so the book that I want to talk to you about today is Buffett and Munger unscripted three decades of investment and business insights from The Berkshire hathway annual shareholder meetings it was selected and arranged by Alex Morris and Alex was kind enough to send me a copy before the book was released he had a really smart idea since I think 1994
all of the birkshire meetings or Berkshire meetings have been broadcast they've been recorded in broadcast so anybody can watch them so he went through like 30 years uh watched every single meeting took copious amounts of notes and then what he created for you and I really the way I think about this is it's a it's a reference tool so he
separated it not by year but by topic so you can pick up this book you know scroll through the table of contents and say oh okay I want to learn about subject X you go right to that page and it'll show you know this year at this timestamp this is what they said about that so I read the book all the way through in chronological order and did
what I always do which is just ABS take a copious amount of notes and uh underlines and then uh add context like when as I'm reading these notes and highlights uh how it relates to the other you know 379 episodes that you and I have gone over and the hundreds of History SC Founders that you and I have studied so
I want to start out with Charlie Munger talking about the importance of creating your own luck by following your curiosity and your intense interest and so Charlie says Warren says he was lucky to find Geico but not every 21-year-old was going to go down to Washington DC started knocking on the doors of empty buildings to try to find something out
that he was curious about so we also made our own luck by being curious and seeking wisdom Buffett adds to this if you enjoy what you're doing you are likely to get a better result than if you go to work with your teach teeth clenched every morning my favorite they they say variations of the same ideas obviously they repeat the importance of
you know repetition is persuasive but my favorite way that that they ever said this is Monger said intense interest in any subject is indispensable if you're going to excel in it in fact there's a great quote from this guy named nval rant that really Echoes a lot of Buffett Ander ideas what what they're saying
about here and especially in in the age of infinite leverage uh how important I think that idea only becomes more important it's definitely something I'm betting my life and career on but nval said if you're not 100% into it somebody else who is 100% into it will outperform you and they won't just outperform You by a little bit they'll outperform you
by a lot because now we're operating in the domain of ideas compound interest really applies and leverage really applies so I think it's really important again if you enjoy what you're doing you're going to get a better result than if you go to work with your teeth clenched every morning uh there's another thing that's really important
and Munger talks about having the benefit both him and Buffett had the benefit of role models that they could emulate inside of their family M says I think we're helped because we came from families where there were some admirable people and we tended to identify other admirable people outside of the family
so inside the family and there's a maxim that Buffett will repeat and he talks about the importance of picking the right Heroes so inside the family think of Buffett's relationship the fact that you know he had was very close to his father called his father as hero Munger was very close with his father but he also talks about his grandfather judge
Munger and one of the things that I think had a a really big impact on on the way Charlie conducted his life was the fact that he observed and they were told stories of uh later on in the family as well that judge monger's sound judgment and then also Financial strength really helped the Monger the entire Monger Clan survive the Great
Depression he was able to provide jobs he was able to bail out uh some family members and Monger talked about just how like you get the sense of when he talks about his admiration for his his grandfather that that's the role that he wanted to play inside of his own family as well another interesting idea and what I obviously want to do here is
because this is essentially 400 almost 500 pages of monger and Buffett in their own words there's almost no other commentary or anything else so I'm just going to rip through ideas because it's very different from you know I've done what 10 episodes something like that between uh all the biographies of buffet Ander and so what
I want to do here is just rip through idea after idea after idea because one of the I think the the really skills the most admirable skills that Buffet oner both have is they M they they're able to coin phrases that make their ideas one easy to understand and too memorable and they do they also do this by telling short little stories so it's going to
rip through you know maybe a hundred different ideas that I found most interesting and even though I've read almost every book that I I found on Munger Buffett so far they use different ways to describe the same ideas so that that they were actually new to me in this book where later on Charlie you know they talk about the fact that you
should study as much business history as possible that you should be reading you know every biography you can get your hands on uh MERS read more biographies than I have one of the reasons they they mention this is because Monger States this in a different way or at least a way that's new to me where he says you need to you should pick an extreme
example and ask what the hell happened here so that's something that they repeat over and over again there's an example of this Warren says I owe a great deal to Charlie in terms of learning a lot about businesses I've also spent a lifetime looking at businesses seeing why some work and why some don't as Yogi Bara said you can see
a lot just by observing that's pretty much what Charlie and I have been doing for a very long time they talk about the fact that greed doesn't run the world that Envy does and the one way to one you have to cure yourself of envy and two you should want to have you want you should want to deserve any success that
comes your way and again this comes from something they learned from a family member so Charlie Monger is telling us that you really should build yourself into a POS a person that deserves what you get and so Charlie says I had a great grandfather when he died the preacher gave the talk and he said none envied this man's success so fairly won
and wisely used that is a very simple idea we want to have people think of us as having one fairly and used wisely and then here's another idea that I absolutely love that if you're actually paying attention right you can spot opportunities in parallel Industries and so they were talking about we I cannot
believe how we absolutely missed Google and why would they like why would they say that because they were using Google's ads at Geico and it was the the most effective ads that they could possibly find and then they realized hey these ads cost Google almost nothing so this is what Munger says I feel like a horse's ass for not identifying Google
better and Warren ads we had some insights because we were using Google ads at Geico and we were seeing the results produced we were paying $10 a click for something that had a marginal cost to Google of exactly zero and we saw that the ads were working for us we could see at Geico how well Google advertising worked and we just sat there
sucking our thumbs so when I when I thought of that I didn't think of Warren or Charlie or or or Geico or Google I remember so there's a guy named Jay gold who I became slightly obsessed with uh because I'm always fascinated by you know people that reach the top of the profession who they admire and so Rockefeller was asked one time like
who's the greatest business man you know and he said without hesitation Jay gold corus Vander when he was the richest man in America he was in the 70s he said that Jay gold who was in his 30s at the time was the smartest man in America so I read a bunch of biographies of Jay gold and Jay was Jay was making a ton of
money in the railroad industry at the time and by paying attention to what was happening in the railroad or next to the railroads he actually spotted a massive opportunity and that was in the telegraph industry so I want to read from this transcript of this uh this episode on Jay gold I did so it says Jay was keenly interested in the telegraph
business now telegraphs went hand inhand with railroading because companies strung their lines alongside the railroad tracks the railroad tracks that he owned and so he started looking into this Monopoly the telegraph Monopoly of the day which was Western Union and and Jay could not believe how much money they made Western Union was a money
machine Jay coveted it he said I'd rather be the president of Western Union than the president of the United States so I absolutely love that idea you can spot an opportunity in these industries that are running parallel to the one that you're already operating in this is a great line uh from Warren Buffett but could definitely be something that
Charlie Munger says over and over again he says the world is overwhelmingly short-term Focus so my friend ham who's the founder of alos Ventures he made me aware of this tweet that he wrote and I thought it was really interesting he was reading this book and in the book there's this quote by this guy named Andy Taylor so Andy Taylor is actually
one that took over Enterprise runer car and he grew it from 78 million in Revenue to 24 billion in re revenue and he was asked like what allowed you to do that and he replied with one word Focus he continues I'm not the smartest person in the room but I have the ability to focus at a level that most people can't
and I can focus for very long periods of time he worked on that business for 38 years he continues I never tired of that Focus I never tired of buying cars I never tired of renting cars I never tired of service I don't get bored most CEOs don't have the attention span to dedicate for Decades of their life to doing the same thing over and over and
over again and doing it really really well and so obviously going back to the Buffett quote the world is overwhelmingly short-term Focus well if you want an edge you just do the opposite of what the world does now I I'm going to repeat this over and over again because I just it's probably my favorite it is my favorite line in the
