Chris Davis: Three Generations of Wealth

Transcript from https://podmenti.com/t/a5fb45c45e8047fa

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Today my guest is Christopher Davis.
A member of the board of directors of Berkshire Hathaway and the Coca-Cola Company
And the chairman of Davis Select Advisors, an independent investment management firm founded in nineteen sixty nine that oversees about twenty billion in client assets.
If you recognize the name, this conversation needs no introduction. Just dive right in. And if you don't recognize the name, you will love this conversation. It's not just about investing. We talk so much about life and living.
Oh it's just fascinating.
Tom Gainer introduced us and it was like finding this older brother you never knew you had. Our conversation was supposed to go for an hour and ended up being nearly three hours. I almost missed my flight.
We discuss topics such as risk, including unique insight from his front row seat on the border Berkshire Hathaway, why retirement has no appeal, the value of writing, resiliency, raising kids in an environment of privilege, cultivating a long-term mindset.
assessing management quality, how he sees the market, how to change your mind, and so much more.
This is the most honest and raw I've ever heard Chris in a conversation or seen him before.
I really hope you enjoy it.
It's time to listen and learn.
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I wanna start with your grandfather, and if I understand correctly, when you were
fourteen and or no, fifteen and sixteen.
You were working for him up in Maine as a coк and a chauffeur.
And that really cemented your relationship with him.
I wanna talk about some of the lessons you learned from from him.
He was in in many ways a great man, and in many ways a very difficult and very flawed.
person, which I guess just makes him human.
And I think
It was
Within our family system, he was sort of viewed as this very aloof.
Uh very unloving, sort of distant.
Uh and even sort of pompous, you know, it was
and uh almost sort of a caricature. And so we had to kowtow and uh be polite. And I just remember my father, you know, always making sure we had good manners at the table. But
You know, he was not popular among the the grandchildren. And uh
Uh and I think that uh my grandmother, his wife, was just this
incredibly warm human and just so full of love and light. I used to say if you average them together you'd get normal. And that was true in a lot of dimensions.
And
I think that that summer that I worked for them.
I was able to sort of see much more of him, uh, see him outside of the context of this sort of patriarch, and uh increasingly I became interested in just
the breadth of his knowledge. I mean it was amazing how he was just reading all the time. He was curious all the time. It's almost like he didn't have time for antics. And I think sort of a switch went off then when I realized sort of
People people in general, but in particular, there was so much more than this very narrow view of looking at him within our our family system. And I became sort of curious about why there were always people coming to visit at the house. You know, why why Kissinger w would come, or Cap Weinberger or uh
or executives from companies or heads of colleges and you know, what was it that people wanted to see him? You know, this kid this man that as kids we thought was so boring or pompous. And it was just at that moment in adolescence, in essence, when when you're able to sort of
see an adult. And and uh it was a little bit like a switch went on. We developed a very peculiar relationship. I was sort of his chauffeur. I would drive him, you know, to the airport on Monday mornings at 530 or 6 in the morning so he could get back down to New York. And you know, those car car rides I saw different
sense of him and and uh it just
just flipped a switch in our relationship that really lasted all the way un until he died. And uh and it
allowed me to see a lot more nuance and a lot of complexity. I think of the you know the old expression, no man is a hero to his valet? Well that that's probably true with
Kids and grandkids too, you know, they they have a very narrow way of of judging people and you know, when Churchill said that that shows the limits of the valet, not the man.
Well, that was sort of the the light that switched. I realized that, you know, maybe I was looking at this person with the wrong
Context and uh
That that was a big changing point. I'm I'm glad you asked about that. And you were sort of going in a different direction. Y your grandfather being um a capitalist.
And at the time you were sort of exploring vet veterinary school and theology. You know, I threw myself into whatever v vocation was sort of at the top of my mind I th I threw myself into. I could really imagine that that sort of life. And so in that sense, I was very curious. I never
At that stage I was young enough that I didn't think about capitalism or communism or industry. I I always viewed my father and grandfather as somehow uh doing research, of studying businesses, of and um it was a very uh so I it wasn't that I
assumed that what they did was boring, it just seemed narrow.
And uh you know, I think yeah, as a kid I I wanted to be a vet. I I you know, the the James Harriet view of all creatures great and small and uh it just
captured me. I I never uh we didn't have dogs or anything growing up. I grew up right in New York City. And uh so I was obsessed with the idea of animals. I was a dog walker. Uh I had all every kind of rodent known to man as a pet, unfortunately for my my mom.
And, you know, gerbils and hamsters and mice and and uh one cat that grew larger and larger by eating my rodents over time. And and uh uh but yeah, the idea of of being a vet, it had this
fantasy of everything that living in New York City in the nineteen seventies wasn't. And I have to say I I love New York now. I really I've loved being here since I moved back in my twenties, but I hated it as a kid. It was just such a filthy
dark, almost post-apocalyptic time. I mean New York in the seventies. Uh people try to imagine some romance about it. It was just it was dirty and scary and dysfunctional. You know, there was a garbage strike. You know the power
uh blackout in nineteen seventy seven. It was like there were riots. I mean it just you know, I carried mug money, uh, going to school in the morning because the
The crazy theory of Upper East Side parents was that if you got mugged, it might be good to have a little money to give them so that they didn't get mad. Well.
You know, I'm no expert on Pavlov, but I think it's it's a really stupid idea to give little skinny kids a bunch of money to carry around with instructions just give it to anybody when you get mugged. But I just I just remember thinking it was
Uh you know, it was uh what I wanted this sort of image of the of the, you know, British countryside and sheep and cows and farming and horses and animals.
was a complete
the vision of Oz to me. And so being a vet was sort of how that vision or that desire to live a different life manifested. And so, you know, and I was quite serious about it. I worked at the Humane Society in New York for two summers. I worked at the uh Bronx Zoo.
as a uh intern.
Uh which was a crazy job to take the subway out to Tremont Avenue, uh, you know, in time for early morning feeding and and uh you know, mostly I cleaned cages is what I did, but I cleaned cages all over the zoo. So I worked at the camel barn and the elephant house, but
I also worked in uh uh the world of darkness with other nocturnal animals. I worked in the reptile house, even in Wild Asia, which is an area where theoretically the the visitors go by monorail around the top and the animals are free. Well, of course they're not free. There's a whole series of pens and
And uh but that was an amazing experience and an amazing place to work. So I was very serious about it. And uh, as a friend of mine told me much later, was actually a a priest that I worked for said, you know, I was confusing loving animals.
with wanting to be a vet. And they are very, very different things. And
I definitely learned that. Aaron Powell Was this driven by your father saying go get a job or was this all self driven? Well, I I give my my parents enormous credit. There was a r a rule from about the time we were thirteen, which was, you know, you were
allowed in the house, you know, three weeks without a job. So that sort of got you through, you know, Christmas break or spring break, but the the the the assumption was you were going to work in the summer. And and that was sort of the assumption all the way through. But to their credit,
Uh they felt like
you know, if it was an internship at the Bronx Zoo or whatever, or working at the humane society.
That was fine, you know, and they would pay you for that, uh, if the job didn't pay you. Everybody had
summer jobs and and it would never have occurred not to. I think I was a little bit
More obsessed.
Uh with the idea of
You know
I don't I don't want to make it sound like, you know, I came out of the womb an entrepreneur or something, but but I loved the freedom of ha being, you know, of having money.
And and so, you know, I started a dog walking service when I was probably in third grade, uh, or second grade. And my parents' rule was I couldn't cross streets with dogs, but I could go around the block many times. And so, you know, I and it was a
A way of getting a pet without having a pet.
Uh and
You know, when the mayor
passed the pooper scooper law.
I mean, again, going back to New York in the seventies, you just can't imagine the amount of dog crap that was everywhere. I mean, it was just part of walking down the street. There were songs about it. It was just everywhere. And so, you know, this this law was passed that you had to clean up after your dog.
People couldn't imagine it.
Like they really couldn't imagine. Now, by then I had worked in the humane society, I had cleaned a lot of animals' cages, it was not something I was at all squeamish about. Uh but boy, people would pay you anything to clean up after their dog. And there were all sorts of strange inventions, you know, with uh you know.
things that looked like uh sort of hedge clippers, but they would have a bag on the bottom or you'd try to get it under your dog before they went. Nobody had
any idea, and nobody had signed up for it. So in fact there were some tragedies where people, uh dogs were jumping off the top of apartment buildings.
Because what happened was people were so appalled at the idea of cleaning up after their dog that they would go to the roof of their building, where of course it couldn't be policed, and they'd let their dogs crap up there. And so there was a period of a few months where dogs were jumping off of buildings and you know, it was
When I say New York was chaotic in the seventies, just that's a sense of the chaos. There are dogs coming out of the air, there's dog shit everywhere. I mean it was really uh and I think just as a you know
10-year-old kid or whatever, the sense of chaos was just i it was sort of overwhelming. But the point is that if I had been happy to charge 50 cents a walk,
uh that law came into place and I could charge
Five dollars.
ten dollars, people would pay me to come twice a day. Uh and, you know, all of a sudden, you know, I'm making
You know, a hundred bucks a week.
Uh it was just you know, I I liked that feeling. I liked that feeling of of uh of of having the independent money and having so so it it it did sort of take off then.
Did your father or mother give you an allowance growing up?
They did. It was a little unreliable. My fat my my parents were divorced and and so of course that allows kids to, you know, I don't I don't know if you ever fish, but you know, in in in in fishing, there's this thing about fishing the seam, you know, where you find two bodies of water moving at different rates and
in that seam between those two bodies of water, there's often a lot of uh of marine life. And uh and so I think children of divorce are very good at fishing the seam. And uh so you know my father would put up some policy about doing chores and collecting kindling and
You know, but he had moved out to the uh uh the country and commuted and uh
And but you know, we were there every other week and uh and so, you know, yes, we we had an allowance. It was sort of, as I say, regularly sort of
And
uh not uniformly enforced, which I think probably reinforced the idea of liking having my own funds.
uh uh uh from and of course interest rates were very high then and so you know I remember my brother and I both being struck that we had put for a few years money we had gotten at Christmas or our birthdays into the local uh savings bank uh
And you know, the idea that all of a sudden I mean I remember going to to get the money out and being given a$50 bill plus a$2 bill and then some change because what
seemed like I had put in only ten or fifteen dollars and all of a sudden there was fifty-two dollars and change. Uh it felt like the most money I had ever held. Uh and so
Yeah, I think very early we w you know, I give my father especially enormous credit. We were a very financially numerate household. He w that was, you know, sort of a a a language that was just part of
part of it. Savings, what interest rate meant, how money could compound. He was very good at object lessons.
Uh uh for those sorts of things. What were your dinner table conversations like growing up? You know, particularly with my father, we'd we would be out there on uh every other weekend, and so of course that would begin on a Friday, which meant that Wall Street Week was on.
And uh my father is very anti television in and not even in a
uh a sort of fanatical way. He's just not interested. He just find it an amazing waste of time. And uh it is one of the things that I really admire about him. And and um
And uh but Wall Street Week was an exception. We I mean I felt like Louis Rukayzer must be a relative or something because he was in the dining room, you know, TV, uh uh watching uh Louis Rukayzer speak. It's funny, when I was
uh near the end of Lewis's life, uh, I went on the show and he he made this

