I manage $1B. Here's what I'm buying.

00:00:00What percentage of Americans who investin stocks do you believe are goodinvestors? Well under 1%. The game weare playing is transfer wealth from theactive to the inactive. If you have thattype of a temperament, it is orgasmicactivity.Okay, if you are even a slightly aboveaverage investor, you can't help but getrich over a lifetime. What's the mistake[music] that smart people are making?Many people die at 25 and are buried at75. I saw Charlie make investments 6days before he died. This is like lifeadvice disguised as investing advice.Yeah. Just quick reaction bullishbearish on the S&P index right now.Bearish. AI, how do you think about itas an investor?>> Invest in the pickaxe makers because theAlphabets and Metas of the world areplaying a game they haven't playedbefore. So, I want to ask you thehardest question, which is

00:01:00Mohnish,round three. Here we are, elevated asalways. We're on the pitch.>> [laughter]>> What percentage of Americans who investin stocks do you believe are goodinvestors?Well under 1%.>> [laughter]>> But the good>> And why is that?>> But the good news is soa large number of investors invest inindex funds.>> Right.And index funds give you a great returnwithout doing any work. So, you don'tneed to be a rock rocket scientist orunderstand businesses or any of that.And you geta pretty good outcome. Are you countingthem in the 1% or are you saying that'sa separate group?>> about the ones who are actually pickingstocks, right? And so, I'm just sayingthat you can take the approach of buyingan index fundand you're going to be ahead of 90 pluspercent of the crowd.>> Right. Which is awesome, right? I mean,just think about doing some activitywhich takes no brain cells and gettingahead of being in the top 10%>> Right.But if you decide that you want toactually study businesses and theninvest in them after studying themin that universe of people doing that,there'll be a very small sliver whowould do well with that. Yeah. What'sthe mistake that smart people are makingwhen it comes

00:02:15to investing?>> It's not a mistake, it's the lack ofpatience. Somost of the nuances that would lead to agreat investment resulthave to do with temperament. They're notrelated to IQ or other things, but theyhave to do with temperament. So it allcomes back to watching paint dry. Right?So when we make an investment in acompany nothing may happen for 3 yearsor 5 years.You know, it's just the just the natureof the beast is that it may um it maynot do a whole lot for a while. And alsouh sometimes you made a it's like manytimes you made an investment, it's amistake.And you need to at some point reversethat mistake. So so there is activityneeded appropriately.Uh but basically the less the activitythe better the outcomes. You gave me oneof the commandments, one of the truthsabout investing, which is thou shall uhenjoy watching paint dry.>> Yes.I asked I called your daughter inresearch for this podcast because I knewyou were very into mental models andthese frameworks of ways of thinking.Yeah. Uh that produce benefits. I said,"What's one that he loves?" And he saidshe said

00:03:31"The mistress is always hotterthan the wife." So [laughter] explain.>> I I I didn't want to say that in frontof my daughter, but unfortunately I did.>> [laughter]>> That was the first one she mentioned.Yeah, so umwhat we own is the wife. We live withher every day.And what we don't ownis the mistress.>> And the unknown hasuh exciting attributes. And so, one ofthe things we have to keep in mind isthe wifeis someone we know extremely well.And we may be discounting some greatattributes she has.>> Mhm.The mistress is someone we don't knowvery well.She just looks hot. Right. We don't knowall the other nuances about her, youknow, temperament and other things andwhatever else.It's very tempting for an investor tosay, "I own this company,but I think this other company, which Idon't own,is better and I should make a swap."My friend Guy Spier says thathe's very reluctantto take any actions on his portfolio.And not being interested

00:04:46in takingactioncan give you a huge leg up. So,sometimes we do need to take action, butin general, you have toreally be convinced uh prettyunequivocally Right. that the mistressis truly hotter. Right. Right. And uhnot just the appearance of being hotter.That is a difficult nuance to actuallymaster in real life.The idea of the wife versus the mistressis you have to have a very high bar foraction. It's not that there's no action.Yeah. It's that the bar needs to be veryhigh to have the conviction level. Youneed to become comfortable passing oneverything below that bar. Yes. And Ithink in general, most of us would dowell to raise our standards about allthings in life. The people that we'rearound, the investments that we make.>> Exactly.>> This is actually like life advicedisguised as investing advice. Yeah.Right?My dad used to say that to have a greatlife, you need one good wife and onegood friend. Mhm.And so, less is more.Buffett says thatif you hang out with people better thanyou,you get better. And if you hang out withpeople worse than you, you get worse.There's a gravitational pull either way.So, the good news is we don't need manyof these. But, what we should be doingis

00:06:01we should be trying to make sure thatour relationshipsare ones with people we have deepadmiration for. People that can make usrise. Right. And I I feel that, youknow, I randomly stumbled ontoinvesting. I'd never been in this field,etc. And I remember So, there's anothermental model, which isuhvery powerful model.>> [music]>> All right, let's take a quick break cuzI got a little freebie for you. So, ifyou're listening to this episode and youlike what Monish is talking about, youmight be like me. You're trying to takenotes. You're trying to remember theseprinciples that he's talking aboutbecause the dude is just a wealth ofknowledge when it comes to investing.Well, the fine folks at HubSpot listenedto this episode. They took thetranscript. They put down the nineprinciples that he talks about as wellas the examples that he have. And theyput it all in a PDF for you. So, youdon't need to take notes. They did itall for you. You can read that, learnfrom it. That's the much better way toget more value out of these episodes.It's in the show notes below. Just godownload that and enjoy.Charlie, you should talk to me aboutintroduce randomness in your life.Introduce randomness>> Randomness in your life. And just totell you the impactthat had, which I didn't even understandthis when it had the impact. In '94, I'mat Heathrow Airport with my wife and I'mlooking for something to read on theflight back.And I pick

00:07:16up one of Peter Lynch'sbooks, One Up On Wall Street. And I'mnever invested in a stock, not reallyinterested in investing, don't even knowmuch about it. I read the book and lovedit. Okay, I'm an engineer running a ITcompany, right? I said, "Oh, I want tokind of read more of this, right?" So,there was another Peter Lynch book,Beating the Street. I read that. And Iloved that, too. And then, there's nomore no more Peter Lynch books.But, in those two books, in one of thetwo books, he talks about Buffett.Right? And I'd never heard of whatBuffett. So, then I said, "Let me findout about this guy." And I was verylucky, the first couple of biographieson him had just come out the yearbefore.And then, I read those, then that led meto the Berkshire letters, thepartnership letters. Huge world openedup, right? And then I started to investusing that approach. So, I'd been doingthe Buffett investing and all that, andreally kind of overdosed on it.And in '97,the thought came to me,"Should I go to the annual meeting?" AndI was saying, you know, the transcriptsget published and all of that, and Idon't know anyone, and I have young kidsand all of that. So,I was very much on the fence whether togo to the annual meeting or not, right?And I decided in the end,

00:08:31"Let's go."Okay, let's see what the hoopla was allabout.The annual meeting opened up another bigworld, right? Andnow,some of my best friendsare folks I met in Omaha. Right. So,reading the Peter Lynch book introducedrandomness. And one thing I I came torealize, I tell people when they'regoing to the annual meeting,that when you're flying to Omaha on aFriday, the two people sitting next toyouare both going to Omaha for the meetingas well. And they're both above-averagehumans. So, just start talking to them,right? Because it's not the averagehumans going there, right? Pre-filtered.And so, when I look back nowon my life, so much of it has come fromthe whole Buffett orbit, right? And theBuffett orbit, what I realized is when Igot to know Charlie Munger,and I started playing bridge with him,I got to know Charlie's friends. I usedto have dinner with him, and I one byone I met a bunch of his friends.Charlie's friends were some of thehighest-quality people I've ever met.They were much older,but I worked on, you know, buildingthose friendships.And that was such an awesome thing.Right. And literally,

00:09:47every time when Italk to some of these guys,and the way the conversation goes, Isay, "Wow."You know, hang out with people betterthan you, introduce randomness. So, thisis what Munger calls the Latticework ofMental Models. So, when you startputting these things together,and you start using them all at the sametime,that's when 1 + 1 becomes 11.Or if you put four models together, it's1 + 1 + 1 + 1 is over 1,000. That's whenyou start getting what Charlie callsLollapalooza effects. And so then that'swhen you get a huge leg up on humanity.There are other people who may be lotsmarter,other people who may work a lot harder.Let's take Elon, for example.So, I forget what he calls it, the uhidiot factor or something, but he idiotindex Idiot, yeah, the idiot index,right? That's right. So, what he says isthey look at some part that they need.And um they'll say, "Oh, this part is,you know, $5,000." So, Elon says tothem,"What are the materials that go intothis part?">> Raw materials. Raw materials. And whatis theprice of the raw materials on the LondonMetals Exchange?>> Right. Okay.And they'll

00:11:02calculate that and say,"It's $270."So, they said then they'll say, "We'regoing to make it ourselves."And we're going to make it for 500bucks. Right. Right? And so, the thingis that none of his competitorsthink like that, right? None of themhave this idiot index. Without that,there's no Tesla, there's no SpaceX,there's nothing, there's no BoringCompany, any of that. So, it's it's oneof those corefoundational models, right? But theother thing about humans is that Boeingis aware of this modeland all the car companies are awareaware of this model. It's not in theirDNA. Right. This is not how they think.They are not going to adopt it. So, theother thing another mental model tounderstand is humans are very poor atcloning.They all understand that Elon has kickedtheir ass.They also understand why he kicked theirass. Yeah. They know everything. He's anopen book. Okay? You you talk to peoplewho work They literally published thebook, yeah.And what you need to do is also known,but after knowing all of that,there is no movement towards that.>> [laughter]>> Right? There's no movement>> By the way, we wouldn't be here rightnow if not for cloning. So, the story ofthis

00:12:18set right nowis that my friend Chris uh ChrisWilliams said he did a podcast here.He sent us a video like I'm doing thiscrazy shoot. LED wall, 3D I've got thisfilm crew here, blah blah blah. He sentus a video of it and I was like, "Wow,that looks cool." But, my first reactionwas, "Buddy, it's a podcast. What are wedoing What are we doing? Why why do youDoes anyone really care if it's inIMAX 4K? Like, does that really make adifference?" And, you know, that seemslike a lot of effort a lot of cost and Isort of wrote it off. So, then it comesout first time I click and then I seenot even before I click the video I seethe thumbnail I'm like, "Wow, that looksdifferent." So, I click cuz I'm a lizardbrain human and if something isdifferent and I click it before I eventhink. And then I'm looking at it andI'm watching this thing and it'sinteresting and it's entertaining and soimmediately I recognized, "Oh, a mistakeon my part." Like, I thought I thoughtthis was not important. Turns outactually this is important. So, you hadto travel a little bit in the sense thatyour first reaction was stay in yourcomfort zone, right? But, the secondleap you made, which is after seeing it,you acted. Right. So, from admiring itto acting it is a huge leap.

