're gonna have one more year of fifteen dollars. Okay. So now you're gonna have sixty versus forty five, right? And by now the stock has kind of gone up and it's sitting at about ninety dollars. Double.

In one year. So I said okay, uh 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 stocks at one fifty five. Some Swedish company came and offered one sixty to buy them. five minutes later I sold the company and it moved on, right? So what I what I'm saying is that that's what we're looking for, right? We uh 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 uh

Last year, for example, I spent about Seven or eight months uh studying the coal industry. full adult world. hated and unloved.

More than anything else. I mean, uh, 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. Like this. If they're the business That

is going to exist for fifty years. on average was going to produce a billion a year in cash flow. That's gonna be distributed to shareholders. available to buy for less than two billion. Where do I sign?

Mm-hmm. Okay. That was a coal industry. Okay. And so It's like you

Your in auctioned markets. you repeated repeatedly run into these things where things you know, there's companies emerging from bankruptcy, there's Things that people just don't like.

Uh there's uh different reasons why things get mispriced. Right. You talked about like um Private markets. versus public auctions and why you think public auctions present more of these dislocations, more of these opportunities. Let me put it this way.

Um let's say this home of mine. was a publicly traded company. Okay, listed on the NYSE. Right. Every day its price would change.

Right. It would be wiggling here and there. And if I look at the Average uh public company on the New York Stock Exchange. The twelve month range of the stock

Might be Seventy to one forty. In twelve months. If I just throw a dart. at any company in the New York Stock Exchange. And I just look at the fifty to week range on that stock price. It's going to be

Sixty to a hundred. Seventy to one thirty. So like a fifty percent swing. It's a big swing, right? My home Which maybe by go up.

four percent in a year or in a good year maybe three three percent. Would be Vacillating in value. It would be Sometimes trading twenty, thirty percent more than it's worth, and sometimes trading twenty, thirty percent less than it's worth. And

If I had a realtor friend and I said to him, Listen, Um, 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 housework? He thought It's what two million. I said, oh, thank you. I call him the next day.

He said, Still what two million. Okay, third day. He said, Listen, idiot. It's two million. Okay. And after a month he would tell me Oh. It's moved to two million twenty thousand.

Okay. And then Again, he would be at two million thirty thousand for a while. Okay, it won't move because it's an intelligent buyer facing an intelligent seller. And so i you're not

Um a company like Ipsco available as the whole company. For the price you can buy some shares. Right.

Because the whole company There's an intelligent guy. The Swedish company paid four times that price. to to buy the company. Right. And so that's just the nature of so uh w 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. Uh you know, in a year in a year if I can make two good investments.

It's a good year. Okay, so we don't need a lot of activity. Right. We just need to be patient. And wait for the times when

Uh something weird. is causing a mispricing. Right. So Uh

Let me ask you a few questions. So Number one. Should In your opinion, should somebody just buy the index, uh low cost index fund, or actively invest? Uh the index is a really good way to go.

Uh the index is too dumb to know that it owns Nvidia. And it's even More dumb. it's even more done that it won't it'll never sell NVIDIA. Okay. Or its own Apple the last 10 years and never sold it, for example. So I would say for the overwhelming majority of humans, probably More than ninety nine percent of humans.

you're best off just buying an index. And I think that the uh the U S equity markets and the US financial uh services industry is so efficient.

that the frictional costs for honing owning an index through an ETF is, you know, single digit basis points, you know, less than Oh. one tenth of one percent, uh less than point oh five percent or one percent or so on. So it's very it's very small. And so I think it's very smart.

to uh go with indexing. Mm-hmm. Absolutely. Yeah, for for the vast majority of people. Yeah, for almost everyone. And for whom Who shouldn't do that? Well, if you are if you have the talent and the patience to figure out what a business is worth.

and then um you know have the ability to buy those businesses well below what they're worth. And patiently hold them. Uh those sliver of humans that can do that uh 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. Uh

Did you ever watch Seinfeld? Uh some episodes. The thing is that uh Elaine Elaine is on a flight. Uh with her boyfriend. Okay. I forget the name of the boyfriend and the boy and I think if you pull up g 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, um

Would you like something to read? He keeps looking at the feedback and says no. Um Do you wanna talk about something? And he says no, he just he just doing nothing, just looking at the seat back in front of it, right?

By the end of the flight She's broken up with it. Yeah. he would have made a great investor. That's what you need. You can be if you can be happy, uh or like you know, Pascal.

