if that guy has a gun this is not going to end well and that stopped me cold you're a fan of biographies I'm wondering which ones stand out to you well for instance uh I like I think he's one of the most underrated presidents we've ever had and I struggled I struggled massively and I really had the biggest period of underperformance that I've ever had in my career you want companies that are doing things for their customers rather than to their
customer a person Warren Buffett in that situation he's not going to make a great decision let's fast forward to what is known as the great financial crisis what are your memories of sort of the conversations you're having inside of
marel you know I guess the the first example that comes to mind is just the the knowledge project is sponsored by metalab for a decade metalab has has helped some of the world's top companies and entrepreneurs build products that
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cover will improve your sleep by automatically adjusting your bed's temperature based on your individual needs the cover can be added to any bed like a fitted sheet and allows you or your partner to cool or warm your side of the bed as low as 55° if you're crazy and up to 110° if you're also crazy I use an eight sleep every night I find this thing is amazing not only at adjusting temperature some nights you know you're just cold and you want to
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plus free shipping on the Pod cover by eightsleep that's eight sleep.com faram Street I think we should start with Munger uh he passed away yesterday and I know he had a big influence on my life and a huge influence on your life I'd
love to hear your thoughts and some of the lessons you learned from him wow uh you said we booked three hours for this and three hours would not even begin to do justice to 99 years of his life what an amazing teacher his statements about
the best way to get what you want is to deserve what you want and working backwards from that idea and that concept and as recently as the most recent annual meeting I think the story was told about what you should do is
write write your own obituary and then work backwards from what you wrote you wanted to be and his life just stands as a a testament to that over and over and over again now that's at the 880,000 foot level and I think that's really
where his most dramatic influence and communication skills as a teacher can really land with people the next level down was sort of the transition he fostered in Buffett to move from the digging around in the balance sheet
finding businesses that were cheap to finding businesses that were good and seiz candy that story is told over and over again about the standing on tippy toes price that they paid but yet the spectacular economics they earned not
only from that business but so many of the things they did subsequently because they had been taught by the example of sees what it is that a wonderful business can do for you over time when you think about about living a life to
deserve what you what you want what you should get what does that mean to you well for instance my father was also a tremendous teacher in in my life and and really the first and foremost teacher that I had and there was a situation
that came up the other day where someone had sort of tricked me into doing a favor for them sort of some backdoor moves and whatnot and I ended up doing a favor for them and and I was with a colleague at the time and we both sort
of realized we've been hustled a little bit and I said you know my dad used to tell me anytime anytime you can do a favor for somebody do it just do it uh because life is long and you never know how those things come back over time so
I think the idea of just always trying to be helpful always trying to add value always trying to do favors for people always just trying to make them glad they interacted with you somehow or another that's a pretty good Central
organizing principle and if you do that consistently day after day month after after month year after year you find that the the world is kind of rooting for you and and Peter Kaufman for instance who was a great friend of
mongers and was the editor of poor Charlie's Almanac you know he he talks about the idea that the universe will do most of the work for you if you align yourself with its general principles so I think you know there's eight billion
people on planet Earth I'm only one if I can get the other 79999 billion to uh maybe not like me at least not hate me that's a recipe for profound success you mentioned your father I want to go back to your childhood a little bit uh you said
earlier you had Quaker Roots I'm curious as to how that impacted you what lessons you take away from that today well the central tenant of being a Quaker is that all people are equal before God and everything flows from that so
for instance if you wanted to tie that to a specific investment decision and this skips over a lot of intermediate steps I remember when when CarMax was was starting out which was a great investment for us for for many years and
the whole principle of Carmax was selling used cars at fixed prices well being a Quaker I had seen that movie before and the old joke about Quakers and Philadelphia and Philadelphia was kind of the center of where the Quakers
came when they when they came to America the old joke around Philadelphia is that the Quakers came to America to good and they did well and they became Merchants by and large so for instance John W Maker's department store which was a
great department store in the department store era in Philadelphia John Wanamaker was a Quaker and and being Merchants was just a fundamental um aspect of of what it meant to be a you know one of the trades that Quakers pursued so for
instance Macy's department store here in New York Mr RH Macy himself I believe was born in Nantucket Island and there was a Quaker Community there that were Merchants that specialized in outfitting the whaling Expeditions so they they had
the supplies and and equi those ships well Nantucket Island was a small place and Mr RH Macy I think had some large Ambitions so he came to New York City in the 1850s or 60s or whatever that was and because of his Heritage and
background as a as a Quaker um he had this Dry Goods business and he was willing to sell it at fixed prices and most Merchants didn't do that at the time and because he was willing to sell anybody a set of sheets a set of dishes at the same price he was able to advertise and put those prices in the newspaper and no other Merchants would do that at the time and Rh Macy the chain went for a 100 plus years of a head start that all came about because
Mr RH Macy as a Quaker acted in a certain way as a merchant Which derived from the principle that you don't charge somebody a higher price just because you can you charge everybody the same price because they are equal what I like about
retailing in one way and this is a narrow faucet of the business we at large but you cannot be successful unless you're win-win with your customer you have to win your customer has to win the whole ecosystem sort of has to win
for you to have a chance at success well there's a Time Dimension to that so for instance U you can win in the short run now that does not meet my definition of winning but you can be involved in a transaction where where you win and for
instance the cycle time is a is a key factor in thinking about what sort of preconditions help you operate in a win-win world so for instance if you're a grosser there uh is a very short cycle time many people go to the grocery store
every week so your incentive to treat people fairly and price the gallon of milk and the can of beans and the stock of celery at a at a fair and Equitable price and treat people well is very high because they're going to be making lifetime decisions about whether they're going to shop at your store as a regular customer over and over and over again getting back to the CarMax example one of the things that people were not completely
believing that this thing would work is that the cycle time to buy a car is way way longer than what it is to buy a gallon of milk so you're only going to buy a car once every five six seven eight years something like that so the
way in which you were treated um you know the car dealers which did not have the greatest reputation in the world there was huge incentive for them to not let you walk out of the showroom what will it take to get you to buy this car
today and even if that wasn't a great deal for you they figured it would be seven or eight years before you were involved in another transaction so therefore they they didn't have the incentives that a grosser would to think
about really the net present value of a customer over a long period of time so different businesses have different sort of natural rhythms and cadences to them that either support the notion of win-win-win architecture or diminish
that to greater or lesser degrees I was trying to teach my kids about this we were in Vienna and we had some of their Famous Cake and we stopped at basically a tourist spot and the cake was I think like3 but the bottle water we ordered
was 18 and I remember like when the bill came I was talking to them about this and I'm like how does this happen like walk me through the thinking here because it's how do you see this like how can they charge €8 for a bottle of
water and we sort of like deduced all the way down to the fact that they're relying on they get the tourist in with the cheap cake uh when you eat the cake you want the water you pay through the nose with water but they're not looking
for repeat customers so they're not worried about win-win they're just worried about churn and getting new people in and I thought it was an interesting lesson for them where it's like well there's certain businesses
where you can sort of uh take advantage of your customers if you will because you know they're less likely to be repeat customers or they're they're buying a certain experience well you've explained it better than I could you want companies
that are doing things for their customers rather than to their customers I like that approach and and funny thing is so your kids and I don't know how old your kids are but your kid who doesn't have 99 years of mongers worldly wisdom
accumulated they can go either way with that depending on the context of the rest of the values and how old they are and how mature they are because one logical reaction from a 12-year-old kid might be wow how do I set up a business
like that because I can buy a bottle of water for 50 cents and sell it for 18 bucks that's a great business I I completely want to do that let's talk about marel a little bit marel started in 1930 you joined in 1990 how did you end up there and talk
to me a little bit about the journey from then until until now you've gone through quite a bit the 1990s the internet bubble the great financial crisis covid yeah I was trying to forget a lot of those but yeah you're correct a
lot of uh water has flowed over the dam so it's a it's a it's a long story in in many ways and again it ties back to Munger and Buffett it was 1984 when Carol Luma wrote that article about Buffett in fortune and I read that I was
relatively fresh out of school and I got graduated from UVA 1983 so 1984 it wasn't out uh very long and I was working in a small investment firm in Richmond called Daven Porton Company of Virginia and and the scales fell from my
eyes in the the logic and the common sense and how how much sense it all made to me and I remember uh this is how how little I knew I went into the office of the head of the department and uh he he was a bit of a crusty fellow and I said
Hey Joe have you ever heard of this guy waren buffet and and I mean I literally said that because I didn't know and he said it's it's it's Buffett you idiot uh threw me out of his office but but I read and by the way our mutual friend
Morgan howel um he he told me something within the last year that made me feel much better he said you should never criticize someone who mispronounces a word because that means he learned about it by reading mhm so uh I appreciate
Morgan's Grace in understanding word mispronunciations so starting there uh so uh Marquel went public in 1986 and luck of the draw I was the Analyst at Davenport who was assigned to cover marel so I I saw this company it was going public it was a small Richmond based company sort of a regional operator had started in in 1930 and operated in in the area I had never known anything about it it really didn't have much of a consumer presence but I
saw the idea of a specialty Insurance operation that was dedicated to making an underwriting profit and Steve marel who was the vice chairman and really the financial guy there um he was also interested in investing the underwriting
profits long term rather than just in cash and fixed income securities which is predominantly what most insurance companies did at the time so I saw that and immediately I said that's what Buffett did with Burkshire so it
instantly like a light bulb going off for me became apparent that at least there was the bones there of of running the exact same play and following the the same approach that that Buffett had done with Burkshire so I became insanely curious about the company uh got to know Steve bought some stock from 86 through 1990 he became a client he became a friend we just developed a relationship in 1990 um marel completed the second half
of a deal which more than doubled the size of a company so they had bought a company that was larger than what they were Steve had been doing a lot of things uh he was he was pretty busy and by that time he thought he could take on
a wingman so after my four years of persistent nagging and and begging that that uh seemed like a good idea to him at the time February 14th of 1990 that year that was when Drexel Burnham went bankrupt that day and I can remember um
my my partner at Davenport Mike Beal we we said you know if we were ever going to buy a junk bond this is the day we should do it and we came to the conclusion that the most creditworthy of the tradable junk bonds that were out
there was RJR so we we we knew that business and we rough penciled some things out and we thought um if the there was this RJR issue that were pay in kind zero coupon bonds and they were set the by by the terms of that Bond