00:13:33It's like90% of humans will not do that. So, SamWalton, not that smart a guy.Okay?>> [laughter]>> Uh very hard>> Founder of Walmart.>> Yeah, very hard working, all American,but not that smart, okay? And nooriginal ideas. Okay? Every single thingat Walmart came from somewhere else.Okay? Everything was copied. Uh he goesto meetuh Sol Price, who was the founder ofPrice Club, which is the predecessor ofCostco.And he meets Sol Price, and he looks atPrice Club,and he says,"No brainer." He sets up Sam's Club.Okay? And Price eventually sells toCostco, and so now we have Costco andSam's, right? And Sam Walton would tellyou in 10 lifetimes he could never comeup with the concept of a Sam's Club.Right.>> He could not come up with the concept ofa Walmart. Walmart came from Kmart. SamWalton said,"There is no human who has come beforemewho has stepped into more retail storesof my competitors than I have.">> Right. "And no human after me>> [laughter]>> will ever beat that

00:14:48record." Okay? So,anytime he traveled anywhere, he wasgoing on vacation with his family andsaw he's passing some retail store, he'dstop his fam stop the car, tell them,"Hang on here." Go do his 15-20 minutetour of the place, and come back andmake notes of what he saw, right? Onetime he takes a bunch of his managersinto one of theneighboring competitor stores.And they come out of the store, and oneof the managers says to him,"Sam, that was such a poorly runoperation." Because they could just seeit, was just a mess compared to whereWalmart was. And then Sam says to him,"Yes, but did you see the candledisplay? The candle display wasfantastic, finding the one goldennugget. Sam said,you can learn from anyone. You can learnfrom the biggest idiot operator. Samwould go early morning at like 5:30 inthe morning to the Walmart distributioncenters with donuts. Okay? And he'd sitdown with the drivers because thedrivers were going to the stores everyday. And he'd tell them, what do you seewhen you go in? And then they thedrivers would tell him, well, such andsuch store, I saw the garbage, there wasstuff thrown out that shouldn't bethrown out, Sam. Okay? And Sam's makingnotes of all this, right? And then he'dgo and, you know, fix all this. So, butwhat I'm saying is thateverything at Walmart

00:16:03came fromsomewhere else.>> Right.The reason cloning works so well is noone's willing to do it.Look at Tesla's market cap and look atthe market cap of the next car company.I believe it's more than the next 15 carcompanies combined.>> of them combined. You can take the wholeindustry combined. You know, they won'tthey won't get there. And on SpaceX, soif you look at Blue Origin and you lookat SpaceX, they have completelydifferent approaches to how they dothings. SpaceX wants to blow up rockets.Their focus is to blow up rockets. BlueOrigin focuses on not blowing uprockets.>> Right.And he's miles ahead.>> Right. And in fact, he's clobbered theindustry, you know, the whole landinglanding these things backwards and, youknow, reusing them and all that. Peoplelaughed at him at that. And he got itdone. I'll give you a story of two ofyour models combined, as you said. So,introduce randomness. There was a periodof time after I sold my first company, Iwas thinking about what to do next. Ikept shuffling through ideas, couldn'tfigure out which one to do.And I realized I'm sitting here in SanFrancisco and I'm meeting the samepeople, talking about the same things,going to the same tech events over andover and over again. And I had this gutinstinct of I need to introduce morerandomness to my life.So, I hear

00:17:18about this event called FarmCon, a farmers conference in KansasCity.Sign me up. I'm going. So, I go and I'mthe only tech guy andyou know, I look out of like a literallyfish out of water. Dresses I'm dressingwrong. I don't know anything aboutfarming. I even get there and I'm like,I don't know what the hell I got myselfinto. I took Ben with me and we'resitting there. They're talking aboutsoybean futures.I [laughter] don't I don't even knowwhat soybeans are. And so, I we'recompletely out of water. But, it was agreat way to just shake up the snowglobe a little bit. Introduce randomnessand serendipity. When we're there, wemeet this guy.And his name's Kevin VanTrump. And hewas the guy who owned this conference. Iwas like, how did you get all thesepeople to How did you get so manyfarmers to come? There's 4,000 farmershere and they all love you. How do theyeven know you? And he said, well, I'vebeen writing this newsletter for 20years for farmers. Half of the thing isjust memes, just funny jokes. Becausethe farmers just want to laugh in themorning and then half of it is hisletter about like what's going on in themarkets today for farmers. And so, we'resitting there and we we've essentiallyleave one of the conference roomsand we decide to clone because I metwith you for the podcast and you hadthis great analogy of who's the dumbestguy in the world? And we decided thatthe dumbest guy in the world is the guywith the gas station across the streetfrom the more successful gas station.And it's like,you could be unsuccessful,

00:18:34but if you'restaring at the gas station across thestreet and he's winning and he's doingeverything right and you're just notdoing those things,that's on you. Yeah. And so, I'm sittinghere and watching Kevin VanTrump andhe's got his newsletter for farmers.And I at this time crypto had juststarted becoming very interesting. Isaid, you know, Ben, what if we createda a newsletter for crypto just like thisguy's done for farming? We'll do it forpeople who want to keep up with thecrypto news. It'll be half memes. It'llbe half news. Yeah. And let's do thisLet's write the first edition tonight.So, we wrote the first edition while wewere there and we named it somethingthat was themed after uh the conference.It was called the Milk Road. Like adairy name.>> [laughter]>> And in 1 year, we built the largestcrypto newsletter in the world.>> Oh, great.>> And we sold it for millions of dollarsand never hired an employee. We had oneemployee. It's like the best business Iever did at the time just in simplicity.Yeah. Um and it was all because westrung together two of these models.Just introducing randomness and thencloning on top of that. I think thathumans complicate things a lot.McDonald's had this whole big departmenton figuring out where to put the nextMcDonald's, right? Location veryimportant.Burger King had two guys. They justlooked at where is the McDonald's going?And they would look at where McDonald'sare going, they'd put it across thestreet.>> Right. [laughter]>> Right? And that was their model.Phenomenal

00:19:49because all the work'salready done. Right.>> You know, cloning gives youa huge advantage. Now, another bedrockmodel. I I think no mental models workwithout this model. Which istake a simple ideaand take it seriously. Right? This is tomenone of the other models, cloning or notusing Excel or anything else, worksunless you buy into this first model.So, you have to go all in, right? I mademy first trip to Turkey purely on alimb, kind of like you going to thefarmers Yeah. conference. Just becauseit was screening cheap as I I justwanted to take a look at this marketwhich is screening so cheap. And thatwas in 2018. What I learned is that theaverage Turkish company, public company,cycles through its float every 17 days.Which means like let's say a founderowns 40% of company, the other 60%>> The shareholder base will just turnover.>> Literally about 4% of the shares aretrading every day. Okay? And every 17days you got new set of shareholders.Okay? Buffett has a quote that the stockmarket is a mechanismto transfer wealth from the active tothe inactive. Okay? [laughter]This is hyperactive. Okay? Now, if youlook at something like BerkshireHathaway

00:21:06and you look athow frequently its shareholder basechanges, it might be the slowest in theworld. It might be like 10 years orsomething or more for the float, right?And here you have 17 days, okay?And then I even looked at places likeIndia, right? So,I actually comparedTurkey and India and what I realized isin Turkey almost all the investorsare gamblers and speculators. They wantto buy at 10:00. They want to sell at3:00 and they want to make 10%. That'stheir model, okay?Whereas in India what I found is thatout of 5,000 public companies,there's maybe 100, 150 companies withgood governance that are investable.Anda lot of research has been done on thoseby a lot of smart people in Indiaand they've pounded into those companiesand they trade at stratosphericvaluations, very expensive.I would look at a Coke bottler in Indiaand I'd look at a or a Pepsi bottler inIndia and I'd look at a Coke bottler inTurkey.And the valuation differentials weremassive.Same business and I'd look at a airportoperator in Turkey,

00:22:21airport operator inin India, huge valuation differences.Again, because here everyone was lookingfor long-term and all of that. So,you're picking like poker tables to sitat.>> So, when you take the first model, takea simple idea and take it seriously, Isaid India, zero.We're not interested. Okay, even thoughI'm Indian.Turkey, I'm going all in. And so, what Idecided is to be an inch wide and a miledeep.And so, I said,I understand the nuances of the Turkishmarket. I want to study everything inhere. I want to be the person who who'sThis is my Moody's manual,right? Go through every single thing.Right? And what I found is whether it'sa useless company in Turkey or a greatcompany in Turkey, they're all cheap.>> [laughter]>> So, this is great. We'll focus on great.Right? And no one's interested. You gotall these people like buying and sellingshares. And so, we were able to makesome investments which we couldn't havemade anywhere else in the world atvaluations we couldn't have made. Youknow, just the simple thing of the takethe first model and it gives you anedge. So, I think the the mental modeljust carries

00:23:36so much weightthat it makes your journey very light.Because they just carry the They do theheavy lifting.And all you have to do is not violatethem. So, I want to ask you aboutviolating them because sometimes I couldsee a world where they clash or that thedefinitions get fuzzy. So, for example,one idea is invest you know, in yourcircle of competence.But like with Turkey, it wasn't yourcircle of com- you sort of made it yourcircle of competence. So, in that senselike how do you think about that likecuz it sounds like some of the best betsfor you and others have been where youdecide to go get smart about a spacebut you were complete beginner in thatspace maybe6 months prior. Well, so like forexample, before I went to TurkeyI had already studiedCoke and Pepsi bottlers. I'd studied theCoke and Pepsi business quite a bit justbecause Buffett had made the investmentand the Cokeconcentrate syrup business isphenomenal. It's a software company. Youknow, it's a 80% margin. It's a greatbusiness.And the the bottlers not as good abusiness as Coke, but they areoligopolies. And most of them do reallywell as well. I mean, they have morecapex and all that, but it's a goodbusiness.

00:24:52So,when I'm looking at a uhCoke or Pes- Pepsi bottler in the world,one of the things to keep in mind isthey had to be approvedto become a Coke or Pepsi bottler. AndCoke and Pepsi are very analabout who they're going to allow,especially at this stage, becausethey've got global brands and all that.So, to me it was relatively easy thatSo, when I went in to, for example, theCoke bottler in Turkey, it wasn'tsurprising to me that the managementteam was super high quality. Themanagement team was multinational. Theyweren't Turks. Like the CFO's fromUkraine. Right. And he had worked inDelhi before that and all of that. So,you could just see that this was aglobal team running this business andall of that. So, similar to the airportoperator, I looked at other airportoperators. So, I started by usingguardrails. Right. And I focused on thethe simplest businesses, which were onesthat were uh the easiest to understand.And And one of the things aboutinvesting to also understand,the businesses that you spend the leastamount of time studyingtend to be the ones that make you themost money.

