Investing Prudently In Perilous Times w/ Guy Spier (RWH023)

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Hi folks. I’m absolutely delighted to bring  you a truly unique episode of the Richer Wiser,   Happier Podcast. I’m here with my very  old friend, Guy Spier in the living room   of his lovely home in Klosters. It’s a  beautiful ski resort in the Swiss Alps   and it’s snowing heavily outside today. So  guys should be out skiing and having fun,   but instead it’s here to chat  with us about investing in life. [00:03:43] William Green: So Guy,  thank you so much for joining us. [00:03:45] Guy Spier: It’s a great pleasure to  be here, William. And yes, it is snowing, but I   think I’d be cross-country skiing today if I was  out and not doing reading or investment research. [00:03:56] William Green: I wanted to stop  by asking you actually about living in   Switzerland. You’ve lived, I think,  in London, Paris, New York, Zurich. [00:04:04] William Green: You lived in Tehran, I  think as a child at some point you have Israeli,   south African and German heritage. You are  married to a Mexican, you speak about five   languages. So you are somewhat international.  So I’m curious as to why you ended up settling   in Switzerland of all places, and also more  importantly, perhaps how it helps you as an   investor to live in this slow, beautiful,  somewhat [00:04:30] sedate, calm place. [00:04:31] Guy Spier: Yeah. Isn’t it fascinating?  Where do you end up? And I think, I mean,   I lived 18 years in New York City and  for the time that I was in New York City,   I really did feel like I’m a, I was a New  Yorker and I feel like I take that New York   spirit that’s deeply embedded inside me with me.  But the problem that I found in New York City,   which is nothing to do with the amazing city  that it is that when I’d arrive somewhere   from somewhere, I’d be calm and my nervous  system would be calm for about a day or two,   and then suddenly I’d, my nervous system would  be converted into kind of a dangling mess. [00:05:10] Guy Spier: And it’s kind  of summarized by this idea of a New   York nanosecond. And the joke is that  a New York nanosecond is the time that   it takes between the lights in front of  the taxi in front of you, turning from   red to amber. And the taxi behind you starts  hooting. And so there’s this sense of sort   of constant movement, which is incredible if you  have a tendency towards melancholy or depression. [00:05:36] Guy Spier: But it would set me on  edge and I think my nervous system was constantly   anxious. By contrast, what I found when I was  in Switzerland was that all of the elements of   the way Switzerland operates and it basically,  everything seems to operate like clockwork. If   something doesn’t operate like clockwork,  it’s something that is almost newsworthy,   was calming of my nervous system and put  me in a [00:06:00] stable, happy place. [00:06:01] Guy Spier: I think that I realize  now that I’ve done really well in institutional   environments that take care of many details and  of random factors and kind of put you in a kind   of a box towards which allows you to go in the  direction that you’re going. So in New York,   there isn’t a box. There is infinite possibility  and opportunity, and by contrast, what I found   in Switzerland is that I was calm and abled to  focus on the things that I wanted to focus on. [00:06:30] Guy Spier: And the environment  is so stable and is so predictable that   enables me to focus on the stuff that I  need to. I mean, at the end of the day,   what I keep telling to people is they say,  isn’t Switzerland boring? And the answer is   yes. And that is really good because I need boring  around me. I have enough things going on in my. [00:06:51] Guy Spier: I don’t need to worry  that I need an environment which doesn’t   distract me. But I, what I would say is that,  as you bring it up, if I think of New York,   which is, I think one of the best contrasts to  Switzerland is that I used to say in New York,   you could never get lonely or unhappy  because all you need to do is to go   into the street and there’s infinite  inspiration and infinite opportunity. [00:07:14] Guy Spier: And so I think that there’s  a danger in a country like Switzerland that you   can become melancholy. And the great news  is in Switzerland is that you have very   easy travel. So it’s Switzerland as  a base, but with the opportunity to   travel pl to places which are noisy and full  [00:07:30] of possibility and opportunity. [00:07:32] William Green: You said something  really interesting to me the other day as   well. I was remarking on how beautiful  the woodwork and the finish in this house   is. And I’ve been staying with Guide for the  last week here, Pro, probably wearing out my   welcome at a certain point, not all William  and everything is so beautifully finished. [00:07:48] William Green: The quality of  everything is kind of extraordinary. And I   was quizzing you about this and you said that  people who are doing plumbing and electricity   and woodwork, they’re paid something like $200  an hour here, that things are set up so that   it’ll last. So they charge a fortune for  woodwork, but then it’ll last forever. [00:08:07] William Green: It’ll be beautifully  done. And it’s interesting to me the parallel   between that and your investing career where  you are trying to find high quality companies   that are going to. And I’m wondering how that  culture of excellence, quality, longevity,   helps in some way how that’s conducive  for the type of investor that you are. [00:08:30] Guy Spier: It’s really interesting  where that, where the, your appreciation of   that comes from. So for the listener’s  interest Williams started asking me about   the bathroom and the seals and the way the  finish was done really to perfection. I mean,   there’s no way that you could change that.  But where I started connecting to that was   when I discovered a brand of furniture  that was in the Swiss free offices and   the credit Swiss offices in New York, which  is this company, u s m and u s m furniture. [00:08:59] Guy Spier: For those [00:09:00]  who know it is this incredibly durable,   very simple lines and also infinitely  variable in that you can reconstruct it   in any way that you want. So I think that I  was drawn to that quality in Switzerland that   wants to make things durable and practical  and exactly why it happened in Switzerland. [00:09:21] Guy Spier: I think it’s got  something to do with the mountains,   but it’s not just to do with the mountains,  meaning that when you live in the mountains,   especially the way it was historically,  Every winter you might be snowed in for   six months. So you really had to be prepared and  you had to plan for the way the winter would go,   and you’d have to have all the things that  you needed for six months because the only   way to come in and out of the valley was  through dangerous mountain passes where   people potentially died from the cold or  from the storms, from the winter storms. [00:09:51] Guy Spier: And, but that is  combined with this kind of I’m sure that   maybe you or other contemporaries of ours  read Veba Protestantism in the spirit of   capitalism. And this guy Weber, who was  a sociologist, studied the impact of   Protestantism and the, that enlightenment view  of religion on people. And there’s this idea   in Switzerland that you should blend in on the  outside and the quality all comes from the inside. [00:10:22] Guy Spier: So those values run deep  in Switzerland. And I can’t even start to try   to describe exactly why they exist and  how they exist. [00:10:30] I think that,   I’m not sure that Switzerland inspires me to  invest in those kinds of companies that have the   same qualities more. It’s just that I am deeply  drawn to that. And I think that when you’re a   scatterbrain the way I am you would think that a  scatter brain is drawn to chaos, but we’re not. [00:10:49] Guy Spier: We’re drawn to things  that we can rely on and that can be certain   about. Whether it’s Switzerland, whether it’s  my wife is incredibly structured in the way she   lives her life, and then when it comes to  companies, I know that I can lose my keys,   put them down, and five minutes later  I can’t remember where I put them down. [00:11:08] Guy Spier: When you live in that kind  of world, you need that quality and certainty and   predictability of how something will function  around you, and why would you not look for   that in companies? So it’s not so much that  Switzerland inspires me to look for that. It’s   that the qualities that I find in Switzerland are  also the qualities I’m looking for in companies. [00:11:29] Guy Spier: And what actually  I find remarkable is that there’s such   a clear parallel for me between the world that  Warren and Charlie want to live in, but somehow,   and I, I’m drawn to that as well, I’m drawn to  those Midwestern values, Warren and Charlie, by   companies that are kind of set and forget in their  ideal world because they have those qualities. [00:11:50] Guy Spier: So much in Switzerland  is about set and forget that so many other   people don’t seem to make the connection.  I find it surprising that there isn’t a   closer interaction between Swiss [00:12:00]  businesses and the mindset of Berkshire Hathaway. [00:12:04] William Green: We’ve spent a lot of  time in the last few days talking about this   very strange and slightly tumultuous period of  boom bubble and bust that we’ve gone through over   the last few years And you’ve been talking about  how a lot of very smart, successful fund managers,   including close friends of yours and mine, got  sucked into a lot of these companies that seemed   crazily overpriced, but were very high quality  in some cases. At least very high quality,   or at least very promising. And so we are here  at this conference of yours, value X, where a   lot of people come in from around the world and  it’s kind of an a nice barometer for the mood. [00:12:42] William Green: And in recent years  you would have people coming in and talking to   you about why you should buy a company like  Snowflake at a hundred times revenues. And   it was difficult. It’s been a tough time.  And you had people telling you, you know,   here’s what’s so wonderful about CloudFlare or  Twilio or Carvana or Roku or Spotify or Netflix. [00:13:01] William Green: And I’m, I’d  like to talk for a while actually about   this strange period and how tempting it was, how  intoxicating it was, how destabilizing it was,   and also how you ended up resisting  a lot of the temptation to pile into   this stuff that was really very seductive  because it had worked for several years. [00:13:19] Guy Spier: It  was the way to make money.   Yeah. And where that starts for me is at the very  beginning of lockdown. And I remember being in   Zurich and [00:13:30] the share prices of some of  these businesses that would benefit from lockdown,   but were all in the cloud and we’re all  this kind of sSAS type business model. [00:13:39] Guy Spier: We’re absolutely soaring.  And one of the ones I remember. With Zoom,   and of course we’re all starting to use Zoom. And  I’d recently signed onto Zoom, maybe in the year   before. And the people who happened to have been  in those businesses looked like utter geniuses.   And I had always shied away from technology in  general, but especially software companies that   had, well, that were spending an enormous amount  of money to grab market share was the argument. [00:14:08] Guy Spier: And I was, I remember that  I was invited to a launch with Eric Schmidt,   with Mohnish, and actually a former, a student  of a student at Stanford Business School. Very,   felt very privileged to be invited to the lunch.  And Eric Schmidt just took it as a non-questioning   rule of business that there was of the, these  new businesses is that there was market share   to be claimed or land to be staked a bit like  the American Frontier West, where they just   let people ride as far as they could and all  the land that they could see would be theirs. [00:14:42] Guy Spier: And any amount of money  that you spent to do this land grab was okay. [00:14:49] William Green: And Schmidt, just  so people know he had run Google, right? [00:14:53] Guy Spier: He was the  chairman of Google at the time.   So he had a lit, he was no longer the c e o  I believe. And so I was kind [00:15:00] of   struck actually by, we hold  these truths to be self-evident. [00:15:04] Guy Spier: There was no other way  to work in business. I mean, this was, and then   there were people from my. The value investing  world who had invested in such businesses with   metrics and valuations that didn’t make sense to  me, but they were being proven, right? Especially   through that covid period where the share prices  of many of these businesses absolutely sold. [00:15:28] Guy Spier: And it went to  companies that maybe didn’t have this   sort of cloud when it takes all, when  it takes most component, like Peloton   for example. So I remember that I changed my  password because I was still in a mentality of   other valuation models for which these kinds  of businesses would be cast out immediately. [00:15:50] Guy Spier: And so I really spent  quite a bit of time telling myself, guy,   you’ve missed the boat. You’re missing the  boat. FOMO is something that spreads like   wildfire through a population. I remember that  I changed my password. So I often use passwords   that I have to remember. I use them to kind of  self hypnotize or to remind me of something. [00:16:13] Guy Spier: So maybe it’s to have  a positive attitude or to be happy or to take   care of somebody. It’s a wonderful way to kind  of influence yourself because you keep having to   bring it up and it kind of works its way into  your subconscious. So I changed my passwords   to remind me that I [00:16:30] had to learn  about these new rules of business, if you like. [00:16:33] Guy Spier: So that’s  the degree to which it got to. [00:16:36] William Green: So what did you  change it to during this heated period?   Because I remember years ago you had Warren as a  password for one website and so I guess that was   a way of you kind of tilting the odds that you  would behave in a high quality, long-term way. [00:16:49] Guy Spier: Remind myself and  I, and for a certain period of time,   because I felt like I had a blotted my copy book  through my experience at DH Blair. The passwords   were, or they had an element of trusted in  them, so I wanted to be trusted. So I just   wanted to work that word into my mind. I want to  be trusted, so it would be trusted everywhere. [00:17:10] Guy Spier: And so, you  know, I’m sure that this is not   very good for me password security  standpoint, and there may be one   password that will have to change right  after this conversation. It’s an element [00:17:19] William Green: [Crosstalk] Of there   are only a few hundred thousand  people listening. You’re okay Guy. [00:17:22] Guy Spier: But I’ll  have time when, during production. [00:17:23] Guy Spier: But the phrase  was new economy. And so rather than,   and this was part of a longer phrase  but rather than ignore it and say,   this is not a place that I need to ever look  for investment ideas to to remind myself that   this was something that I had to engage with  seriously. And there was Hamilton Helmer, I   think is his name, the Seven Laws of  Power, how to Get Power and Business. [00:17:50] Guy Spier: I’m Mangling the name  of the book, but I read that book two or three   times because it was relevant to the kinds of  shifts that had taken place, for example, When   we had [00:18:00] Netflix and over the top  services, and this was again, something that   I had completely failed to focus on, but then  whenever I dove into, so I had that going on. [00:18:09] Guy Spier: And in certain sense,  you can say, I think that if I look at my mind   so that whatever it was that was spreading  like wildfire and a way of looking at the   world and then accelerated by lockdowns and some  of these businesses really did get a tailwind to   their businesses and sawed. And then of course, I,  you’ve got my password changed, so now I’m saying,   no, take these business seriously, look at  them carefully, try and understand if there’s   a if they are actually, if you understand  them correctly, they are actually cheap. [00:18:42] Guy Spier: And it was extremely  frustrating for me because I had pounded   into myself enough over the previous 20 something  years valuation criteria that I just couldn’t get   there on any of them. And it’s not like I wasn’t  trying, and for example, in the case of Netflix,   I saw these prodigious cash flows and  we all saw, I saw the subscriber growth,   but at the same time I saw them spending  an enormous amount of con content. [00:19:11] Guy Spier: Not only that, there was at  some point where they did not do a share issuance,   they did a convertible bond issuance, and all  of this money was going into content. And so   the big question arose at what rate should this  content be amortized and the company was being   valued as if it didn’t have to be amortized  at [00:19:30] all, meaning that the library   was an evergreen library that would continue to  generate the revenues that it was generating. [00:19:36] Guy Spier: And those seem to  be heroic assumptions to me. And for what   it’s worth one point, I rejected Disney for the  same reason. Because in these content companies,   they’re just sinking a huge amount  of their free cash into movie assets,   which are kind of these random assets. Some turn  into a franchise that lasts forever, like Star   Wars or Aladdin and others turn into something  that was watched once and is rarely watched again. [00:20:01] Guy Spier: And if you know, you  just don’t know where on that spectrum it sits.   