Uh Pascal had a great quote. He says that all man's miseries stem from his inability to sit quietly in a home in a room alone and do nothing. Right. Right. And so if you have this ability to watch paint try. watch the back of an airplane seat for a few hours and just be in a nirvana state. This is the This is the work you need to be doing.

fans in a subreddit on Reddit. I don't know if you've ever have you ever I haven't done much done much with it at all. So I w when I was doing my research for this, I'm seeing what do people think about you? 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 wanna 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 corner, everybody gives their stock. It's gonna be this, it's gonna be this, it's gonna go up. And they go to you and you go, I don't really give public stock tips like this. Um And they're like, Well, you got you're on TV, you gotta 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 then he just stayed steadfast. And I thought it was such a great compliment, but also so c uh so big of a contrast from You go watch Kramer or these guys and it's like You go on and it's like over stimulation. Telling you you gotta do something right now, the opposite of patients, basically. Uh is that should people avoid that? Yeah, I mean I I think that it's a big red flag if you're taking stock tips from some guy on T V.

I think that's just not gonna end well. You know, the guy on TV is not gonna be there when it's down thirty percent. Right. He's he's all somewhere. Not available. Have you seen the reverse Kramer index? Uh it's not just 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, uh so you know, uh I wish I wish Um in high school, so even middle school.

uh compounding was part of the curriculum from an investing point of view. And and you know just uh It's really simple, but but you know, the people people don't Pay attention to the mat, you know. There are three variables.

That uh matter with compounding, right? I mean One is the starting capital you have. The second is The um 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 seventy two. Which they kind of Mathematical just a very helpful rule, but explain it. It's a beautiful

Luckily one teacher in college She used to be a student, she came back to teach s 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 the one thing she did was she's like, you know, compounding is the eighth wonder of the world. And let me just tell you the rule of seventy-two. Very simple math. So the rule of seventy-two is just a mathematical quirk that happens to work. So for example, If I'm getting a seven percent return a year.

And I wanna know how long is it gonna take for this money to double? I can take seventy two divide by seven. It's approximately ten. Ten years. Ten years, right? Now if I have a ten percent interest rate that I'm getting And again, if I do seventy two divided by ten, it's seven years.

So you can you can switch between the years or the interest rate. And it tells you the other one. Right. And and this is um the most up important thing in life. is how long does something take to double?

Okay, because that basically leads to everything else. So for example, if you look at someone like Warren Buffett, right, he started He started his compounding journey. when he was like ten or eleven years old. I think he's he would say it's when he was seven years old.

He's gonna be Ninety four this year. Okay. eighty seven year runway.

So far. Right. Uh 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. Uh 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 let's take a situation

of someone who's just finished college, right? At twenty two years old. they got some job maybe like making like you know, seventy, eighty thousand a year or something. And they They put away ten thousand dollars in their four one K.

Right? They're twenty two years old. In An index. Right. That index has done ten percent a year.

Now what that means is the ten percent a year means that that ten thousand Will double every seven years. So let's take a situation where The person is now sixty four years old.

Right. No, they started at Twenty two? It's sixty four, so it's forty two years. Forty two years is six doubles.

Right. I do this to make it easy. Right. Okay, so six doubles, right? That's two to the power of six. two to the power of six is sixty four.

So that ten thousand that the person saved at twenty two is six hundred and forty thousand. At sixty four. But that's not all they have. At twenty three.

They save eleven thousand. That's Again sitting. At some big number. And you keep going.

And you know, sometimes we see these news articles, there's some guy who's a janitor of some college, and he gives four million to the college and Lived in a one bedroom apartment, whatever, right? Why are we surprised? Okay, if you actually run the math, he actually didn't even save that much. And he didn't even have that uh such a great compounding engine. It's not like he found Apple twenty years ago or something. That's not what happened. What what happened was that There was a consistency. And so actually my

Oh 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 four one K.

I got thirty thousand in the four one K, right? I'm gonna I'm cutting to what fifteen percent a year. My employer at that time was matching the first two percent. So it was becoming seventeen percent. Tax free, basically. It's

tax deferred and my income's going up over time. So I was When I first started working, my salary was thirty one thousand, right? So I'm saving Forty five hundred a year, right?

But If I was still working my my 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.

You know, d uh 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 think uh I I wish that Uh

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 started early. Let it be boring. Let it be a stupid index one vanguard and uh whatever. And uh and that's it. The uh the tortoise is gonna win the race. Right. You know.