00:26:07Because they tend to be the simplest.They're obvious and all of that. Butyes, you have to couple the circle ofcompetencewith the introduction of randomness.>> Right. And so, those two are not inconflict with each other.The introduction of ra- randomnessis how you grow. And that's how you mayactually the circle is going to expandover time, naturally going to expand.But you don't need to focus onexpanding.Hey, real quick, if you're watching thisepisode and you like it, I have only oneask for you. This podcast is entirelyfree. We never charge anyone anything,but there is one thing you do have todo.And that is what we call the gentleman'sagreement. You must go ahead, hitsubscribe, like the video, leave acomment. That's all we ask. Thegentlemen's agreement, we'll hold you toit.In your book, you have some greatstories. The one I remember is theAmerican Express The salad oil crisis.>> oil crisis. I didn't know about this.It's a little bit before my time. Tellthis story. It's an amazing story.American Express at that time hadThey've always had number of differentbusinesses that we don't think about.One of their businesses was asset-basedlending business.And there was kind of a a crooked guy.He basically got them to finance

00:27:23hisinventory of salad oil, where he said,"I've got these warehouses filled withsalad oil.">> not a financier. A literal salad oil.>> Yeah, salad [laughter] oil, right.>> In barrels.>> Yeah.And so they had financed it, and therewasn't any salad oil. It was seawater.Okay? So>> Somebody figured this out? How did theyknow this was There was just seawater inthe barrels?>> Well, later it came out becausebasically when they went to collect, youknow, the guy's already taken the money.He's a he's a crook. He's gone. And whenthey went andgot the asset and looked at it, theyfound that they they got nothing.>> [laughter]>> Like they basically had been duped.>> Right. And it was a very significantloss for Amex, where big dent on thebalance sheet. So obviously when theywhen they reported it, the stockcollapsed. And Warren felt that the bigvalue of Amex was in its brand. Hisquestion was, is confidence shakenin the credit cards? So for example, ifif I'm a restaurant owner, and I acceptthe Amex card,in effect, Amex owes me money. Mhm.Right? So what he did is he went to anumber of different restaurants inOmaha, and just stood by the cashregister, and just wanted to see whetherthe restaurants had any concern aboutaccepting

00:28:39the Amex card. And he saw zerozero concern of any kind. So he feltthat the moat of Amex was unaffected andthe trust and confidence in the brandwas unaffected. And the stock on theother hand had collapsed, right? So, hehe actually put 40% of his fundinto Amex.>> 40? 40. 50% of a single stock. It mayhave been about40 million, 30 40 million of capital.>> Right. Uhso, maybe like 10 15 million orsomething went in.The crisis abated, you know, Amexstarted to kind of get their balancesheet kind of straightened out and allof that and of course the stockeventually because these businesses werefantastic and their credit card businessat that time was growing gangbusters.You know, it was just on on a rocketship. Eventually the stock andyou know, the interesting thing is hemet Walt Disney once just before Disneydied. And then he he he felt funny. Hewent to see Snow White. He said, "I wentto see Snow White with my briefcase."Because he said, "Everyone else is therewith their kids. I went to actuallystudy the business." Okay, study whatSnow White Snow White's all about. Ithink he owned like 5% of Disney and ofcourse for him at that time there was

00:29:54nobuy and hold. It was just you know, lookfor the next cheap thing. So, he he hada significant ownership in Amex,significant ownership in Disney. He soldall of these at a good profit.>> Right. But, he could have just carriedthem on. If he had kept them for 20 30years, they would have done extremelywell.>> I'm trying to piece together this puzzleof what are some of the the traits orsome of the behaviors that can lead togreat investing. When I think ofinvestor, I think of finance, strategy,numbers, Excel, spreadsheets. That'swhere my brain goes. That's the mentalmodel, the picture I had in my brain.What you're describing is like he goesto the movie theater to observe. Hestands outside the restaurant. He askedthe guy a question. And it is these arenot spreadsheet This is like journalism.It's research It's first hand research.It's maybe gut. I guess for you, do youdo the same?Tell Teach me about that. One of my 10Commandments of mental models is thoushall not use Excel.>> [laughter]>> Right? And another model is that if youcannot explain your investing thesis toa 10-year-old in about four sentences sothat 10-year-old can understand it,it's a pass. Right. Right? So, basicallyat the end of the dayevery

00:31:09investment has to be very simple.It starts off being this complex thing,but when you've, you know, understoodit, it needs to get down to those foursentences.>> Right. That to me is one of the mostinteresting parts of investing. So, Ithink the way it works is that we have50,000 stocks around the world. So, ifyou're just investing in public markets,the data set is too large. No one isever going to know 50,000 companies. Alarge number of those businesses,something like 90 or 95% or 98% of themshould go into the too hard pile.So, Buffett has a box on his deskwhich has too hard written on it, right?And I think one time when I visited hisoffice, I told him, "Warren, the toohard box is empty, right?" And he alwayssaid, "98% goes in the too hard pile."And he immediately took a bunch ofpapers and put it there. He was like,"It's It's full. It's all full."Um [laughter]In In his case, he made the metaphorreal, right? With the too hard pile. So,most businesses that we would encounteror look at, usually there'd be twoproblems. One is it's either outside mycircle of competence or it's too hard.

00:32:25And this is an exercise in honesty,inner scorecard and all of that, whereyou you have to be honest with yourselfand not be delusional that you knoweverything about everything. So,exercise in humility.Peter Lynch used to saythat when you're looking at businessesto invest in, he said, "Make a list ofeverything you use."Right? What shoes do you wear? Right.What clothes do you wear? You know, whatbrands Where do you go to eat? So, makea list of everything that you consumeand study those companies.Because many of those companies arepublicly traded. Becauseit's very difficult for a companyto get even a dollar from you. All of usas humans are very discerning about howwe want to spend our money. And we makeour choices. And those choices are veryspecific. So,if you are already a consumer of theproduct, you understand the product.That gives you a basis to try tounderstand the business because you area consumer of the product. And then youcan kind of go from there.We are in a businesswhich Buffett says has no calledstrikes.So, if you're a baseball player,three strikes are out. Which means ifthe ball is

00:33:40within the strike zone,you have to swing at it.Even if it's like not in the sweet spot,you have to swing at it.In investing, we can let 10,000 ballsgo.So, it's only when we get the fairestpitchin the center of our sweet spot, do weneed to act. And if those conditions arenot satisfied,just let it go.What you mentioned is entrepreneurs areall about action. Investors are also allabout action. The action is below thesurface. So, basically,a person like Warren is spending all histime studying businesses.Now, usually not much comes out of it,right? Because we only see the whalewhen it surfaces. But whales areswimming the time.And the activity that investors need toenjoy if they're going to, you know, begood at this fieldis justturning the pages one after the otherafter the other. So, there used to be aracetrack in Nebraskacalled Aksarben, which is Nebraskaspelled backwards. Okay? When I used tofirst go for the Berkshire meeting inthe '90s,

00:34:56early 2000s, the meeting usedto be at the Aksarben racetrack,about 10,000 people.But Buffett used to go to that racetrackwhen he was 11 or 12 years old.And what he used to do was he used togather all the tickets that were lyingon the flooror the trash cans that people had thrownaway.And he'd go homeand study each ticket one by one. Andsome drunk may have thrown away awinning ticket, right? They may not havelooked at it carefully. Some things inhorse racing are difficult, you know,win, place, show. Or it could be a placeor a show and could have still won. Andthat sort of thing. So, he'd gather upthe few tickets that he'd find aftersifting through this whole mess thatactually winning tickets. Because he was12, he couldn't go to the window toclaim them because you had to be over18. He'd give it to his aunt, AuntAlice. His Aunt Alice would go to theracetrack and collect on those ticketsand then give give him the cash.And when he was in in his early 20s, hewent through the Moody's manuals. And oneBay,I bought one of these Moody's manualsbecause they don't publish them anymore.But they're on very thin paper, verysmall text.And they have uh some financials

00:36:12aboutthree or four companies on one page.He went through all of them in the early'50s two or three timesturning one page at a time. And what hewas looking foris he was looking for anomalies.AndAjit Jain made a comment this time atthe Berkshire meeting.He says that, you know, when we hirethese people in the insurance business,the instructions I give them is wheneversomeone comes to you for any deal,always say no.Say no to every single thing presentedto you.And then he says,you'll see a dealthat hits [snorts] you in the head likea 2x4.And you can't believe the deal. Right.That's when you bring it to me.And then we look at it. Okay?And investing is the same way. So, whenhe was going through these Moody'smanuals, he's looking to get hit in thehead by the two with a 2x4. And he foundthis company, for example, WesternInsurance.The stock is at $15. They made $25 lastyear.And like $40 of cash on the balancesheet. Okay?That's hitting you in the head with a2x4. Right? So, he pulls that out.Invests in it. You know, looks at it,goes and understands

00:37:27more of the companyand all of that.And then the next thousand companies,nothing.Then he again finds something.Recently, last four or five years, hemade the bet in the Japanese tradingcompanies. Five Japanese tradingcompanies.Those came out of something like theMoody's manual called the Japan CompanyHandbook, which is a English publicationupdated once a quarter.Two public Japanese companies on everypage. It's thick book. Right? He's beengoing through the Japan Company Handbookfor at least 20 years.Okay?This is the first time after 20 years ofgoing through it that he made thesethese bets. But it was a huge home run.Because again, hit with a 2x4. So, theseJapanese trading companies, in thiscase, what he did was all of them had adividend of 8% or 9%.He borrowed the entire 5 billion that heput in these companiesin Japanese yen. So, it's 100% leveredat half a percent a year.The companies are paying 8 or 9% a year.So, he's getting 7 and 1/2% cash>> Right. just for holding theseinvestments.Then in the next3 4 years, they double their theirdividend. So, now it's 16%and the stocks doubled.So,