And in other businesses, they, some of  them weren’t even cash flow positive,   and so you had to go. Michael Mobu has this  wonderful piece where he talks about how to   analyze businesses based on this idea of unit  economics and unit economics in a certain way. [00:20:20] Guy Spier: We talk about, Charlie  Munger talks about how EBITDA is not a real   measure of earnings and this takes you one  step farther. Use the ruder term than that. [00:20:29] William Green: That’s  true. Beginning with the word bull. [00:20:33] Guy Spier: Yeah. Yes and  but you’re going one step further and   you’re saying actually free cash  from operations doesn’t matter. [00:20:39] Guy Spier: The only  unit of analysis that counts is   unit economics. So what is. Cost of customer  acquisition and what is the lifetime value of   that customer? We’re talking about lifetime value  of the customer. You’re making assumptions about   what’s gonna happen over the next 30 years.  That is an extremely long time in businesses,   which [00:21:00] traditionally  technology has been something that,   that you can easily or over time constantly  gets competed away by innovation. [00:21:07] Guy Spier: So can  you really rely on those? Now,   on the other side it only dawned on me way  after other people, and it was frustrating   for me because I had friends, I’d gone and  given a Google Talk invited by Sarah Madan,   and I’d gotten to know people who worked in  Google’s cloud business. And what we understood   from Amazon was that these cloud businesses  have amazing modes because once you’re locked   into that particular cloud, then it’s very  unlikely that you’re gonna want to shift. [00:21:39] Guy Spier: So a lot of  these businesses, especially with   the shoring, soaring share prices, the people  who said, well, unit economics is the way to do   it. Were being proved right? But I was enough  of a dinosaur, let’s say, that I just wasn’t,   I didn’t feel safe updating my valuation models  to that degree. And there’s something where,   you know, I’m, I mean, I’ve, I think I  brought it up to you over the last few days. [00:22:05] Guy Spier: If I go back to those  beautiful days after the financial crisis,   when Mohnish calls me up and he. There’s this  amazing CEO and he’s running a company called   Fiat and Fiat’s got a 4 billion market cap and  120 billion in revenues. And so you kind of say,   you know, if this company can earn  one or two or 3% on those revenues,   which is a perfectly reasonable thing  to expect, [00:22:30] then this thing   is potentially trading at only one times  earnings, or not far from one times earnings. [00:22:35] Guy Spier: And that is a  very safe low to the ground valuation,   which is grounded if you like. And then  you have these things which are kind of   so far away from the underlying cash  flows, and you’re kind of relying on   these analyses like unit economics.  And despite being desperately wanting   to be able to say to myself that this made  sense, I would find myself disappointed. [00:22:59] Guy Spier: And in the way, sort of  my heart sync, I remember listening to a podcast   with the c e O of Roku and I discovered on that  podcast that Roku had, this man had a very close   relationship with Reed Hastings that Reed Hastings  had invested in Roku. And I understood what over   the top was doing, and I myself saw how little  I was watching, say, cable TV and how much I was   looking at these various apps that appeared on my  TV and allowed me to stream all sorts of things. [00:23:30] Guy Spier: And that Roku was a, the  absolute center of this. And so I would excitedly   then bring up the accounts of rock. And I’d just  be utterly disappointed to discover that I was   looking at a 40 billion market capitalization and  revenues of less than a billion. And with that   I was just almost unwilling to look further. [00:23:50] Guy Spier: It just, the idea of walking  down into that cave or walking down that path made   no sense to me at all. And so I was stuck there  and I [00:24:00] wasn’t able to invest in them   while the people who were invested in them  looked smarter and smarter. Just, you know,   an interesting sort of question for any analyst or  anybody who wants to succeed at doing fundamental   analysis is to ask oneself, when do you stop  and start searching down a different path? [00:24:21] Guy Spier: And there’s a question,  you know, should I have gone further down the   unit economics analysis framework? Should I have  spent more time looking and understanding at an   understanding Roku or CloudFlare is a similar kind  of story on the other side. And something that I,   Mohnish has taught me a little bit to do,  but I really could go much further, is that   we often stop searching at the wrong point. [00:24:49] Guy Spier: And I think that behooves  me to go a little bit further despite the   apparent high valuation, just to see where the  analysis comes to and to try and understand a   little bit. I think I probably stopped too  soon, but it was kind of unbearable to me.   I’d trained myself not to do that on the other  side. I think that if you take the fear example,   I would’ve stopped the analysis and  said, yeah, but it’s loss making and the   automobile industry is going through wrenching  changes and this company nearly went bankrupt. [00:25:18] Guy Spier: So there are  sorts of reasons. Stop the analysis   from that side and what you need to  do is keep going just to see where   you get to and to see if there’s  subsidiaries, for example, that,   I mean in the case of fiat, [00:25:30] even  if you assumed, which it wasn’t the case,   that the whole of the automobile, traditional  automobile indi business was not worth anything. [00:25:37] Guy Spier: They had this jewel  called Ferrari, which anybody who held the   spun out shares of Ferrari has got multiples of  our original purchase price just from the spun   out shares. So sometimes something looks really  ugly and you have to go further down the road.   I think probably you’re better off  going into something that looks really   ugly and seeing what’s underneath and  pushing your analysis through on that side   than trying to find reasons to sustain  evaluation that doesn’t make any sense. [00:26:06] Guy Spier: But on either side,   one should not cut one’s curiosity  and try and push through further. [00:26:11] William Green: Why do you think  these friends of ours who were really smart,   really thoughtful investors got seduced and  were able to suspend disbelief and suspend   skepticism? I’m wondering slightly if  in some. It was that they learned the   wrong lesson from the success of people like  Bill Miller and Nick sleep in buying things   like Amazon that were very high quality and  seeing value in a different type of company. [00:26:36] William Green: If in a way,  they took some lesson from that sort   of behavior and then forgot that Bill  and Nick had bought things like Amazon,   incredibly cheap and then managed to hold  they, they saw the quality and then rode   them for many years. What do you think?  Why did people suspend their disbelief? [00:26:52] William Green: Who, these are really  talented investors. Yeah. They’re not mugs. [00:26:56] Guy Spier: Yeah. And I think that where  I go to at its [00:27:00] absolute core is that   so, so the one thing to be really clear about,  I believe, is that any one of us is susceptible   to this, including Warren Buffet. The idea  that a human is not susceptible to these   moods or whatever it is that takes over,  I think is a very bad conclusion to draw. [00:27:20] Guy Spier: We’re all   susceptible to it. And another way of looking at  this very unusual development in human history is   this concept of markets and stock markets and  a price for some commodity or some asset whose   value is disseminated across a population. I  mean, we certainly didn’t evolve with that. [00:27:41] Guy Spier: We all know about the fact  that our minds evolved to taste the berries. React   positively if the berries didn’t kill us and react  negatively if they tasted bitter or did kill us.   There’s this very weird interaction that happens  between stock market prices and human psychology   and the underlying businesses that drive  changing economics are in themselves changing. [00:28:03] Guy Spier: So the economics of  the cloud, which is a new kind of economics,   has never interacted with the human mind before.  And I think that we need to understand that   the stock market and sort of public  markets are constantly changing   interactions between prices, psychology,  and the underlying economic environment. [00:28:27] Guy Spier: And it will constantly  test the human mind in [00:28:30] aggregate to   find something that works. And so sooner or later  you’ve got this constant machine that is going to   find something in enough human minds that when  is spread across them, results in price, action,   and reinforcements of things that kind of like are  extremely unusual for a certain period of time. [00:28:48] Guy Spier: And this interaction  between prices and psychology leads to this   huge dive diverted divergence between what is  going on between the psychology and the price   action and the underlying reality. So I think that  my kind of like, I hope it’s a useful answer is   that will take over any human mind in the same  way that we can say that you know, the virus. [00:29:11] Guy Spier: Any kind of biological  virus doesn’t really make a distinction between,   say, race doesn’t make a distinction between  intelligence. It doesn’t make a distinction   between wealth and you and I know that one of  the great, it’s one of these strange equalizing   factors and a great weakness for very smart  people is that if you’ve been through the   university system, if you’ve done well at  exams, if you’ve had all sorts of experiences   that lead you to believe that you ought to  be able to be successful, say at investing,   you come to believe that there are  some things that you’re not immune to. [00:29:44] Guy Spier: And I think it’s hard  for, especially for smart people to really   make ourselves aware that we’re in a sense more  susceptible to these market moods because we   think we’re so smart that we don’t need to pay  attention, if you like. So I think that’s a kind   of like [00:30:00] trying to attempt a very basic  explanation, which in fact doesn’t explain much. [00:30:04] Guy Spier: It’s just saying there’s  a weird interaction between psychology prices   and underlying economic reality. But then I think  that if you wanna do dive into more of the weeds,   it’s something along the lines of what  you’re talking about that, you know,   a brilliant guy realizes that he  can, that it started with Costco. [00:30:26] Guy Spier: That Costco  despite appearing to be expensive,   was really very cheap. He then has the  realization, and I’m talking about Nick   Sleep and Costco. Along with Zach, and then  he has the realization that actually Amazon   is Costco on steroids and there’s plenty that’s  been written about this and he gets it right. [00:30:48] Guy Spier: And you’re absolutely  right that Amazon was never, in a sense,   not profitable. And it was a point that was  made to me recently by Nick that even at the   time when the share price had declined  dramatically, what they were doing was   they were taking operating profits  and pouring it into new businesses. [00:31:05] Guy Spier: So they were they had  internally funded growth from a very early   point. And some of the companies you mentioned  were all externally funded growth. They were   being funded by the capital markets. But if you  study next leap, and it’s in part my job to study   what brings success to investors and to understand  new approaches to bringing success in investing,   then a natural thing to do in my shoes is  to say, well, Nick found [00:31:30] Amazon. [00:31:30] Guy Spier: How many other analogous  investments are there? And I myself have had   great success by looking at business models that  have been successful, say in the United States,   and applying them in other countries, looking for  credit rating agencies in other countries looking   for-profit education companies in other countries  or branded goods companies in other countries. [00:31:51] Guy Spier: And so it would be, have  been very natural for those of myel to say,   what other Amazon dot coms are there out  there, but in the same way you, you know,   is it perception is a weird thing.  You’re looking for those qualities,   you think you understand them and then you go into  another business and you think you found them. [00:32:11] Guy Spier: Maybe you haven’t.  I think that a lot of the madness was that   people really did believe that they’d found  them, but actually they hadn’t because there   was only one Amazon or very few in the same  way that maybe somebody sees one successful   automobile company in the turn of the century,  but most of them ended up went going bankrupt. [00:32:30] Guy Spier: So it’s a complex story,   but I hope that helps to some degree, to  maybe give some kind of an explanation. [00:32:38] William Green: It also gives  a sense of just how hard the game is.   You are trying to see patterns and extrapolate  from them and learn from examples of success,   and you have to do it with a tremendous  sense of nuance that it’s our gift for   patent recognition can also  get us in tremendous trouble. [00:32:54] Guy Spier: Yes. And so this thing  just turns on itself constantly. And you know,   [00:33:00] maybe you, I know that you brought this  up to me recently. It’s one damned relatedness   after another. They’re also clearly sort of sweeps  of market history. So we’re coming, we were coming   out of a period. It’s amazing how, for how long  the Ben Graham discount to book value or discount   to two or three very simple measures, buying  the lowest decile in valuation worked really. [00:33:25] Guy Spier: But it worked. And this is  coming out of the depression when all sorts of   companies, nobody wanted to invest in the stock  market. All sorts of companies were trading at   discounts to very simple measures of liquidation  value. And people like me and many other like me,   sort of just wished for the days when all  you had to do was find one newspaper towns. [00:33:44] Guy Spier: But that was working less  and less well. But what was extremely successful,   starting with Warren, was looking for these better  businesses and you Happy Rain can if and other   funds looking for better businesses. It’s a very  natural transition progression to go from looking   for better businesses, higher returns on capital,  higher returns on incremented invested capital. [00:34:04] Guy Spier: Not looking for say,  book value but valuing the brands inside   the business based on their intangible  value and not tangible value. Cause if   you try and liquidate the brand,  you’re not gonna get anything.   And then take it yet. One step further into  unit economics, lifetime value of the customer.   