What's the uh circle the wagons philosophy? Well the Circle the Wagons philosophy actually came out of uh When I was thinking about Buffett's letter last year to the shareholders, the uh twenty twenty three letter he he pointed out That

In fifty eight years of running Berkshire. uh there were only twelve decisions that he had made. that had moved the needle for Berkshell. Now Berkshell had a tremendous run. They've compounded, um I mean till recently were compounding it. twenty plus percent a year for fifty eight years. That's you know, if you're doing c uh if you're twenty percent a year. you are doubling every three and a half years. Okay.

And That means after thirty five years it's a Ten doubles. And uh fifty eight is another twenty three years. So you've got another uh what, one six

Six doubles. So sixteen doubles. Uh two to the power sixteen. Now the way to do two to the power sixteen is two to the power ten times two to the power six. Two to the power ten. Round number's one thousand. It's a thousand X, right? And two to the power of six is sixty four.

It's sixty four thousand times. What you started with. Okay. If you started with a hundred dollars, it's six point four million. Okay, hundred dollars to six point four million. Okay, so he he's saying

I would calculate in the last fifty years, fifty eight years, Buffett's made three or four hundred, at least four hundred different investment decisions. He's saying twelve. Are the ones that mattered.

Right. The God of investing. has a four percent hit rate. That's the God of investing. That's why we should index. Right. Well what are the rest of us mere mortals supposed to do? Now the thing is that the I was thinking about his twelve bats, right? And I I d I

thought about okay, which were the twelve and I think he never mentioned that, but you could guess which one. C's would be one of them, Coke would be another one, Amex, uh, Gillette, Cap Cities, Washington Post, you know, you can come up with the names, you know, uh uh bokshaway energy a G chain, hiding a G chain. Probably the biggest bet for them but paid off. Huge for them. What's the story with A G the there's something about the the recruiter for him? So what I realized when I thought about these twelve bets was It wasn't the buy decision. The buy decision is important.

The important thing was they never sold. C's stayed in the stable. For fifty years. Coke has been in the stable for 40 plus years, right? 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. Uh play bridge or whatever. Have you considered golf? Uh I have. Golf is great. And and so If you ask Charlie, he would say

the single best decision, best investment bookshop we ever made. was the search fee they paid. To hire a G G. Okay. Now a Jee Chin walks into their offices in nineteen eighty six, nineteen eighty five, actually.

never having worked in the insurance business, right? Um From scratch without them putting up a bunch of capital or anything. the business he's created for them.

Today. probably has a value north of A hundred billion. Okay. I mean, it just gets lost in bookshop because bookshop's so big.

But I I'll give you I'll give you an example of um Of a uh uh discussion I had with Charlie, I think th that's maybe Two, three months before he passed away.

So he was telling me that um Uh. You know, Boksha Buksha Hathaway writes uh super catastrophe insurance, like you know, uh insurance against hurricanes, uh earthquakes, and so on, right? And

Um many, many years uh there when people are looking for earthquake insurance in Florida, uh hurricane insurance in Florida. Uh Ajit will look at the rates being offered. Just take a pass.

Okay. B basically he would find his too comparative, whatever else people not. Giving it up, okay. Uh What he did in twenty twenty three Uh and they mentioned it at the at the meeting actually, is that

Um He wrote Um hurricane insurance uh on Bukshell's behalf.

uh reinsurance. with a maximum payout. of fifteen billion dollars. So If if these hurricanes had hit. Now uh basically the math is like this. I just want to explain how how Ajit's mind works.

Um, Berkshire would pay out on a big catastrophe like in sh uh earthquake uh hurricanes. three to five percent of the total insured loss incurred. So for them to have a fifteen billion payout. you would have to have had an event

with insured losses in Florida of three hundred billion. It's beyond Andrew and beyond Katrina. Right. It's beyond all of those, right? So it's it'll be need to be a really big event. to for them to have a fifteen billion payout. The premium he collected. uh to write that fifteen billion policy, take a guess.

Take a guess. Five million. He collected five billion. Okay. And I was sweating that guess. No, no, but but he collected that's exactly what he collected. How much did he pay out in twenty three? Zero. There was one that came through. My guess would be they might have paid out three, four hundred million.

Okay. Collect five billion. And and what Charlie said to me is Ajit's done this about six times. Okay, we're

He's picked the years. that he's written these policy because what was happening in most years is the premium offered was two billion. He just took a pass, right, right.