All three generations.
my family on on his show and uh which my grandfather had been on independently of my dad and and then I had been on and so that was sort of a a nice thing. And I think given the the idea of how important that show was growing up, it w there was some something nice about that. But you know I think my
Uh
I think there was a there was a lot of banter. Uh you know, I was generally the sort of the the the
table provocateur. Um but my dad's a great
sort of storyteller. He his breadth of information, like what he knows about, and his ability to describe
Businesses as stories.
You know, it's it's funny. We
We'll get to this, but but I I was just with um

Humans think in stories.
And it makes sense if you think over the course of evolution, how wired we are to learn.
by storytelling, uh and story listening. And I've always argued that like if we really want kids to get excited about STEM and like learning science,
You know, throwing a bunch of formulas at them.
and calculus, it just it's gonna work for some that whose minds really can see that.
But I sure wish every freshman in high school or every sophomore in high school was taught the biography of science.
You know, think of the movie Oppenheimer. You know, Oppenheimer will probably draw more people into physics than STEM funding in high schools will. It's this idea that we're wired to sort of have heroes and to admire them. The whole story of Homer, everything, you know, we it's
It's it's how we learn. We imitate, we study, we lioniz people, we vilify people, and and we affect behavior that way. And and uh
I would wish that uh
We told more stories about scientists about what it was like for, you know, uh a Heisenberg, you know,
pacing around this island in the North Sea trying to

you know, coming to terms with the math of quantum mechanics and losing his sanity because it couldn't be right.
It couldn't be right. It was such a disturbing implication.
But going all the way back, I would say my father had an amazing ability to to
turn businesses into stories. And so every day when, you know, he would get off the train excited, he would, you know, we'd uh pick him up at the station and we'd come home and we'd have dinner, he just always had stories about what's going on. I mean
I was just thinking of it the other day because it was the anniversary of Apple coming public. It must have been the fortieth, I think.
Uh, but anyway, I'd heard something about it, and I remember my father telling the story about these hippies in his office at Fiduciary Trust Company, you know, in in downtown New York, respectable trust bank. And he said, This guy shows up in sandals.
In Sandals, he couldn't believe it. He said, Uh how can a guy show up trying to raise capital
for a business and show up in sandals. He's like, I'm not gonna invest with any damn hippie. But of course he was trying to teach us a story about, you know, about respect and knowing, you know, who you're meeting with, but also this sort of the craziness of the idea that these young hippies were raising money for some crazy computer company and
You know, he had been very close at the founding of Intel, so it was an area that he was interested in, but he just thought these guys, you know, Steve Jobs, these guys seem crazy. And uh but I
But that would be a good example of what we would talk about at the dinner table, him talking about how some guy showed up in his office in sandals trying to raise money for an IPO of a tech company. And it's an enormous strength of his, it's just that you know passionate curiosity and his enthusiasm was infectious.
Are there any particular stories that stand out about moral lessons or businesses that still stick with you today that you try to pass along?
I mean the the the list of business lessons is sort of endless. I mean, in other words, that that was just sort of constant. I mean, just going I'm not sure how much it was stream of consciousness for him versus here's my lesson plan of trying to shape
My kids, and of course, it's six kids, and everybody got different things out of it. It it you know, there were ways in which the business stories
really resonated. I I don't know if I've ever thought of that
question in in that way. I I
I would say one story that really
struck me uh in that I was remembering the other day was uh
About
A man who
Has he described it one of his
inventions. He was a brilliant polymath.
businessman, inventor.
And he invented the yellow tennis ball.
Uh I remember him telling that.
And
He was telling us this story because the man had been
Bitten by a bat.
and had doething done nothing about it and had died of rabies.
This enormously successful
Person.
And I remember
Yeah.

being so out of left field. You know, the idea of somebody dying and you know, and he he said, you know, the the point is this guy that was so brilliant, you know, it just but it never occurred to him that that uh you know he could die of rabies. So I I I don't know how much my father intended that lesson to be
a lesson about hubris or about domain knowledge, uh or you know, about the the closeness of tragedy, or just about we are in the country now, and so if we got bitten by anything to be sure to tell them. I just remember that being something so out of left field.
and uh being so different than anything that we had ever talked about.
It seems really interesting'cause like when you would have guests over or um your parents would be talking about business, you were at the table, which I would
think is different in that generation as well, where kids were supposed to be seen and not heard and sort of like
go to your room and you know, the adults are talking.
That is true. I mean, again, because my parents were divorced, I had the the the gift of being exposed to two very different households.
and both very admirable in some ways and very dysfunctional in some ways. And and I would say that, you know, my mom but was from an old Boston family and
And uh her mother was uh uh Australian and
And there there there was a lot more formality there, you know, and my dad is structurally informal and structurally inclusive, and that more
the better. And he he was very comfortable with us being included in that. He felt like he didn't want that all to be a mystery. I never viewed him as some
businessman that went to an office where I didn't know what happened.
There. Uh
He, you know, ev every one of his kids understood. And can do a pretty good impression of him on the phone with the trading desk and, you know, what the hell's going on? And you know, or listening to him at the other end of conference calls when we were traveling as kids. My he was very much always comfortable being a remote worker before that was fashionable. I mean my dad was
out of New York State for six months a year from
really I think from the late seventies on.
And uh so that meant he was working, you know, I remember the first cell phone, you know, the big thing that looked like almost a crate that he would carry around. And and it's not that he was short term trading. He just wanted to make sure he never missed a conference call or a earnings release, or you know, he
used to say, you know, you you call ten companies, you learn one thing. You call twenty, you learn two. And you know, so it was sort of a numbers game.
And so we were always hearing one side.
of that conversation, whatever it was. And that was, you know, from the time we were little kids on. So
One of my favorite anecdotes, uh, I'm gonna fast forward a little bit here to you going through
sort of exploring the veterinary option, theology
You start out in banking, you end up working for your grandfather.
and he has you writing the insurance letters. You you ask why bother when nobody's reading them? And he had a really interesting response to that.
Yeah, which is is you write it for yourself.
And Shane, it's so amazing that you say that. On the on the walk in, uh
You know, I was I've been um
No
a fabulous book on AI is called The Coming Wave.
Um it's written by one of the co-founders of Deep Mind.
And I was listening to it this morning and it was talking about
You know, uh obviously the ability of the AI models already to do
Very good writing.