they had to be repriced in 1994 at a yield that caused them to trade at par they were trading for about 30 cents on the dollar at that point now we penciled some stuff out and we swagged an estimate that worse comes to worse we thought they were worth 70
cents so they're trading at 30 and I thought it was an interesting speculation to to buy this well the tax law had changed Prett recently to where I think tea was the name of the tax law if you bought a deep discount Bond
personally you had accrete interest income to your taxes and pay tax on it even though you had no cash to do it so most individuals wouldn't buy this risky thing because they were going to have to come out of their pocket for taxes in in
that particular circumstance and um you really couldn't put them in Iris or things like that where you take the tax angle off the table because it was too risky for something like that so I happened to know that Steve had been
part of a group you know with his with his cousins that in essence had done a leverage buyout of Marquel from their parents and they had borrowed money to do it so under tea you could only deduct interest expense to the extent you had
interest income so I happened to know that he was building up this tax loss carry forward of non you know interest expense that would only be um useful to him if he had interest income so I called him up and I said Steve you're
like the one person in the world that this makes sense for and know those Bonds were trading at at 30 cents he was intrigued by the idea and I think by December they had been paid off in full and I think the next day I was working at
marel that's a gray way to get a job if anybody's listening he's open to ideas let's fast forward to sort of 1999 2001 is what was that like on the inside let me let me step into that just a little bit because there's a lot of ground so
fortunately when when I came in 1990 and again the The Playbook was we had this insurance business that in Steve's word specialization in diversification were the Hallmarks of of what we would do we would do I mean sometimes at a cocktail
party people ask me you know what insurance what what kind of insurance do you all do and I respond if you can think of a form of insurance that you can get easily and Qui quickly we probably don't do that we do the kinds
of things that people say oh no or where can we get coverage for filling the blank and we try to be creative we have you know roughly a hundred different product lines run by very thoughtful people who are always trying to figure
out a way to solve a customer's problems so we think in addition to the financial Capital that we put up to honor those promises we have intellectual Capital at work and we should be paid for the intellectual capital as well as the
financial capital and that's really where the underwriting profitability comes from and with those pennies of underwriting profit we're willing to invest that money with an eternal forever mindset so my job day one was basically to to invest that money those pennies of underwriting profit in a long-term way and fortunately from 90 through 96 or something like that the results were spectacular and and and I established credibility by putting up
very good numbers for the first five six seven years I was there now in the late 90s that's when I would say the internet 1.0 came along and I struggled I struggled massively and I really had the biggest period of underperformance that I've ever had in my career and that went on I mean it seemed like forever maybe it was two two and a half years or something like that and I'm an accountant by training as as those businesses were coming along um I
I struggled to understand how things that did not appear to be profitable could sell for such prices in the marketplace and I I I I resisted it in many ways now U my friend Josh terasa helped me a great deal in helping to see
the cash flows that were there um separate and distinct from the way Gap accounting would present them and I managed to to round that corner and pivot in an appropriate way but 98 99 they they were they were miserable years and I I can remember a couple things
that I think are are worth noting and this may make it to the podcast it may end up on The Cutting Room floor I get it but two things one a leadership story so Steve's office was next to mine and we would talk every day all day every
day and every month we would have a formal meeting where I would print out the portfolio and typically the pattern was you triage among the top five or 10 Holdings which accounted for 50% of the value of the portfolio and we talk about
those businesses fundamentals sales revenues Earnings management changes new products the things things that would seem relative to the fundamental aspects of the profitability of a business well in that period where I was so grossly
underperforming in addition to talking about the top Holdings that we owned I would talk about the top things that were in the news that were going up the most that we didn't own and we would talk about the same sorts of aspects the
business the sales the revenues the management the products things of that nature and fortunately for 18 24 months every month at the end of that meeting Steve would conclude by saying I understand what you are doing and why
you're doing it and I understand what you are not doing and why you are not doing it see you next month there are times when as as my friend Shad Row would say in the investment business and I think this is true in business and
life in general that you either look way smarter than you really are or way dumber than you really are so so I think one of my skills as a manager is is I develop deep relationship with people and I ascertain that these are good
people and and they are productive they're very good at what they do but they can go through periods of time where it doesn't look that way so I try to encourage them and I try to help them think things through recognize if they
should change their mind about something but if not give them the psycle ological safety and the comfort in the environment to keep persisting at what is likely to work out very very well in in the fullness of time so that that was
one of the aspects that I wanted to mention the other thing I can remember again I was I was trying to figure out sort of what my next steps were because it seemed that the investment world had changed in so fundamental a way that
perhaps I was a dinosaur and I I needed to be thinking about something else and I thought about going to dental school I mean who knows I just I needed to make a living I had a family support So this BR somehow or another I became aware of this class at Northwestern Northwestern well regarded academic institution great reputation they deserve all of it so there was this two-e class that I signed up to take at at northwester to just try
to think things through and they had a variety of their professors come through and one of the professors got up and he did a discounted cash flow model and he used the Gap as the example for how you how these discounted cash flow models
work and uh I don't know if you remember at that time but the Gap was white hot I mean it was white hot and they had this campaign about khakis and these models that would dance and swing dancing it was just it was just the IT thing so
this professor was was trying to teach us about how discounted cash flow model works and he had laid all this stuff out and he used the Gap as an example and he had these growth rates of50 and 20% going for years and I and I thought to
myself I said I understand the math I know how to do that but but those assumptions they're they're just wrong they're they're they're insane and I I I sort of pressed in on him about that and he and he wouldn't give an inch and and
just wouldn't wouldn't process the notion that these assumptions you're making might just be wildly wrong and I couldn't I couldn't get anywhere with him so literally I walked out of the class and I there was a little Lounge
there where they had a coffee machine and a TV and there was a Cubs game going on and I just sat there and watched the Cubs for a while to try to try to think this through of what was happening and about five or 10 minutes later another
guy stumbles out of the class and he looks at me like is that guy nuts because he he'd come to the same conclusion about um those assumptions just being fundamentally flawed and I said yes so we we kind of sat down and watched the Cubs game together as it
turns out that guy's named John Fox he's with fenmore Asset Management he's been a friend of mine now for 25 years and they're long-term Markel shareholders and where we met was two sort of accounting SLV value guys trying to
figure out what the world was like and finding confusion but we also found each other that's a great story you know any business is undervalued if you map 20% growth indefinitely yeah you can make we make numbers sing when you when you
assume that I want to go back to uh before we continue I want to go back to something you said about talking to Steve and one of the things that you brought up that I think worth noting is that he didn't want to only just
understand what you were doing and why you were doing it but he wanted to understand what you weren't doing and why you weren't doing it and I think a lot of that gets lost today how do you think about that oh I don't think that's
just lost today I I think that's a fundamental human flaw and and and again getting back to to monger um and and Buffett as well when they talk about you they're asked what what mistakes you've made they said well there's two kinds of
mistakes there are the mistakes of commission that things you did that you shouldn't have but there's mistakes of omission things you didn't do that you should have and those tend to be way way way bigger than the mistakes of
commission that you make and those two have been very intellectually honest about talking about some of their substantial mistakes of omission and Omission you don't have a spreadsheet on that you're not you're not tracking that
the world is too big we we as humans don't think in terms of opportunity cost what didn't I do what didn't I choose be because of of what I did I I just happen to have this weird twist that somehow or another the idea of opportunity cost
landed deeply within me and you could make my children sort of have a gag reflex anytime you bring up the idea of opportunity cost because they they kept hearing at the at the at the kitchen table when they wanted to do something
the phrase well if we do that what are we not going to do and you have to make a choice and and people just don't like that it's not fun so the the point about being curious about the path you are not taking so that you're thoughtful about
why you're not taking it is hugely important to do because there're many times in life when in fact you should take that path and how are you going to know that you should change your mind or you should alter course if you're not
even going to sort of incorporate that in your daily hygiene of how you think and and how you process stuff I think that's really powerful I also think it helps you understand people so you were talking about uh sticking with people through a period of maybe underperformance good people and how do you know when to draw the line there how do you know when to be like okay well I have to walk away from this situation because we can't continue this
indefinitely versus uh it's a good person with the right right process the right judgment just a period of underperformance which we all go through have you ever heard of a singer songwriter named Todd Snider never well you should you should look him up there there two albums that I would encourage you to listen to start to finish one is Todd Snyder live and the second one is Todd Snider live Return of the Storyteller and those two albums are
probably I don't know 10 years apart or whatever and some of the songs are repeated but on the first one the first song is a song called Green Castle blues and every once in a while I hear it in my head and it It's haunting It's
haunting in some ways because there's a line in there that that is a refrain and how do you know when it's too late how do you know when it's too late how do you know when it's too late to learn and there do come points where you're past
the point of no return those words exist that sentence exist because it means something there there are points of no return and acknowledge the point is that there and just try to be thoughtful and aware and make a decision that you think
is reasonable rational thoughtful and you know hope for a reasonable outcome if if you're judging Yourself by the outcome in the short run you you're going to make more mistakes than you otherwise would you you should have some
sensation of the process and doing the the right sort of process which again is that discipline of just being thoughtful about things that I think is going to be the best you're going to get so there there isn't a single point of of
answering that question and I think in general in general you should make the error of staying with people too long giving them a longer leash and and letting them play out their hand as much as is humanly possible because when you
live in an p a positive environment like this and I you know I think of my own parents and the unconditional love that I received as a child growing up under the fortunate circumstances that I grew up in that allows me to flourish now
some people there are going to be people in your life who you will offer that go positive go first and they will not reciprocate but then you'll know and the cumulative effect of just operating with that General mindset and doing it
consistently over and over again you're going to stumble upon people who will love you forever and if you find one or two or three or seven or a 100 people like that in the course of your life just because you operate that way
that is so much better a life than than always being suspicious concerned and worried that somebody's going to get the better end of a deal on you or whatnot Let It Go doesn't matter somebody gets a better end of a deal with you okay they
did it one time now if you deal with them over and over and over again that's your mistake not theirs it's interesting I I'm a highly trusting person by default with people and I like to think of it I trust people by default at not