And I remember with a good friend of ours  going through the valuation of Salesforce. [00:34:29] Guy Spier: [00:34:30] And Salesforce  invests an enormous amount in marketing. They   do these, I don’t remember what the name of the  conferences are, but they’re incredible events   where they invite speakers. I’ve attended one in  New York City thousands of people attending some   amazing brand name speakers. They’re amazing  opportunities to learn, not just about at its. [00:34:52] Guy Spier: Of those conferences, how to  implement Salesforce in your business, but how to   improve your life in any which way. But in order  to reach a reasonable valuation for Salesforce,   at the end of your value of your model, you  had to take away those marketing expenses.   You assume that they’re no longer necessary,  and you have to make huge assumptions about   how many customers leave you every year, because  that sort of determines the le, the life cycle,   how much you’ve invested now for the  revenues that customer’s gonna generate. [00:35:23] Guy Spier: And you had to  make, well, we will discover whether   there were heroic assumptions or not. Maybe  there were not heroic assumptions, but   I ended up having a debate in my own mind  whether the assumption was heroic or not,   and that the decision as to whether  that company was cheap or not would’ve   actually turned on whether the assumptions  in the model were generous or conservative. [00:35:46] Guy Spier: And that’s a whole  new world that seems to me to have been   kind of a step too far, at least when it comes  to value investing and getting more, you know,   now that I’m listening to your podcast, Fred  Martin, who’s repeated this word in such a   beauti phrase, in [00:36:00] such a beautiful  way, prices, what you pay value is what you get. [00:36:03] Guy Spier: And the,  you know, the definition of value,   ultimately you can have it in your mind. And a  false valuation model can be reinforced in the   market because of the price action that makes  you look right for a number of years. Makes you   look. But then eventually Gravity pulls it down  to Earth and you discover what value really is. [00:36:24] William Green: You mentioned to me the  other day that you’ve come out of this period with   a couple of new checklist items and you also  talked about how you were protected by being   in this ecosystem where you were reading things  like Tom Gayner annual Ladder. Can you talk both   about the checklist items that are practical  ways to protect yourself against these kind   of temptations, and also how putting yourself  in a certain intellectual space and a certain   ecosystem also is a key way of protecting  ourselves from getting too carried away? [00:36:59] Guy Spier: Yeah, so the checklist  item is an interesting riff on something that   Warren Buffet has said. So we all know  that Warren has said that he does not,   he would not mind if the stock market was closed  for 10 years. His valuation and his confidence in   the value of the business is not reinforced by any  particular price action or any particular quote. [00:37:22] Guy Spier: He looks to the  results of the business, what are revenues,   how much cash is it generating, what are owner  earnings, all of [00:37:30] those good things.   But what I realized when looking at some  of these companies that were investing   in the future of their business,  not from operating earnings,   but from money. In the market, either through  equity offerings or through debt offerings. [00:37:48] Guy Spier: And many of these companies  had originated inside of venture capital firms   where the venture capital firms would’ve fueled  their growth by putting their partnership money   into those companies. But then that kind of, it  seems like that continued in the public markets,   and there were plenty of investors who are willing  to show up based on their unit economic analysis   or revenue growth and all sorts of other numbers  to continue to fund the growth of those companies. [00:38:15] Guy Spier: So they’re taking money  from the capital markets and they’re investing   it in operating losses because they’re going  for this. They believe that winner takes all   or winner takes most, and they wanna grab  market share. And everybody believes this.   And all of this is wonderful until the music  stops and the capital markets aren’t willing   to fund your growth anymore, which seems to  have happened for many companies in 2022. [00:38:42] Guy Spier: And then the company  has to do some huge reorientation because   they have to restructure their business  model based on internally generated cash   flows. And what it seems to me is that in  many cases, at that point, what appeared to   be growth [00:39:00] CapEx or growth expenditure  was actually an operating cost of the business. [00:39:05] Guy Spier: And the internal  accounting up to that point, implied   that the business was profitable. Because  they could characterize these new flows of   capital coming in from the capital markets  as CapEx and suddenly, maybe it’s not CapEx   and maybe actually all the business or aspects  of the business are actually not profitable. [00:39:25] Guy Spier: And so the  simple checklist item that comes up is,   can the company fund all of its growth  and all of its discretionary investment   in potential new businesses from existing  cash flows? And in a certain sense,   what I’m saying is that venture capital is a world  that I don’t, I, I’m respected deeply. There are   people who do it really well and it’s spilled  over into capital market, into public markets. [00:39:55] Guy Spier: But I very much want my  investments not to be of the VC kind, where   capital markets are funding growth, but where  growth is, if it’s being funded, is being funded   internally. So the simple question is, can the  company fund all of that from internally generated   resources? It continue to grow, can continue to  grow even if the capital markets were closed. [00:40:18] Guy Spier: They don’t need  to rely on their interactions with the   capital markets. And what comes up for  me, William, and this is why it’s so   valuable to do things like attend the Berkshire  meetings and at the [00:40:30] time to attend   the Wesco meetings. I know that you’ve  attended the daily journal meeting. . So   a side trip organized at one of the Wesco  meetings was a visit to See’s Candies. [00:40:40] Guy Spier: So  Chuck Huggins was still there   and he led us on the tour of the Seas Candy  Factory, which I should tell you is such a   simple operation. This factory is not Hightech at  all, reminds me of the tour that Mohnish and I and   his daughter did of Malai in China. And so I get  this opportunity. I’m super enthusiastic about,   I mean, I’m not mad about seas candies, but  I can see what an amazing business this is. [00:41:08] Guy Spier: And we all know the  stories about raising prices. And of course   you get frustrated because you say, why can’t  this business be in the west, east coast of   the United States, in the middle of the country?  Why don’t we take it to Switzerland? Why don’t we   convince the Brits? And I say, I start coming up  with all these CapEx projects for Chuck Huggins. [00:41:28] Guy Spier: And he just says, he first  full said, we tried many of them, they didn’t   work. And he said, at this point, Warren wants all  of our excess cash to go straight to head office,   but they would’ve had the  opportunity to withhold cash   from that they were generating and try stuff.  But none of it worked. What’s my point? [00:41:50] Guy Spier: Warren will allow the  investee businesses to make investments and   not send cash up to head office to reinvest  else. [00:42:00] But what he’s not gonna   do is he’s gonna look very carefully if he’s  actually sending cash down to the subsidiary   companies. And effectively the only company  that I know that he regularly does that for   is the energy business where he can be  very certain that the new cash that he’s   sending down into that subsidiary is gonna be  invested at good rates of return in, I believe,   I don’t know the internal operations that well,  probably every other business he does not do that. [00:42:29] Guy Spier: So in a certain sense,   I’m replying that role to my investments in  the public markets. If you are looking to,   if you’re a company that I’m invested in  and you’re looking for to raise money,   you’re like Netflix, and you go and do a bond  issuance for 18 billion to invest in new content,   that’s a Nona. If you’re such a good business,  why can’t you take your internally generated cash? [00:42:53] Guy Spier: Why can’t you take  the revenue that is coming from customers,   pay all your expenses and from what’s left over,  just use that to invest in new content. And if   the CEO were to come to me and to say, ah, but  we’re doing a land grab and we need to raise   this money so that we can go faster, then the  answer to, in my mind, not that I have to say   this to the ceo, is, well, you can’t be that  good a business because if you are under the   gun to grow so fast and otherwise things will go  south on you, you’re obviously not that great. [00:43:25] Guy Spier: And there’s businesses out  there that are far more sedate. And are [00:43:30]   reinvesting constantly in things that widen the  moat and that enable them to go into adjacent   spaces without having to tell a story to the stock  market. So that’s the checklist item. I took a   long time over it, and I took you on a little  journey, but I hope I brought you back to the   right spot, but I didn’t answer the second part of  the question, which I think was equally valuable. [00:43:50] Guy Spier: Yeah, the ecosystem.  Oh, yeah. So, so that in a silent sense is   far easier to answer, and it’s really important.  So that checklist item is a way of me trying to   train myself in a way of thinking that’s  gonna stop me from making mistakes. And if   I simply make that distinction and cut  off all those companies that actually   we see type funded investments that are in  the public markets, I’m gonna save myself. [00:44:16] Guy Spier: I think a lot of brain  damage, a lot of hassle, but the ecosystem for me,   and I think so, so I really, I think it’s a shame.  I th I think I have friends who would’ve benefited   from attending the Hathaway meetings. Every  year there’s a, an idea that comes, I don’t   know where I read it first, but the Sabbath,  the Jewish Sabbath is a cathedral in time. [00:44:39] Guy Spier: And how’s it held up? How’s  it, how does it sustain itself through time? How   do people manage to keep the Sabbath? And the idea  is that it’s mountain ranges held up by threads.   And as you and I know that the sort of the rules  around the sabbath. Are, they’re not infinite,   but they [00:45:00] go into enormous detail. You  can ask yourself why do they go into the norm? [00:45:03] Guy Spier: Enormous detail. There  are rules for those of you listening who are not   maybe that interested, there are rules where one  should not pick up a pen if you’re an extremely   observant Jew. Not because the pen itself  is gonna lead you to violate the Sabbath,   but because in an, it’s an object whose only  use would be to violate the Sabbath by writing. [00:45:22] Guy Spier: So  don’t even pick up the pen. [00:45:25] William Green: And in a way it’s  like not opening a Robin Hood account that you   want to you once said to me, move the candy  away. You were saying to me the other day,   why do you feel like you have to check your stocks   every day? And I never seem to buy or  sell ’em. I mean, I just sit on them. [00:45:41] William Green: But it’s really,   I haven’t seen you once in the week that I’ve  been here. Check what’s happening with your [00:45:46] Guy Spier: stocks. Yeah. No,  I haven’t actually. I haven’t. And that’s   absolutely right. And so you’re taking, making  the exact point. And once you find that rule,   once I found a rule like that then  work on it and actually implement it. [00:45:58] Guy Spier: So whether it is visiting  the Berkshire Hathaway meeting every year,   simply the act of going to the Berkshire  Hathaway meeting is gonna put me into a   better place. Or when I discovered that Nick’s  sleep and it was really beautiful. So they have   the most wonderful office on, just off the  King’s Road. You visited it, haven’t you? [00:46:16] Guy Spier: Yeah. So, you know, the  first time I was I say I look for the Bloomberg   monitor cause I know he is got. And it’s like  it’s on a low bench and it’s uncomfortable to   look at. And Nick says, yeah, we don’t wanna look  at it that often. And they both, he [00:46:30] and   Zach have talked about this. So in, in my case,  when I saw that I canceled my subscription from   Bloomberg for, I don’t know, a period of time  but I gave it to our cfa, oh, Mark Chapman. [00:46:42] Guy Spier: I said, mark, you look  at the Bloomberg. Eventually I decided that   didn’t work for me. But what I did do is those  of the listeners who have experienced with the   Bloomberg monitors that you can set up these  elaborate trading screens and change them   to exactly the way you want it. And for a  certain period, I played with that and I,   and you can set it up in such a way that it  launches one of those things automatically. [00:47:05] Guy Spier: And, you know, you have  one or two monitors that are just like wall to   wall carpeting of enormous amounts of data.  And I had this idea that I could structure   it in a way that worked for me. And at  some point I realized, no, first of all,   I’m not gonna use that functionality on  Bloomberg. It’s just not useful for me. [00:47:23] Guy Spier: And actually  modus operandi is the, it’s on my desk,   but it’s closed for a lot of the time.  So that’s what works for me. But it’s,   so what’s really important is that, and this is  something again, I just think that the Jewish way   in Halk is really interesting. So again, Forgive  me if I’m diving down a Jewish rabbit hole here. [00:47:43] William Green: Yeah. laws.  Basically, it’s the laws that are that,   that keep you on the straight and  narrow so you don’t mess up too much. [00:47:50] Guy Spier: Hopefully. So  here’s a fascinating thing is that,   so, so the listener might not be  aware that the question arises.   What if a a devout Jewish person  [00:48:00] finds himself eating pork? [00:48:01] Guy Spier: You know, the rabbis who  are making, who try interpreting halk don’t   step away and say, oh, then you’ve lost  the game. You’ve sinned. That’s that   even in the way you break the halk, there are  better and worse ways to do it. They go in the   tal mode into, if a man wants to commit  adultery, how should he commit adultery? [00:48:25] Guy Spier: So that’s not  saying that adultery is a good thing.   It’s saying that the god’s presence or  the divine presence never leaves you. The   observation never leaves you. You are never,  no matter how badly you behave, you are never   removed from the obligation to improve your  behavior. So if you apply that in investing,   the point is, you know, I didn’t do the  Nick Sleep solution, but if I’m putting   the Bloomberg monitor on my desk, there  are better we and worse ways to do that. [00:48:54] Guy Spier: If you decide to open a  Robinhood account, there are better or worse   ways to do that. If you decide to day trade,  there are better and worse ways to do that.   If I go to the Berkshire Hathaway meeting, You  know, there are better and worse ways to do it.   I can go to the Berkshire Hathaway meeting, as  you know, from collaborating with me on my book. [00:49:13] Guy Spier: I could go and hang  out with a bunch of New York investment   bankers who sat in the back and were kind  of semi-critical of what was going on and   called it a cult. Or I could say, I need to  imbibe as much of this as possible and find   my group of Indian friends and queue up on the  first day [00:49:30] and sit at the very front. [00:49:31] Guy Spier: So these are all threads  that hold up. And I can tell you that I got into   a debate in my office over this, and just  to remind my ourselves, how do you create   a protection against courting? Getting caught up  by the madness? And I said to my coworkers, if you   think that I’m not capable of getting caught  up in the FOMO and the madness, you’re wrong. [00:49:57] Guy Spier: The only reason why I might  not have been caught up this time is that I did   enough of those other things. And before handing  the mic back to you, I’ll just leave everyone   with one thought. One, one thought. That almost  haunts me, William and I will never forget it,   and I keep repeating it. And forgive me if you’ve  heard it come out of my mouth before at lunch with   Warren at the steakhouse in downtown, in Midtown  Manhattan, Smith and Lanskys Warren says the   words, and we’d been talking about my father  and about how he had never gotten into debt. [00:50:33] Guy Spier: And actually we put a very,  we’re sitting in this place in clusters where   we did take out a very insignificant mortgage.  