And so that exact anecdote was on my mind as I was walking over here, uh, because I was thinking about how strongly he said, you know, the writing is not about the product for the client.
It's about what you learn.
By writing for yourself.
Um it is. And so it didn't matter that we sent out this insurance letter. I don't know, we probably sent out
couple, two, three hundred copies.
A week.
You know, by the time I was working for him, he was probably already in his seventies, so a lot of his peers had long retired, and you know, I wasn't sure anybody was reading this, and and I mentioned that to him and he said, Well, we we write it for ourselves, you know, the discipline of every week.
Going through, you know, reporting on any company that had reported earnings, what was happening with inflation, what was happening with investment returns, was there any specific company news, uh, what had been the performance of the indices, which we would calculate by hand. There was no um
And uh
And you know, where there new, you know, where there demutualization's happening, whatever.
Uh but I was realizing in this
you know, coming wave of of AI.
You know, the idea of being alienated from your work.
uh not realizing, you know, it's
I was interviewing some interns, uh, potential interns.
Uh
and uh at our place. And they were
They were obsessed with this wanting to work remote.
you know, this idea that hey
Uh, you know, I want work to kind of be
not interfere with my lifestyle and you know and
And it's interesting'cause they all had been in college.
During Covid.
And so I said, So you know, tell tell me about
Covid in college.
And oh it sucked.
Suck.
And I I said, Why?
And they're like well
One.
You didn't learn anything.
Two, you didn't mm develop any relationships.
And then three, and this is real was really powerful, is everyone cheated.
They felt so degraded, but
by the experience. And and I I said to him, so why do you think work is different?
Like what is it?
That makes you think that work should be different than college.
So you got your degree with a lot less effort. So you got the outcome.
Why why are you so
Unhappy.
And of course you're unhappy because you were alienated from the experience.
Well, how can't it be the same at work? If you really think the goal of work
is to invest as little as you can in order to get as much payment as you can.
Of course it's gonna suck. And of course everybody's gonna cheat and you're not gonna have friendships and you're not gonna learn anything.
But
This idea that that is how we're wired, that that's what we really want is so
demonstrably false.
Інові край компетент.
We cra it it is just
You know, it's it's it's been our superpower as a species, you know, stories is part of it, but we love getting better at stuff. We're tinkerers, you know, we we wanna improve, we wanna learn, we work together, we turn little things into competitions. Watch the you watch the way kids play, you know? And um
And so this idea that
uh uh that somehow the fact that I can push a button and AI could write my annual report, uh or write a reference letter for somebody that I care about for something that they care about.
Well, I I'm I have no doubt that that can happen. I just I I think that then I'm alienated from that product.
And the for me the process of
you know, creating that annual report, which is probably read by six people nationwide. Uh probably five of them are probably in our compliance department. I think back to his
comment that you do it for yourself. Well, he meant you do it in a very puritanical way because you're learning, and I appreciated that. I mean he was very
Yeah.
Uh.
But I also think we do it because we develop meaning out of out of that sort of
thing and uh and this idea that well
You know, I have a you know, a favorite
Nephew that
you know, wants me to write a letter because he wants to go to some
college or something like that, or a co-op board or whatever. And I really want the person reading that letter to know about this kid because I really like this kid. I love him. And and uh so
You know, for me in instead of spending, you know, four minutes on the prompt and and getting something in,
You know, to spend
two or three hours.
I you know, I feel like I know him a little better at the end. I feel proud to send it to him.
or to his parents.
But I also feel like
You know it.
I I don't think it will be more effective. I mean, I I think that or if it is, it's only because I I still have a little lead on AI, but eh, it ain't gonna last for long. Uh and uh and so
But but I do it because I devote.
derive this satisfaction from it. You know, there was
Ever read a short story? Who the hell wrote it called The Leviathan?
It was uh, you know, written at a time of sort of m the mechanical revolution. So it was in the industrial revolution. Um
And it was sort of a futurist. And it was about the fact that it was based on the idea that there was a a ship that had been created that was so big.
that it would uh the the bow and the stern would all never simultaneously be in the trough of a wave. And therefore it would move sort of
absolutely fluidly through the ocean from crest of wave to crest of wave and and of course it
did not work at all. Uh uh the ocean's much bigger than that. But um
But this guy wrote a short story sort of saying, you know, that this is the future, this incredible floating palace of luxury. And the short story takes place on the deck of this boat when they see some lunatic in a little sailboat.
And he's about to get run over because of course the great ship is on autopilot and can't possibly move and this guy is scrambling and trying to get out of the way and, you know, bringing the sails around and
just narrowly escapes being run down and all the people on the deck are saying, What a moron, what a stupid here we are living this life of luxury and, you know, eating our caviar and and that lunatic is getting, you know, wet and the waves are washing over and he almost died, and
And there's this moment where as he sort of recovers himself, he waves to them.
And
They all feel enormously uplifted. They wave back and you know, and they feel this sort of and they were acknowledged by somebody who's really living.
And uh it was a very I mean, I read it in high school. I can remember the title. I can't remember who wrote it. In fact I'm gonna
Look it up after we're done because I hadn't thought about it in so long and it it does seem peculiarly
relevant. Uh but it was this idea a little bit like Brave New
world with the man beating himself, the primitive, and they think, you know, that is but it's this idea that living this completely alienated life, it may not be a a source of happiness after all.
Something is definitely lost when you you outsource that sort of thinking and writing.
And you actually it it's weird because I think you convince yourself you're smarter than you are, and then in investing you you would take
un unwarranted risks. Risk that you wouldn't be compensated for because you can't see them.
Yeah, it's you know, it it's it's a little bit like that sort of hard form. I love that joke about the efficient market theorists where
You know, they're walking down the street and there's a twenty dollar bill and
one says, Are you gonna pick it up? He says no, because if it was real, it somebody would have already picked it up. And this idea that
Sometimes by
By taking that shortcut you
You just become you
It well, of course I'm an old newspaper lover and so I'm
heartbroken at how few newspapers I can read in their traditional format. And so I have to get better at reading on a screen. And I'm not very good at it. That's and it's a real handicap.
Um, but what I loved about reading a newspaper is I wasn't always sure where my eye was gonna go, what I was gonna focus on. And it was often the case that something might have caught my eye in a way that it doesn't when I'm scrolling on this tiny little
screen.
Actually one of the reasons I'm I'm fairly optimistic that whatever replaces this

Shitty little, you know, five inch.
uh rectangle that we all carry around in our pocket. That is a very, very poor way to get information. This tiny little screen and
You know, when you think about
VR and AR.
Of course, there'll be much more satisfying ways to take in information because
Uh and that will be the functional equivalent of what that big newspaper page was, which if you think about it, it's like the IMAX of computer screens, you know. You'll open up the old, you know, the old Wall Street Journal, our Financial Times, how big it was. Uh it's actually sort of amusing if you were to look at a paper from twenty years ago.
versus today, even a print paper like the journal or
You know, the it's probably
forty percent smaller, maybe fifty percent.
you don't realize it's happened a bit at a time. Uh but just how big
a newspaper used to be versus what it is now. I wanna come back to writing a little bit. You write memos to the board.
Take me behind the scenes in terms of what you were saying and the conversations you were having and what you were thinking.
sort of through
The crises that you've been involved in from the nineteen ninety nine, two thousand and one, great financial crisis.
Covid and today. Every crisis is different. I mean, that is for sure.
I feel like in this very vicarious way.
you know, the the bear market of the seventies.
To me.
Felt like the big crisis. Now I was a kid.
Right. So I only experienced it through my father.
And
But somehow he had started uh the fund in nineteen sixty eight, so sort of at a high.
Um basically the market was back to where it was in sixty six in nineteen eighty one.