50% but like 80 85% I'm not going to give you my bank account information but and I find that it creates velocity over time and I save a lot of time by not having to worry about legal contracts and every certain clause or how people
might take advantage of me and occasionally it backfires uh but I don't want to change the way that I am for those very few instances where it backfires as long as I limit my downside and it can't kill me uh then it sort of works out overall indeed so and for instance I think one of the great analogies for that it is marriage I've been married 42 years now it's a wonderful thing I've never really looked at the marriage license yeah that's a
great way to look at it you mentioned sort of uh not focusing on the outcome and focusing on the process I want to explore that a little bit because one thing that's interesting to me is that we do tend to gravitate towards wanting
an outcome and by wanting that outcome we actually don't focus on the process but if we focus on the process we might end up with 10 or 15 different outcomes that would all be good because we're not worried about the gap between where we
are and where we want to go we're just worried about what's the next logical step that we can take I'm wondering how you operate well there's Nuance to that so for instance there's another wonderful book uh called thinking in
bets by Annie Duke I don't know if you've read that one I think that's a great book um and it casts things in probabilistic terms so um and it's all about process and it's it's within the realm of playing poker which was her um
well-known skill but is also has a lot of stuff in there about insurance so it it gets a it gets a lot of traction with me she uses the phrase resulting so you can look at a hand that you won and you think wow I won so I must have played
that well well not necessarily you you may or you may not have what was your process how did you think what what was your calculation of the odds along the way as you played that ant and if you're playing poker and you're playing
thousand upon thousands upon thousands of hands which are under relatively constrained conditions if your process is sound over time you will have good outcomes you mean you you'll win more than you lose but that's driven by the
fact you have good process and you're able to do it a thousand times Buffett famously talks about coin flips and the language of coin flips and a coin flip in your honor in in your in your favor where the odds are in your favor well
that's true and it's a great example but it's not a great example if you only flip a CO once it's when you flip a coin a 100 times or a thousand times or a million times that the odds of what whatever it is that you set out manifest
themselves and just Crush everything everything else so you you just have to play the odds game and be willing to think long term and operate I mean you talk about trusting I think that's exactly right I try to operate in the
same way you can't uh do that with Stakes that are too high you need you need to have appropriately sized stakes and Bets and decisions along the way and they can increase over time as you develop a relationship of of trust with
with people but it's it's all nuance and process and trying not to be stupid 100% you're not going to go all in with somebody on day one right let's go back so the internet bubble uh sort of bursts I think it was March 2001 is that right
that is exactly right and here's another case where sort of um luck Serendipity process all combined to create as Monger would say a la la paloa outcome so we were involved in a transaction where again we we bought a company that was
larger than what we were and that was teranova uh and caused us to move from being a us-based national insur to an international company and we were negotiating the deal right in the midst of all all of that um in early 2001 I
believe the deal closed on March 1 now March 9th I think I think was the day that the NASDAQ topped I I remember that because among other things March 9th is my wife's birthday so it's a it's a meaningful date to me um and within 20
minutes of me getting my hands on that portfolio I had sold 99% of the equity positions because in in my my sense they had drunk the Kool-Aid and had a a NASDAQ Laden portfolio at a time when those those prices just made no sense to
me whatsoever so on the on the day of closing we we which was March 1 which was March 1 so by a week that that decision saved us I don't know hundreds of millions of dollars um and it put us in a good financial position to work the process of turning around teranova which was a a trouble company and we we knew that um but fortunately we made a very good instantaneous decision which had some skill and some love about it I I don't
claim pressence I just claim that I knew I didn't want to own those things that they owned and normally I tend to be incremental and take step by step by step but every once in a while I am capable of dramatic action as well which
again gets back to the to the Munger thoughts that are drifting through us right now I he talks about sort of uh in 60 70 years of of investing there were half a dozen times in his life that he felt very compelled about a certain
thing and took a huge huge swing at it and that made all the difference so that was one of his skills and one of the things he was able to do um several times during the course of his career I I don't do that very often but that was
one time when I did and it worked out that's an incredible story and the timing there is is so apt and then you also had a lot of cash for the that is correct which which put me back in the good graces of of Steve and the rest of
the Marquel board uh because you know getting through that period of time proved itself uh to be the right way to to go and and that actually connects to it was 07 so I was I was invited and asked to consider going to the board of
the Washington Post company at that time and Don Graham the chairman and CEO of the of the post reached out to me and we chatted and he had understood through my friend Chris Davis who was on on the board and perhaps Buffett as well who
who knew of Mark ell and new of us that we had navigated that period in in financial history relatively well so Don and I were chatting and so don then asked me as as part of their consideration of me potentially being a candidate to join that board would I
share with them some of the memos that I had written to our board real time during 98 99 221 20 so five years where they could see what the logic and decision process were in real time rather than in retrospect so I gathered
some of those memos together and sent them off and I uh i' had never been more nervous about being graded on an English exam than I had in my whole life because here I'm sending this packet of of letters that I'd written over those
years to Don Graham to Warren Buffett to Ron Olsen to Barry Diller uh to Melinda Gates I mean the the allstar nature of that board was just stunning to me and it came back that they were indeed interested so that that was tied
to the steps and the process and the action I had taken through a multiple year period which led to me going on that board and meeting those people and developing relationships and the ongoing sort of just consequences and waves that
keep rolling on the beach from from things that I did 10 15 20 25 years ago I mean they still rever bate to this day I think that's a really good way to look at things because like if you operate with integrity and you operate in a
win-win way and you go positive and you go first you create a snowball and even though you can't see the results immediately they do come and sometimes it takes 10 or 15 years for that reverberation to sort of come to
fruition and and by the way that's the title of Alice Schroeder's book about Buffett snowball yeah and with exactly that concept and of was just wanted a um you know a snowball with some wet snow and a Long Hill how important are those
memos for you to clarify your thinking process and clarify your understanding they're extraordinarily important and and our annual letter that I've I've written Steve was the one who wrote those letters from 86 through I don't know 200 two four five something like that and I I was editor for a while and then I took the responsibility for writing them as a have for the last 15 20 years I think by writing I need to write it down yeah and
I almost feel like a a Pianist at a keyboard where and I and I can't write by hand anymore I've lost the the skill of doing that on a on a yellow pad like I used to but to sit at the at the keyboard and write is is really how I
form my thoughts I want to come back to marel and just continue on this path to the present day let's fast forward to uh 6 months before what is known as the great financial crisis what are are the what are your memories of sort of the
conversations you're having inside of marel what you're thinking did you anticipate this happening um yeah walk me through that well I've mentioned my partner Mike Eaton Mike has a great saying he says you know what it feels like when you're
making a mistake feels great if it didn't feel good you wouldn't be doing it so when I think about 06 or 07 or times that led up to to the great financial crisis I I was making mistakes I was I was absolutely doing that and I can remember
for instance we were not large shareholders of city courp but we did own some and maybe our cost in it was 50 bucks and it was seven times earnings and yielding 5% or something like that the the number seemed rather compelling
and there's always a a turnaround story at city that if you if you believe this time is the time it's really going to all all work uh it's it's always selling at a compelling valuation so we owned some City and as The Crisis began to
develop I think at 26 I sold the entire position and and I can just remember feeling horrible about that but I also remember the feeling of We're In This Storm and I just don't know the dimensions of this storm and this storm can get worse so as painful
as it is to me to take this loss which was manageable and inside the context of a of a portfolio but just I hate losing and that was clearly a loss I I decided to sell it now that proved to be a pretty darn good decision because it
went a lot lower uh before before it stopped going down so went until like one yes exactly so 20 26 was a painful sale but it was it was the right decision so that that is an example of part of the you know memory of your face
being ripped off in in the financial crisis now at the same time uh the were some positives that that I felt and these were emotional aspects so for instance being in the insurance business as compared to being in the banking
business is a meaningfully better position to be in because you can't have a run on the bank in the insurance business in the way that you know if your depositor say I want my money you have to give it to them and you have to give it to them on pretty short notice it doesn't matter what bank you it doesn't matter exactly right in the insurance business you know we've sold an insurance policy against an auto accident or a house fire or life being
lost so unless you you have those triggering events you you generally speaking are pretty limited and say I I want my money I AE the premiums back you you can't just you can't just do that because you you've lost confidence so an
insurance business is both typically much less levered it has much more Equity Capital relative to the size of the the balance the total balance sheet than would be the case in banking and it is not subject to the same run on the
bank risk so I felt very good about being in the insurance business and that I felt confident in the cash flows that we had which were the way in which we could navigate through the storm we don't tend to make good decisions when
we're emotional and going through a a crisis or a panic we all tend to be fairly emotional do you have rules around selling or how do you deal with your emotions in these moments well generally I'm a pretty methodical person
both in the buying and the selling so it's fairly dramatic when I would make um big decisions rather than a series of small incremental decisions so in general I think I'm somewhat protected by the history and the pattern of making
small incremental decisions towards a better spot than what I believe I'm in right now um in terms of the big decisions well don't make too many of them so yeah I can I can talk about a couple instances of making some some big
decisions some of which are worked out some of which have have not worked out so well but in general being an incrementalist I think is pretty helpful secondly take a walk take some time uh don't feel like you need to do
everything immediately slow down it's almost like watching those Bruce Lee movies where the action seems to slow as he's as he's making the steps and uh things get slow motion in your mind that that's helpful I I don't think there are
good rules I think there are processes that and habits and disciplines that you follow consistently over years and those will serve you well in times of need what are the lessons you took away from the great financial crisis that you
took away for yourself but you think other people miss or have forgotten well the number one piece is is the dimensions of Leverage and we all use some leverage of one sort or another in our lives and leverage used positively I mean it's the
lever it's it's a was it Archimedes that had the give me a long enough lever and a folk and I can move the world I'm I'm butchering that quote but the sense of the power of a lever that's a that's a fundamental aspect of civilization but
too much leverage and being on the wrong end of a lever can wipe you out so to try to have awareness of what levels of Leverage you're operating with in your life and and doing the very very best you can to keep them constrained and and
within the bounds of where you can be wrong and still answer the bell for the next round of the fight and and persisting him being durable again one of the reasons we're talking about Charlie Munger today is because he lived 99 years and many of the things that he talked about and the disciplines he followed had a long enough time to play out that we can see he was obviously right he was obviously brand well there were a lot of people who