And my father was derisive because in his view,   why on earth would you ever need to take  any debt ever in your life? Just restrict,   buy a smaller apartment, don’t  buy the apartment, whatever it is. [00:50:53] Guy Spier: And so we  are discussing this with Warren,   and just to bring up the context we’re talking  about how when we lived in [00:51:00] Israel,   luxury in our family and the good  life was to go to this hotel,   the Donna Cadia and get a cafe ua, get us  sort of like chocolate filled, cream filled   coffee with like a bomb. It was so much fun  and it was a luxury on a weekend afternoon. [00:51:14] Guy Spier: And Warren says, just as a  sort of side comment, yeah I wouldn’t wanna get   into debt ever because I don’t want to discover  what I’m capable of. And forgive me if you’ve   heard this from me, but Warren Buffet, this is  not some individual saying that he doesn’t want to   discover what he’s capable of if he allows himself  to get into any significant amount of debt. [00:51:35] Guy Spier: So if Warren is worried  about that, how worried should I be about all   sorts of other things, not just about debt, if I  hang out too much with people who have Robinhood   accounts or so. So if Warren can get himself into  the wrong environment, which would result in bad   decisions, I certainly can. And I really do think  that it’s a constant work of channeling ourselves. [00:52:00] Guy Spier: A positive direction.  And when we see a fork in the road,   when we see an opportunity, you  know, I gave this phrase to you,   take the high road and realize that it’s not  just one decision. And this is something that,   again, is, comes through in Berkshire’s, in  Warren’s decision making over all sorts of areas. [00:52:18] Guy Spier: Assume that the  decision you’re making this one time,   which seems to be insignificant, is repeated  infinitely across your life and across the   universe for you. And what would the results  be? [00:52:30] And if it’s positive, take it.   But if it’s not positive, then take the one  that is less likely to lead to a bad place. [00:52:37] Guy Spier: So take the opportunity  to go to the Berkshire Hathaway meeting,   you know, on the wait, what’s really  hard and is that when you come to these   fomo new business models, it is  my job to analyze that stuff.   So I can’t just dismiss them out of hand and say,  this is rat poison squared. I’m not gonna do it. [00:52:59] Guy Spier: I have to  examine it and decide whether,   for me, it really is rat poison squared.  And that’s really hard cause you have to   go into those dangerous zones. You  can’t just stay in the safe and. [00:53:10] William Green: So Guy,  one of the things that’s striking   is that you’ve come through this period  that was relatively dangerous, right? [00:53:16] William Green: You managed to escape  relatively unscathed from the crypto blowing up.   You didn’t own any crypto. You managed to emerge  unscathed from these hot, overpriced tech stocks   blowing up. The only positions you had taken in  that new economy were pretty cautious. Once you   bought a very small stake in Google you bought  a small stake, I think a 1 cent position in,   in Twitter that then you managed to get  out of when Elon Musk bought the company. [00:53:41] William Green: But now that  everything’s come down, prices have come   down the valuations have come down, the bubble  has burst. It’s striking that you still haven’t   actually done anything. You haven’t managed to  find anything to buy. And you’re sitting on,   I think about 10% in cash, which is the  most I’ve seen you sitting on for years. [00:53:58] William Green: And I’m  wondering why [00:54:00] are you   going so cautiously? Why are you finding  so little to excite you in a period where   it’s no longer so rebellion and so  crazy? And so potentially delusional? [00:54:13] Guy Spier: Sometimes William, William  asks the question, you ask the question with   the confidence that the answers just gonna pop  up, and there’s gonna be some profound wisdom. [00:54:23] Guy Spier: And I’m not entirely sure   exactly why. So I can try and understand that.  And before I try and understand that in real time,   the myth, the fact that’s what I’m doing  doesn’t mean that it’s right. It just means   that this particular human has reacted to his  particular circumstances up to now in that way. [00:54:43] William Green: Do you, I  mean, I’m wondering if you as just   an old observer of you having been  friends with you for 25 years or so,   it feels a little bit like you’re a little  confused by what’s going on in the world   and you’re a little bit shell shocked by what  just happened. And there’s an element of you   being slightly in your bomb shelter kind of  peeking out now that the light has emerged. [00:55:03] William Green: I’m  trying to think, what do I do here? [00:55:07] Guy Spier: Yeah, so one thing that I  can go into a little bit, if you draw me on it, is   how companies that I yearned for, I said, if only  you had the right valuation, then I’d be excited   about you. And we’ve mentioned it already, but  I’ve yearned for Netflix. I’ve written about it. [00:55:26] Guy Spier: Read Hastings is an amazing  level five leader [00:55:30] and I look at it now   and it just doesn’t excite me, as you say. And  I don’t see, I see more danger than opportunity.   And I think that’s the case with many companies  whose valuations have come down. I still don’t,   you know, it’s either initiating a new  position or selling something to buy them,   and I don’t find myself wanting to do that. [00:55:51] Guy Spier: I related to you a  conversation that I had with my father.   So fight, flight, freeze, kind of reptilian  reactions that we all really ought to always   be aware of inside of us. Something  that has served me well is when mayhem   happens or market mayhem happens,  my natural reaction is to freeze.   It’s not a terrible place to be to stopwatch,  observe, try and understand what’s happening. [00:56:16] Guy Spier: And you’ll notice that  there are some trader types that when the market   gets active and volatile, they start trading a  lot. So they’re perhaps going into frightened   flight and freezes a perhaps a more rational  place to be. And you say, come out into the   light. But I don’t see that at all. I think that  I was really struck by a Harvard Business School   professor who came on a sort of briefing call  with a group of people who’s a Russia expert. [00:56:43] Guy Spier: He was really shell-shocked  by the Ukraine conflict and the increased   probability of a nuclear exchange. And I had  a conversation with my father about it where   opportunities to deescalate seem limited and  possibilities [00:57:00] for exel escalation   seem broad. And you’ve got, on the  one side, effectively, you’ve got   two superpowers or two systems in the world,  authoritarian and liberal free democratic,   who are in conflict with each  other over a shooting war. [00:57:14] Guy Spier: And  at least on the NATO side,   we’re trying to pretend that we’re not in  a shooting war with Russia by making all   these restrictions in terms of what arms we  supply to the Ukrainians. But effectively,   if you look to the under underlying reality,  it’s two super plows in conflict with each other. [00:57:31] Guy Spier: Superpowers don’t lose  walls. So how is this gonna end? Is something that   is really scary actually, and leads me to want to  be incredibly cautious and I don’t want to, you   know, sort of be chicken little, the sky’s falling  on our heads, sell everything and go to cash,   so to speak. I think that the safest place to  be is in the kinds of businesses that we are in. [00:57:53] Guy Spier: But I certainly don’t wanna  I’m feeling very cautious. Extremely cautious.   We’re not through whatever the world is going  through and we’ll understand in retrospect what it   was. You know, we are talking about a realignment  of supply chains. So supply chains in the past,   in in this period of globalization that we’ve been  in, perhaps since 1945, has been optimizing supply   chains based on what is the lowest cost way to  produce this good or commodity that we need. [00:58:22] Guy Spier: And the advent of covid  and rivalry between superpowers has meant that   part of the reason why prices are going up  [00:58:30] is that supply chains are being   reconfigured not for optimal costs, but for  resilience. And a resilient supply chain is   probably more expensive. So we see, I just read in  the paper today that Germany had approved, I don’t   remember the name of the semi-conductor company,  but semiconductors being produced in Germany. [00:58:49] Guy Spier: That’s a. We don’t  think of semiconductors being produced in   Germany. We’re talking about iPhones  no longer being produced in China,   but being produced in the United States.  So there are realignments that going on   that lead me to want to just be  cautious, to be really cautious. [00:59:04] William Green: You were  saying to me the other day that you   actually feel like this is a bigger  crisis than say the Asian contagion   that you lived through in the late nineties  or nine 11 or the global financial crisis. [00:59:17] William Green: And it sort  of took me aback in a way that you   regard this as a more fundamental and  potentially really systemic threat to [00:59:28] Guy Spier: investors. But believe that  I don’t think it’s hard to make the case that   this is the biggest shift that has taken place  in sort of global dynamics since World War II. [00:59:39] Guy Spier: Because the breakup of  the Soviet Union in 1989 and the release of   all those Eastern Europe countries from  Russia’s grasp and effectively into the   West and many of them in to NATO, was a  kind of a happy growth period. You had   the creation of the European bank for  reconstruction and development was one   of the institutions [01:00:00] so many  of these countries joined that you use. [01:00:01] Guy Spier: Some of them joined nato.  You had this idea that one way or another,   Russia and nuclear superpower was gonna accept  a reduced role in world. And despite the fact   that it’s still an empire it’s a country  disguising an empire with many subcultures   and countries within it that it was going to  kind of go off into history as the way that   other great empires have gone off into history  like the Netherlands or the United Kingdom and   accept a diminished role and a productive role  and take its place amongst the nation states. [01:00:37] Guy Spier: And it did that where  it appeared to be doing that until it seems   like one way or another Russia decided that  it wasn’t, that fate was not acceptable to   it. And actually Crimea had to be part  of Russia and potentially Ukraine. And   I understand that in their maximalist  version, they would retake the Balkans. [01:00:56] Guy Spier: And so suddenly we have  raw superpower conflict. And that is since   World War ii, we haven’t had that really,  it seems to me. And yeah, I feel like, and   I don’t know how that works out, and  I really do buy into this book that   I read by Henry Kissinger World Order, the  World, it’s a realist view of world affairs. [01:01:17] Guy Spier: The world tends to order  countries, even if they disagree, power blocks,   superpowers, even if they fundamentally disagree,  find a way to order. In the same way that we found   a way to live [01:01:30] side by side with the  Soviet Union, even though the Soviet Union once   had an ideology that wanted to turn the world  communist and the rest, many of us didn’t want. [01:01:39] Guy Spier: But exactly how that falls  out right now, we don’t know. And maybe that’s   just overly cautious. I was talking we’re at  value x. I was talking to somebody who has had   Russian shares frozen, and we have, we know  that Russian assets in Western Europe are   being frozen and in the United States, and at  least we have deep respect for property rights. [01:02:03] Guy Spier: Such deep respect for  property rights that we will freeze Russian   oligarchs assets, say, but we won’t appropriate  them. And it causes a big legal issue for us is   that if we appropriate one set of people ba  based on foreign policy, then who else would   be appropriate? The property principle is  extremely important to western civilization,   but the property principle does  not apply as strongly in Russia. [01:02:31] Guy Spier: Doesn’t apply  so strongly in any other civilization.   We have a huge cross holding of assets, whether  it’s at the level of my portfolio where I own   assets in China, sometimes directly, not  to mention multinationals that own assets,   and now it would be utterly destructive and would  reduce wealth in the world very significantly if   national powers were to start  questioning people’s property   rights in different jurisdictions and  not just a [01:03:00] freezing property. [01:03:01] Guy Spier: Is al already bad enough?  But how can I know that’s not gonna unfold in,   it’s not going to unfold in that way.  And if it is gonna unfold in that way,   and what, you know, I’m not a historian, but  I’m aware that a triggering event in 1914   resulted in a series of dominoes falling  the way the history’s been explained to me   that World War I happened and that nobody  really wanted World War One to happen. [01:03:27] Guy Spier: But one thing led to  another, and I can sort of think of it a bit like   an avalanche, and we are kind of having these mini  avalanches right now. How bad is it gonna get?   And if one thing needs to another,  my father’s does not see a way to   deescalate the war that’s going on in Ukraine.  So maybe it continues to escalate by a series   of involuntary steps where in at each step the  entity is doing what it thinks it ought to be. [01:03:52] Guy Spier: Right? In the same way  that many people right now are crying out for   supplying Ukraine with the arms that it needs  to win. But maybe that is just an escalation   against a superpower that cannot allow itself to  lose with huge strategic debt. I know I’m talking   about things that I don’t really understand, and  I don’t think anybody really understands them. [01:04:09] Guy Spier: But there are people who   know a lot more about these things  than I do. But where is that going? [01:04:13] William Green: And well, I think  you’re also more sensitive to these things,   partly because your family has been so  deeply affected by this kind of history,   right. You had family in Germany that  lost their fortune during the Holocaust. [01:04:29] William Green: You had family  [01:04:30] in South Africa on your mother’s   side that left South Africa during troubled times.  There you have family in Israel. So you are very   you are very keenly aware of the way  in which big global events can affect   investors in extremely surprising ways.  So maybe you’re just more sensitized. [01:04:48] Guy Spier: And if we just go into one  of, one of those family histories, if we just go,   forget about the Holocaust and what happened  post 19 38, 19 39, but you take my family in   Germany in 19 31, 32, and they were living  the good life as good as we have here,   prosperous life full of opportunity.  And by a series of remarkable events,   this man who’d tried to put in  Munich has suddenly won power. [01:05:18] Guy Spier: And by 1936, my  grandfather can no prop, no longer practice law.   