00:38:42the 5 billion became 10 billion andthe 10 billion is paying 800 million ayear.Okay. [laughter]And it wasalmost fully risk-free. Right.>> Right? So, basicallythat is the nature of investing is thatthe game we are playing is there iscontinuous activity of a different kindthan the way an entrepreneur would. But,it is orgasmic activity.Okay? [laughter]If you have that type of a temperament.Right.>> Right? If you really enjoy looking forneedles in haystacks, Right. then thepayoffs are huge. At theBerkshire meeting, Buffett had this linethat I love to hear. He said, "The stockmarket is like a church with a casinoattached to it.">> [laughter]>> And he said,"Seems like a lot of people that casinois getting crowded. Seems like a lot ofpeople are visiting that casino,you know, nowadays. And I'm curious whatyou think about that and especially inthe context of you've got predictionmarkets and Robinhood and options andtwo-day options and you know, leverage."And there's so many ways to play thecasino. And I think all of that, from mypoint of view, makes it better for me.The wealth transfer. Well, exactly. Imean, the thing is the more hyperactivepeople get,

00:39:58the better it is for me. And I mean, itis it is unfortunate because the stockmarket serves a very important functionof allowinggifted leaders and entrepreneursto get the capital to pursue theirdreams. I mean, that's really the reasonwhy we have capital markets, right? Isbasically to funnel capital to thebest uses, best uses of the capital.And of course, the side effect of thatis that you have all the casino activitythat comes with the church.And the interesting thing is that afterthe There was a big bubble in the in theUK, the South Sea bubble, uh where therewas a big speculation orgy and priceswent crazy, and then eventuallya lot of people lost money,the British government's response tothat was to ban public marketsfor 200 years. So, interestingly, likeeven when there were no public markets,a number of great businesses got createdin the UK, and capital still found itsway to them. So, it doesn't all alwaysneed to be through an auction-drivenmarket, but the main purpose of the NewYork Stock

00:41:13Exchange and the Hong KongStock Exchange and so onis to funnel and allow the capital to gointo the Teslas of the world, go intothe SpaceXes of the world, and allowthose businessesto improve the lot of humanity, right?And of course, the side effect of thatis there's all the casino activity goingon,and as we've seen with Robinhood and soon. And so, it's a negative uh forhumanity, and the more that becomesprevalent, that's more negative it is.But I when I look at it from anindividual point of view, like for myown self-centered, self-interested pointof view,the more the merrier.You know, [laughter] that's just goingto be more helpful to someone like me. Idon't know if this is fully accurate,but this is New York Times said this. Onpublic market, 0.1% of the users have60% of the profits right now. And so,they said some number like 2,000 tradershad made like half a billion dollarsthis year.>> [laughter]>> And just 2,000. And so, it was animmense wealth transfer from the casualgambler to what's likely an insider justsitting there who has more knowledge ora bit of a sharp who's being moreselective. Well, the simple the simplething is so if you if you look atsomething like horse racing, the tracktakes 21%

00:42:28of every dollar because you know,physically paying for horses to run isexpensive. Whereas let's say if I goplay blackjack at a great game in Vegas,the house has a 0.2% or 0.3% or 0.4%edge. So every time a gambler bets,49.5%or more is coming back to them, right?It's a 49.5% odds that theywill win that bet. It's a pretty gooddecent. Whereas in horse racing, you'vealready lost the 20% is gone already.But the thing is that there are peoplewho make a livelihoodonly betting on horses. Mhm. And the waythey make the money is the same aswhat's happening in polymarkets, whichisthey watch all the horses and all theracesand they pick the one wherethe odds make no sense.Right? So they they know the horses andknow the races and because the odds areset based on how much is being bet.Right. Just like the stock market or orthe way>> against the other bettors. Yeah, you'rebetting against the other bettors,right? And and that's that's what'shappening in polymarkets as well. Right.I was looking through all the stories

00:43:43you've done and one of the craziest onesis that you paid $650,000to have lunch with Warren Buffett. Wasit worth it?So what happened is in 2007,my net worth hit I think 84 millionand most of it was because of theintellectual property of Warren Buffett,which I I paid nothing for. right?Right? And I felt like uh uhI wanted to thank himand just look him in the eye and justsay how grateful I was. Now, whenBuffett does these lunches, his agendais thatwhatever someone paid,they should feel like they got abargain.And so from his point of view, he justwants to make sure that there'stremendous value delivered, right? Sobefore we met for the lunch, there was alot of kind of 1-year gap between thetime I won and we actually sat down forlunch.Uh so his assistant had asked for biosof everyone who was attending,and he studied all of those. So when hegot there, he basically told us, "Myentire afternoon is free.So whenever you guys get sick and tiredof me, just let me know and I'll leave."What was the one thing youtook away now, 20 years later?

00:44:58Yeah, I made some notes after the lunch,and I think we had a total betweeneveryone aboutover 50 questions that we asked him. Andof course, you know, Warren has thisgreat skill of taking lemon questionsand converting them to lemonade.So sometimes I asked him questions whichwere just innocuous questions, just anupdate. Like I asked him, for example,"What happened to Rick Guerin?" Explainwho Rick is for people who>> and Charlie Charlie Munger were partnersfor decades, several decades.Originally, there were three of them.There was Warren, Charlie, and RickGuerin.And in the '60s, they did a bunch ofstuff together, early '70s, and thenRick Guerin disappeared off the radar. Imean, we never heard from him.So I I just wanted to know what happenedto Rick, you know? So I asked Warren,and uh he converted that question. So hesaid, "Charlie and I always knew we weregoing to be rich,but we were not in a hurry.And uh Rick was in a hurry."So, then uh he talked about howRick was always levered.He always had margin loans. And when thedownturn of '73 and '74 came, '73 '74were the

00:46:13very severestock market correction. It was a crashin slow motion. Mhm. Basically, themarkets went down more than 50% overthat 2-year period. Rick gota number of margin calls.And Warren said that he bought Rick'sBerkshire shares from himfor 40 bucks a share.I mean, those shares are worth 700,000now, right? And he then saidif you are, um,even a slightly above average investorandspend less than you earnand do not use leverage,you can't help but get rich over alifetime, right? So, he wanted tocommunicate the message about the illsand follies of leverage.But, I I felt there were there were somany lessons. There was anotherimportant thing he talked about. He saidthat there are two ways you can liveyour life. You can live your life withan outer scorecard,uh, which is what people think of you,and react to that. Or, you can live yourlife with an inner scorecard, which isyou measure yourself with internalmetrics, not with external metrics.And he said that would you prefer

00:47:29to bethe greatest lover in the world butknown as the worst,or the worst lover in the world butknown as the greatest? So, he said ifyou know how to answer that question,you got it made. So, I think this innerand outer scorecardis, uh,really, uh, to me, it's a reallyfundamental mental model. You have to betrue to yourself.>> Right.>> Because we can be swayed, easily swayedbyexternal inputs, external stimuli. So,to keep it centered is awesome.I've thought about that one a lot. Ithink I read in his biography, I thinkhe called that the most important lessonhis father taught him was to live lifewith the inner scorecard. How does onedo that? How do you go from going fromthe outer scorecard to inner? You've gotcritics who arevery harsh,right? Who want to pull you down andtaking you belowwhere you know reality is. So, one ofthe things Iuh frequently run into is I've I've metpeoplewho criticize Gandhi a lot.Mhm. Criticize Buffett a lot. Criticizesome folks that I thinkhave lived remarkable lives, right? Andthey nitpick at Right. Oh, what aboutthis? What about that? And so,

00:48:44the way Ilook at it is I say, "Okay, if they cancriticize Gandhi,then I'm fair game.">> [laughter]>> Okay. So, you know, just understand thatthe Gandhis of the world beingcriticized. And so, Don't be shockedwhen you are criticized.>> when you areanytime you have any kind of a publicpresence or anything else, you are goingto get all of the above.Berkshire has something like almostwhat? 400 billion in cash?Yeah, 380, yeah. What are they doing?What are they waiting for?Well, I mean, I think that this has beenthe history of Berkshire where the cashwill build up and then they'll findopportunities and they'll put it towork. Uh they're not suffering right nowbecause treasuries are playing prettywell. So, they're they're making decentmoney. But the second is that we getdislocations and we don't know whenthese dislocations come. We haddislocations during COVID, we haddislocations in the financial crisis. IfI were to make a guess, I would say that5 years from now the cash may behalf or less of what it is today. Mhm.Berkshire used to be run by a greatcapital allocator.Now it is run by a great operatorand

00:50:00a pretty good capital allocator.Mhm. Berkshire's going to get phonecalls.And Warren used to say that when theycall you on a Saturday,that's when you know you're going tomake a great deal. He said the Saturdaycalls are the best.>> Because it's the most desperate call.>> Because usually they need they need thedeal done before Tokyo opens on Sundaynight US time.So when there is a crisis and Berkshireis a little better known now than itused to be, Greg will get the call. Andum you know the investing game isinteresting because you need extremepatience with extreme decisiveness. Mhm.Charlie used to say it's like standingby a streamwith a spear looking for salmon goingby.And he says, you know, you might bethere for a while, but then suddenly ajuicy salmon comes in. And when a juicysalmon is passing by,you have to act fast. You can't startcontemplating your navel at that point.>> Right. Right? So you have to be verypatient where you have the spear and youdon't know whether it happens in thenext 5 minutes or the next 5 hours orthe next 12 hours, but you're ready.Right.In your whole investing career, what oneinvestment has been the best for

00:51:15you? Soum I I haduh two more than 100 bagger investmentswhich went up more than 100 X before Istarted the funds. Uh so I startedinvesting on my own in '94 or '95 andthen umby the time I got to 2000,I had two businesses. The one went up uh140 Xand the other went up about 100 X. Andin one case,I had uh invested about uh 10 million.Uh, no, 10,000.Uh, I had a million dollars in about in'94, so I I invested just 10,000 onebusiness. It became 1.4 million.But there was another business Iinvested in which,uh, became,uh, more than 10 million. Mhm. And sothese two were the outliers. So, uh, theoriginal million became like14 million or something, but it wasdriven by these two investments.[clears throat]More recently, uh,the company in in Turkey that we boughtat, uh,uh, 3% liquidation value,it's just about hitting 100X now. Whichone is that?>> That's Reysas. Reysas. That's thewarehouse or the>> Yeah, the

00:52:30warehouse operator. Okay. Uh,I mean, so what happened there is thatwe were buying a company, I think whenwe first started buying it was a 15, 16million dollar market cap.Liquidation value was about 800 million.And>> What was the big misunderstanding? Likewhat you know, you've told me thesewords before. I look for what's hatedand unloved or where people haveconfused risk with uncertainty or was itsomething else in the Turkish market?Why was it trading, when you say 3% ofliquidation value, that means the priceof the business,there's 30X that in just the assets thatit owns if it had to liquidateeverything. So, you know, 30 33% orwhatever. Turkey was and even still isin such a weird state that it's hard tobelieve. So, for example, at that time,the company was trading atWhat what should have happened with acompany like that was that the ownersshould have taken it private. Right.And, uh, the owners of the business didnot have a good understanding ofbuybacks and taking it private. Theythey are very good operatorsand they went to the public markets toraise capital so they could grow. Right.They got the capital, they were growing,they never cared about the stock price.They've actually never