And
So
To me, what happened in the seventies.
Felt.
Like it was the big crisis.
Now.
You're looking through a kid's lens, so my parents got divorced, you know, things were upended. You also had the hostage crisis, you had, you know, this crazy inflation, you had the the 73-4 bear market.
Where it was just
calamity, you know, and uh
My I just
I I view that as this sort of
epically transcendent sort of test of
of of you know Amer sort of it the largest American crisis in my now
I don't know how much that's demonstrably true and how much was looking through that lens.
But I think of that as sort of the first.
economic crisis that I felt aware of.
And you know, it just being in this time when everything seemed to be going.
wrong. You know, the the sort of the chaos in the streets and
the divorces and the the oil embargo and the lines for gasoline and you know, are you an odd number plate or an even number plate and and you know riots in Los Angeles and New York and cities on fire and the loss of American
sort of preeminence and the Olympic boycott and that Soviets invade Afghanistan. And you know, it just it felt like
uh uh it was a time where everything was sort of hanging in the balance. And as I say, it was probably through this
Childhood lands.
And then you really fast forward to the late 80s and you had the S<unk>L crisis.
And I think because I was coming into business then, that felt like opportunity. You know, now here it was one of the greatest commercial real estate crises and
Uh well, you'd probably have to go back to the thirties. Uh, you know, all these look through office buildings and the collapse of these big financial institutions, Bank of New England and things like that. Um
And uh
But nothing about that felt scarring to me. I I all uh it all felt like opportunity. Uh but of course it was where I was in my career. I got nothing to lose. I had nothing to lose. I could come in and it reminds me of, you know, the fact that, you know, I described that seventy three, four.
Chaos.
And because I remember my father and just the dis my father was thirty percent cash in nineteen seventy-five.
And uh uh and so the fund dramatically lagged in one of the best market years of of a decades.
uh seventy five and market went up thirty percent or something like that.
And uh, you know, the fund probably went up 20.
Because it was a third in cash.
As he said, he was just beaten down.
He'd just been wrong day after day after day. My grandfather had been living overseas, he was ambassador from sixty eight to seventy five, in Switzerland,
And he comes home.
And he's like, This looks great. Now his net worth was down eighty percent.
Він у хуес.
Uh but he hadn't experienced it viscerally.
So he just came in and he went on margin and he levered up and he probably had one of the best stretches of his entire career starting in 75. Um and so you know, obviously sort of the degree to which you're scarred in the trenches during the process. So you know, I missed that in the late 80s, so that became very for
And similarly, when you got to the late nineties
Yeah.
You know
All of that excess of lagging this crazy roaring bull market.
Uh
You know, it was corrected so dramatically and so quickly.
And we were so well positioned for that. It wasn't like, you know, in in in two thousand the market went down nine percent.
If I remember right, maybe nine, nine and a half.
And it wasn't like
managers like us who had stuck to sort of a discipline
You know, went down too.
And the market went down nine. It's like we were up nine or ten. You know, managers, there were managers we admire that were up twenty or twenty-five, with the market down ten.
It was such a so
That also didn't feel scary.
Now
You throw nine eleven.
On top of that.
And then all of a sudden that's very visceral, right? You know, we had had offices in the trade center, and that that was
You know, that was had this sort of disorienting.
Fear.
Um it
had sort of a shockingly mild economic impact.
But it was so visceral to us.
as individuals, and and it was so visceral to us as Americans, too. You just, you know, the whole country was so shaken.
Да даю край.
where the economic impact and the psychological impact were sort of mirror images.
Of each other.
Well
Then the the funny thing is you roll into the the great financial
crisis.
And that was the opposite.
You know, what we saw in the front row of that.
was the whole system.
about to collapse.
And
Did you see that before it happened? No.
No, I I felt smug
because of what we had chosen not to own as the excesses got wretched.
So
You know, if you think of the six horsemen of the apocalypse, uh in uh uh the financial crisis, you know, Bear, Lehman, Fanny, Freddie.
uh Wamu country wide.
Uh
You know.
We didn't own a share of any of them, and yet here I am running a financial fund, running a fund that ha probably had
Forty percent in financials as well.
So I felt very well positioned.
going into that.
I felt like oh there's excesses and we're not
Anywhere near'em.
And then
The the storm hits.
And
that was this, you know, I really felt flat footed. And I think this is one where
I mean I think what happened at AIG
Was so primal for me because my grandfather had been
You know.
An IPO investor in AIG. Hank Greenberg sat in our family pew at my grandfather's memorial service. I mean, that's how close we felt to that organization. His offices were in 70 Pine Street, which was the AIG building.
And and you had a company with a hundred billion dollars of net worth, eighty billion of tangible net worth.
Probably had
You know, it probably had
seventeen or eighteen billion dollars.
Uh
Earnings.
That had nothing to do with
Financial markets.
You know that
And it couldn't go illiquid.
Because
To get your money out of an insurance company, you have to die or crash or have a claim. You can't just not really a run. You can't get a run on an insurance company. So the old
saying I sort of grew up with, which shows you a very strange upbringing, was, you know, banks go illiquid before they go insolvent.
and insurance companies go insolvent before they go illiquid.
And yet here was AIG going illiquid.
It didn't make any sense. And I couldn't so I just kept thinking, No, it's gonna be okay, it's gonna be okay, and then bam, one day
We're done.
ninety ninety percent diluted in a single day.
And uh and of course you couldn't
Couldn't recover.
Uh and by the way, when it was all fully said and done, it was probably more like ninety-five percent.
And um
So I would say what happened in the financial crisis was so disorienting to me.
I felt we're well positioned, we're well positioned, and then you know it was it was, you know, the the Tyson, you know, everybody has a plan until they get punched in the face.
It all of a sudden I was punched in the face and it was
And um so we we muddled our way through, but it was uh I don't
Um
I give myself low marks.
For
Just
the way uh psychologically
I b was so disoriented.
in that two thousand eight, nine period.
We we lived to fight another day. We, you know, in many ways, one of the things that we had done in that period was we had said, look, there's a possibility that even a company like Wells Fargo could be nationalized. If they can do it to AIG, they do it to anybody. And uh so we de-risk the portfolio. Now
I had studied my dad enough to know that going to thirty percent cash was not the right thing to do. But it may have been, you know, selling some wells and buying Nestle.
That ensures that if the crisis gets worse.
We're gonna own businesses that'll get to the other side. And if the thing stabilizes, well, Nestle's gonna go up a lot, too.
It'll just go up a lot less.
So in essence, we planted the seeds of a long stretch of underperformance relatively from that. We built wealth and we felt like that was job one. We had to get to the other side. Uh but that was a uh uh
But that, you know, we're only just now beginning to sort of claw away out of
you know, a long stretch of relative underperformance. And it started with that, and then of course it culminated in some of this crazy free money stuff. But when Covid came around, that was the crisis for which I think we were the best prepared.
It was one that sort of
It was like nine eleven in the sense that it took over people's psyche.
It was so visceral, so real, the fear was real.
And yet even at the time
I think we felt very convinced that the economic impact would be transitory. We didn't know.
How bad it would get, and we but we had a lot of conviction that we owned companies that would get to the other side.
We weren't worried.
Uh in that way that
we had been in in the financial crisis or something like that.
And uh and so
That was one where I felt we stayed very steady.
And and I think
Of o of all of the crises I've been through, that that was the one where I felt the greatest resolve that we were on the right course, that we were we were cognizant of risk, but we were not, in the sense of the financial crisis, de-risking the portfolio at the wrong time. We weren't letting the emotional fear that came from
having your physical safety in question undermine our focus and our discipline around the portfolio. And so
That was one where I felt we we sort of got better.
Three distinct rabbit holes I want to go down there.
The first one is that you use the word
Positioning
Multiple times.
Talk to me about
The difference between
positioning and predicting and why you chose that term. I think it's important.
one of the great gifts of age has been to me
I feel like there are some things in life that feel
totally predictable. Like as you get older you're like, well that I knew that marriage would never work, or I I knew that was a bad idea.
But you also become overwhelmed by how many things were totally unpredictable.
And I think it's that focus on the second bucket.
Uh
makes me think a lot about positioning, about preparation.
versus prediction.
And it is
Just amazing this sort of prediction.
industrial complex
Is just it
Nothing seems able to stop it because people want to believe.
You know, they want a crystal ball and they've wanted that since, you know
ancient Greece and and uh people have been willing to, you know, look at chicken guts and
and uh look at, you know, M2 supply or look at you know, they'll just come up with some thing that will
retrospectively have been predicted predictive, but of course it's a correlation.
Not a causation. And so
I think just as a firm, we think enormously about that idea of positioning and preparation.
versus prediction. And so
We tend to think of characteristics like resilience, adaptability, durability versus optimization versus it's not an optimizing sort of approach.
There will always be people that are doing better.
In the short term. So it's it's it's not optimized for short term, but it is
By definition, it's probably the most effective long term strategy.
Because you can't predict the future. So eventually you get a string of whatever your return is, but you multiply by zero.
Whereas somebody's always outperforming you if you're not maximizing current returns, but you're maximizing longevity.
But in the long run you actually outperform them.
Well, the i the the the the absolutely optimal outcome will be achieved based on luck.
Right. In other words, it's it's you know, somebody will buy that lottery ticket and uh and will get a
Oh nearly infinite return, you know, a billion dollar billion to one payout or whatever. And so, you know, I do think there will there will remain people and you're right, in the in the very long term, it should be the case that if you avoid the blowups, you uh make progress.
when the the the sun is out, but you don't think that over time it will just be a war of attrition. And uh it's something that my friend Tom Gaynor and I talk a lot about is it's just stay in the game.
And you know, it's funny watching the
you know, the collapse of SBF and all of that. But you know, it was such an insane theory.
to think that, you know, the theory would say bet it all every time that you have an advantage. And if everybody did that, you would get a better outcome net.
Uh
But of course, it's an insane
Theory.
Uh because your
certain to end up at zero.
It's just a matter of when.
And so it it was such a disconnect in terms of this sort of mindset.
Um
You know, just the complete disregard for that Kelly criteria and for that idea of living to fight. And I think it's one of the
You know.
Goes back to one of the reasons I love that we
manage a mutual fund. I mean I love that
what we do ultimately
ties to a very specific individual, you know, that is going to retire or not, or is going to send a kid to college or not. Because it does make us realize one of the really
Deep.
Dark, dirty secrets.
of money management.
Is that
You know, a
If if you were faced with the choice of
You know, you return
Ten percent a year.
For the next
Decade and the market does twelve.
Or
You
are zero and the market's down two.
Every money manager takes the zero.
But every client would take the ten.
Because
that that is gonna determine you know ten years of zero return.
Is not going to help them achieve their goals, but you will be one of the largest money managers on earth if you do that. Right. And so this asymmetry.
of incentives.
I think uh
It's it's one of the things that we never want to lose track of that
you know, ultimately
You know, achieving ten percent is way, way better than achieving zero.
And that the we wanna beat the index over time. We wanna beat
the competition over time. You know, if you have
five thousand competitors.
you're gonna have to go a very, very, very, very long time.
to eliminate luck being at the very top of that.
But it doesn't matter to us. You know, what matters is is, you know, that person being able to afford their retirement or and so the zero versus the negative two.
That
You know, we'll take the ten.
And and we'll run the portfolio for that. And as I said, in in the financial crisis, that meant that we de risked
And I can't look back and I can look back and say that that was wrong in terms of what happened, but in terms of what we know at knew at the time.
I feel it was right.
And and or I I I give
I give us some
I give us some scope around that.
You know, I think in Covid
It was I think it's one of the reasons, you know, some of the people that
Well,
I I think we
it we had a great advantage.
in that of, for example, not having an insurance operation. Uh because I think what was really scary for
investors that had insurance operations during COVID is they had no idea what was gonna happen to their liability side.
Uh and so that also terrified them at a time when the assets were going down. Um whereas for us we felt
one, we were absolutely amazed at how well investors behaved then. You didn't see big redemptions, you didn't see people
running the cash and so that allowed us to same stay very steady.
too and and to to look at this.
You know, horrible, terrifying.
thing, but to be able to look at it with some dispassion around the economic implications.
You sit on the board of Berkshire Hathaway, which is
probably the company that comes to mind when I think of
who's well positioned no matter what the future
sort of what happens in the future, whether it's positive, negative, stays the same.
Uh a hundred and sixty billion dollars on balance sheet, like
they're going to exist, they're passively stable almost. H how do you think about
that in terms of positioning and in terms of
The risk management
uh from the company.
Well
You know, it it there was a beautiful
uh last uh interview with Charlie.
uh that Becky Quick did. And I I give her enormous credit.
Uh now, of course, she was recording that for his hundredth birthday in January.
Uh it's amazing that it was like two weeks.
before he died. And it was I I it gave me so much pleasure to watch that. I mean, because he was just so lucid and engaged.
Um I if I'm remembering right, in that interview, but if not in that one in over the years, it's something that he goes to over and over. Is this idea is Berkshire is run with the idea that some
That that
from the very beginning.
that uh the people that h were invested in Berkshire had a hundred percent of their net worth in Berkshire.
And
That really does shape.
the culture there.
So it is it's not that it's afraid of risk.
But
Yeah.
Will
Not
The the sort of risks it takes.
are risks that
are manageable on the income statement.
You know, the idea of Berkshire really, really being built to last.
That is profoundly true.
And and
I think that
Um
You know I