A lot of all the other insurers wrote that policy. Boksha took a pass. Right. No call strikes. Right. And and and now, for example, uh we've had Um We had some unusual um losses. Like for example, um that uh that ship in Baltimore.

Right. Now that's going to h end up being about three or three to five billion in losses, right? And it's the biggest maritime loss in global history. It's going to change premiums for ships in the future.

Books she will probably be writing. when everyone else is saying, I don't want to do that. You know It's like the cat who sat on 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 that's a What's the story of that? It's a quote by John Templeton. Uh and I actually uh there's a good friend of mine, Prame Watts, in Canada. They call him the Berkshire Hathaway of Canada. Wan Buffalo, Canada. And uh I had seen that

uh that plaque on in his 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 Uh want We 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. Right. So uh I'm always looking at what is hated and unloved.

Right. And usually you will get a lot of mispricing when something is hidden and unloved. Right. Uh, tell me about Bitcoin. Are you a fan of uh crypto? Bitcoin, are you a believer? outside my circle of competence.

And I would say that if you put a gun to my head, I would say it's gonna end badly. 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.

Uh but it has the full faith and credit. uh of the US government which is then backed by the uh hardworking American people. So basically I think that uh I think that it's um For me it's in the too hard pile, but I think for most people I would just say take a pass.

Right. Most people who have invested in Bitcoin couldn't really tell you. Um Why it's Or what it's gonna be worth.

And why it should be worth that. Mm. Okay. Uh 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 um I would love for you to to tell the story because I think most people have never heard of these people. So

Tell me about um Next sleep. Who's Nick Sleep or uh Junjunwala? Whichever is your favorite. Give me give me one of the the stories that Well I think Nick is uh Nick is a wonderful guy and there's a book called uh uh Richard Richard Wiser Happier that came out uh maybe two, three years ago. And then the chapter on him. Nick is very uh he's a recluse, he doesn't do uh interviews and such. I was actually surprised he even talked to the author, but it's worth reading the the book.

And uh You know, him he he and his partner Zach uh they would uh come into their office and basically Just sit. And read annual report after annual report, till they were blue in the face.

And um and and they would uh want to see if they could understand uh different businesses. And that exercise of reading those annual reports led them to the annual report of Amazon.

Right. And uh For example, I I've been a customer of Amazon, known Amazon for a long time. Excellent, familiar with the business, but every time I would uh take a cursory glance at Amazon, It looked very expensive.

on a earnings basis, or 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 Uh what

what should have been categorized as cap acts wasn't was just categorized as expenses. So the US government was really funding their growth because there were no taxes uh being collected. Now What What Uh Nick and Zach were able to do because they were just sitting in their uh office with no distraction reading year after year of Buffett's uh of uh Bezos' letters

And the basos letters are worth reading. I mean I think they're they're very uh clear. He clearly laid out In those letters. what he was up to. Right, and that he's

Basically that that He wasn't he wasn't uh Completely candid, but he was basic you could tell that the business had very high returns on capital and he was investing Oh.

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 didn't wouldn't sink the company. And um So for example, one of the bets they made Well the AWS. Right, which became a huge

And they didn't know it was gonna become as big as it did. But but basically Um, they also made a bed on fire, Amazon Fire, which didn't work. But basically I think what uh what Nick and Zach 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 um a bet on Amazon. And uh 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. Then we have the US.

The UK regulator was telling them that we see this position. as very high risk. Um 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 they were managing I think Two or three billion. Uh, they had made hundreds of millions in For Each of them.

And uh they said, look. Uh we are independently wealthy. We never thought we'd be here. We're young. Oh

why do we have to listen to some regulator, right? We could return all the capital. To All our investors. And uh What what Nick said is that when I return the capital

I'm gonna put everything into three stocks and these are three stocks He owned maybe a dozen stocks, but he was gonna go into three stocks. There's three stocks he was gonna put one third each into. was uh one third Berkshire, one third Amazon, one third Costco. Right. And

So he said I'm very comfortable with these three talks Very built to last businesses. And he did that.