00:53:45even now, eventoday,they don't really calculate their kindofwealth by the stock price. Theycalculate it based on what they thinkthe business is worth. So, they don'treally care about the stock price, whichis actually a good way to>> Get a scorecard. Yeah, great great wayto run, but actually you really want thebusiness to tradenear the stock price near the value sothat anyone entering or exiting isgetting a fair deal.That's what Buffett tries to do. Hewants to make sure that Berkshire'svalue is always around what it's worth.But, there were other businesses that Iremember the first company I visited inTurkeywas trading at a PE of 0.1.Never heard of that. Not not one, 0.1,which means that the market cap wasequal to one month's earnings. Okay. AndI remember my friend had sent me a listof the businesses we were going to visitand I did no work on these companies. Isaid, "I'm going to do work on themafter I visit them because I don't wantto waste time if I don't like them orwhatever else." So, as we were drivingto the company, I start asking himquestions so I'm just somewhatintelligent in the meeting. So, I said,"Okay, so what's going on here?" Hesaid, "Well, Mohnish, it's a PE of 0.1."I said, "0.1?" And it's one of thelargest banks in Turkey. I said, "What'sgoing on?" He said, "Uh they violated

00:55:00some UN sanctions. They were doing somewire transfers with Iran that were notsupposed to do."And what happened with that company wasthat uhthe CFO of the businessuh who didn't have anything to do withthis crazinesswent to the US to vacation with hisfamily at Disney World.And when he landed in New York, the umSouthern District of New York uh folkspicked him up at the airport and put himin Rikers prisonin violation of the sanctionsand then told him the rest of the familycan continue on to Enjoy Disneyland.>> [laughter]>> So, So when that news hitthe streetI mean that's like you know they youwill be cut off of the swift swiftsystem. It's over. The US can putsanctions on you. I mean you could justyou know knee cap the bank. And Erdoganat that time was calling Trump in hisfirst term saying can you please releasethe guy? Yeah. And he didn't do anythingand Trump saidit's New York State. And so all of thiswas playing out while I'm going to seethe company and actually the thebusinesswas a well run bank and I told my friendit's too much hair even for

00:56:15me. I'm notgoing there. Okay, so Turkeythen and even now has some crazilypriced assets which is why I decidedtake a simple idea take it seriously. Isaid okay this is the situation wherehalf the winners of the sovereign racetrack have thrown away winning tickets.Right? Instead of one in a thousand orone in 500 it's 50 out of 100 havethrown away winning tickets. Sobasically it's it's going back to themental model. You take a simple idea youtake it seriously. You know I rememberwhen this company was 15 millionTurkish stocks are allowed to go up 10%a day. They were limited in a daycompany you know. So I was concerned howmuch stock I can buy. So I told thebroker buy every share available. Don'tworry about the volumes.Take out all the asks. You know thestocks at 15 someone's willing to buy orsell at 16 or 17 whatever. I said allthe asks up to 10% just take them allout. If anything more shows up take itout. I said just take everything you canget, right? So the guy calls me thebroker calls me and saysI have5% of the company being offered byTempleton funds. US fund in Turkey.Templeton

00:57:31funds is us 5% of the companyfor a million dollars. Okay? So, 20million market cap, basically 1 million.I said, "Why are you calling me? Takeit, right?" [laughter]And so, now this is not a Turkishinvestor. Right. These are not peoplewho are day traders.>> Right. Somebody in New Yorkmade a decision, "I'm out of Turkey."And the reason he they were going out ofTurkey is the currency was very unstableand inflation was rampant. And they wereright about that. So, two things thatwere bothering investors a lot, whichcan bevery detrimental to making an investmentis an unstable currencyand high inflation.And other mental models came in to helpme.So, one of the things that I think Idiscussed with Charlie is let's saythere's a thermonuclear event, globalthermonuclear event.99% of humans are dead.So, we've gone to70 million humans left out of 7 or 8billion.And everything's destroyed.The 70 million human humans that areleft,someone is going to start producingCoke concentrate.And someone is going to

00:58:46resurrect a Coke bottling plantbecause there's 70 million humans.And there's no currencies anymore.But humans will be willing to trade15 minutes laborfor a Coke.So, a company like Cokeis not dependent on inflation.It's not dependent on exchange rates.It's not dependent on anything. There isabenefit it gives. So, it doesn't matterwhether you're trading Coke cans inseashells or dollars or lira orwhatever, there is an exchange thatwould take place.So,I said to myself when I was looking atthis warehouse company, I said, "What isa warehouse?It's land,paint, cement, and steel.Okay?All four are inflation indexed. If thecurrency goes crazy, all of these pricesare going to go up. So, I don't careabout the currency.And then the exchange ratealso didn't matter because these areprime assets in a prime city. Peopleneed those assets just like they need tohave a Coke. So, I only looked atinvestments in Turkey

01:00:01which werenaturallyimmune to the whole inflation orwhatever that was also going on. Andwhat happened in Turkey is when we werebuying this company, it was five lira tothe dollar.Okay? That was the exchange rate.Seven years later,it's 45 lira to the dollar.Okay? The lira has collapsed by 90%.In dollars, I'm up 90X.>> [laughter]>> Okay? In dollars, in lira, I'm upinfinity. Who cares? Okay? I don't careabout that. I I'm just looking at it indollars. And the reason we went up indollars 90X is exactly so there wasthere was another mental model where Isaidthat there are many businesses in Turkeythat will get hurt by inflation. We'renot interested in those. So, there wasanother company there called TAVAirports.All their revenue is in euros.Everything is in euros. Okay? They'relisted on the Istanbul Stock Exchangewith all the gamblers. Okay? Now,airport operators, these are phenomenalbusinesses. And normally you look at anairport operator like you look at one inIndia,the trailing PE it'll sell at is 70times, 50 times,>> a natural monopoly, right?>> Natural monopoly,

01:01:17very desirable,everyone wants in, and so that's justover inflated and all of that.In in Turkey, it's sitting at like fourtimes, three times, you know, it'ssitting at nothing like basically. So,and in this case, in the case of theairport,the currency is not relevant. They'renot eventhey're not in fact what is happening istheir revenue was in lira in in euros,and their costs are in lira. So, in factwhat's happening is the employees aregetting poorer every year.>> Right. And so, basically it was justusing a few models. Take a simple idea,take it seriously,active versus passive,understanding that thermonuclear eventpeople want Coke, and let's look atassets where the currency[clears throat] is not relevant. Right?And when I was able to look at thosethose four things, there was no one elseon the planetapplying those four models at that sametime in that market. Right? That's it.How how difficult was that?So, I want to ask you the hardestquestion, I think. I think the hardestquestion, let me tell you how I arrivedhere. I love the idea of studyingbusinesses cuz I love business and Ilove studying, put them together, I'mhappy. I

01:02:32enjoy it, I think it's a greatintellectual sport, and I do it. I picksome stocks and I have some index andyou know, I combine the two. At the sametime,it seems like most people lose moneydoing this, even smart people lose moneydoing this, and for example, I hadCathie Wood on the podcast.I said, "Cathie, I you know, she's superpopular.I think she's really smart.I even agree with her about many of hertheories and thesis about where theworld is going.At the same time, I told her I was like,"Look, if I look at the last one year,two years, five years, you haven't beatthe S&P, but you're taking huge fees onyour money." And the way her model worksis is that. I said, "Look, I thinkyou're an honest person." Like,would I asked her the question, I said,"Would you invest in someone with yourtrack record?" And she said, you know,she had a great answer. Like, you know,actually I really appreciate you givingme the chance to answer that. And so,she gave me, you know, a good answer.But, I'm curious, you know, same thing,how hard is it to beat the market,really? And how do you feel cuz in someyears you do and some you don't. I don'tknow exactly because you're funds andyou have the ETFs. It's hard to evenpiece together fully. Yeah. But, I guessgive me two answers. One is, what isyour track record? You manage somethinglike a billion dollars. So, what is yourtrack record compared to just blindlyput in the index?And secondly,how do you feel about that? You know, asa sort of smart, honest

01:03:47person who'sstudying this game and trying their bestto do the best they can.Yeah, so the the track record,uh, it depends on the fund because we'vewe've got different funds and so on.But, if you look at our oldest fund,which is now, um,uh, what? It's uh, 20 more than 27 yearsold. Every dollar is turned into about$30.Uh, so dollar become about $30 in theoldest fund. And I think the S&P isuh, every dollar is less than seven,approximately six or seven dollars. Thatfund has done done well. Uh, if I'lltake the newest one, which is our ETF,for example, which is, uh, got about twoand a half years of history. If I'll ifI look at the entire two and a halfyears, we are behind the S&P because Ithink the S&P has done like 19%since, uh, on average per year in thelast two and a half years, and we'vedone like 15, 16%. But, uh, this year weare ahead. Uh, so if you look at threemonths, we are ahead, six months, oneyear, and even 18 months we are ahead.Uh, and I think in the last one year,for example, we areuh,beating the S&P by more than 20 points.Uh, pretty significant.