You know, being on the inside versus the outside of Berkshire, I mean, you know I
going to Berkshire annual meetings since 1989 or something and and read everything that they've ever written and all the back to the partnership letters. And so
It's not like
There's a big
surprise uh uh on the inside versus the outside. And if if somebody was to ask me, well, was there any
Anything that seemed different or any change in nuance or emphasis or
The one thing I would say is
How profoundly and deeply
Warren thinks about risk.
And things about
How important it is that Berkshire can withstand just about anything.
just about anything. And
And I think, you know, publicly they talk about that.
But to see in the inside what that really means.
How much they and so
You know, it is it is a
Uh it it is really
been built with the idea that this is somebody's only asset and it needs to be built to last. And and yet amazingly, I mean Charlie in that interview talked about how they without taking much risk, they could have added a lot to returns by having a little more leverage. But the
You know, that's not
who Warren is.
And that's not what he wanted. And the amazing gift. And I you know who I would put in this category is um
Uh uh S
Uh Carl Clarman and Bow Post.
You know
What's so amazing is that the investors in Baoba I haven't looked in.
number of years. But if you were to look over the the long term

You know
The the cash, if I remember rightly, at Bowpost is sort of average between
You know.
fifteen and forty percent for sort of the whole time.

Uh
I don't think there's ever been a time when it's gone maybe below fifteen. I I I could be wrong but I'm pretty
Uh uh.
So even in times of chaos, if
And if you're an efficient market cap M
a you know, a fish and frontier rather a fishing frontier.
Quant you'd say, well, that was an enormously costly decision because you carried the cash the whole time, you never really ran it down, even when there was chaos. So the idea that, oh, it's good to have a reserve in case bad things happen. Well
Um
And yet.
The investors in BowPost have paid nothing for that insurance policy. Yes, there's a there's a theoretical charge because you could say, well, if you didn't have that, and we impute the rest of the return.
But
In a way, you've gotten this incredible performance over an incredibly long period of time.
And have carried that.
And uh I feel in many ways that sort of burn sure's been like that. It's it's been run in this incredibly
conservative way, but but you haven't paid any price for that as an investor.
Except some weird theoretical suboptimal outcome. But the the the fact is that you you got your cake and you got to eat it too.
You got to have
you know long term wealth creation long term outperformance
And this incredible durability and resiliency. And and I I I think that's not a terrible way to live.
How would you define risk? What is risk?
I mean i if I define risk as an investor.
I'll s always start with the client work backwards.
Yeah, when when I speak to a client, I think
You know, for them the risk
for them is is ultimately it's ultimately becoming beholden.
I'm somebody.
Right.
be beholden on the government, they don't want to be beholden on their relatives or their kids, you know. Uh uh they want that sort of financial independence.
So
You think very much, you know.
You have this sort of responsibility.
Where
You know, I sometimes joke, you know, risk is having to being forced to change your lifestyle.
Uh
There's a lot to that.
You know, I think a lot of
people, particularly people that are savings and investing, right? It you know, you have to recognize that there's a huge amount of people living hand to mouth and paycheck to paycheck.
So I'm I'm
I'm gonna define risk in terms of the investing.
Public.
And I would say in terms of the investing public, you know, everybody who invests
Is making a choice not to consume now.
In order to be able to
consume in the future when they aren't producing.
And so, you know, obviously for them risk is about
that somehow that decision having been mistaken, right? In other words, they should have consumed now because they ended up with less.
And so
You know, I do think that
You know, I joke that risk is a is about, you know, a lifestyle change. It's one of the things we often when we s we spend so much time with financial advisors and financial advisors that are thinking about how to manage client behavior.
And I always say, you know, the number one is if you can get them to spend less
That that that has just a huge benefit.
Right? Because
It's not that they spend less, which means that they have more to save.
uh you know more to invest for next year or the year after. That that's true. But what really matters is that you're annuitizing a lower rate of spending. You're sort of creating expectations and um
But I do think at a deeper level, I mean the the risk the financial risk that people fear the most
is this idea that somehow they lose their financial independence.
And uh
And that that that there is real dignity.
uh uh in in that. There's dignity in financial independence and there's a loss of dignity in becoming beholden and becoming dependent. So
I often think of
risk around those things. And of course at an individual investment level, you know, risk is about the the the permanent
loss of of of capital in that investment and really over a course of a portfolio, because you can be taking a risk of 100% loss.
in an investment and it can be a very rational risk to take. You just
You better size it, right?
We mentioned earlier free money.
H how do you think about
where we are today. We've just gone through
probably the lowest interest rate period.
Human history. In human history.
And we've printed more money.
Yeah, we w How do you think about this? The scale of what we've gone through is really
Unprecedented. It it in a and and
I hate that word because everything is unprecedented that's never happened before.
Money has a cost.
For reasons that are totally obvious when you just think of the structure of what it is. You know, it going all the way back to Babylon, which is I think some of the first recorded interest rates had to do with, you know, somebody has a herd of goats and you want to borrow a couple of goats for a while. Right.
You then you had to return to them.
the lost productivity that the what they gave up
the milk or they gave up the kids or whatever it was from those goats. So in order to use their goats, you had to pay them something. Otherwise, why would they give them to you? And so
Interest rates is really about
You
Taking the produ productive asset
From t using a productive that belongs to somebody else and therefore needing to compensate them for their loss of that. So of course, for all of human history, money has a cost, right? Because it wouldn't make any sense if you were providing a productive to somebody.
For free.
Right?
So the idea that we
actually created that environment.
And
that we created this environment by driving down rates and then
And simultaneously printing
so much that normally would have caused rates to go up would have created a lot of inflation, but we created an artificial suppression mechanism by buying all that in and sort
Well
That was like pulling back on a slingshot.
And nobody has any idea.
where this is gonna end up. I mean, it is the idea that we're done.
Uh some of the euphoria that people feel today.
That's nuts. I mean this Yeah, talk to me about that because it it looks
You know, from the outside in in a little way, and I mean you do this for a living
There's been no consequence or very little consequence considering the scale, magnitude, and duration of what's happened. Yeah.
Well, I think it's gonna play out slowly.
But it is
It is a massive sort of turning steamroller.
And the
I don't really see any easy way out of it.
In other words, I don't see the solution. Now
I'm gonna put AI on a side burner because of course what has historically happened
is that in some ways
Technology.
has has often created a bailout.
І will need something like that. I mm d certainly
inflation will have to the only way we can repay
uh uh uh the debts that we have incurred.
is going to be by
You know, devaluing.
the currency so we can pay back. And you could do that gradually over a long period of time with
Three, four, four.