book you know you pick an extreme example and ask what the hell happened here so they're constantly because you know monger and Buffett both have this encyclopedic knowledge of business history in their heads they're constantly referencing I ideas they have and they explain the idea to you and I through stories and usually through the
stories of an individual founder or individual company and so here's an example of the importance of investing in and partnering if you can with talented Fanatics this is Munger I always cite the early history of national cash register it was created by a fanatic who bought all the patents had the best Salesforce and had the best
production plans he was a very intelligent man and passionately dedicated to the cash register business and it was a godsend to retelling when cash registers were invented think about that there was a time where you know the amount of theft I think the the primary in addition to like organizing your sales and keeping track of it but I
think it drastically uh reduced the amount of theft that would happen at the actual cast register for your employees stealing from you in other words if you read an annual report prepared by John Henry Patterson who's he's describing who was the CEO of national cast register any idiot could see that this was a talented fanatic who was very
favorably located and therefore the investment decision was easy we have the NCR annual report from 1904 Patterson not only tells you why his cash register is worth to people about 20 times what he's selling it for but he also tells you that you're an idiot if you want to go into competition with him another idea that's explained
beautifully with the story that none of this none of this works if you cannot trust your own judgment so Buffett says you can't expect anybody else to do this for you people are not going to tell you about wonderful little Investments you have to find them yourself when I first visited Geico in January 1951 I I left
and then the rest of the year I went down and would visit leading Insurance analysts I thought I'd discovered this wonderful thing so I went to see these great investment houses that specialize in Insurance stocks and he wanted to know what their opinion was and they told me that I didn't know what I was talking about you can't look around for
people to agree with you you can't look around for people to even know what you're talking about you have to think for yourself an ability to detach yourself from the crowd is a quality that you need another note that I left myself and really an idea that I absolutely love there's just always it's it's always shocking to me and this I
think I got obviously the benefit of reading biographies and studying history in general there's just always opportunity hiding in plain sight so think about the last like I think last few weeks so Jerry Jones was the 76th person right uh 75 other people before buying the Dallas Cowboys said no right Jerry Jones was a 76 and he said yes he
paid 140 million today that's worth $10 billion not including all the money you know and the opportunities uh that came from that in the three decades that he's owned the team uh the week before I did the the episode on Leon hess uh same thing literally like Leon Hess that family company just sold for like $53 billion and it starts with Leon hes
saying hey that product that you as a refiner is throwing away I'm going to make a business out of that in the same way that Sam zuray built his banana Empire right became the richest person in Louisiana if I'm not mistaken from saying hey you're throwing away those bananas because you can't sell them in two days I'll just sell them in two days
and then obviously building a business from that but it's shocking the amount of opportunity that's hiding in plain site and Warren makes the point where a lot of the things that he's invested in some of his biggest wins they were publicly available information and so he's talking about one this is you know he
said this 30 years ago but he goes what is complicated about Coca-Cola where $3 billion pre-tax better off than a few years ago because of Coca-Cola there's nothing I know about the product it's distribution system it's finances or anything really that hundreds of thousands or millions of people don't already know they just didn't do
anything about it and then another idea I think is very important and I've seen it a few times John Rockefeller is obviously the the first example of this John Malone is another example of this but there's been tons of examples that from the biographies that you and I talk about it's this idea that you can if you
can go and actually know more about an industry than anybody else and Warren's talking about some of the due diligence and really like he went out he wasn't just sitting his office in Omaha especially in his early career he went out and tried to do dig for information and I like this idea of saying hey I'm going to I think there's an opportunity
in this case the industry is coal I think there's an opportunity in this industry so I'm going to learn about every single major company in this industry uh the reason I brought up Rockefeller about this is because in the early refining industry he had this thing called secret allies and what he went he literally the same thing he
wasn't sitting in his office in Cleveland and then later on when they moved to New York he went and met every single other oil refiner they wind up uh creating I think it's called like The refiner Association of America something like that to band together and then he would see the books of every single one of his competitors and two they they
gave him a bunch of um advantages obviously one he could figure out okay this this this guy's a serious player he's actually running a good business this guy sucks he's going to go out of business and he obviously knew which ones he wanted to buy uh from this so I think it's a really interesting idea this is Buffett's version of that when I
was 23 years old I got interested in the coal business I would go out and see the CEOs of eight or 10 coal companies I'd ask them a lot of questions but there were two questions I'd always ask at the end if they had to put all of their money into any other Coal Company except their own and go away for 10 years which
one would it be and why then the second question if they had to sell short in the equivalent amount one coal company which would it be and why it sounds a lot like the Rockefeller example it's like oh I see your books I see how well you how well this company's run you are my most formidable competitor or in many cases you know turns into one of his uh
like he'd buy and they'd turn into partners because he'd get he'd give them the uh Standard Oil stock uh so it says I would know more about the coal companies from an economic standpoint than any one of those managers probably would I'm going to mention Rockefeller again because there's a lot of similarities between the way Buffett and
Munger think and the way Rockefeller did when I uh went to Charlie monger's house and got got to have dinner with him he actually said that he thought Rockefeller was the greatest entrepreneur of all time so Buffett says we do he talks about the importance of having a fortress of cash we do like having a lot of money to be able to
operate very fast and very big we know we won't get those opportunities frequently certainly in the next 20 or 30 years there'll be two or three times when it'll be raining gold in all all you have to do is go outside so later in the book at the very end Monger gives monger and Buffett give a bunch of book recommendations and Munger heavily
recommends reading Titan the biography of Rockefeller written by Ron trau and listen to this this very similar to what Warren was just saying you know two or three times it'll be raining gold and all you have to do is go outside says it is this is now reading from Titan it is impossible to comprehend to comprehend
rockefeller's breathtaking Ascent with without realizing that he was always that he always moved into battle backed by Abundant cash whether riding out downturns or coasting on booms he kept plentiful reserves and won many bidding contests simply because his War chest was deeper keeping a fortress of cash is
how he kept buying out his competitors and other refiners and then he has another observation that it's not the the speed at which you get the information it's actually the quality like are you actually getting your top priority should be the quality of the information that you get he's saying this in 1994 imagine like I mean the the vast
difference between you know the world when when he's making this comment this problem is so much more pronounced now and again I my my own personal opinion on this is that uh attention spans just keep getting shorter and shorter and shorter so if you do have the ability to focus on something for a very long time I think that Advantage just keeps
getting more and more value in the future but Warren says the speed of information really doesn't make any difference to us it's the processing and finally coming to some judgment that has some utility and none of that involves anything to do with quick information it involves getting good information another idea that I absolutely love is
the importance of building a business that is natural to you I have um I read both of Michael Dell's autobiographies they're excellent going to make episodes on them soon and in the second autobiography one of my favorite ideas that he had was you know this idea of Dell was completely natural to to how he wanted to spend his time and he actually
got energy so where other people in his organization would burn out Michael Dell was able to keep going cuz like this I I designed a business set is completely natural to how I want to spend my time and so Warren Buffett is talking about you know there's there's a different bunch of different ways to run your
business uh he was talking about there's a bunch of different ways to invest he was he was comparing and contrasting the way he wants to invest with Peter Lynch and I'll skip over most of the parts but I just want to get to the the punch line he says I've said on in on investing there's more than one way to get to heaven I would not do as well if I tried
to do it the way Peter does it and he probably would not do as well if you try to do it exactly the way I do it so that idea of building a business is completely natural to you and how you want to spend your time and how you want to actually organize like what is your actual company building philosophy what do you want to do uh I think is