encountered Charlie Munger at age 37 or 52 or 29 or 60 who didn't just write up a check for all the money they had why because at that moment in time it was not as obvious as it is today that the stuff he was saying was right so being able to last through difficult episodes and still be in the game is epically important and that's one of the things a long successful life will show you let's talk about DT because I think that's an
interesting uh area to go on a little rabbit hole here and I want to talk about um your thoughts on DB how to unwind it you learned a lesson from uh I think it was Shelby Davis Around D would you share that with us well it was in
the early days of marel Ventures so Marquel obviously started out as an insurance company it had always been willing to invest in equity Securities and be longterm but the next logical step when you're investing in equity Securities and
you're doing it from the perspective of what is the underlying businesses involved instead of just buying a partial interest in that business through the purchase of publicly traded shares how about we buy a majority of it
or all of it and there were people who were rightly concerned about what it is we knew and what skills we had when we were buying controlling interest in companies that weren't in the insurance business so Shelby Davis was a wonderful
and is a wonderful teacher and mentor and helped me in many ways along the way and I can remember in the early days having a conversation with about about the marel venters business with him and he he very quickly and succinctly put
his finger right on it he says you know if you want to make sure you're not buying a business run by a crook buy one that doesn't use leverage and so I said tell me about this he says well think about it if you're if you're 100% Equity financed
you are not going to steal money from that business because it's your own money Crooks don't want to steal their own money they want to steal somebody else's money so when you have a structure that has a lot of Leverage to it that is not a statement that that person is a crook but it is a statement that conditions exist in which a crook would operate whereas if you have a business that's largely Equity financed and it's the person's own Capital
involved you have you have greatly reduced the conditions and the circumstances that allow would allow a person who is not of Integrity to take advantage of that situation so it's it's not just the finances it's it's the
character indication and the and the till that you get into somebody's internal wiring from the fact that they operate with no debt or very very low leverage uh compared to someone who operates with a lot of Leverage you've you looked at tens of
thousands of companies over the years uh all their financial statements does that become an addiction that people don't walk away from yeah I think it does um and and again there's an adrenaline rush I mean addictions happen because there's a moment of positive reinforcement I mean you won the bet your horse won you won your football team won um you hit the slot what whatever um so there's a a dopamine reinforcement and hit that you
get from winning and it's uh a disproportionate size it's an outsize return relative to the equity Capital that that you that you laid out there so yeah that sounds like a fundamentally important component of addictive type
substances and I think people get hooked on um the adrenaline of that I mean the phrase deal junkies and I can think of companies that are run by CEOs that just always seem to be doing the next deal or that's what that's what gets them going
and motivates them and it's important to have some of that drive but it needs to be balanced and again in the right dosage so what differentiates somebody from uh like a Mark Leonard from somebody else who who does a lot of
deals and and how do you how do you think about that in terms of debt leverage fragility well um you know Mark Leonard is a great example someone is is incredibly thoughtful who who laid out a plan and you have Decades of evidence
that he's executed upon it so that is a guy who has earned the confidence that the the marketplace places in him um and also he's um and a kind of clastic enough gentleman that you get the Sensation that he's really not driven by
the approval of others quite so much he is a self-motivated independent autonomous thinker uh and and you don't just have to ECT that's going to be the case because you're looking at a 14-year-old kid you're looking at somebody who has done it for decades and
and again to your point about having looked at a lot of businesses and talk to a lot of people that in and of itself becomes a frame of reference for how you make the judgment about the next person that you meet um do do you ever drink
wine yes do you like the Parker wine ratings you you go to a wine shop and you see something 89 92 whatever those well it's my understanding and I'm sure you should probably fact check me on this because it's a great story and I'd
like to think it's true but but I do not know the people uh personally so I can't verify it but it's my understanding that Robert Parker was an attorney and he he just liked wine and his friends were impressed with the fact that he seemed
to be accumulating this knowledge about wine and was thoughtful so he started the rating system basically as a means of communicating with his friends and compared this wine to that wine and like this one a little better than that one
and less and assigned the points rating and some certain phrases and language that came to be uh used as the currency for how you discuss wine and it's a it's a it's a frame of reference kind of exercise so that's the point about
meeting a lot of people and looking at a lot of uh businesses is you develop this this lifelong inventory of frames of reference and points of comparison to judge the next thing that you're looking at and again Munger the lce work of
models and all these multi-disciplinary things such that anything you come across you should have some mental construct in your mind by which to judge the next thing you come across can you take the other side of the DAT argument
when does it make a lot of sense when should a company go all in when should um that be used well I'll I'll tell you a story about this and this probably goes back 15 years or so ago and I remember one day coming in the office
and my normal routine is drink a cup of coffee and read a set of newspapers one of which is the Wall Street Journal and there was this article in the Wall Street Journal about uh the Walt Disney Company that had just issued 100-year
debt and I think it was at 5 and 58 and I saw that and I said oh man I'll bet that they're refinancing something that was a 100-year debt at 5 and 78 that had a five-year call and I just instantaneously had that thought and as
I I dug into it that was almost exactly what they were doing doing so if you're Walt Disney and you can issue hundred-year debt at those kinds of rates use all the debt that they will give you because really what the label
is debt that's fixed cost Equity so the labels don't always describe exactly what's going on so next step is I went in to our Chief Financial Officer at the time and I I said you need to call our bankers and see if we can issue anything
like this and he sort of scoffed at me and what not and I said no no you you really need to chase this down so he did and he called our bankers and our Bankers said well you know Walt Disney is a consumer name it's it's very well
known and marel nobody's ever heard of Marquel half the time they pronounce it Marco if so U you guys can't issue something like that so I sort of walked away and little pouty as I can be and at that time there was a company called
Eskimo Pi which makes the chocolate covered desserts and it had been owned by Reynolds Metals which was the aluminum company that was headquartered in Richmond Reynolds had gotten a hold of that company because Eskimo pies are
packed in a foil wrapper and one point in time they couldn't pay their bill and it ended up as part of rynolds it was not really a natural part of rynolds so they they spun it out and it was this public company that had a market cap of
maybe $20 million to it so I went back to our CFO and I said here's what we should do we should buy Eskimo pi and change the name of Marquel to Eskimo pi and then we can call people up and say Hey you want an Eskimo Pi Bond who could
say no to wanting an Esco P now needless to say that was one of those uh ideas that I walk around the hall with that did not get executed upon but to your to the point about debt um and and we've seen issuances I mean the last five or
10 years where we've lived through this unbelievable episode of extraordinarily low interest rates putting 30 50 100y year debt on the books at those kinds of of rates like my children they have 30-year mortgages in the twos that that's a good piece of debt to have so that makes a lot of sense um there's a lot of companies that didn't do that though they didn't take a long duration at what would historically be exceptionally low rates the US
government also didn't do the same thing they didn't issue a lot of long duration debt they issued a lot of shortterm duration debt how do you think about sort of debt and time the answer to your question r large of people who did not hit the bid of the ability to issue long-term fixed rate debt there was a trade-off where they were looking at even lower short-term costs and they just operated under the assumption that you'd always be able to
refinance the loan at a lower rate when it when it rolled over and for a whole generation that has been true so the so the idea and I've been way early on this 10 years ago I thought rates were starting to get too low and would have pushed out our
maturities whatnot well tactically that would have been labeled as a mistake now might well come to be seen that that was just too early and the the the DMZ between too early and wrong is a is a gray murky area so we
we'll see but I I think that the environment we've just live through of essentially 0% rates that's just weird there there's there's no fundamental justification for that and I think we'll look back on it as a as just a very unusual episode but we'll be looking back on it we will not be living through it again for a long time I often think short-term optimal is rarely long-term optimal but you have to opt out and be willing to look like
an idiot to play a long-term game in a short-term world how do we learn or how do we teach people to think longterm in a way that makes sense like how would you go about teaching somebody to think well one of the ways that you
do that is you say extreme things and reductio at absurdum you reduce things to an absurd level so for instance Munger I believe one of a times he says you want you want two great weeks in your life start taking heroin have two great weeks but you'll
ruin your life but some people do and some people literally do that and some people in a in a sort of meta way uh do that so you you're constantly faced with that choice of taking a short-term gain at the expense of the long term or
trading it's it's deferred gratification it's the marshmallow test these these are not complicated topics they are m matter of discipline thoughtfulness Common Sense long-term perspective now that being said um you know it's easy
for me to to say these kinds of things because my life is good I'm been gainfully employed I'm happily married I was raised in a nuclear family I just Advantage great education Advantage after Advantage after Advantage after advantage and I can remember at one point my my oldest daughter was was is a lawyer and she was essentially practicing as a um you know public defender kind of kind of practice and she had done that for a number of years
seven or eight years and it was time to to make a change and do something else because she was a very empathetic person very caring and very involved in very difficult circumstances day after day after day and a human being can only
take so much of that so it was her last day and I decided to celebrate by taking her out to lunch and so we go out to lunch and we're very lovely place looking out over some beautiful Green Hills in Richmond and I asked her about
her last case and she told me and she said well this guy went into the waffle house and he ordered a meal and he had the meal and um when it came time to pay for it he paid with Monopoly money and I thought you know was a guy
stupid or a jerk or trying to play joke and she says Daddy he was poor he was poor and he was hungry and she says my clients are Zen masters of the right now there is no past there is no future he was hungry he knew if he went into a
waffle house and spoke the words of a meal they would bring it to him and the consequences of what happened when it came time to pay for that meal were irrelevant to him because he was hungry that stopped to be cold and again
uh opened up a new area of things one should have empathy for and empathy about for people who are in circumstances that are less lovely than my own but I have been given the gifts of being able to afford to think long term so it would be irresponsible of me
not to but I don't want to cast judgment on those who are in a position where they don't have that same luxury that I have it strikes me as one of the differences between people who consistently get better results than other people is that they're almost never in a position where circumstances are thinking for them and they're able to master their circumstances they're always in a position where they have good options they're always in a position
where almost any choice they make is a net positive whereas the inverse of that when you your circumstances force your decision you're forced to sell your house because you can't afford the interest rates or you're forced into
doing something all your options are bad you put Warren Buffett in that situation he's not going to make a great decision the difference is certain people tend to avoid those situations through lock and through design I'm wondering how you
think about positioning and how you design it within marel so that you always have optionality to the upside and rarely to the downside you're making a spectacular Point here so by every single daily decision I'm always trying