01:05:03So, in this inthe ETF case, I think it took us sometime toget properly invested because I only canfind like couple of things in a year.And I would I would say that I wouldexpect that in the fullness of time ifwe look at after 5 or 10 yearsuhwe should be ahead of the S&P. Also, theS&P has um it's a handicap situation forthe S&P because it's overvalued. Youknow, it's sitting kind of elevated inin valuations and such. And so uh atsome point the stock market becomes aweighing machine. And so I I think thatin general the index broad index overthe S&P may not do that well for thenext decade just because there's been somuch growth Yeah. into the future in thelast decade. Souh I think we'll be fine. Yeah. Yeah. Iguess do you do you feel likeuh the question I think I'm trying toask is more like how hard is it to beatthe index? Well, so yeah, so so if youlook at the entire US stock market overthe last 90 years4% of companieshave basically delivered the marketreturn. So, the the return we're gettingin the market has come from 4% ofbusinesses. The other 96%

01:06:18have justtreaded water. And if you look at WarrenBuffett, for example, and he said thishimself that 12 investments he made over60 yearsis what has created Berkshire Hathaway.He has made more thanthree or 400 investments. So, again, hissuccess rateis 3 to 4%.And this is the reason why indices dowell.Because the index is too dumb to knowthat it owns Nvidia.And it's too dumb to sell it. Okay? It'stoo dumb to know that it owns TSMC.And it's too dumb to sell it.Whereas an individual investor or or aportfolio manager will look at and say,"Oh, it's overvalued or this and that orwhatever else or the mistress lookshotter or whatever else." and make thatchange.So, this is the reason why indexinvesting does well because it includesthat 4%. So, you don't need to thinkabout it. You have captured the 4% andyou will get a market return, which isvery good. When I look at what I'mdoing,I don't think I would have the wealth Ihave had and I don't think my investorswould have had what they have done if wehad indexed. We've done better than theindex.The way the way I look at it is thatevery year that goes by,

01:07:34I'm getting tobe a better investor. So, I think thatif I were playing a game likebasketball, I would start declining,right? And when I get to my 30s and 40s,I'm gone, basically. But investing is agame where you can keep getting betterand you keep seeing more patterns, youexpand your circle, you get better atuh looking at different things. So,experience is a huge plus. And all ofthis accumulates and also you get toride the winners, if you will. So, theimportant thing in investing is not themistakes you make.It's not selling the winners. The 4%bets of Berkshire that worked,the other 96% whatever Buffett did withthem did not matter. It didn't matterwhether they sold them, bought them,liquidated them, whatever else. Thatdidn't really move the needle. What whatmattered was not selling Coke.Not selling Apple. Having Greg Abel runMidAmerican Energy. Having Ajit Jain runthe insurance.And not firing Ajit and not getting ridof him. Those were the important things.>> This is your circle the wagons concept.>> Circle the wagons. So, so the thing isthat we we have to understand thatcapitalism

01:08:50is brutal.And almost every business willeventually go to zero because of thecomparative destruction forces.But there's a sliver of businesses thatwhat happens is that a brand gets builtortaste happen like a business likeMcDonald's. It starts off with no moat.Right. But now it has a brand. You know,um there'll be a a sign on the highwaysaying McDonald's 8 mi ahead. Right. Yousee that sign and saythat's where I'm going. Right. Right?And Even if Shawn's Burger Shack is 1 miaway.>> Exactly. And that's a moat. That's themoat, right? And soit's actually accidental for the mostparthow and when moats get built. But once amoat gets built some of these moatsbecome enduring for a very long time.Like if you look at something like FICOfor example, the FICO scores. I meanthat business just prints cash, right?But it started off with no moat. Then asmore and more people start using thatscore and nowthere's some movement where people aretalking about other things, but peopledon't want to move away from FICO. It'stoo entrenched, right? And so we asinvestors have the advantage

01:10:06of buying into existing moats,right? And so if I look at for examplethe largest bet we have, which is aTurkishuh warehouse operator.They have prime warehouses extremelywell builtin prime parts of Istanbul.Okay?And that's a very important city. It's abig city. It needs it. It's It'sfundamental. I don't think that's goingaway. In fact, the demand for warehousesincreases in an e-commerce world. Mhm.Right? Because you need uh in fact, whatthey were building uh quarter millionsquare foot warehouses are now becomingmillion square foot warehouses becauseall the nuances happening withe-commerce. Sowe we want to look at businesses withthe moats have staying power for fortime. An airport operator, a Cokebottler, you know, going to go on,right? So, we want to look at theseenduring moats. Eventually, we want toown parts of those enduring moats. Iwant to ask you about some new things.So, what what you know, it's veryinteresting to look at the kind ofinvestments of maybe early days Buffettand just things that are around for 100years, but then there's new things thatmight be around for 100 years from nowor or might not. I'm curious youropinion

01:11:21on these. So, I'm going to throwfour um kind of topics that you that youyou can rapid fire. Give me just yourkind of where you're at mentally onthese different things. So, first is AI.I don't think you could be an investorin the world and not have AI thoughts,whether you think it's going to disruptcertain businesses or create newindustries or really be huge tailwindsor headwinds. Invest in the pickaxemakers.So, I think I think that the Alphabetsand Metas of the world are playing agame they haven't played before.Which is having businesses very highcapex. May work, may not work. I don'tknow, but what I do know is they have topass through some toll bridges.They all have to pass through TSMC.Uh they have to pass through ASML. Theyprobably have to pass through Micron.Right. So, I have no bets in any ofthese areas becauseum it's either goes in the two hard pileor it goes in outside circle ofcompetence or it's too expensive.So, if I'm not making a betit doesn't matter whether I'm right orwrong, right? So, what I'm saying isthat uh there's no way I'm going to sellthe Turkish warehouses>> Right. to buy TSMC.Because that that trade makes

01:12:36no senseto me. Right. The mistress looks muchuglier than the wife.>> [laughter]>> Yeah. And there's no bonus points forpicking the winner.>> valuation.>> Yeah. Yeah. Um you when I when I came toyour house onceyou were telling me about yourinvestments in coal and you talked abouthow you look for things that are hatedand unloved.>> It's a clue for you to go go spend sometime because you think that there mightbe opportunity there.I feel like the right now in my world,the hated and unloved bucket is SaaScompanies, vertical SaaS companies. AndI saw you invested in Constellation.Yeah. So, I'm curious and I've beenthinking about this, too. There's, youknow, a lot of great businesses are onsale right now. So, so that was an areathat was an area where things fellwithin circle of competence.And it made sense. So, the idea thatBetsy and HRis going to fire up someAI AI software, whatever, and developher own software and get rid of Workdayor whatever else they're using in HR isjust a pipe dream. Yeah. So, I thinkwhat is not understood well by themarket is thatsoftware is not coding.Okay.Codingis automated

01:13:51and will get even fasterand whatever, but it may beat most 1/5 of the pie.And so, just because you can getsomething coded quicklydoesn't mean that Adobe's going out ofbusiness or you don't need Photoshop andyou don't need all the products thatthey have.And and so, I actually feel the markethas got it wrong. So, in in my view, theadvantage will go to the incumbents. So,an Adobewill be able to reduce his costsbecause I mean, Microsoft's laying offpeople. They're all laying off people,right? Because they don't need so manybecause they can they can automate it.So, all of these incumbents are going toreduce their costs. Now, they may alsoend up reducing price. Right. But Idon't really seeuh they may not even need to reduceprice. Okay? Depending on the or know,how much the moat is. I don't see theircash flows going down. And And so, ifyou drop the price in half and the cashflow is not going down, uh you know,where do I sign? You know?>> [laughter]>> And And I specificallyonly investedin the Mark Leonard universe ofbusinesses

01:15:07because he has a unique mouse. So, thereason why I invested in mouseuh in Mark Leonard isno one elsehas ever cloned Constellation.And no one elseever will be able to cloneConstellation.All right. Explain who he is cuz he'sthis mysterious guy. There's no likeThere's like two photos of this guy onthe internet.>> Mark is ahighly highly unusual leader. Okay?There's no other person like Mark. Let'sput it that way.What he's built at Constellationis very unique. So, there are probably70 to 100,000 vertical market softwarecompanies, private companies in the US.They have a team a biz dev teamthattouches all these companies twice a yearwith a phone call and twice a yearwith an email. Mhm. Okay?And in fact, the funny thing is I was inOmaha at the Berkshire meetingand a guy comes up to me and says, "UhMohnish, I'm a huge fan of yours. I'm inthe Constellation M&A team." I said,"Don't go anywhere. Need to talk to you,right?" So,"Tell me what's going on." And you know,I tried to get a conversation

01:16:22goingbecause, you know, Constellation is sucha black box. But anyway, they have thislarge M&A team. They buy a company likeevery three days or something, right?>> they bought They bought like 200companies last year, for example, right?And they bought more than 1,000companies. And they don't use bankers,right? And so, they're been doing directdeals. And nowI think paying, they might be payingfive times cash flow or something ormaybe six times cash flow. But then,almost immediately, within a year ortwo,the effective price becomes likethree or four times cash flow becausethey bump up the revenue a little bit,they bump up the license fees about 20%whatever, and then they've got all thesebest practices that they built up. Now,they don't tell the company to do thisand that, but they say, "Look, you're inthis business. Here's, you know,80 other companies we have like this andthis is what we've learned. So, this iswhat we suggest." And you do your thingand whatever you want. So, they actuallyextractmore efficiency out of their engine. So,on an organic basis, if they were notbuying anything, they'd be growing about3% a year. So, these companies they'rebuying are not dying. On average, theyare still growing. So, if you think of aif you think about buying a businessthat's growing 3% a year,and, you know, interest rates are wherethey are, you would be fine paying 15times cash

01:17:37flow.That would probably be a proud where thedeal should be done somewhere between>> I I explain what's the math there? I'm Idon't understand.>> The math there is that a business isdoing 10 million in in sales and let'ssay they're putting 1 million to thebottom line. Okay? And that 1 million'sgoing up 3% a year.Now, let's say you were buying thatcompany for 10 million.Okay? Your alternative is put it intreasuries.You put it in treasuries, you're goingto get 400,000 a year.Okay? You put it here, you're getting amillion a year, right? And the millionis growing. But but it has more riskthan treasury, so you won't pay exactlywhat a treasury is paying. So, that'sthe math is, you know, thethe risk-free rate effectively makes itthat if you knew a business was growingat 3% a year, you would be willing topay in a low interest rate environment10 15 times cash flow, whatever. And so,they're they're effectively buying itfor three or four times because they getthese efficiencies.So, now you're taking the cash flow thebusiness is generating and you'rereinvesting it at a 25% rate.Right? I mean that's and then you'recontinuously doing that. Right. Sonobody else has the patienceto put in the engine to

01:18:52touch the 70,000twice a year.And also the more difficult part isintegrating them. Right? So the cultureto say let's do this and that in manyways Constellation is superior toBerkshire Hathaway. Berkshire Hathawaybuys businesses of all kinds.These guys buy only one kind ofbusiness. Right? And they're buying onekind of business and and they're buyingit in a delegated manner now because thepeople doing the deals are not even atheadquarters. They don't even need anapproval for it. They've been told anybusiness up to 20 million you can justdo your deal. And as those teams havekeep keep doing that and have the trackrecord they bump up how much they'rewilling to So so it's actually adelegated model now at this point. Andso from my point of view you'vebasically got a mouse trapthat's growing cash flows at 20 to 25% ayear. What should you payfor a mouse trap that's growing cashflows 25% a year? You would be paying 40times if you knew that was going tocontinue forever. You'd easily pay 40 50times. It went down to teens multiple.Right. And it came down to a point whereeven someone like Monish a cheapskatelike Monish got interested. And uh andthe thing is so I I think that the DNAhe has

01:20:08is very very special and this universeof companies that he's going after istoo small for private equity. Right.Private equity hates doing theseitty-bitty deals. Right? And the secondis they don't want to buy and hold them.So he's buy and hold these comp Theseguys want to flip. So the frictionalcost of buying a tiny company and thentrying to find another buyer and allthat there's too much nonsense involved.So, quite frankly, the onlycompetition they would have would be ifsomeone decided I want to do everythingexactly the same. And [clears throat]the market could tolerate threeconstellations.It's large enough for three or fourconstellations. But there are none.There's only one.>> Right. So, that's why we are in. That'sit.>> And And now the thing is that we don'tneed You have to understand the 4% ruleof Buffett, right? Only 4% of his betswork. So,if you look at my bets, like, you know,uh airports, coal,uh warehouses, Constellation. If all ofthem work. Now, if I if you ask me abouteach one, I'll give you a case why itworks.>> Right.All of them not going to work.Because that there's no way If If I weredoing If all of them work, we're doing100% a year. All right. Okay, that's notgoing to happen. But if half of themwork, we have a home run.>> Right.