something you should you know spend a lot of time thinking about and of course refining over a long period of time Munger one my favorite one of my favorite things about this book is there's just great you know stories that Monger tells that really are self-explanatory and memorable and here's one birkshire has a substantial
shareholder whose father accumulated the original position and when he died he left a very large estate practically all of it was in two Securities birkshire and one other outstanding company a bank was a co- trustee and the bank officer said you've got to diversify this it was a very large estate and the young man said well you know if my father believed
the way you do he might have been a trust officer in a bank instead of leaving this large State and this goes with their reoccurring theme the advice they have is like you really should should be trying to find a wonderful business or build a wonderful business and if you do that you'll you'll have your entire family for Generations will
be wealthy and so they said if you look at how the fortunes were built in this country they were built by someone who identified a wonderful business Coca-Cola is a great example there aren't 50 coca-colas a really wonderful business is very well protected against the visites of the economy over time and
competition we're talking about businesses that are resistant to effective competition so when they're like hey if you look at how The Fortunes in this country were built that that popped out into my mind right and then the second thought second thing we're like Hey we're talking about businesses that are really resistant to effective
competition so those two things in coming one after another in short order I thought of Michael Bloomberg right how many people have said I I started a Bloomberg killer and the guy 50 years later is just still printing cash and what was fascinating is um Bloomberg's autobiography I think it's episode 228 of Founders somewhere in there uh it's
one of my favorite books I've ever read because you know he's unapologetically extreme what was fascinating is you know he had this huge winfall and he's on Wall Street and he's like okay what am I going to do like what's my next ACT here um and he decides there's actually a line where he's talking uh The Reader through his
decision-making process figuring out you know what's the next thing going to do which obviously is the next thing he's going to do is Bloomberg and he realizes like actually most of like the great great wealth in the country was not through just pure investing it's the entrepreneurs you know love that line from Nick sleep one of my favorite lines
ever it's like the greatest investors aren't investors at all they're entrepreneurs who never sold you know Bloomberg still owns all of his company uh so Bloomberg writes in his his autobiography although few of the great fortunes have been made in investing uh so from John D Rockefeller to Sam Walton to Bill Gates great financial success
comes from starting businesses with concrete products in the real world building jobs creating value and helping people and so I think Bloomberg is a perfect example of what buffer saying here if you look at how fortunes were built in this country they were built by someone who identified a wonderful business something Charlie Monger
repeats over and over again and this is an idea that I think of all the time and I try to make all my decisions through this just because I learned this from Charlie in fact I was on a phone uh with a friend of mine and he was trying to make decisions too and I was like you just got to think of like your Alternatives like you should be running
every single uh decision through opportunity costs Monger says all intelligent people should think primarily in terms of opportunity costs there's a great book I think it's episode 286 of Founders it's called all I want to know is where I'm going to die so I'll never go there I think it's a buffet Ander uncommon Common Sense
something like this I forgot the actual subtitle but it's one of my favorite episodes I've ever done if you could only read one book on Buffet Ander that's the book I would read and I want to pull a line out of that book that Monger says decisions in life are all about opportunity costs and wise people think in terms of personal opportunity
cost in other words it's your Alternatives that matter that is how we make all of our decisions so this idea of using opportunity costs as a filter to make decisions I think is one of the most powerful ideas this next page this is to me this is related to opportunity costs Charlie Munger we ordinarily don't like small positions Buffett we like to
go in heavy if we want to invest in a business through the stock market we want to put a lot of money in we do not believe in a little of this and a little of that Buffett continues if we find an idea that we want to put $500 million in we probably would be even happier we could put three or four billion in good
ideas are too scarce to be parsimonious with once you find them and Munger perfectly summarizes his entire section in one sentence as he is prone to do the whole secret of investment is to find places where it's safe and wise to not diversify a few pages later they continue this Charlie and I when we read about one business we're always thinking
of it against a screen of dozens of other businesses it just happens automatically but it's just like a SC Scout in baseball thinking about one baseball player against an alternative you only have a given number on the squad one guy may be a little faster one guy can maybe hit a little better that sort of thing but always in your mind
you are prioritizing and selecting in some manner my own feeling about the best way to apply that is to just read everything in sight again so they have this historical business knowledge in their head the way I would put it I I love this um is Charlie munger's description he's 95 when he says when about to read to you and this is Charlie
Munger on Lee and Munger says leel is not normal he is the Chinese Warren Buffett he's very talented in 95 years I have given Munger family money to an outsider to run once once in 95 years and that is leilou and he is hid it out of the park it is pretty picky but once I have leelou if I am comparing to him
remember using opportunity cost as a filter who else am I going to pick by the way that is a good way to make decisions and that is what we do if we've got one thing we can do more of we are not interested in anything that is not better than that that simplifies life a great deal and so one way to refine your ability to to make decisions
through opportunity cost they're constantly talking about you know the importance and the value of reading history if you've never watched a baseball game and you never seen a statistic on it you wouldn't know whether a 300 hitter was a good hitter or not you have to have some kind of Mosaic there that you're thinking is
implanted against you'll have a pretty good idea of what happened over time in America in American Business If you do so he says I'd like to have that material going all the way back I'll go back and read fortune uh articles from the 1930s on a specific company I like a lot of historical background on things just to get it in my head how the
business has evolved over time and I don't know if you can hear that but I keep flipping pages and they keep saying the same stuff when deciding whether to do something compare it with the best opportunity you have next page everything we do comes back to opportunity costs there's a bunch of great lines I don't think most of these
even need explanation we love working with people who are just plain nuts about their business the best thing to do is learn from the other guy's mistakes George Patton used to say it's an honor to Die For Your Country make sure the other guy gets the honor one thing they're constantly preaching to protect yourself against if saw so many
people go broke because they abuse The Leverage so avoiding the self-destruction is obviously very important big thing you want is to protect yourself against the insanity and market prices and volatility wiping you out and the way they teach this in my opinion the best way to teach this is these stories so Monger says one of my
children knew a man who had a $2.5 million house and $5 million worth of Securities but he couldn't live as comfortably as he liked on the income from his Securities so he got in the habit of picking up easy money he kept selling naked puts secured by his account and in due time he didn't have the $5 million of Securities and he
didn't have the house and he now works in a restaurant two things that that buff Ander both repeat is these mistakes that that tend to be hidden hidden which is not buying when you know you have a great opportunity and then selling too early so Monger says the mistakes that have been the most extreme in our history are mistakes of omission they do
not show up in our figures they show up in our opportunity cost in other words we have an opportunity and we almost do it but they don't and so he gives us an example of this that cost him $200 million personally when I was younger I was offered 300 shares of bdge oil any idiot could have told you there was no possibility of losing money and a large
possibility of making money so I bought it the guy calls me back 3 days later and offered me $500 more shares but this time because he was limited on money I had to sell something to buy the damn bdge that mistake of not buying more shares has cost me $200 million another idea told in a funny way uh is this idea that you know they
prioritize having essentially like a lean headquarters lowc cost structure really deliberately underst staffed and so Munger says somebody once subpoena our staffing papers on some acquisition not only did we not have any staffing papers we didn't have any staff and so that reminded me Steve Jobs when he came back to Apple was going through some
kind of lawsuit I I think it was with probably like with Google might have been with Microsoft but they subpoena all of like the the employee records and uh one of the employees is talking with one of Apple's lawyers and they're like where's your employee file file and so he opens a file it's like one piece of
paper and so the guy goes to Steve and he's just like where's our annual reviews like where's all this stuff he's like I don't like why would I give you an annual review it's ridiculous like give you feedback all the time and so this idea is like really question the decisions like do you need this process do you need this person do we actually