to avoid exactly what you spoke of where you're in such a limited set of options that the circumstances make the decision for you I I hate that and trying to do every single thing I can to avoid that so what that means is low leverage and
what that means is not being at a point where you're faced with a very difficult decision and you really don't have many options or whole cards to go to so everything is designed to not have to be in that circumstance both for marel and
personally I think that's a hyper underrated under appreciated and almost never talked about yes it's also because it's that opportunity cost it's it's the thing you're not doing so so one of my friends um talked about value investors
always get the last laugh but they miss a lot of laughs in the interim so when when the part's rocking and rolling and you're sort of looking at your watch and saying you know we better get out of here before the consequences start to show up you're leaving the party at a suboptimal time because the optimal time to do it would be you know 1 second before the police show up my wife is an engineer and and I have a lot of friends who are engineer
and Engineering mindset and the engineering mindset of optimization is a great thing up to a certain point there's the point of satisfaction rather than optimization and I am a satisfier not an Optimizer I'm not smart enough or
disciplined enough or calculating enough to really be a good Optimizer so I try to move from Satisfaction to satisfaction to satisfaction to satisfaction and to last long enough where that that compounding effect of always being on the field always being
in the game has created this wonderful Compound Effect because again as Munger said any number no matter how big multiplied by zero is zero but it is so tempting to be at the moment where you're you're making bigger
and bigger numbers and you're minimizing the risk of zeroing out because that's not what's happening right now what is happening right now is is you're making that number super big and that's super fun who wouldn't want to do that well
the person who wouldn't want to do that is that person who's at the party and instead of completely falling into the joy of the party is looking at their watch and thinking you know we want might want to make a different decision right right
now and and again munger's discipline of thinking backwards inverting always inverting always working with the end in mind that's that's just the fundamental component of the way I'm wired I think one of the hardest aspects
of that is in order to do that you almost have to look like an idiot in the short term to be successful in the long term and that becomes hard and three aspects immediately come to mind financially you have to be willing or able to withstand that emot Al psychologically you have to be willing to withand doing something that not everybody else is doing and have them maybe Point At You and laugh at you and environmentally you have to be in a
situation where you have stability and it's not going to jeopardize that it's exactly right I find immense joy in being on the team of people that I'm with at Marquel and it really feels like a team sport to me and among the things
I've read and really studied and and and tried to to internalize like everything that John Wooden ever wrote the UCLA coach um I'm currently infatuated with Nebraska volleyball and I went to a Nebraska volleyball game a couple of
weeks ago and when you see a game like that unfold and you see the team aspect of the play the positioning the constant communication while the ball is in the air the labero who is 5 foot2 among all these six-footers because her job is to
dive to the floor to get that ball up to her team is to just see a team on display like that fascinates me and I I love that aspect of sports and I really feel that within the walls of Marquel with my teammates who are so skilled at
the positions they're in and I I get to be the head coach who is's not exactly on point and I'm not the one hitting that ball but I do get to be the coach of that team and that that's just a very joyful thing and I think one of the
reasons that matters so much to me is that as a kid I was never on a team I mean I grew up on a farm 100 acres rural area it it just logistically was not the sort of thing where I could I could play team sports so that that was a gaping
hole in my youth that somehow as a full-grown adult I I get to have that Sensation that that I didn't get to have as a kid and I I I love it um and that that team aspect and the ability of a team to do things just a very joyful
thing and and that helps you endure the idea of you know being the kid who's picked last or not on the team the the social isolation and distancing that it takes to have that long-term View and stand apart from what the crowd might be
saying perhaps some of that comes from these youthful experiences they give me a frame of reference to know I can endure this and I love that and both of them are temporary sometimes you're on your own sometimes you're with the team
be aware of it and be able to operate in either environment I think it's a it's easier to stand and do something different within a team because you still you're doing something different with your tribe uh and then you're not alone
anymore it is harder when you're alone and you know if you're a reverent like Munger it you know seemingly seems easy to him but um Charlie was a very social person oh totally yeah and I was you had the great gift of being able to have some dinners with him along the way and uh for instance I in in my house right now if you walk in there will be a bottle of Santa Margarita Peno ggio wine and there will always be a bottle of that in my
house because the first time I got to have dinner with them it was U with my friend Chris Davis myself and Charlie and we um we ate at a restaurant and we we sit down and the waiter comes over asking us if we want something to to
drink and of course Charlie says yes and he says just bring us a bottle of the cheapest white wine you have it'll be fine and it was a nice enough restaurant that you do the base rate of whatever kind of wine they had it would be fine
and it was a bottle of that Santa Margarita Peno ggio so I always have that as as a marker in a testament in my house so uh despite the legendary I icono classic nature of Munger believe me the man liked people he liked being
with people he liked eating and drinking and laughing and telling stories and telling jokes so um he he he drew sustenance from his fellow human being just like just like the rest of us do uh I I want to get to present day here and
then uh go on to some other topics so fast forward from the great financial crisis to January 2020 walk me through the next six months January 2020 was when things were just starting to unfold and you saw this news of things that were happening in in
China but not Richmond Virginia and slowly the uh encroachment of Co came closer and closer such that by the time March came around so I I was actually scheduled to go on a trip to Vietnam which would have left the US in
in late February and come back in early March and kept sort of going back and forth that we would go not go and finally decided to scrub and not go and the group trip uh got canceled and everything but that was a game time
decision and that wasn't until the end of February um and things getting shut down I think it was March 13th where I think that was a Friday and that that's in Virginia when when things kind of kind of shut down early in the day in
March 9th I got a call and it was from someone who I would label appropriately as a senior government official and he wanted to have dinner with me and that was the kind of call if that person calls you and wants to have dinner you
say yes so so I said yes and we arranged in particular meeting plac this is March 9th I'll remember this for the rest of my life and I got there first it was a restaurant and he comes in and he has his hand extended to shake my hand so
March 9th a senior government official who was in a position to know a lot of stuff that I didn't know that would receive briefings and and and things you know walks into a restaurant and and shakes my hand that was the last hand I
shook for probably two years and a number of things one if that guy on March 9th was willing to shake my hands that means that nobody knows anything the the amount of stuff that no one really can be capable of of knowing
is is immense so don't take anything too seriously when it's told to you by people who are supposedly authoritative because they don't know and you need to have some degree of of um filter skepticism about the level of knowledge
that somebody actually has when they're asserting something by the end of that week things were shut down you weren't supposed to go out U and it was just just a a miserable time uh like Charlie I I too I'm a social person I like being
with people uh in the in the isol that was enforced uh through that time has immense social costs and I I don't want to second guess the decisions that people made in good faith and to the best of their ability but I also think in the sense of opportunity cost and mistakes of omission we have not admitted to ourselves what mistakes we made through the the period of Co and educational gaps Social Development people's mental health U that that
suffered because of isolation so all that stuff was going on financially we get to the end of March it's the end of our first quarter we have our normal review processes one of the biggest hits that we took in our in our in our
insurance business at that particular time was event cancellation insurance so the underwriter who would run our event cancellation book is doing things like Wimbleton in in England uh the Tokyo Olympics a wine festival in Napa a music
festival in Tennessee a fidler convention in Kentucky I mean weddings all over it was a a welld diversified book of business but the losses on it were complete and total so it didn't matter he as an underwriter thought you
were doing a good job because you were diversifying and how could all these risks correlate to one thing well we found out how they could all correlate to one thing a worldwide Global pandemic so we had big losses in that particular
book of business that we recognized in that quarter as well as many other things um and we reported a 118 that quarter which is the worst quarter that I think has ever been reported in the history of the Marquel organization and
we were operating amidst conditions of uncertainty so it it was not a fun time and as a consequence of that 118 that we put up I did um take about 20% of our Equity portfolio chips off the table and and sold some positions just because
again my number one job is to make sure we are always there to answer the bell for the next round of the fight so I reduced some of our Equity exposure as a consequence of what I saw taking place on our insurance bu at that particular
time in retrospect that was not optimally timed um and there were some things that I wish I hadn't sold as as we go you know continue to go down the road but at the same time um I did fortify our balance sheet and operated
from a position of safety so it wasn't fun but it was the right thing to do and confronted with the same facts and circumstances in real time again I would do the exact same thing and if you want to see a movie that would sort of
illustrate and I'm not claiming this amount of Glory or or or involvement but that uh Tom Hanks movie Sully where the pilot lands the plane in the LaGuardia and he was second guest in the hearings is why didn't you go to teer bro well
the decisions he had to make in real time with no possibility of turning back they were outstanding they were unbelievable they can always be second guest but you really shouldn't do that so it it just was a period that was no
fun I hope you don't second guest yourself I mean if we go back to what we knew at the time right like it's so important that we we don't apply today's knowledge to what we knew at that time I remember you know taking a lot of chips
off the table too because I'm like I just don't know what's going to happen I remember going to the bank and getting access to cash I remember stocking up on food uh I remember doing a whole buch bunch of things that uh I actually
stocked up on food in February which my kids were like what are you doing why is our dining room table full I'm like you never know what's going to happen right this is like uh think of opportunity costs I spend a couple hundred bucks now
I get a lot of rice and beans and you know if the world shuts down we can eat for a while uh I don't know what's going to happen and because I don't know I want to I want to position myself to um survive multiple possible Futures you
want to satisfy rather than optimize yeah totally and it was a good lesson for them because they thought it was crazy and then the world shuts down uh and then to your point about thinking independently I think there's a huge
aspect of that and I do think people made uh the best intention decisions but the one thing that bothers me uh from somebody who me violated the law on a regular basis during this in Canada because I uh had a bubble of people that
was more than two households and you know we had a teacher involved and we had all the these other things involved and um you know I had neighbors threaten to call the cops on me and we've never looked back and and actually said hey
you know our bad we had the best of intentions you know maybe it didn't work out the way we anticipated here's what we would do differently next time and I think that that has caused a lack of trust so if this ever happened again I think there would and it might even be more serious next time uh and the problem will be because you don't look at your mistakes honestly and objectively that nobody's going to believe or they're going to hesitate to
believe you next time and that lack of trust is the most concerning thing for me as a citizen in the world because if people can't trust the authorities quote unquote and you still have to exercise independent judgment and independent
thinking uh but if you can't have a baseline of trust in institutions uh it becomes really hard to operate in the world well well if you don't have a baseline of trust in institutions what that means is you have no institutions