And his properties have been, their properties  were being exp appropriated one way or another,   and their only chances to leave. So  how do we imagine the unimaginable   that was unimaginable to them? And in their  case, all of their assets were in Germany. [01:05:39] Guy Spier: If by some reason they  would’ve had lots of assets outside of Germany,   life would’ve been a lot better because they  would’ve been to able to recover. In fact it   would’ve just been a case. Moving country. Going  back to one of your original questions, no doubt   I’ve been drawn to the United States as a  country of extraordinary strategic depth   where world events are [01:06:00]  unlikely to affect you in that way. [01:06:01] Guy Spier: And I’ve been drawn to  Switzerland as a, an island of calm and an island   where property rights and individual rights have  been respected for a very long period of time. So,   yeah and you know, we, I worship at the Church  of Berkshire Hathaway in Warren Buffett and Ben   Graham and value investing, but that can only take  place within a framework that allows it to happen. [01:06:22] Guy Spier: And I have to be aware that  potentially that framework gets destroyed. And it   may be that’s a 1% probability or less, way less,  but it’s still possible. And I wanna survive that   on the other side. And it’s worth saying that  in my view of the world shorting things, betting   against betting that things will go down is not  a particularly useful way of protecting yourself. [01:06:46] Guy Spier: Because ultimately  you, you’re relying on the system to pay   you out on your short bet, and you need  to be able to enforce that short bet.   And maybe you’ll be able to, but maybe you  won’t. And so, sort of buying insurance,   it’s actually setting yourself up in such  a way that if you have a very bad outcome   for the next 20 to your 30 years,  you can still do fine if you like. [01:07:09] Guy Spier: And so, if I buy a  new company, especially if it’s outside   of Western Europe, north America, Then, you  know, by definition I’m going out some way on   my risk curve. So what are, what do they talk  about? Risk on and risk off in some circles.   So you’re increasing the risk in some way  and you’re increasing the complexity of   the [01:07:30] portfolio and you’re increasing  the number of events that can affect you. [01:07:33] Guy Spier: And yes, you’re  potentially diversifying as well,   but we’ve been through a period of global growth,  globalization, optimization of supply chains,   you know, people supplying all sorts of goods  from all over the world. And I pray and hope   that will continue because it’s the predicate  of so much of the wealth that’s been created. [01:07:54] Guy Spier: But  what if that doesn’t happen? [01:07:56] William Green: It’s interesting  how heavily exposed you are, not only to the   US but actually to China and India. And you  were talking to me the other day about how   part of your reaction to this period of tremendous  turmoil and heightened risk is to bet on big,   powerful, almost unshakeable economies like  the us You have a position in Switzerland,   in Nestle that you’ve owned forever,  but no other Western European stocks. [01:08:23] William Green: And then you  have big exposure to China through things   like b y D and the like Alibaba. And  then you own stuff in India. And I’m   curious how you think about this question  of investing in places like China that seem   pretty fraught in some ways. As actually a  sensible place to be in a dangerous world. [01:08:46] Guy Spier: Look, we’re dealing in  hypotheticals that go way out, and I can’t   claim that my reasoning is watertight,  bulletproof. The only way to look at it   so I can talk [01:09:00] about why I think I’m  making sensible decisions, but it could still   turn out that in the light of new developments  that there was a better way to organize oneself. [01:09:11] Guy Spier: So China needs the world.  I’ve said in other places, and you know, it was   started off with General Motors, what’s good for  General Motors is good for the United States and   vice. What’s good for bier moths like Alibaba,  Tencent, b y d is good for China and because it   drives increased rising incomes in China, what’s  good for China is good for those companies. [01:09:34] Guy Spier: What’s good for  the world is good for those companies,   and I think that Chinese Communist Party Chinese  leadership understands that I was very heartened   by the way in which they pragmatically lifted  their covid restrictions when they realized   it wasn’t serving their population. And so  they’re clearly making rational decisions and. [01:09:55] Guy Spier: You know, the most  beautiful version of globalization is that,   and it’s part of why, you know, just to  dive into places anywhere where there’s   conflict. If you take the Israeli  Palestinian or Israeli Arab conflict,   the minute you get trade between nations  economic interest means that political   conflict and military conflict kind of  recede because it’s in nobody’s interest. [01:10:17] Guy Spier: China anyway,  has an enlightened leadership to the   best that I can tell, and the more economically  intertwined China is with the rest of the world,   the less interest or the, this sort of rivalry  between different [01:10:30] ways of organizing   the world’s economy, whether it’s under  authoritarian leadership the way China has,   or under liberal democratic leadership the way we  have in Western Europe and North America recedes. [01:10:41] Guy Spier: And so, I  think that they are rational, that,   my simplistic sense of it is that while China  will act in its economic interests, also in,   in the sphere of allowing foreign  investors to make money in China,   I really worry about the smaller countries who may  be like Mae trodden under the feet of elephants. [01:11:01] Guy Spier: And so it seems  to me that China is unlikely to be as   volatile a place as say Indonesia  or the Philippines or other places   where they’re small countries  moving around between elephants. [01:11:14] William Green: You took a big hit last  year. BYD which was a very successful investment   of yours, that then maybe the valuation got a  bit ahead of itself, or maybe people decided that   China was a much riskier and less pleasant place  to be invested than they had previously believed. [01:11:32] William Green: And you also took a  bit of a hit in India where you’d had a very   successful investment in an energy company,  Indian Energy Exchange. And it really gets   at an important question about patience and  the willingness not to sell your winners.   You, at one point, I remember Mohnish had  sold his position in Ferrari entire position. [01:11:54] William Green: You sold half  and now Mohnish looks back and it’s like,   guy, you never should have sold any of  it. Can you talk about [01:12:00] this   painful subject of whether you just  ride out the volatility for a stock   like B y D or a stock like Indian Energy  Exchange or Ferrari and you just hold it   for as long as you can, or whether you  should be trimming when you’ve got big gains. [01:12:16] William Green: How do you think through  this really difficult and conflicted issue? [01:12:22] Guy Spier: Yeah, and I find  myself wanting to reach for a cheap response,   which is badly and maybe badly is human,  that all humans unable to think clearly   about these things. Because in large  part you’re dealing with all sorts   of uncertainties and complexity that is  beyond any particular human to optimize. [01:12:41] Guy Spier: It is very possible,  William. That we focus on the humans who,   it’s not that they took those decisions. Well,  it’s the, it’s that the humans, the people who   who lost on those decisions are not the ones that  we focus on. And so we never and I just keep going   back to Fool by Randomness by Naim Taleb, where  we always have to bear in mind that the phenomenon   we’re looking at, there may be a process in the  world that throws up only the successful examples. [01:13:07] Guy Spier: And the non successsful  examples are not visible to us. And those   successful examples appear to be the  products of extraordinary skill. And   the individual who’s successful through it feels  skillful. But actually there was, and they pro   not just feels they are skillful, but there was  an element of luck that enabled that success. [01:13:28] Guy Spier: So in [01:13:30] the  Berkshire case, we can take the example of   Coca-Cola where that investment has been held  through an enormous period of time. But there   was a period where but Coca-Cola got to evaluation  of 40 or 50 times earnings. And then a few years   later when the company’s share prices come down  significantly, Warren confesses to the annual   general meeting that it was probably a mistake  to hold onto it and he should have sold it. [01:13:56] Guy Spier: And we all know  the example of Nick Sleep and Amazon,   but there’s an interesting history that  perhaps could be written there where in   your book you describe how at certain. Nick  took half his money off the table while I   think that Zach left his money on the table. Two  divergent paths, which one was the right one? [01:14:17] Guy Spier: So, and it’s really  hard when you have, so in both of those cases,   BYD and India Energy Exchange, the position has  appreciated enormously in the portfolio. It’s,   they’re worth multiples of the original  investment. And so the question arises   when you see the valuation get ahead of  itself, when perhaps risks on the horizon,   at least to near term earnings, are loom greater  relative to the valuation should you trim or not? [01:14:46] Guy Spier: And on the one side you  have Charlie Munger who says it’s hard enough   to buy a good business once, let alone twice.  Don’t water the weeds and trim the roses,   hold onto them. Be the guy who  [01:15:00] was Berkshire Hathaway   until that moment when it really  was very highly valued. And Warren   regret telling or Amazon where until recent  history, the thing to do was to, hold on. [01:15:09] Guy Spier: So that’s clearly one  aspect and the other side is that the volatility   fertility can be painful. There are cases, and we  see many of these inverted U-shaped charts where   a company’s valuation got so extremely ahead  of itself that on the other side of the down   direction of the chart, you sort of  say, will that thing ever recover? [01:15:31] William Green: You and I were driving  the other day. Your home in Zurich to this house   in the mountains here in clusters. And you were  telling me how you drive very slowly and you’re   perfectly having to drive 35 in a 50, I guess  kilometer an hour area. And I was saying to you   that’s a pretty interesting insight into where  you are at the moment, psych psychologically,   that I as someone who over the years I tell  you when I think you’re getting too swaggering   and overconfident and when you’re unreasonably  defensive and too shaken and that you actually   should not be so apologetic cuz actually you’ve  done really well and your returns are good. [01:16:09] William Green: I was  saying to you I feel like you are   more timid at the moment than you need to  be. I’m not saying this is a any insight   into the situation in Ukraine or anywhere else.  I just think there’s something about you that’s   slightly not in fetal position,  but slightly dented and bruised. [01:16:27] William Green: And it, it really does  raise these [01:16:30] interesting questions about   the illusion that we have that an investor is some  kind of icy, rational dispassionate operator. And   you and I have talked a lot about this over the  years, that actually one of the most important   things is to manage your own emotional  craziness and to have this self-awareness. [01:16:52] William Green: Can you talk a bit more  about how you actually do. Because it’s tough,   right? I mean, I said to when I came last week,   I said, you seem a little lonely. You seem  a little sad. Yeah. A little deflated. And   you know, your wife and kids were in London  cuz they were on half term from school. [01:17:09] William Green: And  so Laurie, your lovely wife,   who’s now here in Klosters was with the  kids. And it’s just, it’s a fascinating   kind of microcosm of the reality of what  you are dealing with as an investor,   that you want to be this cold, dispassionately,  unemotional person, but in fact you’re dealing   with things like feeling bruised because  you’re stopped your tared or feeling sad   because your wife is in London with the kids  and you’re not able to hang out with them. [01:17:33] William Green: Can  you talk about this question,   how to manage your own emotional vulnerability? [01:17:38] Guy Spier: Yeah. Of course.  And it’s so, so extraordinarily important   and every person’s emotions span come  from a very different place. As you,   you and I are both close observers of Mohnish  and I mean, you’ve traveled with him in India. [01:17:56] Guy Spier: I’ve traveled with Mohnish  in India and I don’t [01:18:00] think that I will   ever fully understand the way Mohnish’s internal  landscape operates, which is really different from   mine, for example. And for what it’s worth, we  cannot, I cannot, none of us can look at Mohnish   and say, well, I need to operate the way he  does because I will never be able to recontruct. [01:18:19] Guy Spier: That internal emotional  landscape. I think that what comes up for me   when we talk about my emotional landscape, is  if I just stay with that point before I come to   what I’m about to say about me is that it’s no  good observing an investor and saying, I should   be the same or I should do the same. One thing  that we never know is when they talk about X,   Y, Z company stock investment, what proportion of  their portfolio it is, it makes a huge difference. [01:18:47] Guy Spier: If that particular  thing is 1%, 10%, a hundred percent,   and even though we can try and reconstruct  their perspective, we don’t really know   that perspective. You might know of somebody  who has a very concentrated position in X,   Y, Z portfolio that they run, but actually that  portfolio is a minuscule part of their net worth. [01:19:06] Guy Spier: Or maybe they, it is  in a fee structure that they’re making so   much more money out of the fees that actually,  that position serves as a way to advertise what   they’re doing. So it’s very hard to get anybody  else’s perspective. That’s the really important,   if I go to my own perspective and we  take my mood a week ago and it’s lifted   probably dramatically or significantly,  [01:19:30] we have to take into account   a number of things we’ve talked about  and it just in, in very rough sense,   we can talk about the war in Ukraine and  concerns and conversations with my father. [01:19:38] Guy Spier: We can talk about these two  positions that have declined having gone up many   times. In India and China, we can talk about,  my wife had been away from me for a number of   days and I’d lived through a number of dark  days in Zurich. All of those factor into the   mental landscape that I’m in. And I  think that the answer for all of us,   or at least the answer for me, is to, excuse  me, to cultivate a kind of a balanced garden. [01:20:07] Guy Spier: And so the balanced  garden’s got to have some trees and it’s   got to have some shrubs, and it’s probably  gotta have a lawn. What do I mean by that?   There’s, you know, the balance in the  family, there’s the balance in my mood   as a result of exposure to sunlight.  And then there’s also the degree to   which our investments have a huge impact on  my mood and the way I feel about the world. [01:20:29] Guy Spier: In the  case of India energy exchange,   they’re repurchasing shares right now in quite a  large number. That feels great. I don’t like the   fact that they’re share prices down. Obviously  it’s not fun, but I love the fact that they’re   reping shas. That is part of what affects my  mood when I see that Warren is either reping   Shas of Berkshire Hathaway, or he’s buying  a huge new position in Occidental Petroleum. [01:20:56] Guy Spier: And my first reaction on  Occidental Petroleums to say, what’s Warren’s   getting [01:21:00] into the old business? Doesn’t  he realize that the. Oil businesses being hammered   by every single possible regulation. And it’s  hated by so many people as being a source   of major carbon emissions. Until I saw a talk  with the c e o of Accidental Petroleum and the   voluntary measures that accidental  petroleum is taken to become carbon neutral. [01:21:21] Guy Spier: And the understanding that  the c e o of that company has, that it needs to be   a responsible supplier of energy to the planet  and to be a responsible supplier of energy,   it needs to be a carbon neutral supplier of  energy to the planet. So it is working very   hard see itself as a solution to the planet’s  climate problems, not as a contributor. [01:21:42] Guy Spier: They definitely  don’t have their head in the sand. And   Warren clearly understood that. And I  there’s elements to that investment that   so reinforce me, make me feel good about  our investment in Berkshire Hathaway,   make me reinforce him or make me understand  that Warren’s still on top of his game   and that I have hired the CEO of these  assets who cost me next to nothing. [01:22:08] Guy Spier: So, you know, when  I put an investment in the portfolio,   one of the things I need to ask myself is how  is this going to affect my emotional garden,   given what is going to happen? Our  friend Mohnish laughs at me from my   position in Nestle, but that Nestle position  contributes to my psychological health. [01:22:27] Guy Spier: If you. . And  so planting [01:22:30] that garden   along with one’s real life circumstances  is part of how I’m managing myself.   