need to be doing this Steve Steve thought annual reviews was the dumbest thing ever because he's like I'm giving you feedback constantly why would I wait for TW you know once a year uh to give you feedback it didn't make any sense but I love this idea it's like we didn't have any staffing papers and we didn't have any staff just again like I just
love the Simplicity to all this bu it says when we bought the Scott and felter Company in 1986 it had been shot by first Boston to more than 30 Partners I read about in the paper so I sent a letter to Ralph Shay I had never met or talked to the guy but I figured I'd gamble 21 cents or whatever a a first class stamp cost and I said we'll pay
$60 a share if you like this idea I'll meet you in Chicago on Sunday and if you don't like the idea tear up this letter Ralph met me and we made the deal and we paid $60 per share so there's actually a guy named Jim Clayton I read his biography a long time time ago and Warren actually buys his company and in Jim Clayton's autobiography he talks
about what it was like to negotiate with Warren Buffett and by this time Jim Clayton had let his son Kevin become the CEO of Clayton Holmes so it says Buffett told Clayton the CEO of Clayton Holmes he wanted to buy the company and would pay $12.50 a share Kevin said that his board would give consideration to an
offer of $17 per share buffer response $12.50 Kevin replied the board was interested in considering $15 per share buffer responded with $12.50 Kevin said the board will accept $13.50 per share Buffett responded with $12.50 and then he hit him with this closer he says even if all this is buffing now even if all the capital and
stock market shut down you can still Bank on my $12.50 price and that is the price that Buffett bought the company for and then Buffett talks about the importance of being able to trust your own judgment and really shouldn't really be asking other people's opinion or being paying attention to people when they're buying or selling your stock or if you want to
make an investment or buy a company or do something with your company and other people disagree says every day somebody sells a few shares of Burkshire and somebody buys a few shares and they're probably coming to different opinions on the valuation it really doesn't make any difference to us we don't pay any
attention to what people say you really should not make decisions based on what other people think think so there's a great comment about from Jeff Bezos about he knew the fundamentals of Amazon even when his stock was dropping like a rock and so this is what he said I watched the stock fall from $113 to6 but I was also watching all of our internal
business metrics numbers of customers profit per unit every single thing about the business was getting better and fast even as the stock was dropping it's a fixed cost business and so what I could see is that from the internal metrics it is that at a certain volume level that we would cover our fixed costs and the
company would be profitable and then a bunch of lines on the importance of keeping things as simple as possible and really just keeping the main thing the main thing we have no human relations department no legal department no investor relations no public relations we don't have any of that we've got a bunch of Allstars out there running
businesses we just asked them to mail the money to Omaha another thing the important thing we do with Managers generally is to find the 400 hitters and then not tell them how to swing and then this is my favorite one it reminds me of Novak jokovic we have a number of people working for us that have no Financial need to work at all and they probably
outwork 95% or more of the people in the world and they do it because they just love smacking the ball now I don't watch Tennis but I do love excellence in every form and there is a 2018 interview in the financial times with Novak jovic and I went back and I read the interview but because he says I can carry on playing
at this level because I like hitting the tennis ball this is simple I'm going to keep doing this and keep playing this because I love it the simple Act of hitting the tennis ball which is the main thing right I kept the main thing the main thing I actually love it the interesting part is that the the person interviewing in the financial times
follows up are there tennis players who don't and jokovic says oh yes there are people out there who don't have the right motivation I can see it but I don't judge and so you go back back and you can see how many Majors did he have you know in 2018 he was like I don't know let's say fifth or sixth or something like that in total majors in
all of tennis history and then you fast forward you know a decade or even less what half a decade and he's number one I can carry on playing at this level because I like hitting the tennis ball this next quote is really a combination of two ideas the importance of Designing a business that's natural to you and making yourself easy to interface with
so Buffett says before I ran this I had a partnership I had a great group of part partners and essentially I like to be left alone to do what I did I like to be judg on the scorecard at the end of the year rather than on every stroke and not second guessed in a way that was inappropriate I like to have people who
understood the environment in which I was operating in and one of the most important things is Buffett told his Partners what he liked to do how he wanted to spend his time how he wanted to run his business they do this over and over again and then you can decide hey do I want to want want to be a shareholder do I want to partner with
these guys and like one one thing that they bring up over and over again is in their wholly owned businesses unless it's going to completely drain a bunch of money they're not going to sell them uh even if you know they can say oh we used to make 15% now we make five let's sell it and then we take that money and
we can make 15% they're like this is just the Quirk of us how we run our how we want to run our businesses but I think telling people that making yourself easy to interface with about what's important to you what you actually like to do uh is very I think very very important another great idea that they repeat is that good news takes
care of itself so just tell me the bad news I don't need to know the good news that'll take care of itself and make sure you don't let problems Fester uh you ought to jump on everything Charlie has pushed me all my life to make sure that I attack unpleasant problems that surface and that sometimes not easy to do when everything else is going fine
when I procrastinate Charlie has been the one that Jabs me into action he's performed a lot of services that you don't know about they're constantly talking about the importance of working with the best people you possibly can again the way I think about this is never ever ever forget the dynamic range of humans uh so
in in many cases like you want to overpay for talent because if they're truly talented it's almost impossible to overpay for talent my the the greatest example of this is when Apple buys next you can think of that as hey they spent half a billion dollars to rehire Steve Jobs and they got the deal of a sentury they say large sums don't bother me I do
not mind paying a lot for performance in the end if you get a great manager you want to pay him very well you want a big carrot out there for them if they achieve the results that you've set out and a few pages later picks up on you have to be very careful how you design like you want to reward great people in your business be be careful how you
design this in centr structure he he says you don't want to award profits alone so they talk about the fact that Geico spends like in this number is probably even higher today they spend like you know 800 million a year on advertising or something like that and so it's like well if people working in Geico if we say you're your individual
composition is just tied to you know short-term profits what's the be best way shortterm to increase our profits it's like we're just going to pull back on advertising and he says it'd be the dumbest thing you could do you don't want to word on profits alone you just quit advertising and then you'll start shrinking the business a little and so
there's two actually ideas that PO to my mind about this section that that are you know I don't hear repeated very much and so David ogy he talked about that advertising is actually a production cost this is what he says I've come to regard advertising as part of product to be treated as a production cost not a
selling cost it follows that it should not be cut back when times are hard anymore than you would stint on any other essential ingredient in your product assuming that you need to advertise to sell your product right so if that's the case then advertising is actually production cost now Izzy sharp had the best application to this Izzy
sharp was the founder of Four Seasons and he talked about the fact that one of the benefits in his business is that his other competitors building Hotel Brands they all did the same [ __ ] when they there was a pullback in the economy they would automatically pull back their advertising budget he would either maintain or if he could extend and spend
more on Advertising so he went up picking up a bunch of market shares in financial downturns because his his competitors wind up cutting back their advertising cost when he realized it's the ex he needed to do the exact opposite and I think a few pages later Munger didn't have Izzy sharp in mind but really if you think of if you
analyze what y sharp was doing by making decisions like that uh that that's how you know was a great manager so Monger says I think almost all good businesses have occasions where their managers are willing to make today's results look a little worse than they would otherwise to help tomorrow and again the importance of this is like you can
really see in the Behavior Uh the fact that most businesses are actually poorly run and even you would think they they talk about in in this example that the even the variance like think about the Fortune 500 CEOs the variance and performance even in that subset right 's an enormous difference frankly in the
talent of American Business managers the CEOs of the Fortune 500 are not selected like the members of the Olympic track and field team you do not have the uniformity of top quality that you get with the American Olympic team you get some very very terrific people but you also get a lot of mediocrity and I think that's why Monger is always saying