yeah you have no institutional Authority or legitimacy and that is not a world you want to live in how do you think about risk I think Peter Bernstein defined risk is more things can happen than do happen and I think that's a great
definition of risk so the thing is you should think about that all the time so just this past week I was in Florida and I was traveling with two colleagues and it was bizarre and South Florida is its own world and ecosystem and we were
in a rental car and we were stopped um at a particular spot and we were about to park the car and this and this other car comes up and literally rubs the the side of our car and hits us in a slow sounding crunch as this guy in
this big oversized vehicle just sort of crunched us and kept on going so I'm in the back seat and one of my colleagues is at the wheel and and he's about to get out and sort of confront the guy who who just you know slow motion crushed us
well I said Let It Go Let It Go what is the upside of dealing with this is a rental car if it costs money to fix it we have it we're going to be okay if if that guy has a gun this is not going to end well and it's not worth the damage
to the bumper that that guy just inflicted so we had three people in the car who were processing it differently but that was my immediate reaction so there's an example of how I think about risk in that situation I was looking at
the certain cost of what it was going to cost to get that car fixed versus the uncertainty of who knows who's in that car in front of us and why he behaved in a completely bizarre manner what what other bizarre behaviors is HE capable of you can anticipate exactly so there's an example of real life risk and we've we've laughed about it it since but that that's just kind of embedded within me I'd love for you to go deeper about risk
and maybe offer a few more stories or a few more things that have really shaped your view on it well for instance we live in a world of cyber risk and among the things that we would do at Marquel to deal with cyber risk is we try to be
disciplined we have appropriate cyber professionals who are trying to do their very best to keep us safe and and protect us but also you know we have 20 different businesses in addition to the insurance business all the businesses
within the marel group uh operate autonomously and their it systems are are autonomous and by not unifying them or not linking them you've created some level of safety some level of risk mitigation by virtue of the fact that you've you've
you've uh had these things uh operate autonomously ly and that would be a part of my my thinking as to why autonomy is a good idea is because you create some fragility when you when you centralize things so there's a lot of things we
centralize but some things we don't and one of the factors we think about is does this increase or decrease risk to centralize it or leave it independently um operated if every business unit operates autonomously how do you compensate the CEOs of those units so that they're rowing for one marel well the basic architecture involved in everybody's compensation includ to my own is multi-year so for instance I'm personally compensated over a fiveyear
rolling average uh for any incentive compensation and while the specifics will be different for the CEOs of the different businesses none of them are compensated heavily on any one year's results so if you extend time Horizons you get directionally correct information about what's really going on and what you're really trying to do is Foster the mindset of an owner an ownership mentality in people running these businesses and um again back to my
own example I've been at Marquel 33 years now well any given Year my my paycheck is calculated on on the last five years but it's sort of irrelevant to me in the sense that I've always been at Marquel I always plan to at Marquel
so I was not a I don't have marel blood I didn't marry a Marquel but I think of myself as a member of the Marquel family and a steward of the organization because it is defined by professional career and so I want incentive systems
that in essence mirror and Foster that sort of mindset as much as possible some people love that and they're comfortable with it and that's that's naturally how they want to uh operate and some people will chafe and and are not happy with it
and generally speaking those people tend to not be long-term people at marel whereas those who sort of get it and understand it and it's it's consistent with the way they would behave if if they were anywhere and they
were running their own business they do fine it Marquel and they're happy with that that kind of mentality and way of doing things are they compensated on their own individual unit and how are they tied to marel is that compensation tied to
marel shares or it's a bit of a hybrid so for instance myself would be marel as a whole which is appropriate I'm the see of the whole thing so it all matters with different people individually the number that year might indeed be tied
almost exclusively to their business unit but to the extent they start to accumulate wealth in the form of marel shares then they become more and more tied to the fortunes of the whole group over time when you make uh decisions there's a
quantitative and qualitative aspect to them I'm wondering what qualitative aspects do you tend to find the most difficult or the mistakes that you tend to make over and over again that are hard to catch I think Buffett told a
story once upon a time but the the person who's going to really fool him and be able to Swindle him out of some money is going to be a guy you know driving a car wearing khaki pants being uh very modest and humble in his bearing
and ways but at the same time just be um stealing his wallet without Buffet noticing I would be subject to the same sort of social influence so my habits tend to be relatively Frugal and and modest and not flashy so somebody who's
flashy and not modest and not Frugal that that sets off uh some red flags that caused me to be a little more Vigilant and hyper than I otherwise would be somebody trying to fool me would engage in the kind of behaviors
that that I feel more comfortable with and maybe my guard would be down because you know these markers tell me that that fine when in point of fact it's not and that's also when the people around you can see and alert you to a blind spot
that I might have uh to to be sensitive about that so far the record's been pretty good we've we not had much of a problem in in that regard but that would be what I would worry about one lesson you learned from your dad was you can never make a good deal
with a bad person I'm wondering if there's any times where that's really hit home for you when I've made a deal with a bad person can you give me an example of that well I mean some of these are a little too painful to to to
talk about but it it's important to be able to make mistakes that's important to be able to size the mistakes such such that when you learn them they don't they're they're non-fatal mistakes and they're mistakes that you get better and
wiser and stronger and faster on on account of but you can't foresee everything and and Forstall it I think you should trust your judgment so for instance to the extent that um you went through some dating process before you
got married that was really a process of getting to know somebody to see if their values overlapped with yours enough that you really thought you could get along together for decades that that's what dating is all about and in business so
much of what we do is in effect a dating process you're doing business with somebody you're interacting with them you you go to the movies you go to a restaurant you go to a ball game all those kind of things it's not so much
because you wanted that meal at the restaurant or you wanted to see that movie or you wanted to see that ball game it's so that you could discern whether this was a person who you really could work together with in all kinds of
circumstances over a long Peri periods of time and and that's what our business is it's cultivating relationship with customers trying to do things for them to make their life better and if we made their life better that didn't pay us
fairly and we get to be creative we get to feel like we added value we get to learn at stuff we get to have fun and we get to build these relationships that just make life fun and to the extent it works you keep doing more of it and when you get snookered you stop are there any other lessons that your dad tried to instill in you that sort of stick out uh as ones that you try to keep in top of mind today or teach your children my
father was a a fundamentally kind man he he was just nice he he was nice to people he always treated people with dignity and respect no matter what their circumstances or or position in life was we we lived in a small town um he was a
CPA he did people's tax returns he owned a liquor store so would would see the people you would see in a liquor store on a on a day-to-day basis um so he he did encounter all walks of life and I observed him treat anybody he dealt with
basically the same way and that was a laugh a smile a hearty handshake trying to help somebody out if he could I I really don't know how to put a finer point on it than than that and so I'm do it his whole life you're a fan of biographies I'm wondering which ones stand out to you that you've read over the years well for instance uh I like us Grant I think he's one of the most underrated presidents we've ever had his background was as a
quartermaster so as he came into his role his spot as a captain and a major and a colonel was not firing bullets it was in logistics and making sure that the soldiers who were on the front lines had food in their bellies had blankets
to protect them when it got cold had uniforms to wear and had the armaments so that idea a of logistics and support and Supply goes beyond the tangible items of Supply it's a mindset of otherness that I think Grant embodied um Grant was also fighting for
the good guys for a noble cause and the idea that you are using your skills and your gifts for something that is good those those two Force multiply with itself so I and and again he wrote his biography um at the at the time there
was not a presidential pension and unfortunately his daughter did not marry well she married one of the great swindlers of that that era um and he was bankrupt I mean he had no money and he he knew he got sick and the cancer was
developing and you can almost read that book and feel the Race Against Time that he was personally involved with basically because that book with the help of Mark Twain who was a friend of his and a contemporary provided the
income that sustained his wife and family after his death so I was going to pick one biography to read first I would read that one but over and over and over again I mean if you come into my office you'll see a wall of books probably half
of them are bio biographies um one that comes to mind from an earlier point of the conversation is Admiral Nimitz and if you think about Admiral nits in World War II operating in Hawaii at that particular time um you know he would the plans would be
made and there would be an intense planning exercise and an attempt to optimize the circumstances and situation that the Navy was in but then the ships went out and in order to remain in stealth mode there was no radio
communication so basically nemits might be back in Hawaii for two weeks two weeks before he had any feedback whatsoever of how these plans were working out and reading about him and reading about the fact that he just walked and walked and walked and walked and swam and just physically tried to process this period of Epic life and death existential uncertainty with walking and playing bridge and swimming and all kinds of things that's
just an interesting example and again we we could spend days in my office looking at book after book after book and I love having the physical copies of the book because when I walk into my office the spines of those book catch my eye and
they remind me of what it is that that I read and I love reading uh I have a Kindle I use it all the time it's like traveling with the Library of Congress so I like that but I also respect the work that authors do and again the
Munger tribute uh Munger talked about you know buying a biography for 25 bucks is the best investment you can make because for 25 bucks you're getting about three man years of a person's life that went into writing that book so was
a as a tip to the authors who did that normally if I like a book I'll buy the Kindle and the physical copy to tip them a few bucks for the work that they did and if I'm sitting at home or in my office I'll read the physical copy if
I'm riding on an airplane or traveling I I I'll read the Kindle and and I'll go back and forth just so that I always have it at my fingertips when you mentioned Grant and Logistics one thing that sort of struck me is the focus on Basics and we get
lost with that in the world there's almost like a natural entropy to we have Simplicity and then entropy takes it to complexity and we have to spend a whole bunch of money fighting that complexity to bring it back to
Simplicity I'm wondering how you think about the relationship between Simplicity and complexity and how you bring it back to simplicity at such a big organization with so many employees and so many systems and so many well I think there are a couple
tools and techniques so one you referenced earlier Mark lard who's a great business leader he talks about the concept of Base rights all the time what's what's the base rate here so to always go back to what the underlying
base rate of something is and explaining or reconciling why it is you think this thing is going to be different than what the base rate that is a very important discipline another important discipline we would have at Marquel is this idea of
autonomy and that the businesses are run in autonomous fashion well my wife who was the CEO of one of those businesses until her retirement um it was a relatively small business unit and she said there's no place to hide So within
that unit it would be unlikely that people would go on too much of a flight of fancy and get overly complex because there's daily feedback in a small enough unit with a small enough number of people sitting around one table it's