I think that the worst for me in terms  of psychology happened when I shorted   a couple of stocks. And you know, I read  David Einhorn’s and year End letter and he   talked about his short portfolio and how  he’d made money in his short portfolio. [01:22:52] Guy Spier: And I just,  I’m not sure if it’s admiration,   it’s probably awe that somebody like David  Einhorn can keep his psychological balance,   it seems while having a significant short  portfolio of whatever kind. And what I found with   the three stocks that I shorted was that my world  was upside down. It turned my world upside down. [01:23:13] Guy Spier: That cannot be good. Now,  maybe if I’d gone to work for some super-duper   hedge fund that, that knew how to short stocks,  I would’ve learned how to manage my psychology in   that way. You know? And I think that it, going  back to your previous question, I think that,   and this is for those who are interested,  this is the kind of conversation that William   and I would have offline because William  really has helped me manage my psychology. [01:23:35] Guy Spier: And I’ve actually come to  understand William, I don’t know why this time,   perhaps cuz you’ve helped me  a little bit with meditation,   I’ve become much more aware of your extraordinary  sensitivity to what humans are feeling. So within   hours of William being in my presence  says, wow, you’re a little medically. [01:23:52] Guy Spier: I’m like, how the hell does  he see that? And actually what? Realize is that   I am a little melancholy, but I hadn’t [01:24:00]  realized it in myself until you’d said it. But so   when something has risen multiple times and  it’s at all time highs, and there’s public   exuberance about it, to be able to come in at  that moment and say, you know, fast forward   one year and this thing’s down 50%, will you not  have regretted not selling a proportion of it. [01:24:21] Guy Spier: And that’s an extraordinary  discipline, which brings me back to I’d   invested in a company called White Mountains  Insurance, and the c e o was the former CEO of   Geico, whose name escapes me as story  [Crosstalk] Who? Jack Burn. Jack Burn.   Jack Burn’s. Amazing guy. White Mountains is  red domiciled to Bermuda and have an analyst   meeting in New York and Jack Burn, who’s decided  to go full Bermuda has got all of his management,   many of them addressed in Bermuda  shorts at the Waldorf Astoria. [01:24:52] Guy Spier: And they’re doing a share  issuance. And they had acquired a company at 50%   of book and now they’re doing a share issuance  before the share price of White Mountains has   risen to a hundred percent of book. And they,  the acquisition had been funded in part by   Berkshire Hathaway. And I go to Jack, it’s one  of those moments, I know that we’ve talked about   it with him, these people who, where I’m just a  minion and he totally focuses me and he and I. [01:25:18] Guy Spier: Why are you selling shares?  Why are you diluting the wonderful returns that   we’re gonna get? You know, this is not the time to  sell. This is the time to double down, you know,   and we’re in the middle of this Adani thing,  which is kind of interesting [01:25:30] in India,   and he looks at me straight in the eyes, as we’ve  discussed with director of Berkshire Hathaway and   Coca-Cola takes me totally, seriously, focuses on  me, and he says, guy, it’s the right thing to do. [01:25:43] Guy Spier: And Warren has blessed it.  Not only has Warren blessed it he’s asked me,   he’s told me it’s the right thing to do.  Why? Because the share price had risen a lot.   There was a certain amount of risk on the  balance sheet, and it’s better to reduce   the risk on the balance sheet. And it’s always  hard to do a share issuance like that because   you kind of wanna hold onto the future returns  that you’ll get if you don’t do a share issuance   in the same way that when you have highly  appreciated stock, it’s hard to sell it. [01:26:09] Guy Spier: And my point to you,  William, in an offline conversation would be,   feel free to remind me of that when I’m  sitting on highly appreciated positions.   Because what happens with most people is that  they wanna call you a genius. And so how good   it is to have friends who will say, you know,  you’re not gonna be such a freaking genius,   or You’re not gonna feel that great about  yourself, how do you manage your psychology? [01:26:32] Guy Spier: If it’s down 50%,  can you guarantee it’s not gonna be down   50%? Isn’t it the discipline that  you need to have to sell some of   your position into this exuberance? So  that’s part of building that garden,   isn. And Williams allow, allowing me  to, I don’t think it’s meandering, but- [01:26:48] William Green: Well, there’s a  very important point that you raised there,   which is that, that you’ve created a  garden that can survive your own flaws,   your own biases, your [01:27:00] own periods  of overexuberance or fear or paralysis. [01:27:04] William Green: And I think  that’s an incredibly important idea   that’s worth emphasizing, that it’s  not, it’s creating an error resistant   strategy so that when you are not operating  at your best, it’s going to be okay. [01:27:21] Guy Spier: Yeah. It’s a  really interesting idea. It’s kind of a,   an extension of this idea, drunks and bars, which  is so powerful if we dispense with the idea of a   rational operator inside our heads, and instead  we to mix metaphors, try to bowl with curtains. [01:27:36] Guy Spier: So try  and set up those curtains. [01:27:38] William Green: We’re  gonna do fire with those ra with   the bumpers bowling with adMohnish  would say bowling with bumpers. [01:27:43] Guy Spier: Yeah. And the thought that  was coming to my mind, which is part of this is,   and it is a beautiful, I haven’t heard John  Alcan, the CEO of Exor say this in public,   but I think in an interview written down,  he talks about seeking out truth tellers. [01:27:58] Guy Spier: So when you’re in a position  of adulation, when any fund managers delivered a   year of good returns, there’s a certain amount  of adulation that of. The fund manager wants   to think it’s normal. And the thing is, it’s  not normal. And so what you want to do is put,   surround yourself with truth tellers, people who  will burst through your bubble and help you to   understand who you really are and allow your, make  sure that you don’t start believing in your own   Midas touch because it’s not a Midas touch and  bring you [01:28:30] down to earth so another. [01:28:31] William Green:  Yeah. And also bring, you,   bring you back up when you are feeling  unreasonably embarrassed or upset or   that you’ve somehow disappointed. So it’s both  ways. It’s trying somehow to remain centered. [01:28:44] Guy Spier: Yeah. Yeah. And I  think that what comes up for me is that   you probably have done a better study of this  than many or all, is that the fund managers   who have a bad year and then shut down the fund, I  believe that they shut down the fund more because   they can’t take the psychological pain than  the business is actually permanently damaged. [01:29:07] Guy Spier: And so if they could just  stick with the psychological pain for long enough,   they will recover. I had enormous psychological  pain after 2008, nine, and I remember one of the   investors in the fund and a friend from business  school he comes, I think to by that time living   in Zurich and he takes me out for dinner and  he just wanted to make sure that I was gonna   stay in the game because he knew that if  I stayed in the game, we would recover. [01:29:32] Guy Spier: The great benefit  for me is that I was forced to enforced,   I had family interests in the fund that meant  that overwhelming likelihood that I was gonna,   I did stay in the game but that was  psychologically hard for me. And I   think that for some it becomes so  great that they decided to shut down. [01:29:47] William Green: We had a similar thing  in early 2016 when Horsehead had blown up and I   came to visit un Zurich and there I was reminding  you of this the other day and you’d forgotten   probably cuz it was too painful to remember  where you [01:30:00] said to me at some point   that you could understand why sea captains would  sometimes say, please relieve me of my command. [01:30:09] William Green: And I said to you, do  you hear what you are saying? And you said to me,   and I have a weird memory for these sort of  things so I can remember the exact words. I   can’t remember where my car is usually, but I can  remember this sort of thing. And you said to me   yeah, I’m saying take me out of my pain.  And I just think it’s such an, it’s such a,   it’s such a powerful insight into  how difficult it is to manage your   portfolio professionally because  you are subject to so much judgment. [01:30:37] William Green: You are being,  you’re being judged the whole time you feel   like you’ve let down family and friends  who are in the fund. It’s so painful.   And so it seems to me that one of the great  advantages. The investors like you have is   at least you’re self-aware. At least you’re  trying to look at yourself honestly and say,   oh, wow, I’m not in not always  gonna be in an optimal state. [01:30:57] William Green: So I  better structure my portfolio in a   way that can survive these emotional storms. Yeah. [01:31:02] Guy Spier: I want to go down  three different avenues. Oh. Simultaneously,   when we get riled up, there’s something  important that we have to learn. So when   I riled William up over writing for  the ft there’s obviously associated   pain there for William in one way or  another that needs to be unpacked. [01:31:22] Guy Spier: And there may be a piece  of wisdom or a piece of valuable insight for me   of in what I’m saying. But those two things  need [01:31:30] to be kind of separated. I   can dive into the way, William, you riled me  up. And it’s interesting cause we managed to   successfully unpack it. So, William is telling  me that I need to he thinks that I would benefit   enormously from looking more closely  at the way Fred Martin lives his life. [01:31:45] Guy Spier: And at that point, I’m  must confess that I had not listened to his   podcast with William Green, which I greatly regret  having not done. But the way William Couches it   triggers in me a reaction to people who are  predictors of the future, who are forecasters   and the whole band of forecasters who are  always wrong, but always get paid to forecast. [01:32:06] William Green: So, Yeah. And this is  because Fred has a, he’ll look at where he thinks   a company is gonna be in seven years. And so this  triggers in guy, this fury because it’s like,   well, no, people can’t do that. And then and  so in a way that perfectly legitimate point   which is debatable, but a legitimate objection,  blinded you from the thing that I was trying   to explain to you, which is you should  be looking at the portfolio of someone   like this because he has a specialty  in small cap stocks, in mid-cap stocks. [01:32:39] William Green: He’s very smart,   he’s very disciplined. And if you are looking  for 10 good stock ideas over the next 10 years,   this is exactly the sort of pool that it would be  smart to fish in. He should be at least in your,   on your radar, but because you were  so irritated by the way I put it. [01:32:58] Guy Spier: But we, but I’m really   proud [01:33:00] of it because we  navigated our way through that. [01:33:02] Guy Spier: In part, I think William,  cuz you’ve done a lot more meditation than I have,   but what William’s reaction is to say to to  see the fire or to see that, that there’s   more heat than light being generated.  And he steps away and says, listen,   I’m gonna go for a walk or something like that,  which created this space for me to realize what   had triggered me and still triggered me, but set  it aside to set aside the possibility that there’s   some wisdom there that is not getting through  because something has been inadvertently trigger. [01:33:32] Guy Spier: Which we eventually got to,  but just to bring it back to your reflecting on,   for example, what I was saying to you in  those incredibly painful moments is that,   again, my defensive reaction in this case is,   so my defensive reaction in the Fred  Martin scenario is that I want to focus   on something about forecasting and  associations I have for forecasting,   which are really irrelevant to the point that  you’re making for me, but it got in the way. [01:34:01] Guy Spier: And that could have  just been, that could have resulted if you   would’ve taken mine And William’s training from  university would’ve gone into a super intellectual   debate about something, thinking that we’re very  smart and getting nowhere. Instead we managed to   navigate our way through. And I listened to Fred’s  podcast, believe it or not, while ice skating and   and extraordinary guy, and actually many  similarities to my father, who’s also a pilot. [01:34:25] Guy Spier: So really interesting.  And William got that through my defensiveness   when it [01:34:30] comes to the financial  crisis about bleeding from every orifice or   wanting to be relieved of quote. My command  is that I have suppressed the memory of what   I said and the memory that you’re bringing  up, William is the most painful aspect of,   it’s kind of like at the apex of  everything that I was feeling. [01:34:48] Guy Spier: And kind of as a  summary of it, you know, I can understand   why captain would want to be relieved of his.  By remembering that to me and consider that I   just suppressed it. It’s like, oh, I’m this  perfect person for whom that didn’t happen,   allows me to remember how bad it can get and  therefore take actions for it not to get that bad. [01:35:09] Guy Spier: Again, I don’t think you  want to voluntarily put yourself in positions   in your portfolio where you have this feeling  of, I’d like to be relieved of my command. You   don’t wanna be put into a position where you’re  saying things like, we’re bleeding from every   orifice. And so in a certain sense, remembering  that to me now, surfacing that, accepting that I   was the person who did that should allow me to  not be in a position to do that in the future. [01:35:35] Guy Spier: How do you do that?  No problem. To have a position that goes   down on you 90%. If it’s 1% of your portfolio,  big problem for a position to go 90 down 90%   if it’s 25% of your portfolio. So part of it is  position sizing and it’s not a perfect science,   but I’m really amazed if you  think of Warren at Shire Hathaway,   how little risk in a certain way he takes  and [01:36:00] how quickly, how quick he is   to remove something from his portfolio that  presents the probably possibility of a loss. [01:36:07] Guy Spier: And we can think  of the airlines where he just said,   I don’t ever want to be in a position where  I have to own a company that goes cap in hand   to the government. I’m selling it. And I believe  that in the airlines he had bought the position,   it had double. In the crisis from Covid, it had  halved again and he sold it more or less at cost. [01:36:26] Guy Spier: But he was quick to do it.  