01:21:24Even if 40% work, we have a home run.So, this is a very forgiving business.And so, that's where this is, which is Idon't know which half works.I wish [laughter] I knew.>> you knew. Yeah. If only. I don't knowwhich half works. So, like like I knowthat our coal bets, for example,there are things that can cause that betto fail. They're low probability, butthey could happen. Right. So, maybethose things happen, maybe they don'thappen. I don't know. Right.Constellation, maybe cloners arrive. Idon't know. Maybe the DNA of the companydeteriorates after Mark is gone. I don'tknow, right? So, there are theseunknowns. But it's a favorable bet. It'snot a 100% bet. It's a favorable bet.And as long as we keep making thesefavorable bets, we're okay. So, HowardMarks came on the podcast.>> Oh, really? Wonderful.>> And he was um he he laid out a a why theS&P might be a bad bet for the next 10years. And his take was basically, ifyou look at the current P/E ratio of theS&P, I think it was like 23 or somethinglike that.That the forward 10-year return hadvacillated between -2 and 2% anytimethat it happened.>> Yeah. Uh and so I just want to give youkind of like a just quick reactionbullish bearish on on the S&P indexright now if you were to to be aninvestor. Bearish. Bearish. Same reason?Yeah, I I

01:22:39I don't I Howard is very verysmart. I don't disagree with that.>> Yeah. GLP-1s. So it's amazing. We havethem We have a>> The the best thing since sliced bread.Yeah, exactly. [laughter]And it put sliced bread out of business.Um I read a stat that the GLP-1 drugsOzempic and and the others they'recurrently generated double the revenueof the AI of the AI companies. So it'slike 79 billion a year versus you know40 billion a year.>> are embryonic right now. And we're earlystages.>> And also I think the the science isgoing to get a lot better. Yeah, so likegiving your how you're thinking aboutthat right now whether from investorpoint of view or just you know>> Well, I think I think from an investorpoint of view to for me it goes in a twohard pile. And reason it goes in a twohard pile is industries with rapidchange are the enemy of the investoraccording to Warren. So we go we waskingthen Mounjaro became king and then nowthey're talking about some of thesetablets. The tablets are going to have ahard time because they have to gothrough the liver and all that. Butbasically to meI I think that this trajectory is goingto continuebut given the valuations and given wherethis headed it's they're too many Right.>> Gold is simpler.A few years ago when I was at your houseI asked you about Bitcoin and yousimilarly

01:23:54were like somewhat bearish onit but you said you know ultimately toohard pile for me.>> Yeah, it's also too hard pile. Outsideconfidence.>> Has anything changed in your opinion cuzthe more time goes by in a way like allmoney is a confidence game as you know,right? Every currencygold every gold bar is a confidence thatthis will this will last. I was curiousif anything had changed over time foryou with Bitcoin.>> I II prefer goldto Bitcoin. It's not used by a bunch ofscammers and you know, ransom seekersand whatever else. Uh so, to me thewhole thing is in the too hard pile, butI would just say that given that wealready have gold, why do we needBitcoin?>> [laughter]>> Okay, we won't debate you on that. It'llbe a 4-hour podcast.Yeah, there's aa couple of life models I wanted to askyou about cuz I asked you many of theinvesting truths. Yeah. But then some ofyours I feel like maybe are related toinvesting, but probably not.One wasdon't die at 25 and get buried at 75.Yes. What do you mean? So, that's aquote by Ben Franklin. As you know, Ihave no original ideas.So, Ben Franklin uh said that manypeople die at 25 and are buried at 75.And basically

01:25:09what that's saying is thatyou've stopped growingand you've stopped kind of doing thingsand you're kind of just coasting. Youknow, I I had discussed a stock withCharlie uh in my last meeting with himand he was buying that stock 6 daysbefore he died. Okay, he was 99.9 yearsold. He didn't know he was going to diein 6 days. But when you're at 99.9 yearage, you know, life expectancy is not 20years or 10 years. Okay? But he wasI saw Charlie makeinvestments and bets and decisionsignoring his mortality. Mhm. Like likehe was 25. He was making the bets as ifhe was he was 25. And so, I think thatum livingtill the very end, truly living, isreally important. So, we we we want tobe pursuing our passions. We want to begetting our music out. We want to bedoing the things that we want to dofor this very finite time we have here.What does it mean get your music out? Isaw that on your your list, but I didn'tknow what it meant.Well,all of us havemusic in us.And it's different,

01:26:24you know, for themusicians it is actual music that theybut about the but the thing is we haveto understand who we are.And understanding who we are is noteasy, but we have to understand who weare.And we have to understand what would besomething we want to bring to this worldthat makes the world better and makes usfeela sense of accomplishment for doingthat. So we we all have special talentsand there are there's no person who'sgot nothing if you will. They everyonehas something special. We have to getthat out because that's going to be afulfilled life. Mhm.September 28th,2075.Apparently, that's the date I'm going todie.>> [laughter]>> One of your pieces of advice isand I quote, "Ask God Google when youare going to die and act accordingly."Last night I Googled when I would die. Igave it all my info.I told it I'm a non-smoker, this yearsold, I've done this, etc. etc. And itgave me a a pro- Here's a range Yeah.And here's the most likely date,September 28th, 2075. Awesome. Allright, now what do I do?>> [laughter]>> You freaked me out. Now what do I do? Socontrary to Seneca,life is short.

01:27:40And Gandhi has a quote, he says,"Live as if you were to die tomorrow.Learn as if you were to live forever."Right? And even Steve Jobs said that ifhe spent two, three, four days doing notwhat he really wanted to do or loveddoing, he would make a change. So Ithink that 2075 seems a real reallylong ways away, you know, like 49 yearsor whatever. But it's not that far awayand I think that there's a Buddhistsaying about living in the moment. Andliving in the moment is fantastic. So, Ithink that treating every day as if it'syour lastand living it to the fullest for thefull 49 years,that's what you want to be doing. So, Ithink you know, people say"Oh, I'm going to graduate, then I'mgoing to work 3 years at McKinsey, thenI'm going to get some experience, thenI'm going to start my business." Youknow, Buffett would say to that, "That'slike saving sex for old age."Not a good idea. Okay? So,don't make a lot of long-term plans. Wehave to enjoytoday. Yeah. Don't wait to live. We haveto enjoy every day. So, I think gettingthe music out, doing what we love to do,working with people we like, admire, andtrust, and pursuing our passions,

01:28:56wehave to do that all the time. Right.Those are sort of like the eat clean,exercise, get good sleep. What those areto health Yeah.>> I feel like what you're describing is tolike living life well. Absolutely.>> Yeah. You know, one of the things that II think is your part of your music youget out is that not only do you studyinvesting and study companies to investin, but you study the investors. Mhm.And my favorite learnings from you haveactually been the stories and theinsights you have having studied all thegreat investors.I want to ask you about a couple ofnames I didn't ask you about in previousones.The first is Ed Thorp.Right.>> about Ed Thorp. What do we learn from EdThorp? The first time I met Ed Thorp, Iwas naked.>> [laughter]>> Go on. So, just to give you the longformanswer. So, Ed Thorp, MIT trained PhDmathematician, very smart. He actuallyworked withClaude Shannon. And if you studyShannon, there's podcasts on him and allthat. But Shannon is you know, probablyone of the smartest humans around everlived. But Ed Thorp basically used MIT'smainframe computerto figure out how to optimally playBlackjack, right? And he came up withwhat we now call basic strategy.

01:30:12And at that time in the early '60s, whenhe when he did this, casinos in Vegasand Reno, etc., played single deckBlackjack to the end of the end of thedeck.And Blackjack is a game where every timea card is played, the odds change. Andso, if a deck gets, you know, filledwith more aces and tens or whateverelse, then you're basically as a as aplayer going to it's in your favor.And smaller cards, it's against you. So,he's counting cards, it's easy to do,and when the deck got loaded, he'dincrease his bet bet and not loaded,he'd reduce his bet, and he cleaned thecasinos out. And at that time, thecasinos were mob run.And so, they basically showed him abaseball bat and said, "Don't ever comeback." Okay? And so,>> even know what he was doing or they justsaid>> [laughter]>> We don't need to know. They knew thatthey were losing money.They didn't know why they were losingmoney, and that's all they cared about,that they were losing money. Right. Andso, he went back and he's a, you know,very meek, timid guy. He said, "Wow,this is like like they might actually,like, you know, kill me or something."So, he said, "I'm not going back." But,to get back at them, he wrote a bookcalled Beat the Dealer,which sold millions of copies, whichbasically says, "Here's how you beat thecasinos." Okay.