inflation and let that roll through and that chips away at it.
And you can do that provided there's enough discipline to stop growing it.
I don't think either one of those things are particularly sure bets.
Um so I think we're still in this
idea that well, you know, uh there's a fabulous
uh uh investor um
who came out of T Row Price uh um

Who uh
talked recently, I heard him speak about uh 2021 versus 2023 mindset.
And the twenty twenty one mindset.
is still that there's free capital, that you know, you grow, you'll always be able to get bailed out.
And there's still a lot of that if you haven't been forced to the table.
Now, owners of office buildings are finding that
There is no access. And so you're you're seeing things beginning to change there. We saw some of the chaos at
You know, First Republic at Silicon Valley, saw it in the UK pension plans. You know, you've seen these real cracks in the dike.
That were quite dramatic.
Uh but very, very narrow.
I think everything else is
sort of rolling through as things reprice.
So um, you know, private credit, private equity, you know, venture capital, um, there's a lot of stuff that is gonna take some time.
And as I say, this sort of wild card.
is that if you read the annual report of our own government, you would not finance them at
Three or four percent. Right. There's just no chance.
And so one of the risks of deglobalization
There's so many risks. I mean, the idea that we could be
giving up on one of the most
powerfully.
uh uh constructive
trends in the history of humanity.
I mean it just it it wins at every level. It's not perfect. Uh but it is it is so important.
And that we could be willful. Well, one of the risks of that
Is if you know, if
If China ends up with fewer dollars
uh then we have fewer buyers.
uh for the debt that we're issuing. And so there's there's a lot of ways it could go wrong. I'm you know it it
Yeah.
My grandfather said you always sound smarter if you're bearish.
You know, I just listened to uh uh
you know, one of the great investors of the last fifty years, Dan Druckenmiller and and
You know, I I I made a note of his comments because what came to mind, uh to my mind at the end was Woody Allen's talk to the graduates when he says, you know, on one side we face
calamity and extinction, and on the other side we face, you know, total ruin and, you know, and obliteration. Let us hope we have the wisdom to choose correctly, you know
And
You know, you create these scenarios where there is no it's hard to see any way out.
And so going back all the way to your question about positioning.
I think you say, Well, if that's the future, what do I do?
Right. Well, I could own some shiny metal. I could own some bits and bytes in the form of Bitcoin.
I I sure as hell don't want to own any sort of fixed income instrument. Um
And so it uh real estate is scared.
scares me. I mean I
listened to the head of one of the largest real estate companies last week talk about, uh, you know, they were seeing some unbelievable opportunities to buy
uh uh buildings with, you know
eight percent, nine percent cap rates.
Oh, what's so good about that?
Yeah, I mean yeah, the risk adjusted return on that is pretty small. I can buy Capital One at a fourteen percent after tax earnings yield.
I mean, what's so great? I don't understand this this real estate mindset that still thinks that a single digit cap rate, you know, compensates them for the risk that they're taking. And and uh
You know, as I said, I you buy that at a cap rate. I'm not sure you could finance it at that, but who knows.
I'm not I'm no expert in real estate. So I I take real estate off the table.
You know, venture capital, well, of course there can be fortunes made.
Private equity, I think there's one hell of a reckoning. Should be coming, but I feel that in a puritanical way, and it never seems to come. They seem to get away with it. You know, and when they the government tries to pass laws on carried interest, it just seems so obvious.
that, you know, even a friend of mine in the private equity space was like, well, it was good, well it lasted. Even he couldn't believe
That that they're still getting away with it. It's just so
You know, I'm jealous of the fees. I I hate the accounting.
I was arguing with the head of a very major private equity firm recently and I was like, it's just despicable that you show your returns
But you don't know.
uh uh adjust them for leverage.
Like benchmark'em to the S P with the same amount of leverage. You know, with all of that said, well, it seems to me in that world owning
Burkshire.
Seems
Like
Pretty fabulous.
And you know, when I look at the portfolio, the positioning of our portfolio, I think owning Google feels pretty good. Owning Amazon feels pretty good. Owning Meta.
feels pretty good, but sure just so does Capital One, so does Wells Fargo, Bank of New York, you know.
Tech industries, you know, the l the largest copper mines in the world. Whatever you believe about electrification, a lot of copper is needed, and they have the longest lives, some of the lowest costs.
deposits in in the world. So I just feel like w
I I can't predict
Yeah, you know, Stan creates a
picture where I can't find any way out of it.
But
Having said that, what am I gonna do?
Well, I'm gonna
I'm gonna own businesses that are resilient, that can adapt, that
have pricing power.
Uh don't have too much debt.
Don't have too much debt. Have global
you know, durable have have have cash current cash that allows them to reinvent. I mean one of the
dangerous things about, you know, the the most aggressive type of growth investing is it just posit a huge amount of cash in the distant future.
And it really underestimates all of the
risk adjustments you should be making.
Because
You you
There's uncertainty that you will get that, but there's also uncertainty about what the discount rate should be.
When you get there. And I I can perfectly easily see a world where rates go down to two or three percent for a couple of years and then they're eight, you know.
Four or five years from now.
I just don't know how to handicap that and to be fair, I've never met a rich economist. So I don't I don't think it's it's really a I just think you have to think about how do you position.
You know, what we you have no idea if you're gonna be sailing through a storm.
So
Just
Be prepared for that, and have redundancy, have resiliency, and
But you know, going, you know, imagining there's some tropical island where you can go and drop the anchor and just wait it out, that's not an option. There is no safe harbor.
Do you think there's a timeline mismatch between policy
And citizens and also investors and CEOs and companies. Yeah.
You know, I think Brian Roberts is now in the
top five CEOs in the in the S P for tenure.
And
You know, in thinking about that, I think that the median tenure something like three and a half
Or four years.
Whenever you get
Uh uh
cycles that are uh
In conflict.
You know, obviously we have an election cycle that is totally different than the policy cycle.
It's one of the things that we should all I mean, this jingoism and this anti China sort of mindset is so dangerous because we stop learning.
China has done some things magnificently well, including lifting almost a billion people out of s near starvation, poverty in in a generation.
Um, but one of their great strengths has been this enormous long term.
Focus.
And of course that's been part of what's created businesses like
Berkshire and Marcella I mean, I always I highlight Capital One because it's still run by the founder.
Right, he created that company, I think, in nineteen eighty-six or eighty-seven, still the CEO.
Um, you know, the tenure of CEOs can really, really matter. You know, the old saying in nepotism is that, you know, a good farmer farms for his children.
Uh I remember Freddie Heineken.
uh saying to me very early in my career
making a comment that, you know, pointing at this little kid that was playing by a swimming pool.
And saying, you know, I make decisions for him.
That's my grandson. What a huge advantage.
Right, versus the average
sort of and by the way, uh you know, private equity loves to tout that they are great managers. They are always looking for the exit, you know.
And that is it's interesting, right? Because Berkshire Hathaway
Was able to do what it did because Buffet owned so much.
He wasn't worried about somebody else coming in and sort of usurping control. Like if you think about if you you scale the numbers down a lot,
And you take a hundred and you know
Yeah.
160 billion if a private equity fund would see that and be like, Oh, we're gonna buy it, dividend the cash out. But you can't do that because structurally.
Well, that's true. I I'm not a total believ I mean, it people have used that rationale to create A B stock and things like that and controlling stock.
And um
I have mixed feelings about that. You know, to me it is curious that
Amazon never needed that.
They didn't create super voting shares where you could own a tiny economic interest and yet
Um, so I I have mixed feelings about
Uh controlling stock.
But on the other hand
I do not have mixed feelings.
uh about uh the idea of how long term investors get screwed.
by short termism creeping in. And if I'll give you a good example
Um Costco had a classified board, which meant that, you know, only a certain number of directors could be elected each year. And that
operates as a fairly effective poison pill because what it means is if you wanted to get control of that board, it would take you three years.
Mm-hmm.
By and large, as investors, we don't love
That sort of poison pill.
And then get it.
Uh um
However.
In the case of Costco, the
We really supported it.
And we supported it because we said, Costco, we want them to have an incentive to report earnings exactly as they are. Or put differently, we don't want them to have a disincentive for doing that. And so, you know, one day in I forget what year it was, probably fifteen.
or more years ago now.
Uh maybe twenty years ago.
Uh Costco closed at forty one, had been come down from forty five. It was a momentum growth stock, darling.
They reported a bad quarter, that stock opened at twenty seven.
Uh and we
amazingly bought 17 million shares that day. It was one of the great trades of my whole career.
And uh
You can
talk about how much I screwed it up, that we still don't own those shares, which we don't. And so that was a terrible mistake.
uh selling it o over time. And one that Charlie uh was
always willing to point out.
But
Yeah.
When we bought it, we had high conviction that it was worth over 40.
And so
But it would have been easy if
theoretically for uh some sort of private equity firm to jump in and say, hey, we'll bid thirty-four for the whole thing.
And people say, Hey, well that sounds good. The stock's at twenty seven, you know, thirty four sounds good.
So that idea of
private equity being able to take advantage of volatility means that
you create for if you want to represent long term shareholders, you may have an obligation not to have negative surprises. And if you have a negative obligation not to put you know have you negative surprises. So what means is you're creating an incentive system of hiding those or smoothing them out. And so
I I do not have
an answer on whether control stock is good or not. Obviously before uh
uh uh the creation of the B shares, there was no super voting stock at Berkshire or anything like that. And you could argue there there still isn't. The A shares have more vote, but anybody can own them. And um
But it is a uh uh
You know, you could argue that it was a good thing that
Meta?
Had that.
that people, you know, Mark did not have to worry.
about, you know, being forced out because he controlled the company.
Uh so
But I do tend to like when control is simply because you own more shares rather than you somehow have a separation of your economic interest from your
controlling interest. But I'm not
I'm not certain on it. I've got there's so many good examples on both sides.
There are examples of, you know
Hershey was an example where controlling
You know, shareholders.
you know, force them to do absolutely suboptimal things for long periods of time.
And there're lots of examples of family businesses that have that second, you know.
Second or third generation really screwing it up.
But there's so many success stories too, and you look at some of the Graham family and things like that and so
So I'm torn. I
I'm not sure I really welcomed it for companies like Google and
Mat up.
I I didn't like it.
I didn't like the way.
Venture capital firms were convincing founders to do this. And at the same time, I mean, I actually had this argument with a very prominent
Venture capitalist publicly, uh, at a conference where I said, Have you ever invested
In any company.
Where you haven't asked for a seat on the board and
Been it and the answer was no.
So why do you think that somehow your equity
is more valuable.
uh that you should have a seat, but no other owner should.
And especially after you've sold out. Yeah. So they would go and, you know, sort of create this view that, oh well, you know, let us be your backer because we'll ensure you're always in control. And uh drove me crazy, but
It's okay, they made a lot of money, so
Hats off to him. You mentioned Angar a few times. How did you guys meet? Oh God, it's such a great story. My grandfather built this fortune. I mean it was amazing. He started, borrowed$100,000.
When he died it was eight hundred million. It was held in a trust f as long as my grandmother, his wife, was alive, and when she died it was two billion. But a hundred percent of that money, a hundred percent uh was marked for charity.
They that was
Uh his belief he'd told us all from the beginning, my father's done the same thing.
Um uh unfortunately. And um
You know, it so they've really sort of followed what I would call the
Carnegie Buffett School.
versus the the Munger School, where I think Charlie said on that same podcast that half of his net worth had already been transferred to his kids and he has fabulous kids.
My I was working for my grandfather and
It was clear that the capital of his firm was all gonna go to
to charity and so the uh it couldn't function as an operating business anymore.
And he had this business that was called uh uh was a stock loan business. I don't know how familiar you are with securities lending or in in its simplest form, it would be if you were a short seller.
and wanna sell shares, uh shares short in you know company XYZ, the person who buys company XYZ from you uh is not interested in the idea that you're short. You need to deliver them some shares.
So what you do is you go find an owner of XYZ and you say, Hey, can I borrow your shares?
uh for me to deliver in. And the guy says, Well, what are you gonna give me for collateral? Do you say, Well, I'll give you 102%
of the value of that short position.
And uh you I will give you that, but you've got to pay me interest on that money. And so
There is a very, very thin profit margin that is basically
uh uh tied to the relative credit of the borrower versus the lender, and you make a tiny little
crumbs of spread.
So my grandfather's firm had this portfolio of appreciated stocks.
A g best example of all is Berkshire.
And uh and Berkshire for many, many years, uh had a charity program where if you owned a share of Berkshire each year, you were given a dollar amount per share that you could assign to any charity of your choice.
And uh companies have this tax incentive, and usually the CEO decides and gives it to whatever his or her favorite charity is. But at Berkshire they said it's much more democratic to let each person vote. So for many years, but in order to be able to do that, you had to own the shares in your own name.
Right, it had to say your name on the stock certificate. So very little
Few shares were held in street name.
And because there were very few shares in StreetName, if you wanted to short Berkshire Hathaway, it was really hard to find any shares to borrow.
And so my grandfather having a brokerage firm, having a big position in Berkshire, and all of these people that wanted to short Berkshire, well, there was a big thing in the eighties, particularly that this argument, oh, Berkshire is just a closed end fund selling at a premium. So there was a
obvious trade that all these really smart people would talk about, which was basically short Berkshire.
Buy some Coke, some Cap Cities, some Freddy Mac, you know, by the public companies and you pick up a nice risk free arbitrage. Well, of course, the shorts got killed for
Uh decades.
Of course they still wanted to keep doing it. You know, short sellers are often convinced that they're right, even, you know, you think of the Tesla short sellers over the years, you know. Just they just didn't want to look at the facts.
And so my grandfather loved this'cause he could make an extra one or two percent a year.
By lending out Berkshire to these crazy short sellers. And it sort of delighted him because he thought that they were
completely wrong, and yet they were gonna pay him. So anyway.
He he had a a guy who ran that operation.
And the guy gradually said, Well, I want how about if you pay me twenty percent of the profits that I make lending out stocks. And my grandfather said, Great, well, next thing you know.
He's got, you know.
ten or fifteen employees in the securities lending operation and they're acting not just lending out his own securities but acting as what's called a broker finder, you know