listen find great people and stick with them really Buffett has his own version of this right he's not talking about himself but but but Monger uses Buffett as an example where Buffett says really outstanding managers are invaluable and I love what uh what Munger says here he goes you should not be looking for other warrants on the
theory that they're under every Bush it's like there is not other warrants um and then they give you some some advice I I love this they talk about uh you know when they're picking managers uh to run their businesses we don't like banjo hitters who suddenly Proclaim that they could become power hitters so my friend
Brent Bor uh runs a a company very similar to in some ways to Berkshire he he spent time with both uh Buffett and Munger Brent buys a bunch of private companies keeps them forever and sometimes he has to find new CEOs for these companies and so one time he was having dinner with Charlie Munger and he was just asking like how do I solve this
problem and it's one of my favorite stories because it's just like the Simplicity of Monger thinking and you know Brent was like well how do you hire great CEOs and monger's response to Brent was something like we find somebody that did a good job before and ask them to do the same job for us and uh the followup question bren's followup
question was something like yeah but what about you know hiring for potential or Youth and monger's like we we don't do that just like it couldn't be any more simple you we found somebody who was a great Co it's said great become a come over here and be a great Co for us uh but I just love that idea it's like okay or you could say I'm a b you know
try to take the chance on the banjo hitter and maybe the banjo hitter can transform into the power hitter uh but most times they don't so I just love MERS again beautiful Simplicity on that and then again I think this is the perfect illustration of how do you communicate ideas so they're memorable right and you could say Hey you know you
really should be organizing your life and your business in a way that you know they can withstand that they will actually survive or you can say hey you don't want to drive yourself into a vat of beer at one point in your life so what does that mean saying that if you're a shareholder in Brookshire your returns in 99 years out of 100 will
probably be penalized by us being excessively conservative and one year out of a 100 will survive when other people don't when I set up my office in 1962 I put seven items on the wall I went down to the library right and I made photoc copies of pages from Financial history one was a story that happened in May 1901 When the Northern
Pacific Corner occurred Harman was trying to get control of the Northern Pacific railroad and James J Hill was the largest stockholder was trying to retain control uh and in that paper in 1901 the whole rest of the market was totally collapsing cuz Northern Pacific went from $170 a share to ,000 a share in one day trading for cash cash because
the shorts needed it and there was a little item at the top of that paper which I still have hanging up in my office where a beer brewer in New York committed suicide by driving into a vat of hot beer because he received a margin call he probably knew how impossible it was that in one day a stock could go from $170 to 1,000 to cause a margin
call but he ended up in a vat of hot beer and I've never wanted to end up in a vat of hot beer there is something interesting when I had dinner or uh with with Munger one of the most fascinating things he said it was so odd he thought it was very unusual to be so wealthy and love that that goes against human nature
the fact him and Buffett everybody obviously knows they were super rich but they were also really beloved and my own theory of this and I didn't think about this to ask him at the time but it popped to my mind like why would that be the case and I actually think it's because there the benefits of teaching you know it's not like they they hoarded
the knowledge that they of their six or seven decade career they wrote about their shareholders they talked about the AGM they you know people wrote books on it you could just pick it up and be like oh you know M buff have found some really good ideas I should probably take them uh and use them and there's also uh other benefits as
well where by doing this this is multiple times I actually read a book called what I learned before I sold to Warren Buffett I think that's the title of the book uh it's the guy that uh third generation of hellberg diamonds and you know he had a very prosperous privately held family business and when the he realized it's probably the right
time to sell the business he had one person in mind Buffett why do he have a because he went to the meetings he read the shareholder letters I'm pretty sure he was a shareholder it's like I I I benefited so much from all the teaching and so they're actually talking it starts out with monger and and then Buffett chimes in about the fact that
they have all this opportunity by the fact that they built this following and I think they built the following through the best way it's just like hey I'm going to sit there and learn all this stuff through my day-to-day job and I'm going to turn around and like share it with you and you can hopefully benefit
as well so Monger says we get offered things by people who would not sell to anyone else that is really peculiar and it has happened a lot Buffet chimes in it's happened and on important ones when I heard from iscar uh that's the metal cutting tools company I had never heard of iscar are its founder uh his name is
Eaton wenhe himer I think is how you pronounce it he basically told me that he wanted to sell to Brookshire and or he didn't want to sell to anybody else we met and we made a deal another thing they repeat is the fact that they are individual opportunity driven in fact there's a great line in Napoleon that is related to this but they're talking
about you know when they when they started it was like we didn't know what we were building right we just had a lousy textile mill it isn't like Charlie and I sat down and worked out some plan we'll run this dumb textile business for 20 years and then we'll finally have to fold it and then we'll do this that and everything we just kept putting one Fit
One Foot In Front of the other Napoleon approached his life the same way he says I had very few really definitive ideas and the reason for this was that instead of obstinately seeking to control circumstances I obeyed them and they forced me to change my mind mind all the time most of the time I had no definitive plans only projects Buffet
continues our partnership was the same way we sat down with people and in my case I handed them a little sheet of paper it laid the ground rules I wanted to be sure that we were on the same page you don't have to read the partnership agreement there's no way in the world I would take advantage of you you shouldn't be here if you think I would
but I do want you to be on the same page and be measuring me by the same yard that I measure myself so I already repeated this I love that idea because it it combines really a number of things but really being easy to interface with right making yourself easy to interface with by just telling people what's
important to you and then working with people where you would be comfortable with just a handshake agreement and then in case you were doubting the importance of never ever ever forgetting the dynamic range of humans Buffett is asked what's the best investment he ever made listen to his response the best investment was getting Charlie to be my
partner another great idea maximize the amount of time that your company spends on making magic for your customers and minimize or eliminate overhead or processes that get in that way we really free up our managers of our business to spend 100% of the time thinking about what is good for their business ideally what he wants the managers of the
birkshire businesses to be doing spending all their time focus on what counts for the business and eliminates the distractions that often come in with come with running a business he says I would guess that CEOs of most public public companies waste a third of their time at least on all kinds of things that really don't add a thing to the
business and in many cases subtract from the business we allow them to spend 100% of their time focused on what counts and that is a rare occurrence in American businesses it'd be very fascinating if you have a tool that can actually calculate like what percent of your company's time is actually focused on
making magic or improving things for your customer customers as opposed to you know all this overhead these processes these things that actually don't matter to the customer I've never heard of or seen anybody tracking that as a metric but I think it's a really good idea want to go back to this idea where he says you know there's these low
hanging fruit maybe not low hanging fruit because you have to know how to analyze it but they you know there's a bunch of public information that if you have good judgment and you have like you can interpret differently and you can profit from this so he winds up investing 400 million I think in petrochina in the early 2000s he's going
to sell this for a few years later for a $3.5 billion profit but I just want to pull out some the way he was thinking about this it was right there in black and white in a report that anybody could get we just sit in office and read those things and we were able to put 400 million out that now is worth 1.2 billion so again he gets like 3.5
billion when when he winds up selling the stock the Petro trano annual report came out and I read it that's the only thing I ever did I never contacted management read a brokerage report or asked for anybody's opinion I came to the conclusion that it was worth $100 billion and it was selling for $35 billion what is the the sense of talking
to management any further refining of analysis would be a waste of time when what I should be doing is buying the stock it is like somebody that walked in a door and they weighed somewhere between 300 and 350 lb I might not know how much they weigh but I would know that they were fat that's all I'm looking for something that is
financially fat there's a line that Monger says it's not in this book he's actually got a funny way to say it in this book I'm going read to you but it's something I think constantly he says in business we often find that the winning system goes almost ridiculously far in maximizing and are minimizing one or few variables he has a great line in this