Jeff bezos's two pizza roll you know which wants his teams to be of a size that two pizzas ought to satisfy everybody so even within the 20 some thousand employees that we would have at Marquel generally speaking almost every
single decision is made by a small group of people who have accountability to one another who have the responsibility to make the decision and the authority to make the decision and are are operating in such a way that they get feedback from their peers
they're part of long-term relationships all of those things work together to create a system it's like Lego blocks where you look at this great Lego structure well that huge Lego structure that you see was built one little tiny block at a
time and those blocks have integrity so that that's the same sort of model that I that I dream for for Mark ell and by and large has has worked pretty well for a long period of time you talk about small groups of people making decisions do groups make decisions at Marquel or do people make decisions and they're operating within a group um I think that's a very nuanced point at at uh and in fact I I do use the phrase now that I'm the sole CEO it's
it's good to have one throat to choke so yes people make decisions and there is an individual that will be accountable and identified with the decision but any individual who would make the decision without using the resources that's
available to them of their friends their peers their colleagues the data the that's stupid so let's try not to be stupid uh we're going to make mistakes but let's not make stupid mistakes and not let not as former chairman Alan
kersner used to say let's not keep making the same stupid mistake so we while we have people who are responsible for any given thing the embedded network of relationships that exist and groups that exist um it's very helpful for
people to make those decisions and feel comfortable and feel supported with when they are wrong because the people who were also around the table who might not have had exact personal responsibility for the decision they know they were
part of the process and as such they tend to be forgiving supportive helpful and resilient in facing the consequences and what do we need to do to make it better a play on monger's quote but I uh I sort of came up with this phrase to encapsulate it for me which is avoiding stupidity is easier than seeking Brilliance exactly right well we've talked a little bit about opportunity cost I'm wondering are there questions you ask yourself about it how
do you go about thinking about opportunity cost how would you teach somebody to think about opportunity cost you know I guess the the first example that comes to m is just the the role of being a parent and how I try to teach my children about that and again very simple Concepts and just at the dinner table when ideas were proposed or plans were being drawn up or requests were being issued is the the question is if we do that what are we not
doing so that that question seems rather Timeless to me so if somebody says all right we're going to hold this stock my colleagues will say well you like this thing over here doesn't that mean if we're holding this that we're not buying
that and discussion I mean that's an accurate statement so we talk about it and sometimes I say you know you're right about that and this is so much more compelling than that that we ought to indeed make that shift and make that
change sometimes it's it's a lot grayer a lot more nuanced and you you don't know but that question always of what are we not doing because we're doing this I don't care whether you're talking to a four-year-old or 40y old or a 90y
old that that's a relevant question so I think the real learning comes from asking that base level question and participating fully in the conversation with thoughtful reasonable people about what the answers are and how do you
incorporate things that you can't see so like not this or that but like if you're thinking about opportunity cost and I know you think about this much deeper so I'd love to get into the weeds here but if you're thinking about opportunity
cost as like X or Y well that that's one sort of lens into opportunity cost another is like well there might be a new letter that comes up in a year and I need to be in a position position that I can take advantage of that right um the
the framing of that X or Y is too limited it's really X or not X so that's y z m 73 it's like a comedian says why are all plans lettered everybody says they have a plan B how about how plan two Plan Three plan four so in addition to the letters they're they're the numbers involved so it's not just X it's all not X and I joke I mean I love Vin diagrams as a way of illustrating things and articulating things and if you think about marel
marel group r large well there's one Vin diagram that would include all things insurance so we have an insurance business and insurance related businesses that would fit in that bubble of a VIN diagram and then we would have a a bubble that would say
non-insurance and I challenge people tell me something that exists in the world that is not in one of those two bubbles in the in the VIN diagram so that's actually a helpful construct to have there was one CEO who I encountered
one time and he referred to his company as a not yet company so they did all these things but when somebody would say do you do such and such he would not say no he would say well not yet tell me about it should I and I love that
mindset so in many ways I've copied that learn that um so in the construct of an insurance business or a non-insurance business when somebody proposes something to us I go well I think it ought to be able to fit in one of those
two bubbles let's talk about it let's think about it you've called the interest rates a curfew can you describe that for me well I've I struggled during the era of ultra low interest rates to try to just understand it and wrap my mind around it so for instance when uh Susan and I graduated from Virginia College and we started in the Working World and we we bought a house I think our first mortgage was at something like 14 or 15% and I can
promise you every discretionary penny that we had went to paying down that mortgage I mean that was that was just a crushing force in in our life that we we oriented ourselves around getting out of that particular debt for the mortgage
that we U took on to buy our first house and if you think about 14 or 15% interest rates like existed in the early 80s I joke that that'd be like a 6m curfew so if you're a kid you come in from school you eat dinner and there's a
6 p.m. curfew nothing bad is going to happen I mean you're you're you're done and as interest rates come down you can sort of think of that as as curfew getting later and later so if the curfew goes you know from 14 down to 1200 maybe
that's a 7 p.m. curfew so you wolf down a bite of dinner and maybe you can go outside and play for a little bit before you need to get back in at 7 o'clock but still not not too much and as interest rates keep coming down lower and lower
the curfew is getting later and later and by the time the curfew gets to midnight or past midnight that is effectively no curfew and as one comedian once joked he thought they should uh turn off ATM machines after midnight because no possible good comes from getting cash out of an ATM machine after midnight and I I I think that's that's a good point and the idea of um 0% interest rates or low interest rates that meant there was no such thing as a
bad idea any possible idea that you had had no push back on it from needing to service the debt so the capital allocation decisions that we have made as a society in the last five years I think we're made in the context of no gravity no no curfew no no counter
example no no sense of opportunity cost what are you giving up nothing do it go so everything got funded every idea no matter what and that creat circumstances um as an example and and I don't want to be too specific I'm not an
expert on this but I was thinking about this the other day when I was shaving and I shaved with a Gillette razor and I I knew a guy who was a little more into the world of venture capital and uh that end of the spectrum that I was and there were several shaving companies that came along and tried to displac Gillette and I think Dollar Shave Club was one of those and I think they ended ended up getting bought by Unilever for a big sum
of money and I don't think Dollar Shave Club ever intrinsically made much money itself but unever felt so threatened by them that they spent a bunch of money to buy it in the fullness of time I don't think that probably was the best
decision for Unilever but a lot of money got allocated and sifted and sorted that way and if you think about that story of companies that never uh were able to intrinsic Ally support themselves and pay the bills out of existing cash flow
but were relying on the capital markets to fund them and then the behavior of somebody who ought to have known better I mean Unilever did not act in an optimal way and again I'm a satisfier not an Optimizer but as I look
at that I think if they had the chance to make that decision all over again that they probably wouldn't so that's just one tiny little story but you could tell it a million times and a million different ways over the last last five
or 10 years and some of that's great and and going back to YSA S Grant and Mark Twain if you look at the period of the Gilden Age and what happened with railroads and the um characters shall we say that were involved in the funding of
railroads so many of those stories are the same things you see happening in the financial markets of the last couple of years but that's not totally a bad thing because for for instance after the rail you know the railroad financiers came
and went what we were left with as a society was the railroads which made things better so technological progress seems to have some odd marriage between engineers and Technical people and innovators and entrepreneurs and wild
Promotional financiers and that that marriage between the two yields technological progress but usually at Great costs to a lot of people and great wealth beeding for some people that may or may not be a good thing and um but I
but I don't know how that happens without those wild extremes and if you think about America RIT large versus many other places in the world you know we we let that we encourage it as part of our DNA part of the culture where
that happens it doesn't happen so much in other parts of the world and we have been the net beneficiaries as a society from The Innovation that comes about from the fact that we operate with a pretty wild west me mentality of of that
sort of stuff so it's just interesting to observe one difference in the past 30 years is that we seem to bail everybody out now whereas we used to let people fail and there used to be a real downside and skin in the game if you will I I know
people even now in Canada with mortgages and they're just like oh the government's going to step in and intervene because nobody can afford their houses and I I feel like that's a very dangerous path to sort of think and
walk and um I'm wondering how you think about that in terms of our approach and I think I would think about it in similar ways as you that that would seem to be a situation that is not durable what do you think of stock option
accounting I I don't think it's very good um and in fact as a as as Sometimes some people will ask me and typically students or younger people what should they study what should they what should they learn to uh be a better investor or
a better business person and among the things and this is my training I'm I'm CPA and it was an accountant uh by training I say well I think you should take the first year of accounting the oneon-one courses I think you should take the
second year of accounting which is cost accounting managerial accounting it's where that notion of opportunity cost and fully allocating cost get get loaded in beyond that point in the world we find ourselves today it might be
somewhat counterproductive to keep going too much into accounting Theory because you you tend to get lost in the details rather than understand the economic substance underneath what accounting is trying to tell you um
there's an old saying the map is not the territory so no matter how good your map is it is only limited in its ability to actually describe the territory that you're talking about now you need Maps but don't over rely on maps and don't
think that Maps contain the entire truth they contain 70% of the truth 60% 80 I don't know a a good function of it but but not all of it so just always be able to think about economically what it means so for instance one of the reasons
that I did not participate incom 1.0 is that is when option accounting was at its worst now it has improved somewhat and the the practices of of options have shifted more towards restricted stock and things like that where the account
accounting is better and more straightforward and more aligned with economic reality so I would always economically adjust when I saw big options to think about what the actual cost would be and you know used it in the con an option is basically an interest free loan so if I took an interest free loan and I bought that stock and you used the current market rates of interest to account for that nominal sum of money that in essence is
being lent behind an option that's kind of I would shw up and try to figure out what the actual cost of it would be but second thing going back to Shelby Davis's comment if I saw a company that be using a lot of option stuff I would
just put my pencil down and say I just I just don't like that so I'm it's in the to hard pile and I'm not going to try to calculate that to the fourth decimal point I just don't want to any part of it that caused some errors of omission
there are some companies that I wish I had bought even though they went beyond my personal preferences and tolerances for what I would have hoped would have been the practices that they would have followed but I learned some of those
lessons and I'm sure I'll continue to make some mistakes like that because I'm sort of imposing my own moral judgment when I draw that line but I have to I I need to Define what's acceptable to me and what isn't and I'm sure I'll get it