And uh
It was sort of out of control.
And so my grandfather who was eighties said, Jesus, Chris, I you know, it I I don't know what to do. I said, You gotta get out of this business. I don't e I mean, we're doing a couple of billion of footings a day and I don't even know some of these counterparties. There's this one here I've never heard of, you know, in Greenwich, long term capital. I mean, I don't know.
Miracle. Uh so I'm like, Where I'm gonna get us out of this thing.
So I decide I'm gonna try to sell it.
I'll try to sell this operation because we're gonna have to close it down when he dies anyway, because we the charity couldn't operate that business. So I was thinking of who would be a good buyer. It needs to be somebody with a really strong balance sheet, a big portfolio of appreciated securities, you know, great credit and credit rating.
And so
I thought Berkshire. Now I'm like twenty six years old. And uh
And a guy named Bob Lensner who had uh
Uh uh
was somebody I knew in New York who was a friend of Sandy Goddessman's, I think, and he knew Charlie.
And so I
said to him, Hey, do you you know, do you think you can put me in

Mm.
put me in touch with Charlie and Charlie said, Well, I'm gonna be in New York for I think either a Costco or a Solomon meeting, and I'll have breakfast with you.
So I show up at eight o'clock at the Millennium Hotel downtown in New York, and I I pitch this stock loan business. Like I I throw it right out there. I'm you know I psh I have no idea.
And
Charlie stops me after like four minutes.
And he goes.
I have no desire to own a business run by seven guys named Vinny.
And of course, it was the perfect we literally had seven guys named Vinny. I mean it might have been Vinny, Tony, Mikey, but it was really a back office, slightly shady operation.
And he said, But I'm very curious about how you picked Berkshire and how you got
where you are and what are you doing and and uh we got talking about the insurance letter and this, my grandfather.
And we stayed at that table until lunchtime.
Which is it was almost four hours and
It was it
changed everything for me. I mean it was and at the end he said, You know, young man, anytime you you wanna I'll make time to see you. Anytime
Los Angeles and I enjoyed our conversation and so I just started ginning up an excuse to go there all the time and uh would call on him and and
I just
I am
I I can't
I can't even put into words how much I just admired his
incredible depth and breadth and and um
You know, it's funny the the Venn diagram of what I admired about Charlie and what I admire about my father.
don't have a huge amount of overlap.
Uh they're very, very
Different.
But there's something in in my admiration of Charlie that has this real real depth. And uh that that was that was how I met.
Charlie long quite a bit before I met Warren and
But just the sheer breadth of his knowledge and his his it the speed and the processing speed and what would come in and what would come out of left field, it was just
Breathtaking. A really incredible human being.
Talk to me about some of your favorite stories or lessons you learned from him.
Well
It it would it would be a book. If I was to think of like a couple of the things that mattered
There were things that mattered personally in a way that was very surprising. Uh, you know, in my personal life, I went through a un unexpected divorce and I was
having dinner with Charlie and he was saying, you know, I generally am not a fan of divorce because people don't tend to do better.
Uh it it's
You know, they they it it tends
to be uh about a fantasy and it tends to reflect sort of a lack of
you know, realism, uh, and all of the things he said about marriage over the years or so.
interesting about, you know, trying to
you know, be deserving of the partner that you would like to find and so on. Um
But in you know, just in this moment where
you know, I could feel you know, Charlie was a tough critic and there was n he never held back telling me when he thought I was
you know, foolish or stupid, but I felt so deeply
supportive to that you know, that he he was
It was coming from the it was like the hardest teacher you've ever had. You know, the hardest teacher you ever had is a tough critic.
Um, but you feel they're rooting for you. Like that's part of what makes them your favorite, you know? Um
I felt like that with Charlie, but at one point Charlie said, Well, you know, it's
it it's very hard to be blamed for someone else's unhappiness.
And uh
Yeah.
Just those words and in this moment that was for me a you know quite a
uh a a time a low point in in my life and a time when it felt quite traumatic. Just the grace of that phrase, you know, that it's very difficult to be blamed for someone else's unhappiness. And and you know, there there can come a time when it it that's just too much. And he said it's particularly hard if you're wired
in a way that you love somebody and you want to help them.
You know, you're tr trying to make them happy, you're doing you know, and so he said it it it can get to a point where that that's that's just too much.
That that was
Something that I I wouldn't know how to describe that in any other
formatted. It wasn't an investment lesson per se, but it was it was one that was
very, very helpful to me.
Um
You know it I
the the story now is out. Uh it was something that he had said to me when I was asking him about his happiness and and uh
and how he owed his his debt of happiness. And he said he he owed it to his wife's first husband.
But I'll I'll give you one though w that was also amazing, which was around Costco.
Um
You know, we were talking we talked so much about Costco over the years and and um