And What what happened uh a few years after they hung up their boots Is um It's really funny. The uh Amazon still kept you know it's a juggernaut, right? Still kept going. And so

It became Seventy, eighty percent of the pie. So instead of them being one third each, it was eighty, ten, ten, for example, right? And Um Uh, 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 uh another business which has not done well. Sideways. And that goes back back to Buffett's point of Twelve. that worked in fifty-eight years.

is We are not going to if Warren Buffett has a four percent hit rate. the rest of us are gonna have a two percent hit rate. Okay. So

But you also need to get rich just once. So I think that what worked really well For Nick and Zach. 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 eighty percent or whatever. Still done very well. Right. And and I think one of the things that uh investors forget Is that Um if you look at the

the Walton family. Um 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 the entire net worth. in a single stock, right? So more concentrated than even Nick Sleepers, right? And um 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. Um None of them gives them sleepless nights, right? And uh so For example, in two thousand Um

eighteen 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 in the brotherwood is exiting Turkey. And I have a really good friend of mine in Istanbul

Is it very good investor, kind of classic Ben Graham investor. And I told him, Hey, uh Hider, I'd 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 the Your strongest conviction, biggest position. to the smallest position. And I said, Don't take me to see any companies Wait, you don't have money in. Okay. He said money should be a blast. So I went in twenty eighteen, first time to Istanbul.

The blufish on the Brosphorus was great. And uh all these different businesses we saw were great, you know, and I didn't really do much work, he told me what w places we were going to, but I just said, let me meet the companies first. I went back in twenty nineteen. And

We're 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 I'm not gonna spend time so as we're driving over, I said Hither remind me What company are we going to? What's the what's the Cliff Note version.

He said, Okay, he says uh this company gonna visit uh Ray S. has a sixteen million market cap, sixteen million dollar market cap. And he says a liquidation value of the business if you sold it today is eight hundred million. So I said um

Is it a fraud? He said he said no, I'm I'm invested in the company. And so I said, You're telling me The company is trading for two two percent. of liquidation value.

He said, Yeah. I said why? He said. It's turkey. You know, everything's cheap. I said, but this is the

Outlier cheap. Ray Sas basically is a very simple business. They uh the largest warehouse operator in Turkey. They rent out all these warehouses. These are 99% leased, inflation indexed, And um they lease to Amazon, Ikea, Car four Mercedes, Toyota, like blue chip clients.

And all of that, right? So I went and uh met the father and son who run the company and The founders. And um And then after that I went and visited a bunch of the warehouses.

And I couldn't find anything wrong with it. Uh basically Uh and he was absolutely. If you just went to any realtor in Turkey. And said

This is their eighty warehouses. Um give me a value in each one. You would just look at the rent. And he would tell you, Okay, you know, you're looking at about seventy, eighty dollars a square foot. for each warehouse. They had twelve square feet. It was about a billion dollars.

And there was two hundred million of debt. So we've got an eight hundred million liquidation value. And sixteen million market cap. Okay, and so then I thought okay, this thing probably Um, trades by appointment.

And Maybe can't buy the stock. But Turkey has very high trading volume because they're all gamblers. And um So I found that when I when I started buying the stock That

Huge volumes are available. And I I spent eight million dollars. to get a third of the company. Okay. Now

The way I look at it is that, you know, when you look at, you know, Buffett's letter with the twelve positions, or you look at Nick's leap with Amazon, right? Um The family that runs the business, they have maybe forty, forty five percent ownership, right?

Uh I'm an outside investor. At thirty three percent. I've no board sheet. But the way I look at races. is the way the Walton family looks at the Walmart stock. Right.

Uh I said uh and what what I've noticed since then, since twenty nineteen. Is they have increased the value of that business. So I would say that Probably today the business might be worth one and a half to two billion.

Somewhere in that range. And I think they'll can 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 Uh we are done. Uh We will keep that business. I don't care about the stock price. So the sixteen million market cap now.

is about five hundred million. You know, in four years and you know the Turkish Lira, which when we were investing it was five lira to the dollar. Today.

it's approaching thirty three litra to the dollar. Turkey litras collapsed. Um In dollars. We are up almost thirty X, right, right. But

uh the business is worth more. Right. And so the thing is that It's exactly what what Buffett says is that Basically Uh just leave it alone. And uh as long as that family and

That father and son are running the business. We will just Uh keep our stake. And uh and uh let it keep running. So basically the idea is that Oh

I'm also going to when I look back gonna find There were a few Things that move the needle big time. And the rest did. And and uh the key to moving the needle is

inactivity. And so that's what you you gotta be just you gotta Be very patient and be very inactive. Right. You talked about um Bezos being a capital allocator. Um

Buffett, obviously capital allocated that 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. Cause we know how maybe they how good their brand is or their product is. But

Uh 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 S you know, you're s sitting on a hundred billion dollars, you have to figure out some way to invest it. This is like, you know, so so tell me, uh Meta or Facebook. What do you think? How do you think they've done with uh capital allocation? Well, I think I think it was really surprising to see how

Um he did a one eighty. I mean uh I think uh Mark basically moved from being a spendthrift. To being a patel.