book he says I think it's a great strategy for the great mass of humanity is to specialize nobody wants to go to a doctor who's half Proctologist and half dentist and so they quote the former CEO and chairman of IBM Thomas Watson where he says I'm no genius I'm just smart in spots and I stay around those spots so they're talking about uh Circle
competence really the way I think about it is like they're talking about the the multiplication of effects of extreme extreme Focus I talk about one of my favorite entrepreneurs in America people are surprised when I say this because I just think it's hilarious and he's only done like one interview and I think the
interview is like two or three years old it's a guy named Todd Graves okay Todd Graves is the founder of this place called Raising Canes Todd Graves sells chicken fingers that is all he does he just happens to do it better than every else in the world and he has done that for 25 years with extreme levels of
focus and he's worth 10 billion dollar and he sells [ __ ] chicken fingers and one of the things I absolutely love when if I ever sold chicken fingers and I'm not going to uh based on what he said in this one interview I heard from him he like that's exactly the way I would do it I loved everything about his mentality the way he thought about his
business it is unbelievably similar to countless of you know history's goodest Founders that I've read biographies of and that you and I have talked about in this podcast it's crazy it just he applied it to chicken fingers so he said one thing in that interview I abely love he goes I believe in doing one thing and
doing it better than anyone else I run into people all the time and sometimes it's people I read about sometimes people actually meet that they invest and build in only one industry and they do that for a long time that if you track every great company or every great person in that industry somehow they're in that deal and I think that's a sign
of wisdom there's a great line where um I think it's Buffett that says if you have doubts about something being in your circle of competence it isn't and I think it takes discipline and you know wisdom and self-control over a long period of time in that interview that Todd Graves did they're taking like all these phone calls from people like
they're calling in uh are making videos and they're asking questions it's just like I love what you do this happens over and over again it's it's remarkable part of human nature I love what you do I love it's like I I get this myself it's like I love what you do X have you ever thought about doing Y and I'm like if I do y that means I do I spend less
time on X and you just said you love that I do X and so he kept get like I love what you do why don't you do you know add dessert to the menu or make it spicy or do all this other stuff and Todd he was very likable comes off very likable in the interview he's just like no I like the menu is the way it is today that was exactly how it was the
day I opened and he talks about the benefits of extreme focus and it goes down to even how fast he's able to turn cars over in the Drive-Thru and that made may like may make a tiny difference when you got five locations but he's got like 600 or 800 it makes a massive difference and in a business that's working that difference only expands
over time again I believe in doing one thing and doing it better than anyone else I actually had a friend of mine uh who's really good at uh new business creation heavily focused on technology and Ai and he met with a guy who was like the grandson of like a shipping magnet and the guy's like oh I want to do what you want to do and he's just
like why would you think that's possible it's like do you see me trying to go buy oil tankers like what is going on here if I jumped in your game you would kick my ass why do you think this the reverse is not true has a very fascinating Quirk to human nature to me it's like I don't know if we can see it in ourselves maybe
other people have to tell us the cas is I don't know I just and maybe it's also like prone to my personality it's why the these lines jump out on the books it's like I just like doing one thing and doing it over and over and over again uh it just speaks to my soul so this is very interesting you see their take on the internet over time and and
really technology and this isn't what I'm about to read you is not really about the internet I don't think that for for our purposes like how we should be thinking about this so they say this in 2000 and they're talking and it was obvious to them like oh [ __ ] we got some businesses here that we own that are
going to get wrecked by the internet and so for us for for me and you I think like when we're when I'm going to read this to you but not don't think about like you know encyclopedias or the newspaper Internet it's like really what we want to know is like what is all technology is is a better way to do something and usually it's better and
cheaper so what is it what is happening now what are the businesses that are happening now what which ones will decline as a result of the new technology that is created today and I think the proper response to this is to be like Billy Durant the founder of General Motors and I'll explain to you what I mean by that so this is from the 2000 meeting buff it
says 15 years ago print encyclopedias were the best tool for educating not only young children but for educating me or Charlie when we wanted to look something up on a subject that was 1985 worked fabulously right and they owned the world book encyclopedias it was a marvelous product but it requires this is again why you think of Technology as
all technology is is a better way to do something so for me to learn back that you know in ' 85 I'm picking up the World Book Encyclopedia what does it cost like how did that get to me uh the World Book Encyclopedia requires chopping down trees operating paper mills binding and printing and delivery of a 70 uh 70 lb UPS package it was to
put together in a way that for four or 500 years was the best technique for taking that information and moving it from those who assembled it to those who wanted to use it then the internet came we pay and then they talk about okay so the internet is going to destroy that obviously you know your Wikipedia it's
free you can use it anytime you want and that's like the tip of the spear there then they talk about the fact that they at one point uh in the book they talk about you know the just from owning a single newspaper which is the Buffalo news they were making like 40 million a year in profit that they could not uh reinvest in the business so it's just
shooting off 40 million a year in cash flow that they were then taken by other businesses we pay a significant percentage of our circulation Revenue at the Buffalo News to our carriers and we pay additional money to the district managers and then we pay for trucks to deliver the product out and we pay for huge printing presses and all that sort
of thing and people Cho down trees in order to give us the raw material to transmit information and Buffalo about what the Buffalo Bills did on Sunday now you have the internet that has virtually no incremental unit cost and could deliver the information instantaneously it is incredibly low cost compared to most of the other
methods of conveying entertainment and information now they're saying this in the year 2000 we were asked if we're afraid the internet would hurt some of our businesses the answer is yes so even if famously you know Buffett and Munger are not great technology investors I guess you know the Apple investment not
not withstanding you know even if they they didn't make a lot of money in all these internet stocks they clearly saw what which like they saw it very clearly like the internet is going to destroy our newspaper business and our World Book Encyclopedia business but again what is the the point here is is like okay what is like this today and then if
you've identified that maybe you're you're in a business like that now what is the proper response and the reason the proper response in my opinion is to be like Billy Durant so what do I mean if you go back and you actually think about the American automobile industry I I would argue the two most important
Founders in the history of this industry that that you know changed our geography for God's sake uh was Henry Ford and Billy Durant Billy Durant was the founder of General Motors now what was interesting to me is what Billy Durant was doing before he founded General Motors he created one of the most successful horse carriage manufacturing companies
and as soon as he realized the car was coming and this is at a time this is before wait this is a decade and a half before Ford actually solved the problem of how to mass-produce cars right so he saw this early right he's like wait a minute the car even I think there's like a couple hundred on the road in Detroit and most of them all of them were
handmade most of them didn't get go very far he immediately switched he's like the car they're going to improve the car they're going to figure this out I'm getting out of the horse carriage business because this new technology has come around and he immediately jumped into the automobile business that's what I said if you can if if you are in a
business or you're identifying one or maybe you're in one where technology is going to do what you're doing today better and cheaper the move is to do what Billy Durant would do which is to jump into that oncoming phenomenon that was impossible it was impossible for any one person to stop the phenomenon of the automobile and I would guess there's a
ton of Industries and businesses that are going to be severely diminished as a result of all the new technology that's coming out right now one thing that Buffett Ander taught me is that learning is not memorizing information learning is changing your behavior and so there's multiple examples where they identify a
supremely talented person and they sell way too early so two examples of this that PO mine is Buffett knew Bob noise founder of Intel and met Walt Disney and knew without a doubt how talented these people were so they were sitting uh there there's a um College in Iowa called grenell and both Bob and Warren Buffett were sitting on the board of
this the the chairman of the board of trust of grenell college and the investment decisions of that endowment were made by the Board of Trustees specifically Buffett and grenell actually buys 10% of the private placement that was the initial funding of Intel uh and he says we bought 10% of the original issue at grenell the this