Or you see in the White Mountains example how in   a certain way, aggressive he was to take risk  off the table. And in part that’s because he   doesn’t want to ever be in a position where  he’s asking, you would never want, as owners   of the shares of Berkshire Hathaway, we would  never want Warren calling Charlie and saying,   I now understand what a captain feels like when  he says, I’d like to be relieved of my command. [01:36:52] Guy Spier: And and how on  earth can I expect to become better if   I’ve suppressed? So ideally I would’ve not  have ever gotten to that position in with   whole side being such a large proportion,  it was at its maximum size, I believe   maybe 10% of the portfolio that’s too high,  a percentage to have a position be wiped out. [01:37:12] Guy Spier: Warren has invested in  Australian insurance company that I believe   was wiped out. It was a kind of a fraudulent  situation, but it was a 300 million pound   investment, dollar investment. I don’t remember  exactly of a much, much larger portfolio,   but that was too large. A proportion  of the [01:37:30] 10% was too large,   a proportion of Aquamarine Fund and I’d  forgotten about it and you reminded me of it. [01:37:36] Guy Spier: And so in another time, when  we have outsized positions, it’s a very relevant   question to ask. And if I can connect to that  emotion that you’ve surfaced in me, I believe that   I’m far more likely to. Intelligent action that  is difficult, but which takes risk off the table. [01:37:53] William Green: Yeah. It  could have helped you think about   BYD and Indian Energy Exchange in a different way. [01:37:59] William Green: Not necessarily  whether it was optimal in rational terms,   never to sell and just to keep writing these great  performers that you think will do fantastically   over the next 10, 20 years. But just to  look at yourself and say, what can I handle   emotionally correct. And then also Guy there’s an  interesting question related to Mohnish, which is   related to position sizing, which is  Mohnish had this foray into Turkey, right? [01:38:25] William Green: Where he  gets incredibly excited about all   these unbelievably cheap stocks in the midst  of hyperinflation. And you were saying to me   at the time, like, I can’t believe Mohnish doesn’t  understand, you know, the macroeconomics of this.   And if he’d had a different education, maybe  would’ve been more sensitized to this stuff. [01:38:40] William Green: A Mohnish  is quietly picking up stuff like Reas   that was like just absurdly cheap and now has  made him a fortune. And it may actually be that   you were right, given your temperament  not to buy something like Grace has,   but I but it, or maybe it should  have been a 1% position. I don’t   know. Can you talk us through where you  diverged from [01:39:00] Mohnish on that? [01:39:00] William Green: And when  you look back on it now, whether,   even though it was the wrong decision in certain  ways not to buy race, that’s whether for you   actually it was the right decision given your  temperament, your desire to survive and the. [01:39:14] Guy Spier: So I’m gonna take  you through a set of extremely rational,   well thought out reasons why investments in  Turkey should not make it into, say, my portfolio. [01:39:26] Guy Spier: And I’m  taking, I will take you through that,   but the listener and William, you  need to be aware that this may just   be a rationalization of what is going on  in my lower brain that is subconscious. [01:39:37] William Green: How  to make the decision parable? [01:39:39] Guy Spier: Yeah… Exactly.  And I think that before I go into that,   it’s really important to realize or to be  aware that if you have something that can go   up 20x that but there’s an enormous, that there’s  potential for complete a hundred percent downside. [01:39:54] Guy Spier: What is wrong with  making it 1% position? That’s okay. And   I think that in the circumstances of my very  rational evaluation of the idea that I didn’t   want to be in Turkey for some reason. I, in  my mind I was saying that if I don’t do 5%,   I’m not gonna do it at all. And 5%  probably would’ve been too much for me. [01:40:12] Guy Spier: But there’s nothing  that’s, there’s no nothing in the rule book   that says it couldn’t have been a 1% position.  My, my decision not to get involved in Turkey   is to some degree, based on my evaluation  of the country which is an authoritarian   regime that [01:40:30] imprisons  journalists and has a history that has,   is deeply problematic for me in that Turkey  as a country seems to regularly suppress. [01:40:40] Guy Spier: It’s  history, it’s suppressed the- [01:40:43] William Green: But China does the  same, and yet you’re heavily invested in China. [01:40:46] Guy Spier: Yes.  That is a contradiction. And   so in Turkey, two, two of my greatest objections  to the way they suppress history is the history   of Christianity in Turkey. And one of  the founding places of Christianity was,   is Constantinople, but that history is suppressed. [01:41:02] Guy Spier: The history of the  Armenian genocide is suppressed in a way   that doesn’t seem to be healthy. And to your  point, William, a whole culture of the Uyghurs   is being suppressed in China. And my experience of  being in China is an attempt to talk at political   matters with very intelligent people that  peaking University and Swei University. [01:41:22] Guy Spier: So these smart  students is that it’s met with a blank   stare in that this is just not a subject. It  would be like you tried to talk to me about   human cells and human biology, for example,  is I barely understand what ATP is. And   some people who studied biochemistry a  lot, but you’d meet with a blank stare. [01:41:39] Guy Spier: And  my response to that is that   in part it’s my deep respect for Charlie  Munger and Charlie Munger’s statements   that there are different ways to kill the  mouse or kill the cat in the words of one   of the Chinese leaders. And that China has  a system that works for it, and that I have   been indoctrinated [01:42:00] in a certain way  by my education and I have to respect China’s. [01:42:05] Guy Spier: Although, on the other  hand, I’m a big supporter of an organization   called UN Watch, where the founder has  deep issues and problems as many human   rights organizations do with China’s  treatments of minorities like the weak   girls. And in my reading of China is that  and the end or not to justify the means. [01:42:25] Guy Spier: That’s a deep moral  principle that I think that I’ve learned.   And in a certain way, the conclusion in China  is that because they’re lifting so many people   out of poverty in a certain way, the  ends perhaps do justify the means or   there’s an acceptance of that. There’s also  something about it being a superpower on a   path to somewhere that creates stability and  certainty for investing in that environment. [01:42:51] Guy Spier: Whereas somehow when  you’re a medium or small sized country that   is engaging in human rights violations, it  does get treated differently. And I know   that my human rights friends would be very  angry with me for saying this, but on a pure   in evaluation of investments, I do think  that merits a different evaluation. [01:43:10] Guy Spier: A small country  in Yeah, in engaging in human rights   violations is different. And yes, you brought  up in the pause that in the case of Turkey,   it seems to me that this populous leader  who engages in many actions to ensure   his power with the Muslim population or  with a traditional [01:43:30] population,   if you. Is engaging in acts, which appear to me  to be economic insanity, including increasing   the money supply and lowering interest  rates in the face of raging hyperinflation. [01:43:44] Guy Spier: And what was explained to  me just verbally in conversations with Mohnish is   that effectively vast proportions of the economy  are dollarized. And so the hyperinflation really   doesn’t have any impact at all in that when you  come to real estate contracts on significant   pieces of real estate with foreign multinationals,  the whole contract is priced in dollars. [01:44:04] Guy Spier: So it’s moot point what  the inflation rate is. But my conclusion was   that a country like that can tip over the  edge in one way or another. When I started   observing Turkey, the Turkish army was kind  of understood to be in control of the country   and provided economic, sorry, political and  therefore economic stability for the country. [01:44:26] Guy Spier: But now there were  this, there was this populist in charge and   where could it go from there? It could go to  some extraordinarily difficult places. And I   think that one of the extraordinary mantle  qualities, I think both you and I admire,   andm. Mohnish, is that he’s able to go into  such situations and see an unchangeable truth   and he can wipe away all of that. [01:44:49] Guy Spier: All of  those things that would make,   he likes to joke about it, would make me  go into a bomb shelter and focus on that   thing. And that thing was that this  was an entrepreneurial family. That   controlled the [01:45:00] shares of this  company who had very valuable real estate   and very valuable relationships with  people who wanted that real estate. [01:45:08] Guy Spier: And in retrospect, as best I  understand, the unfolding of the war with Ukraine,   and this, the call up of troops in Russia has  meant that many people have left Russia and   Turkey is one of the places that they’ve  come to driving up real estate values.   So I had principled reasons for not wanting to be  involved in Turkey, but I think that it behooves   people like me to go into something like that  and do the second and the third step of analysis. [01:45:35] Guy Spier: And I’m not sure  if it’ll make it into my annual letter,   but I think it is a mistake of a mission. I  think it’s worthy of analysis. And that does   not mean that I have to go and become a huge  investor in Turkey. But it’s my job. I took a,   I spent a lot of time trying to understand  crypto. It was my job to understand crypto. [01:45:53] Guy Spier: And if it was my job  to understand crypto, we know what Charlie   thinks of crypto. It’s my job to understand  Turkey in a much deeper way than I did and   to investigate I’d rather be investigating Turkey  and a company like Grace Os than, or it’s equally   important for me to do that as it is to try  and understand unit economics valuation models. [01:46:14] Guy Spier: And I didn’t do that.  And that doesn’t mean I had to invest. [01:46:17] William Green: We were  talking about Mohnish the other day, and   you told me about an email that he had sent  you where you were talking about lessons from   mutual friendly Li Lu, who made an early, an  immensely successful investment [01:46:30] in   B y D. And you were talking about, so,  so how are we gonna do more of this? [01:46:34] William Green: How are we gonna find  more companies like this? Mohnish sent you this   remarkable reply where he was saying, well  look noses to the grindstone. And he said,   if I do 50 deep dives a year, then every  four years or so, something like race US   will appear. That’s gonna make a huge difference.  And I’ve been talking to you a lot this last few   days about how you set yourself up for the next 10  years, and we’ve been discussing this question of   what do you actually need to make  it a successful 10 year period? [01:47:01] William Green: You’re 25 years into  the run of the Aquamarine Fund. It’s been a very   successful period. A lot of funds have died along  the way. You’ve managed to survive and outperform   the market. But looking forward to the next 10  years, when you think about this question of   how many deep dives you need, how many winners  you need, whether you only need one big winner,   one one BYD, or you need five good ideas,  how do you think about this question of   what’s actually gonna determine  your success over the next decade? [01:47:30] Guy Spier: For the listener’s interest  you’ve driven, helped drive my thinking and its   evolution. So I like countries like Switzerland.  I like structured environments. That doesn’t   mean that I can be any structure. It should be a  structure that drives me towards my goals. And I   realize now that if you take a guy Spier 25 years  ago or 15 years ago, I was like able to operate   as a lone wolf, if you like, on the hunt for  prey on the [01:48:00] hunt for the juicy stuff. [01:48:02] Guy Spier: And I’ve been  through a period where I’ve had to be   regulated like we all do. And that actually  initially smothered me in that the way the   regulations were implemented by well-meaning  people smothered that hunt for understandable   reasons. The regulators in the world’s  developed financial markets decided that   they had an interest in having a whole bunch  of things in place around people like me. [01:48:29] Guy Spier: And that drew an  enormous amount of energy away from me   and took away from the ability to be a lone wolf  hunting. What that message from Mohnish brings up   is that now he does this naturally and he  has a capacity to structure his life without   having external structure, is that to succeed  you can’t just be a lone wolf hunting the. [01:48:53] Guy Spier: Shiniest thing that looks  like it’s gonna be a success. You wanna send up   processes around you that enable you to  do it. And when you bring up 50 company,   50 company deep dives in a certain  way, it’s applying a process,   a sales funnel that you would normally apply  to potential customers, to investment ideas. [01:49:12] Guy Spier: And so he’s  setting up a funnel for himself,   and he’s very good. He taught me a lot about how  to set up a funnel, except the funnel is not,   say investors or buyers of your product. It’s  investment opportunities. And so I am excited,   given where I am right now, [01:49:30] to  structure my environment such that those   funnels are far better defined and are  far more likely to lead me to juicy prey. [01:49:38] Guy Spier: To use the hunting wolf  analogy. And that doesn’t mean that it has to be   one funnel, that the ideas only come in from one  place. They can come in from multiple different   kinds of source. What I’ve said in the past,  people say, how do you find investment ideas?   And my response was basically  predicated on natural human curiosity. [01:49:59] Guy Spier: And it was this idea  that new ideas, because their new ideas   source themselves in unusual ways, if  you’re looking for them in the same places,   they’re unlikely to source themselves. They’re  unlikely to be good ideas. So the example I’ve   brought up in the past is that a company  screens well meaning. All the best ideas   out of that particular screen have been picked  off and have got, are no longer in the screen. [01:50:23] Guy Spier: And what is left  are all the things that, all the ideas   that appear to look good in terms of the screen,  but they’re underlying factors that are no good.   But unbridled curiosity, looking everywhere also  isn’t gonna cut it. So, you know, defining those   processes of what are gonna allow you, and  I think that it’s a huge shift in opinion. [01:50:40] Guy Spier: If you think of Mohnish,  who really convinced me when I’d first met him, of   this idea of not meeting management. It’s a 100,  180 degree turn to actually meet with management.   And, you know, I’ll never stop saying this. One  of the most important things that anybody’s read   in my book should understand is that in my book  I talk about not meeting management.[01:51:00] [01:51:00] Guy Spier: And that is  wrong. Should certainly meet management,   meet them at the right time, in the right way,  and in a way that they can’t influence you. [01:51:08] William Green: So it’s  about being appropriately skeptical.   And likewise you have this extraordinary  advantage as an investor that you have   access to this incredible ecosystem of  people coming at you and sharing ideas. [01:51:19] William Green: So you’ll  hear Mohnish talking about recess,   you’ll hear Lilu talking about malai in the old  days, or b y d or really smart friends like,   like, like Brian Lawrence and Josh Hark and the  like, garish Baku, who I think came up with the   idea Forry many years ago. Yes. In a way, the is,  you’ve gotta be open to all of this stuff and yet   somehow remain discriminating enough, discerning  enough skeptical. That you do what works for you. [01:51:47] Guy Spier: Yeah. And structuring that  information environment is an endless process of   refinement. You know, when you talk about some  of those people, they’re some of the smartest   people that I know, some of the deepest  and thoughtful analysts of businesses. I   went through a certain period where I was not  embedded in such a wonderful group of people. [01:52:05] Guy Spier: And I assumed that if I’d  heard the idea, it must be bad because all of   the people I was dealing with were DH Blair type  people perhaps. And it required for me to update   my model of the world to understand that actually  I was embedded in a group of really discerning   people. When it comes to talking to CEOs, you  just want to, it’s not just being skeptical. [01:52:25] Guy Spier: This idea that the  first idea in your brain is the one that   sticks. So you want to do an [01:52:30]  appropriate amount of reading about them,   about what they’re saying, about what their  company’s doing before you meet with them.   