01:31:27And the casinos freakedout because they said, "Now we've gotlike 10,000 head tops are coming at us.">> [laughter]>> And so, Blackjack became a game fromthen till now, which where the ruleshave continuously changed, where theystarted not playing to the end of theshoe, they introduced multiple multipledecks, and all these different and allthe different, you know, rule changesand everything else to keep up with allof that. And it's been a kind ofAnd you know, the movie 21 where the theMIT kids went in with all of that. So,anyway, he did well. He he he wrote Beatthe Dealer, and then he realized therewas a better casinothan Vegas, which was the New York StockExchange.And there's something known as theBlack-Scholes formula, Okay. which isthe way how options are priced. So, theguys who came up with it, Black-Scholesand another guy, they got the NobelPrize for that. Basically, it it tellsyou if you got a stock with whatevervolatility, how to price the options,the call options, whatever else else onthat.Ed Thorp cracked how options were pricedbefore Black-Scholes, but decided,instead of getting a Nobel Prize, he wasgoing to make money off it. Okay. So,he's>> He He set up a

01:32:42entity calledPrinceton-Newport Partners,and they killed it, like 25, 30% a yearand no down years and any of that. AndI did that for a while, became verywealthy. He uh moved to Newport Beach,became a professor at UCI, and then uhsomeone introduced Houston, just thinkabout this. It's like a kind of ForrestGump story. Someone introduces him toKen Griffin.You know, Citadel's founder. While Whilehe's at Harvard, you know, trading outof his dorm room,Ken asks, because Ed was not using hisall his um algorithms and everythingelse, he'd retired, uh Ken asked if hewould give it touh to him.Ed talked to Ken, realized he's veryunusual, and said, "You can have it all,and I want to invest with you."And so, he becomes one of the earlyinvestors in Citadel. So, that enginejust keeps going.>> Oh my god. And then also, uh he meets uhBuffett for bridge, I think, in the'70s, and realizes this is the guy, andhe puts a bunch of money with him. So,you know, he's invested with KenGriffin, [laughter]with Warren Buffett, with himself,Princeton-Newport Partners, and thecasinos, all of the above, right?Legend.>> Now, I'm in I'm in Irvine, California.I'm at this uh club where I go playracquetball

01:33:58and I'm getting ready for myracquetball game. So as I'm gettingready I'm naked and this guy is olderguy is looking at me and they're theWall Street Journal next to my and hesays to me, "What do you do?"I said, "Oh, I'm I run a hedge fund,right?" Andhe starts talking to me and I forgetthat I'm naked, okay? And then he says,"I'm Ed Thorp." And I get so excited. Isaid, "Oh my god, Ed Thorp." And I go upto him and I'm not talking and then Irealize you're naked, you know, this isnot appropriate. So I said, "Ed, can wejust meet for lunch?" You know, I said,"Ipromise you I won't show up this way,okay?" [laughter] And he said,"Absolutely, right?" And so then I methim for lunch and got to know him. Infact, I just got a Christmas card forhim and he wrote me a nice note. Uh butEd is fantastic. I think he's a greatguy. And you know, he's I think 90,great health. And you should get him onthe podcast.>> beat roulette, too, did he not? Oh yeah,he had a he had a device by which theycouldI forget it. They did something wherethey wore>> or something?>> Yeah, yeah, they had something they worewhich would kind of tell them what wasgoing on with the roulette and all that.Yeah.>> Okay, that is an unbelievable story. Youmentioned Ken Griffin. I've heard someof the kind of Ken Griffin lore. What doyou know about him and and what kind ofmade him special and why maybe Edinitially spotted that this guy might bea little bit

01:35:13different?>> So I met Ken around 2000 or so.I was running an IT company and umsomeone I knew said that they werelooking for consultants.And my wife went inas a consultant to Citadel, okay? Soshe's actually at Citadel. Uh Ken waslike there might be like 10 people atCitadel at that time.And she'd come home every evening with awhole bunch of Ken stories. Like he saidshe'd tell me this guy is very unusualand the place is very unusual.Everything's very unusual. So he he hadhired some whiz bang RussianmathematicianPhD, post-doc, whatever who was workingon the algorithms.And everyone at Citadel would come tothis Russian guy with their problems.And Ken didn't want anyone coming tohim. He just wanted him to crank withoutanyone bothering him. So my wife told methat there's a temp that was hired. AndKen told the temp that here's your desk.Here's Hugh. Here's the mathematician.No one crosses.So the temp says, "Oh, what do I do?"Nothing.Your whole job is to make sure no onecrosses. No one talks to him. So she'sjust looking

01:36:28at this temp and the tempherself is in shock. Someone's paying meto like, you know, file my nails. Soyeah, Ken is a very intense guy. But Ithink I think he is very smart. I thinkhe found all the different nooks andcrannies. Uh built a tremendousbusiness. And so I have a lot of respectfor him. Awesome. [laughter]Did a great job.Yeah, I I I I feel like Ken Griffin uhintensity stories is something that thatthat I can binge on. I've heard, youknow, when Enron was going out ofbusiness, did you hear the story? Yeah,they all went in and they bought all thegot all the traders.>> Got all the smart guys out. Like arescue mission. I just read the otherday that they had made an offer to someguy uh at Harvard or whatever, some newgrad. And Ken asked him, "Solet's say you made 10 million a year,what would you do?" He said, "Oh, I'dquit. I'd go climb the tallest peaks,this and that, whatever." So Ken says tohim, "Please reject our job offer. Youknow, we've already made the offer toyou. We can't resend it, but pleasedon't accept it because we really don'twant someone like you." Right. Uh we wewe don't want someone at 10 million whodies at 25.>> [laughter]>> Right.You know, you've done podcasts likethese before with me and then others. II think our podcast together more than 5million people have listened. However,the sad part of that is I bet if Italked to those 5 million

01:37:43and I say,"What did you really take away? What didyou what did you remember? What was thething that you you took? I'm not surehow many would havesomething that clicks. And so, I want tomake it easy for them this time. What'sthe thing that they can't miss out ofthis one? Cuz I don't want people tojust listen, be entertained, and go backto doing things exactly how the way theywere. Lead an aligned life. Mhm. So, whowe areis hard-coded at the age of five. So,between our genetics and what happenstill in the first five years. How oldare your kids? I have a 6-year-old,5-year-old, and a 2-year-old. Okay, soyou've got some work you can do for the2-year-old, but the 6 and 5-year-old thecake is already baked. Okay?>> [laughter]>> And especially after they're about 12,after they're 12, the only thing you cando for them is control who their peersare. What happens with us humans is weshow up in this world without an owner'smanual.Okay? We don't know what our calling is.The calling is predetermined at the ageof five. If we don't follow thatcalling, this is our inner inner map,and this is how we are externally. Weare misaligned. And to have a greatlife, it needs to be like this. Now, toget from here to here means you have tounderstand who you are.And there are clues to understanding

01:38:58whoyou are. So, what you have to do iswhenever you do any activity,you have to ask yourself, how much do Ilike that? And then when you meetsomeone, how much did I like meetingthat person? And so, you have to try toget to the point where the glove fits.So, you may be a lawyer, but you weremeant to be an artist. Or you may be amusician and you were meant to be arunning back. Okay, so I mean, I foundit out by going through these industrialpsychologists who we did all thiswork with and all that, and I was ableto get towhat my calling is when I was 34 or 35years old. Till then, I was wanderingthe wilderness, completely lost. Right?And then it life became a a better.Getting to an aligned life is the mostimportant thing. It's not being a greatinvestor or, you know, finding greatinvestments or any of that. I think thething is you have to get your music outand you have to understand what thatmusic is and you have to live in analigned life. And it's worth thepursuit, however painful it may be,to understand that as early as you canin life. Mhm. The shortcut is you couldgo through uh psychological tests with apsychiatrist. What do what do you askthem for? What do you What do you askthem to do? Is there a name for this?

01:40:13Isjust You're You're going to tell themthat I want to understand who I am andwhat is my calling in life. What am Isupposed to be doing? Now, you could goto my guy. You can go to him.>> Yeah, who's your guy? Uh his name isJack Skein. I've met I've met Jack.Okay. Yeah. All right. Yeah, he does thekind of full life 360 sort of analysis.Yeah, so so you can go to Jack and Jackcan only do like 20 a year or something,okay? So he can't do it at at scale. Buthe may know others. Right. And so that'sa pretty foolproof way to get there.Other than that, I think you have tofeel your way. If you don't not willingto do that, then you have to look atwhat you like, what you don't like. Youhave to look at whether doing somethingenergizes you or doesn't energize you,that sort of thing, right? And so youhave to find whatyou love doing. And if you only do whatyou love doing, you'll do it very well.And why do you think most people don'tdo that? It's because the world tells uswhat we are supposed to do.And we think that what the world tellsus what we're supposed to do is what weactually supposed to do. For example,the human brain is set up optimally tostart specializing after the age of 11.And from the age of 11 to 20 is a windowto specialize.That is the exact window when theeducation system

01:41:29makes you ajack-of-all-trades. So, likeMichelangelo, you know, he was doing hissculptures and paintings and all that10, 11. Buffett picking stocks. Right.Uh Gates coding at 11 or 12, right? So,you have to try to within the context ofa world that wants to be ajack-of-all-trades,start getting to what is your calling,like the way Buffett and Gates did it.They were in a world ofjack-of-all-trades, but within thatworld, Gates spent an enormous amount oftime doing coding. He would slip out ofhis parents' home at night and code allnight and come back and sleep andwhatever. And so, he got 10, 20, 30,000hours of coding experience by the timehe was in his early 20s.>> Right. And nobody could touch him afterthat. So, yes, we have to at that age,that's your job as a parent, make surethe kids at 11 or 12, you're trying tofigure out what they're good at andtrying to increase the timethat they get for that. Well, uh I don'tknow what my calling is just yet.Actually, if I look back at that age, uhI was doing something very similar tothis. The two things I really loved todo back at that time was I loved to playany kind of game where there was ascore. I was playing online poker at avery young age. Things that related tobusiness and and money. And then theother was I was doing improv all thetime. I loved

01:42:44it. It wasn't a podcast,but an improv session. I just did thisfor whatever, 3 hours, and it was noproblem, right? And I could have knownthat signal at a younger age and>> I think you'reIf you're not there, you're damn close.>> Yeah.I want to leave you with one thing. Ihave aa gift for you in this envelope. I wantyou to take a look. We asked somebodywho knows you well to write a letter,and it's your friend Guy Spier.>> And Guy wrote this letter for you. Heknew you were here today. All right. So,let me just start reading it because Ireally like to read it later at leisure,but that's So, that's awesome.So, the title is what I did not learn atHBS. Monish Pabrai taught me everythingI need needed to succeed in business.Dear Monish,this is fun.>> [laughter]>> Dear Monish, I met you some years aftermy MBA,but the truth was, despite the degree, Iknew next to nothing about business.My real education didn't begin until wemet for dinner at the restaurant at theDelamar Hotel in Greenwich, Connecticut.I remember that evening vividly. I cameaway from that one dinner with moreideas than I had in 2 years at Harvard.Books I'd never heard of and ideas I'dnever thought of. You introduced me toPower vs. Force by David Hawkins and toGandhi's autobiography, The Story of MyExperiments with Truth. We discussed

01:43:59Robert Cialdini's Influence, ThePsychology of Persuasion. But whatstruck mewas that you had not merely read aboutthese ideas, you had put them intopractice in your own life in a way thatI did not even know was possible.Sitting opposite you, I realized that Iwas a conventional thinker. You, on theother hand, had a very unusual mind.Someone who knew how to get things donein the real worldand translate ideas into action. I,myself, was very misaligned at the time.I'm deeply grateful that you werewilling tobecome my friend. That allowed me, overtime, to untangle some of the misalignedelements in my personality. Alignment.You couldn't give me a better gift. Thisis very special. Yeah. Thank you somuch.>> Yeah, I want to thank Guy for doing it.We we called him last minute. I said,you know, who knows him better?Excellent.>> Honest, thanks for doing this. Okay,awesome.