is Buffett talking now the genius who ran that investment committee which was him managed to sell it a few years later he says I won't give you his name which is him and there's no prize for anybody who calculates the value of those shares now what is also fascinating so again learning is not memorizing information
learning is actually changing your behavior you knew how talented noise was how much you respected him and you sold too early he also did this and again there they talk about the importance of rubbing your nose in your own mistakes so you avoid doing that in the future because the the amount of gains they gave up you know the oil vage oil
company he said it was 200 million if you if you think about you know missing out on Google when even though the ads are working the the increase in Intel even though you knew Bob noise and then maybe the most egregious of all is Disney uh you know you're talking I don't know maybe hundreds of billions of dollars depending on how much money they
had and they could have put into it at the time but the reason I bring this up is because Buffett bought Disney stock after meeting Walt Disney in 1966 he paid 31 cents a share and uh sold uh when the stock went to 48 cents a share another person they identified as a talented fanatic as somebody's ferociously intelligent was they loved
Jeff Bezos and you know they talk about the fact that it's remarkable what he's done they saw how Talent he was relatively early on obviously maybe not at the IPO or before that and they never acted on it they never bought a single share Buffett loves Bas so I just want to read a couple things that he was he
said about him it's really remarkable one person who built an extraordinary economic machine in two really different Industries almost simultaneously from a standing start at zero while facing competitors with lots of capital and everything else to do it in retailing and to do it in the cloud like Jeff Bezos has done at Amazon is really
incredible the truth is that I watched Amazon from the start and I think what Jeff Bezos has done is something close to a miracle I had a very very very I'm not stuttering he said it three times or he wrote it three time or said it three times I had a very very very high opinion of Jeff's ability when I first met him and I underestimated him and I
love the way they think about describe you know this this the constant everchanging nature of technology and I think one of the things that Walt Disney did spectacularly is you just stay in the game long enough to get lucky someone else can actually invent a technology that will drastically increase uh the market for your products
the value of your company they were talking about and Buffett knows this he was saying somewhere way back somebody invented television and then they invented cable so a baseball player who could bat 406 in 1941 was worth $20,000 a year now a baseball player even a marginal big Leaguer will make vastly greater sums because in effect these
inventions of these two technologies uh The Stadium size was increased from 40,000 to the entire country or and in many cases even the entire world and so one thing I think about this and this comes up a bunch in the books is staying the game long enough to get lucky someone else can invent a technology that drastically increases your Market
Walt Disney blew up a partnership okay I think this was the United Artists and one of the founders of United Artists was Charlie Chaplain which was one of Walt Disney's Heroes he B blew up a partnership because he refused to sell them the rights the the Disney's rights to television and he did that at a time
when there was only a few thousand TVs in existence so again stay in the game long enough to get lucky someone else will invent a technology that can drastically increase the value of your business market right Munger and Buffett talk about you know the fact that coke bed Coca-Cola uh benefited incredibly because somebody else that did not work
at Coca-Cola invented refrigeration there's a great line um there's a great line in rockefeller's autobiography you know he writes that he's a much older man probably in his 80s at the time if I'm not mistaken and he's talking about the fact that oh this this guy that absolutely love this young this young fellow uh Henry Ford came to visit today
and I just love spending time with him I was like yeah I bet you do because Rockefeller made more money in retirement from his oil stocks because Henry Ford invented the Model T invented the mass production of automobiles which then what does that do drastically increase the demand for rockefeller's product yeah I bet you love spending
time with him too uh so I just I just love that idea again like stay in the game long enough to get lucky what would have been the difference in rockefeller's wealth you know he what if he decided to retire and sold his stock before the invention of the automobile it's an interesting question to to think about another interesting question to
think about is how many people do I actually need they talk about over time in industries that are working you actually see they become more efficient on a per person basis so one example they give is the oil companies are a classic example if you look at employment relative to barrels produced refined and marketed it's gone down
dramatically over 20 years Monger continues if you put it in reverse you say name a business that has been ruined because it was overd downsized I cannot think of a single one but if you ask me to name businesses that were half ruined or ruined by float I could rattle off name after name after name it has gotten
fashionable to assume downsizing is wrong well it may have been wrong to let the business get so fat that eventually had to be downsized goes back to being almost deliberately understaff there's a great example in um in Sam Walton's autobiography where they're interviewing other people around him and he's constantly questioning he gets annoyed
at like any level any extra level of layer any extra level of process and you know he he says over and over in his autobiography like if you you either serve customers or you support the people that do or we don't need you and you know there was this one example where they were having a problem uh when when inventory comes into the Walmart
stores of actually putting the right prices on there so they had to add another layer of these guys that would go around and it would like have these like handheld devices and they would scan every single thing to make sure that the price that the computer says it should be is actually the price that the customer sees and their their mere
presence would annoy Sam you kept asking like why do we have this extra layer like why don't we just do it right right the first time and I think implied in there is his his his correct instincts that you have to be very careful of being bloated of jumping immediately that the solution to the problem is more people then there is an
interesting uh comment here where they're like we really don't want to clutter up clutter up our minds and so we try to focus on what is important and what is knowable so when um I was lucky enough to have a two-hour lunch with Sam zelle before he died and we we talked about this because anybody that knows Sam zel says the same thing so what they
say about Sam is what Sam said about Jay priter so Jay priter was his his mentor when Sam was a very young man I think he was still in his 20s when he met pritzker and he said that priter was the the greatest Financial mind of anybody he ever met and that you know Sam would bring him a deal or they would talk
about buying a business or whatever and he's like okay here's like a list of eight things or seven things that that we need to worry about and PR's like [ __ ] it's like that's the one thing there's only one variable and if you solve for that variable the deal will work out and so they're talking about you know if you went back in 1919 you
could have bought a share of Coca-Cola for 40 bucks and in between that bunch of times it dropped by 50% there was World War II there were pandemics there was adventure of atomic bomb and really the only important thing was how many servings of Coca-Cola were going to be served every day you know many years into the future so you think about like
what is the most important factor that's what Jay that's what Sam zel or Jay prer taught Sam zel that's what Sam zel taught other people and that's what they're saying here it's like you know war wars be damned uh economic financial crisis be damned like if I'm buying the stock for the long term and I forgot how long they may been holding this for
three decades are they going to be serving more coke on a daily basis you know in the future and all that mattered was by 1998 they were selling 1 billion servings a day and bu it makes the point here the person that can make people a little happier a billion times a day around the globe ought to make a few bucks doing it if you developed a view
on any other subject in any other way that forestalled you on acting on that which is most important the specific narrow view about the future of the company you would have missed a great ride and then I love this part because they're talking about an ideal asset or an ideal business they're talking about during inflation but
really I think it obviously applies during times of low inflation as well the ideal asset is a royalty on somebody else's sales where all you do is get a royalty check every month and it's based on their sales volume you came up with a product originally licensed it to them and you never have another bit of capital investment you have no
receivables no inventory and no fixed assets and there's actually I've come across some of these crazy deals where people have become very wealthy as a result of that so I did this episode on Jimmy Buffett and what's fascinating if you go and look at like there's a list of like the top 10 wealthiest musicians of all time they all like kind of make
sense you know they had huge hits they're very well known and you have like this the one outlier on that is Jimmy Buffett you know they had like two hits they weren't even that big um you know they were like 20 years apart and yet this guy you know had a multiple billion dollar net worth uh when he passed away
not including all the money he was taking out of the business I forgot I forgot what it was on the podcast but he was making something like $70 million a year and when you read about how he did that is because he had all these license agreements that were using like the Buffett name and and Margaritaville Jimmy Buff and Warren buffer were