wrong sometimes I'll get it wrong A lot of times so just try to be humble and recognize where you got it wrong and something is able to power through something particular micropractice that I mean not love you mentioned cost
accounting uh one of the interesting things to me is um something like oil seems to be priced based on historical cost and not present cost H how do you think of um how do you think of things like that I'm I'm not a great natural
resources investor that's not really been in my circle of competence or something that I have a lot of expertise with so I don't think about it a lot now what I do think about it is in the context of so for instance and and
Buffett talks about this example all the time in oil wells you know you think about that as being an inflation protected kind of asset but not really because once all the oil is gone out of that particular well in order for the company to
continue to exist you're going to need to make Capital allocation decisions and capital expenditures which set you up to find and pump the next well and accounting is oriented towards historical cost of what it cost you to drive to to to drill that last well not what it's going to cost you to drill the next well that has always been a fundamental challenge to me and I I don't know the answer I know the accounting is not helpful so therefore
it's just not been an area that I spent a lot of time investing in and his counter example and in fact this is one of the charts I I keep in my office is I have a price chart of a barrel of oil compared to the single day admission at
Disney World since it opened in 1974 and you know what the price of a single day admission at Disney world has compounded at a faster rate than that of a barrel of oil and I think the accounting is better I mean there are fixed costs of
the hotels and the monals and all that kind of stuff they continuously need to be refreshed for Disney World to remain irrelevant property but that accounting is is pretty good it's reasonable and I can get my head around it and it seems
to me if I'm looking to protect myself from inflation I would rather own shares of Disney than than an oil company when I when I see those kinds of patterns the other one I track is the price of a pine of Guinness and that I mean that goes
back to 1757 and the price of diio shares which are the owner of and you know we're owners of both of those companies and one of the reasons is I think that they have fundamentally good businesses that add value that consumers love and trust
and are are whatever the costs to operate Disney World to produce a pine of Guinness what whatever they are whatever currency it's denominated in I think that's something consumers will pay those costs and some margin of
profit for the companies such that uh despite whatever happens in the realm of inflation that's what I call an inflation protected asset Munger calls EA he what did he say Bullit earnings yeah every time you see the word iida
just substitute earnings I'm wondering if you can walk me through that when you see iida how do you think about it how do you break it down what goes through your mind it it's one of those uh things that sort of like fiction there might be some degree of
difference between uh what Munger the smart guy thought and what me the less smart guy thinks so I is is a is a phrase and it is a term of Lang language that a lot of people use and there was a there was a Russian ambassador to the US named Alexi dubinan and he was I think from from Kennedy through Nixon or maybe even Ford or Beyond I mean a long time so that guy was the Russian ambassador to the US for decades and he was fully Russian he was
born in Russia raised there educated there but he'd been in America so long that he was very good at American idioms and the American culture such that he was spectacular in his role as an ambassador because he was able to
understand and comprehend both cultures which had a lot of differences so iida is almost an ambassadorial World Charlie Mard is correct in in the pure accounting sense that tells you I mean that is a map of a territory that is a
60% map not a 90% map it is a map and it does tell you something about the territory now if you're talking about oil companies or steel mills or heavy Capital intensive businesses it's not a good map because the D that you're
subtracting out to sort of talk about um the earnings power not only is that D real and shouldn't be subtracted out if you're really thinking about it economically it should be 2D or 3D or 4D because the next well the next Mill is
going to cost you more than what you're depreciating against and the worst thing about that is if you're a manager of a business like that and you're using iida you're fooling yourself and you're underpricing your product and you might be in a position
where you might know that but that's what all the competitors do so you're forced into that situation those are situations I don't want to be in if you're using an old example of IA and you're talking about something like a TV
station or a radio station um or a newspaper to go back into history just to make the examples easy those are businesses that did not require much capital expenditure relative to the business they had so while the a the amortization might be a big number because it cost you a lot to buy it you can safely add that back because you're not going to have to reacquire that radio station that you already have you've paid for it so the accounting
convention requires you to expense some amortization and by the way those accounting conventions change from time to time as to how amortization is calculated and treated uh but I think you get the gist of it is you need to be
able to understand what it really means and take it from a 60% map to a 90% map and the reason you need to do that is for for marel where we are active buyers of businesses sellers of businesses have been conditioned to use that phrase so
if you come in and try to academically explain the limitations or what adjustments you need to make they're to sell that business to somebody else and sometimes you should be happy about that because you don't want the business but
sometimes they have a really good business and so your job is not to teach them how to think differently about their thing your job is to understand what economic reality is and make a rational decision is would this be a
good decision for marel or not so you need to be comfortable and operate like debran did in two separate and distinct cultures and distill what you're really talking about and it's it's neither good nor bad it's just a translation
exercise think that's a great way to explain that what's the worst part of your job haven't found it yet I feel like this is what I was put on Earth to do it's fun I enjoy it and again like we were talking about being at the uh keyboard and writing and and
you feel the joy I mean I feel like uh remember the movie Chariots of Fire and Eric little the runner and he was a person of deep faith and the Olympics got scheduled such that his race was on Sunday and his sister who shared his
faith and his spiritual discipline of the idea of the Sabbath tried to tell him you know don't don't run that's the violation and I can't remember the exact line but Eric little responded he says you know God but God made me fast and I
feel his Joy within me when I run so I have some Glimpse and essence of that and that I think this is what I was put on Earth to do and I enjoy it and I've been relatively good at it so I'm going to keep doing it until I can't run
anymore relatively good I think you you have one of the best track records in history I I like how modest you are there uh you rarely sell stocks why is that getting back to that notion of opportunity cost um I think the case to
sell something and buy something else should be compelling so the the the run the the the tie goes to the runner that that's there already secondly there's tax efficiency in that for us in that assume that we have something that we
bought and generally speaking it is kind of worked out you you have a gain there which is unrealized and unrealized means untaxed so we have the tax liability accounted for on our balance sheet but in essence that creates a loan from the
government for the tax portion of that unrealized gain so if you sell something that has a big gain to it you are not reinvesting 100 cents on the dollar you're reinvesting 80 or 70 or 60 and so the next idea relative to what you
already have a gain in must be super compelling in order to reinvest $60 Cent from hundred cent dollars of staying with the position you already have that that's one of them uh the the second algorithm at at work to use one
of the terms of Art and language that that everybody um flaunts these days the great algorithm in life is do more of what's working so so I bought the first share of Burkshire in 1990 I can't remember what the last time I bought
more of it was but within the last year or two so I've consistently bought that stock for years done the same with Marquel personally um you know bought my first shares on the IPO in ' 86 I bought more when I joined in 1990 I've bought
consistently along the way at higher and higher prices but that's doing more of what works and in general that that's proven to be a pretty effective thing to do over time why do you think it is that it's so hard to do that more of what
works that it's it's simple but not simplistic it's simple but it's hard and one of the things that's hard about it is that an in as an individual you have to let go of your own ego to be willing to accept what the universe has handed
to you you can't make that happen you have to let that happen and people who are gifted and smart and intelligent and high energy and want to do things it is it is not their natural inclination to be able to embrace and accept things that are done on your behalf rather than by your active work it's it's part of it other part of is it doesn't it doesn't look like it works every day there will be periods where you know people will be you're the
batter and again Buffy uses the example Ted Williams The Hitter you know he's only going to swing at those pitches that are in the precise part of the STK Zone that he has determined are favorable places for him to swing that
bat and the ability to just sit there with the bat on your hand and have a have a strike call on you from time to time and as bu says in the investment World there are no called strikes you get to look at pitch after pitch after
pitch without having to to swing um that is is um boring for people it's it's not stimulating enough it's not fun enough well for me it is just different I I love the idea of of patience and I do think that we get bored we know what
works but what we want to do is we we know how to achieve the outcome we want but what we try to do is achieve it faster like we know for most individual investors if you save money every month and you put it into an index fund and
you wait a really really really long time you will be financially independent and incredibly wealthy in life we that's as close to a formula as you're going to get for guaranteed investment success and yet the number of
people that follow that formula is incredibly low in part because they know it works but they they want to speed up the natural outcome and I think of this as a lack of patients often changes the outcome how do you develop patients how
do you think about that uh I guess it it's part of that childhood background of not being the fastest or the strongest or the swiftest or pick first for the teams and stuff so I just I just got used to just being steady and and subtle and appreciating
that in the fullness of time it would work out so again and getting back to that luxurious position of all the conditions you laid out of being willing to stand alone to being in the environment where that's that's
acceptable I can't remember your third contract but those sorts of things I have been gifted with those circumstances and I've made personal choices which have reinforced that so it it all it all worked and I recognize not everybody has those same
gifts and environmental circumstances that I've been faced with but these are the ones that have been available to me and I've just tried to be rational and thoughtful and take advantage of the gifts that were handed
to you I want to end with a version of the question we almost started out with but different which is what is success for you continue to be able to do the things that I do uh been happily married for 42 years three kids who are adults and standing on their own couple of grandkids now so the idea that this life and being part of an organization like for for marel when I started at Marquel we had 300 and some people we now have over 20,000 and
that's 20,000 people multiply that by the households that are involved because of the organization we have a place where 20,000 people can find sustenance for their daily needs and take care of themselves and their family they can
learn and be creative and because of what they do uh in serving customers I mean it's it's hundreds of thousands maybe it's millions of people when you really connect the dots of what we have been able to build and construct and how
all of that exists because we're doing something for somebody else and they're happy we're doing it and want to do more of it with us that just seems like a really good system that that I enjoy being one of the architects of and being
part of to continue to keep that going forward and you know as I as I sit in business meetings and talk with the people who are running these businesses and I see the opportunities that are flowing in front of them and I and I see
the way in which the architecture of marel has provided them with this base of both Financial intellectual social emotional Foundation such that they're able to make the most of the circumstances they have and I don't mean that narrowly financially I mean that they're able to help other people and it's just [Music] fun there's no better way to end this no better way thank you for an amazing conversation thank you thanks for listening and learning
with us for a complete list of episodes show notes transcripts and more go to fs. Blog podcast or just Google the knowledge project the phontum street blog is also where you can learn more about my new book clear thinking turning
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