So you can, your fir the first idea, the  first impression is from written materials   that the company is produced before  you speak to the company management. [01:52:44] Guy Spier: And that is the best way.  It’s not just about being skeptical, it’s about   arming yourself with knowledge that you compare to  what the CEO or the CFO of the business is saying.   But I think that, first of all,  the question you asked me when you   arrived is really good question. And  it made me reevaluate William Green. [01:53:01] Guy Spier: So I probably  pushed the world too much into the   world of literary types and mathematical  types. William and I say, You have a very,   very firm grasp of the mathematics of finding  one or two good ideas a year and what they can   do if they go up. Many times I think that many  people don’t even have that mathematical grasp. [01:53:23] William Green: And so William  made it very God guy is just trying to   make up for the fact that he insulted  my mathematical incompetence recently. [01:53:29] Guy Spier: Yeah. But I think that  you overdo it actually. You really overdo it   so it’s easy to insult in a certain way.  Cause you kind of want to be insulted in   it in the same way that I enjoy being  insulted in my literary abilities. [01:53:40] Guy Spier: But it really,   it reminded me of how important it is to  find those ideas, because as you said,   that is what is gonna drive the future  much more than having a well-functioning   team that complies with the regulations  that we have to comply with, for example. [01:53:53] William Green: Yeah. That stuff’s  really important too. But everything in a sense   for you has to be oriented around finding  a handful of great ideas [01:54:00] Yeah. [01:54:00] William Green: Over the next few  years. And that means managing yourself,   managing your ecosystem of friends  and investors and managing your mood,   managing your access to sunlight,  managing your exercise. But it’s,   but it all in some ways is directed  towards finding a handful of great ideas. [01:54:18] Guy Spier: I want to turn this around   cause I think you’re at the  end of your questions. Okay. [01:54:22] William Green: You can ask one  final question and then, because we have   about 23 people waiting for Guy downstairs,  we’re, I’m gonna let you go after that. [01:54:28] Guy Spier: So, one of the things, and  it’s really been such a, an amazing time to spend   with William, has been more intense for me than  usual, but William, I realize that you, in the   last few years have gone through a transformation  of your ecosystem, and I just think it’s,   I have not understood the power of the  platform that you now have underneath you. [01:54:48] Guy Spier: And I believe that it will  continue to grow, but maybe it is interesting for   everybody to hear the story of how you are a  kind of a nameless, not completely nameless,   but a less well known figure, although  e extraordinarily talented writing for   publications like time and others, and that  kind of external structure collapsed around you. [01:55:14] Guy Spier: And so  in the past few years now,   you have built your own platform and  your own brand. And I’m just curious to,   for you to describe what that feels like  for you and where it’s going from here. [01:55:26] William Green: What happened to me is  I had this pretty [01:55:30] successful career   as a journalist and so I’d written for all  of these publications starting very young. [01:55:34] William Green: For the New Yorker and  the London Spectator and then the Economist and   Time and Fortune and Forbes and stuff. And I  felt kind of a big shot because I became an   editor at time, I edited the Asian Edition  of Time and then European, middle Eastern   African Edition of time. And then I got laid  off in the middle of the financial crisis. [01:55:52] William Green: And then I  spent a period of time when I was sort of,   when I was sort of lost and broken in some ways  because the magazine business had collapsed   and I had to reinvent myself. And in a sense, my  closeness to to you partly came from the fact that   I helped you with writing the Educational Value  Investor at a time when I was incredibly bruised. [01:56:14] William Green: And so that was part  of my reinvention. So I did that with you. And   then I helped as a ghost writer on several other  books. And in some miraculous way it kind of led   to this odd transformation in my life. And I,  I then wrote The Great Minds Who Investing,   which led me to interview a lot of great  investors again, which is something I’d always   been passionate about but had got away from while  I was editing the international Auditions of Time. [01:56:39] William Green: And then that  led me to write Richer, Wiser, Happier,   which really enabled me to deepen some of the  exploration that we’d had in your book where you   were talking about what does it actually mean  to have a rich and successful life? How does   investing fit into that? What can you learn  from these people like Warren and Charlie? [01:56:58] William Green: And so I. [01:57:00]  Went deep on that, focusing on 40 or so people   instead of just your career and what you’d learned  from the great models in your career. And that has   then spawned this podcast, which enables me to  continue having these questions with remarkable   people. Like, like you or like Ray Dalio or  Mohnish or so, so many extraordinary people. [01:57:21] William Green: And so for me, it’s just  been fascinating to, to feel this thing unfold   and to go from to, to, I, I mean, if  there’s any takeaway, I think it’s just   we really don’t know what’s coming.  And so you have to have the flexibility   to change it. It goes back to saying, Howard  Marks talked to me about where you have   to accommodate yourself to reality  as it is not as you want it to be. [01:57:48] William Green: And I think that’s  what both of us are trying to do as investors,   as writers in life. You, the game changes  and you’re constantly having to say, well,   this is the hand I’ve been dealt. How am I  gonna play it wisely? And now I find myself   in this beautiful position where thanks  to Stig Brodersen and Preston Psyh who   founded The Investor’s Podcast Network, I get  to enjoy these conversations and then to share   what I’ve figured out from these  conversations with great investors. [01:58:18] William Green: So  it’s a total transformation,   but it’s in some ways a continuation. And it  only makes sense when you look back at it,   never when you know you must have had the  same thing where you, when you look back   and you see how your [01:58:30] period at DH  Blair, where you got knocked off course led   to your discovery of Warren Buffet and  this different way of doing business. [01:58:37] William Green: And that led to you  writing your book and setting up your fund. And   it, it all seems almost logical and inevitable in  retrospect, but while you are going through it,   you are lost half the time. You are  confused, you are failing, you are,   you know, it’s like Churchill saying  that success is basically blundering   from failure to failure without parent loss of  of confidence or something along those lines. [01:59:02] Guy Spier: And it’s, so, yeah, it’s  been a strange and interesting path. It’s also   to go to Psalm 23 you know, you kind of went  through a career valley that I think I can’t   it, it’s suddenly lost. It lasted five years,  maybe even 10 years. And I think of Psalm 23,   even I go through the valley of fear of  the valley of death, something like that. [01:59:20] Guy Spier: And actually, no, no evil,  that sort of thing. Yeah. And and Winston Chall   says, if you find yourself in hell, you’re  probably the best thing to do is to just   keep going. But, and I wanna share something  that I think is really interesting. So when   you when those brands collapsed and were no  longer your kind of external scaffold, So I,   you should know that William prepares for six  hours or more for every one of these interviews. [01:59:42] William Green: Oh, no. Days. [01:59:43] Guy Spier: Yeah. So, so the days  and the quality of these interviews as a result   of that enormous amount of preparation, and  William, through your training as a writer,   you understand things that I will never  understand, like a narrative arc. And these   podcasts, I believe, have a narrative  arc [02:00:00] from beginning to end. [02:00:01] Guy Spier: When we were  writing, rewriting most of my book,   William was explaining to me how the chapter has  a narrative arc and there’s a payoff at the end,   but there’s a setup at the beginning. So, William  I think that what I discover is that the skills,   you had highly honed skills as an editor  and a writer for these publications. [02:00:22] Guy Spier: A discipline that  is hard for people like me who pretend   to be able to write, to understand, but  then when that scaffolding fell away,   those brands were no longer part of your life.   Those a whole bunch of things that you had to  kind of fend for yourself on things that you’re   naturally less good at. And I think that those  are things that, for many people, are skills   that they have to get good at, to break through a  certain level of awareness of what their workers. [02:00:49] Guy Spier: And I think that what  I’m pleased about in your story is that   those things worked out sufficiently  well. That now you can go back to using   the very skills that were honed.  10 years ago as an editor of time,   for example, I cannot, I mean, William, I  sent William the 25th principal and this- [02:01:09] William Green: In  guy’s annual report, which I edit- [02:01:11] Guy Spier: And maybe  one day we will actually do a kind   of a deep dive on what guy’s writing  looks like before William gets to it. [02:01:19] Guy Spier: And after it. I don’t  think that anybody understands the precision   that goes into making those pros so beautifully  clear. And what [02:01:30] happens is that   we just think we’re smart because  we understand what we’re reading.   We don’t realize that there’s an enormous  amount of work that is gone into ensuring   that the reader understands easily  the ideas that are being conveyed. [02:01:42] Guy Spier: And yes, guy has some  good ideas, but boy is he bad at conveying   them. You have no clue actually. And  I think it would be an interesting   thing to do in the same way that this  interview is probably easier to listen   to because of the preparatory precise and  careful preparatory work that you’ve done. [02:01:59] William Green: Thank you Guy.  And yeah. I’m going finish with one final   conclusion based on what you just said,  which is that I think sometimes people   read your book or read my book or  listen to us speaking and think,   oh, these guys have it figured out and they’re  smart or they’ve been successful or something. [02:02:15] William Green: And  I actually think what’s really   the truth that I draw from our careers over  the last 25. Is that we’ve been indomitable,   persistent despite all of the failures and  setbacks and disappointments where, you know, you   have a period like me getting laid off from time  or the job I had afterwards, which I detested, or   you going through horse head or the disappointment  over recess or the worry over the war in Ukraine. [02:02:42] William Green: And  the consistent thing goes back   to something that Tom Gayner said to me when  I interviewed him during Covid. And he said,   one foot in front of another. And I said to him,  can you elaborate on that? And he’s like, no one   foot in front of the other. That’s what I’ve done  all through my life, and it’s what I’m doing now. [02:02:57] William Green: And I think it’s worth  [02:03:00] emphasizing this because there are   lots of secret sources, but really the ultimate  secret source is that tremendous perseverance,   even when you feel a little lost. And when  Guy and I were talking earlier this week   about friends of his who’ve just taken a  75% hit and 80% hit in funds that they run,   or stocks that they manage, you were saying,  what I tell ’em is, be kind to yourself. [02:03:22] William Green: You know,  we’re human. We make these mistakes,   and you pick yourself up and you move forward. [02:03:26] Guy Spier: Yeah. And before you allow,   I allow this to close. I hope that you’re  okay with this ad lib question, William.   I’m excited about the guests that you’ve had  on the podcast, on your podcast. I have come   to appreciate that you are very carefully  selective about who you put on the podcast. [02:03:43] Guy Spier: So you should know that  every now and then I come up with people for   William. I think it would be cool for him to  have on the podcast, and William has a way   of dismissing my thoughts, which are kind of  like quite derisive and it’s like there’s no   chance. I know what it would’ve been like to be  in an editorial committee with him, but can you   just maybe talk about some of the guests that  you’ve either got coming on or that you plan to   have or you’d be interested to have and how you  select them and why you’re excited about them? [02:04:09] William Green: I have  an episode coming up with Ray Dalio   that is really fascinating to me because  it’s given me an opportunity to go deep   into I’ve interviewed him before as a guest  host on, we study billionaires, but engaging   in his thoughts and his mind and figuring  out, that’s what I have to learn from Ray. [02:04:26] William Green: That’s been a really  interesting process and thinking about [02:04:30]   strengths that he has in terms of being honest  about where he is in his life, about what his   skills are, about, where he has deficiencies,  how he has to get other people around him to   help and to compensate for things that he’s not  as strong as the honesty and the self-awareness. [02:04:47] William Green: So that’s one where I  think there’s a great deal to learn but what I   find wonderful is that in, in each of these, in  each of these interviews, there’s this process   of going into someone’s mind, figuring out how  they think about the world and trying to explain.   The connection between how they invest  and how they think and how they live. [02:05:07] William Green: And so it’s just,  it’s an endlessly rich area to delve into.   And I’m grateful that you’ve been with  me on this journey for all these years   trying to figure this stuff out. I’m grateful  that we got to talk today at great length,   and I’m gonna let you go now because I know you  have people waiting for you, but it’s just been   a real treat, and this conversation will be  ongoing, and I’m looking forward to having   you on the podcast in a few months time, or next  year or whenever you can better do this again. [02:05:32] Guy Spier: It’s so much fun, William.  I, this is like life well lived, actually. [02:05:36] William Green: Thank you. Take care.
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Channel: We Study Billionaires
Views: 41,932
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Keywords: warren buffett, monish pabrai, guy spier, berkshire hathaway, berkshire hathaway annual meeting, guy spier value investor, guy spier interview, guy spier investing, value investing, guy spier mohnish pabrai, the education of a value investor guy spier, mohnish pabrai guy spier, guy spier education of value investor, mohnish pabrai, the education of a value investor by guy spier, the education of a value investor, charlie munger, how to invest, stock market, investing 2023
Id: G1yQcykKYJg
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Length: 134min 29sec (8069 seconds)
Published: Sat Mar 18 2023
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