You know? Uh he I I mean literally I I just can't Uh uh I think it was remarkable to see uh an entrepreneur pivot that way. Right. So uh 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. Uh they I mean Facebook is a great business. You know, all the different uh 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.

Mm. And uh so that was just wonderful to see. So I think yeah, I think the uh capital allocation there is excellent now, right? What do you think about uh Elon Musk, fellow uh fellow uh Texas resident. Um The United States, this is one of the just the beautiful most beautiful things about the United States, is

Elon wasn't born here. Okay. And he wasn't educated. In his F

twenty years of life over here. We the United States got a finished, basically. And uh he's created tremendous value, tremendous jobs. and disrupted multiple industries. Um

I think I think Elon is uh exceptional. Allocate or Capital. Yeah, it's uh Terrific actually. And Tesla gets a lot of there's a lot of conversation. Is Tesla overvalued? Is it undervalued? Is it you know too frothy. I guess what's your take on uh when you look at a business like Tesla, how does your mind

Analyze a business like Test. It would it goes into the too hard pile. I I would I would I would I would say this. I would say that Elon is not human. Okay, he's beyond human.

Um if you just think about all the things he's done. I mean now the neural net, uh and uh and um You know boring company and uh you know, what he's doing with SpaceX and all that.

It's uh it's just really very remarkable. Uh the execution is off the charts. Um, and uh I think I think like I said, I think it's just uh Oh. unbelievable in terms of what he's been able to accomplish. So I have a lot of respect. I think I think Elon understands

capital allocation really well. Uh and I think uh all the businesses that he uh he gets involved 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. His hiring is so good. uh the teams that he's building are so exceptional. that uh I mean, when you're hiring a software engineer

Uh there could be an engineer who's worth ten billi ten million a year. And there could be another guy worth a hundred thousand a year. And he can tell the difference. Right. And so he's uh 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 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 and I 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 Um Uh someone asked him, I think, uh, what would you like on your gravestone? And he said uh I tried to be useful.

And I think Those those words I try to be useful. Um encapsulate Charlie really well. Uh, if you look at Warren Buffett's tribute to him that he did this year in the letter.

Um Charlie selflessly helped Warren. Uh a lot. I mean Without Charlie Munger, there's no Berkshire Hathaway. Um Even though you had a Warren Buffett there.

And I twice I went to Charlie when I was facing Um 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 Yeah.

Charlie always was trying to see How can I help? The world. uh in all the institutions that he touched. Uh, you know, his memorial was at the Harvard Westlake School in California and LA.

Um transformed that institution. He was at the board of the Good Sand Os hospital, transformed the hospital books are halfway transformed. I met so many partners you had in different businesses. always gave them the better deal.

And uh I I think in every way possible. He I think that was just absolutely correct. He Selflessly tried to be useful.

And You know, Charlie I don't think Charlie believed in God. I don't think he believed in religion, right? And I think he didn't believe in legacy. He I think he believed that when we're gone, we're gone. It's

Ashes and dust. Right. 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.

Right. Um six days uh six days before he passed away, he was buying a stock. Okay. You know? A stock we discussed, you know, and uh I'd send a write up on. So uh 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.

uh many decades ago he was almost blind in the other eye. Uh He cared most about reading. Right, that was most important to him.

And I saw him one time and the second eye was giving him a very serious problem where he could have gone blind. This was maybe ten years ago in the second eye. even when he was facing the prospect of complete blindness. Um He was so stoic.

Never Said Oh poor me. Self pity. His response to me was I'm gonna have to learn Braille.

You know you know, that's that's how he was gonna deal with it. You know. And so I think that there was I think it's just great uh We have such a big rich body of work that he left, poor Charlie Dalmanac.

And uh I think a lot to learn from him. Well thank you for sharing that and uh thank you for doing this is hopefully your you know, process of uh of sharing some of your wisdom. So thank you for doing this. It's a pleasure. I really enjoyed the session. Thank you. Okay.

Sounds good. Thank you. I feel like I can rule the world, I know I can be what I want to I put my all in it like my day's off On the road less travel never looking back

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