actually friends it's also one of the reasons I po popped to my mind but then you also look at some of the craziest deals in history like Michael Jordan's uh royalty he gets 5% of all the uh the sales of the Jordan brand I think he made like 300 million last year doing that maybe like 150 million the year before and it's like keeps growing uh
Coco Chanel became the richest woman in the world when she was alive based on the deal where she got either 2% I think 2% of all sales of Chanel and in the contract said that the her former partners had to pay every single one of her living expenses which is very fascinating there's one that came up recently uh Steven Spielberg for for
quite a while has gotten 2% on all of Universal studi ticket sales and I think it's at every single Universal Studios throughout the world in fact because that's a public company they uh he's been making anywhere from I've read different reports from like 30 million to like 70 million a year for a while and they had this
disclosure in um in their Universal their disclosure where they estimated to buy them out of the deal would cost like another like 1.5 or 1 .7 billion so this idea it's like well you're just getting a check every month it's based on sales volume uh you know you don't have to invest any other Capital to the business it's just just you have no receivables
no inventory and no fixed assets very interesting now uh we talked about earlier that you can sometimes spot an in spot an opportunity based on this like this parallel or related industry to the one you're working in there's actually an example of this that's it's it's kind of similar to this where you have a deeper understanding that only
happens through experience there's two things they mentioned ciz candy over and over again forever it's probably the most commonly mentioned business in this book maybe Coca-Cola is up there as well but one of the most the only part I really want to pull out about C's is that it taught them it there's two benefits one all the money
coming out of it I think they've pulled at least two billion of cash out of it I think the numberers got to be higher now and I think they were still doing like a 100 million a year in cash flow that they can then obviously reinvest into other businesses but I thought that that's fascinating obviously they only
paid 25 million for the company right but what was fascinating is they didn't understand the power of brand like the magic that is a brand until they actually own a business that was a brand and you have these benefits that seem undeserved but are directly related to the fact that you have a brand that is beloved in the consumer's eyes and when
you have that a lot of weird things happen C's not only provided us with earnings used to buy other businesses but beyond the earning it also opened my eyes to the power of Brands you could say that we made a lot of money in Coca-Cola partly because we bought C's I understood Brands to some degree but there's nothing like owning one and
seeing the possibilities to educate yourself about things you might do in the future if we had not owned C's I would not be surprised if we would have never owned Coca-Cola later on and so that's a related to the fact that Buffett really loves mind share like having mind share in a consumer mine like CE candy does for you know much
smaller group of people Coca-Cola does for the entire world talks about Walt Disney the fact that you know no Mom is going to be like I want to go to the store and buy you know Paramount Pictures movie it's like no it's Disney's The only brand it's super super valuable to have this mind share and you see this with Geico and how much money
they spend on Advertising how important it is we'll spend and these numbers are you know more than a decade old so they probably even spend more now we'll spend about $800 million a year on Advertising we were spending a little over 20 million a year when we bought control in 1995 so he's drastically increased
Buffett has drastically increased the amount of money he spends on Advertising he's he's aiming for ubiquity is the way you can think about this we want everyone in the United States to have in their mind the fact that there's a good chance they can save money by picking up the phone or going to the website and checking it out when we get that message
in people's minds you never know when it's going to pay off later down the line we love spending money on Advertising at Geico we want to be in everybody's mind a brand is a promise that's still the best description or the best uh yeah the best the best definition of a brand I've ever come across a brand is a promise but I I just
think there's just a great line to describe what you're really aiming for you know this mind share this like the brand is a promise there's something that's happening in the mind uh that just gives you these you know un unexpected and like compounding benefits for a very long time and Munger talks about Costco you know my wife's family
they're Costco Fanatics I didn't even know what the hell Costco was before I married into his family and I told you they've been Costco members I don't know 20 no it's got to be longer now 27 29 years in a row they're never canceling that menu or that that that membership I don't even know if they shop anywhere
else it's it's freaking nuts so again I think this is just a great line Costco has created ferocious customer loyalty and of course strange things happen when you do that long enough and again Coca-Cola has ferocious customer royalty Disney you know Costco all these inter brands have ferocious Customer Loyalty now I want to get to this part that I've
been quoting over and over again it's my favorite line in the book right pick one example pick one extreme example and ask what in the hell is going on here so they're talking about the fact that you know well before they bought into Geico uh they knew all about the history of the US Auto Insurance and there's all
these other outliers that they found interesting so they said State Farm was started in 1922 by a fellow in Bloomington Illinois who had no money no Capital into the business and over time in a huge industry he becomes the dominant player and at this point this is like 20 years ago he was like more than twice the size of the number two
player which is very interesting and incidentally State Farm on the Fortune 500 list has the third largest net worth of any company in the United States number three from Bloomington Illinois with a guy who had no money how does that happen you find you find some interesting aspects in studying how a company could become the third largest
netw worth in a country with no apparent Advantage going in so this is when Monger follows on again I love this idea picking some extreme example and asking my favorite question what in the hell is going on here is the way to wisdom in this world when something like a State Farm happens you should try to understand it and if you think about
that that's exactly what you and I are doing together every week they you can't have a more extreme subset of the human population than somebody that was so good at their job that somebody decided they had to write a book about that person's life that is the smallest percentage that you can't there there is
not more of I don't know many there is probably isn't another way to pick a more extreme like subset of the human population and ask what the hell is going on here and then interesting enough this book ends with a bunch of book recommendations from Charlie and waren over the years so I just want to read a few to you some of these I've
done podcasts on and some of these I bought immediately so it says I very much enjoyed Connie this is Charlie Monger speaking I very much enjoyed Connie Brook's book master of the game which is a biography of Steve Ross who headed Warner and was later CEO of Time Warner she's a very insightful writer and it's a very interesting story I'm
rereading a book I really like which is Carl Van doran's biography of Ben Franklin i' had almost forgotten how good a book it was we've never had anybody quite like Franklin in this country and never will again Buffett says there's one chapter in the general theory by John Mayor kees that relates to markets the psychology of markets and
the behavior of Market participants you'll get as much wisdom from reading that as anything written in Investments Buffett also says I read the quotable Einstein it's a lot of his commentary over the years and it's a great read I just ordered it I think it's like again 400 pages of just Einstein in his own words uh I'll have that book soon if
it's good I'll make a podcast on it Monger says uh Robert hagstrom sent me his latest book on Warren Buffett the Buffett portfolio I was flabbergasted to find it not only very well written but a considerable contribution to the synthesis of human thought on the investment process Monger also says another book I like very much is Titan
by Ron tral I did this on episode 248 if you haven't listened to it it's obviously the biography of John D Rockefeller that's one of the best business biographies I've ever read Munger said uh Warren Buffett says you should read kathern Graham's autobiography personal history it's a terrific book that's episode
152 uh Buffett says probably the most representative book on My Views is the one that Larry Cunningham has put together the essays of Warren Buffett I love that book too that's episode 226 s uh because he essentially has taken my words and rearranged them and put together what he put together there best represents my view and then Munger says
he just read in the Plex by Steven Levy about Google and he found it very interesting I find it interesting the way people have created these engineering cultures which are quite peculiar and different from most of what we have at Berkshire I haven't read this book I actually just ordered it I certainly enjoyed learning it and if I
enjoy learning it I regard it as important because I think that's what you're here for to go to bed every night a little wiser than when you got up and hopefully you feel this podcast helps you do just that makes you a little bit wiser than you were before you listen to it that is where I leave it for the full story highly recommend buying the book I
think it's a no-brainer again I wouldn't read it straight through I definitely think of it more as a reference and I would jump around based on the table of contents but if you buy the book using the link in the show notes you'll be supporting the podcast at the same time that is 380 books down 1,000 to go and I'll talk to you again soon