And uh and we owned it for
You know.
14 years, I think. So we had a long run with it. And it just the valuation kept going up and up. And it it was a a mistake to have sold it, not because the valuation went up, but because the the the reach of the business got so far beyond what we thought was possible. And so it was it was a real mistake.
But Charlie made an interesting comment once because I was challenging him on this idea that there's a certain number of customers that would go to a Costco.
If they didn't have to
Be a member.
And so I said, Let's say the membership fee is two percent of revenue.
If you raised prices two percent, you would still be lower cost.
than anybody else.
And yet you would have more customers.
And because you had more customers, you'd have higher revenue.
And so
It would seem to me that keeping customers out of your store
that would otherwise be there is
Is a mistake.
And uh
Charlie's insight, I mean, th there's there's a long answer to that, but the the one of the shortest answer answers is he said, think about who you're keeping out.
Think think about that.
The the cohort that
That
won't give you their i license and their ID and get their picture taken.
Uh or they they aren't organized enough to do it, or they don't
can't do the math to realize how they're
He said that cohort will have a hundred percent of your shoplifters.
Mm-hmm.
And a hundred percent of your thieves.
And now it'll also have most of your small tickets.
And that cohort.
relative to the US population will probably be shrinking.
as a percentage of GDP.
relative to the people that are able to do the math, that are responsible enough. So going all the way back to insurance, you know
Somebody's credit rating is a great predictor.
of whether they'll crash their car.
Well, because they're responsible and they tend not to cheat. So is being an army officer.
Right? USAA doesn't need to know anything else about you, just that you're an officer in the United States Army and they can offer you a lower price.
Because they know you're not gonna cheat.
And the difference in fraud, of course, there's a lot of fraud in auto insurance. So if you don't have to charge for that fraud, you can charge a lower price.
But the question is how do you keep
The fraudsters out.
Well, army officers is a good shorthand. Government employees.
used to be a good shorthand, which of course was what Gico stood for, government employees insurance company. We'll just insure government employees and we'll just we don't need to know anything else, just your government employee
You have a lower risk.
And so this ability to Charlie's phrase was the intelligent loss of sales.
He said you're young and you just think more is better, more is better, more is better. But more is not necessarily better.
It's who do you keep out?
Who do you keep out of your company? Who do you keep in, you know, as a in running our own firm, we we you know, there's so many lessons of Charlie's that are were captured in, including having a board of directors made up of people that I don't want to disappoint.
Well, in the mutual fund industry, that's very unusual. But we have a board of people that I really admire and I don't want to disappoint. Well, Charlie said you should.
Because they're the face of your client.
And so
Have people on that board where you would
Feel a little sheepish to do lousy.
And then you'll you'll work harder. That's a that's a good a good lesson.
And uh
But you know, have things that make it hard for people to trade in and out. Now now, you know, when we had the mutual fund trading and all of those scandals, you know, we were in a wonderful position for that because we never let him in in the first place, you know. He's like, Well, why do you want
You know
that sort of investor, like set their expectations.
Keep them out. Like you don't want to be the biggest, you want to be the best.
And so that means you're gonna have to keep a lot of clients out.
And uh your your life will go better if you keep on. He said it's one of the reasons he gave up being a lawyer.
Because
You know, being a lawyer he said it's tough because your best
your most profitable clients are gonna be people that you don't respect very much.
because they're always operating right on the line, they always need a lawyer, they're always trying to get around it. But
You know, your your best clients will will be your worst customers.
Well, that's a tough
That was part of Charlie giving up the law, you know. And and so those are
You know, examples that, you know, had very personal impact on me in terms of how we structured.
our firm, how I think about businesses and think about, you know, that loss of sales, about, you know, having
You know, setting up.
Pudding.
Yeah, I
Charlie's bust behind me and my desk. You know, he just said having physical reminders reminds me a little bit when I was
Yeah, uh
doing my degree in theology that that uh
You know, C. S. Lewis was somebody I admired a lot and and uh
C. S. Lewis was very old fashioned in this in certain ways, and and one of them is he believed it's a it's a good idea to get on your knees when you pray. And uh
And that's you know, I I thought that was really sort of reactionary. I mean, you know.
You can pray anywhere, you just sort of you know.
Talk to the
T.
the greater being, whatever it is, you know.
Uh
And uh
His C. S. Lewis's point was, Well, we're animals.
And boy, there's
Nothing like
You know.
Being on your knees with your head down to
reinforce in your brain that you are very vulnerable. And uh it that that gesture changes your mindset. Twice still I'm gonna be the last guy in New York wearing a tie. Uh but I always felt it was respectful, going all the way back to Steve Jobs and Fiduciary Trust and my dad thinking, who is this hippie in sandals?
with his long hair and and won't even get a haircut and
But you know, we have clients, you know, who come to visit us and
You know, if they're coming from the Midwest and I'm wearing a golf shirt, it feels disrespectful. So part of it is about
communicating respect to them. But it's also
It makes me feel like
I'm I'm ready for work now. I'm a believer in school uniforms. I think I think kids behave a little better when they're in a school uniform. I'm also a believer in that. Was it your father or your grandfather who used to like run down this street to be grandfather because he was like, What if somebody saw me? I know. And it is an area where
My dad and grandfather were so different, and again, both admirable, but in very, very different ways. But yeah, my grandfather always sort of had this sense of, you know, he was a great man and it was important that he and you know, Ben Franklin did the
Same with a wheelbarrow in the streets of Philadelphia. In his autobiography, which is, you know, eighty pages.
There's a section about uh uh borrowing money.
And he says, you know, and you borrow money
Uh there it's very important that you do certain things.
And one is that you need to reassure your creditors.
that you're trustworthy.
And so he always advised paying them interest a day early.
Uh but another thing he's he said is he would load up these, you know, big
Printing blocks.
and typed things and he'd have a wheelbarrow and he he would be seen pushing this wheelbarrow and he said, It's important that they know I'm industrious. And so in the book he says there were times he didn't need to do it. He just you know, he was managing his his brand, uh you know, and
But in a way that he felt it was important and well my grandfather had had that. He felt
You know?
Interestingly, Charlie always talked about dressing conventionally, you know, wearing he said he's so eccentric in other ways that by wearing a suit and tie people assume that he's more conventional than he is, and that serves him. So
But yeah, it was my grandfather that would hold his jacket and shuffle and
And where's my father?
Is
He it there are ways that he doesn't care what anybody
else things and he is much more uh

dispositionally much, much lower profile than his father.
We talked a little bit about avoiding customers, which is like a form of inversion. Yeah. What do I want to avoid?
One thing I've heard you talk about in the past is avoiding your weaknesses.
You tell the story of Tiger Woods. I'm wondering if you can tell us that story
And also relate that to your life and how you learned this lesson.
The story, which I believe is true, was about Tiger Wood's first British Open. I forget which course it was gonna be held at, but whatever the course was, it was notorious for those deep pot bunkers and
And uh apparently uh the weakest part of Tiger's game was his sand.
game coming out of bunkers. Uh
And so as the press was following him around
uh they kept badgering him about what is he doing to improve his sand game, because that could really be the linchpin in the British Open. And
And uh uh he had said that he was working on his drives and his irons.
And they said, Why? And he said, because I want to avoid the sand.
And uh and then I believe played the entire British Open without going into a bunker once in the whole open, which was
at the time unprecedented people talked about. So uh now
If you were to tell me that that's not true or it's apocryphal, I'd believe you, but it's such a good story, and it does get at this very deep truth, and you said it was certainly was a Charlie truth about inversion.
And um
You know, so much of Charlie's mind was about and you know
Think about the causes of failure and try to avoid them.
And in fact, in our research department, we have a a letter that Warren wrote in 1965, I think.
uh that are sixty six
uh that lists the reason that he believes most
uh money, institutional managers tend to underperform.
And uh we framed that letter and put it on the wall in the research department because we said what we should do is just try to avoid these five things.
And to the extent that we avoid these five things, we will over time be above average.

You know, one was group decisions. That was number one.
Uh number two is the desire to conform your portfolio and policies to what other large well regarded.
Firms are doing. Three was the asymmetry of risk and reward. Obviously, better to fail conventionally than succeed unconventionally.
Um
four was over diversification.
And uh five was inertia.
And it's funny, we just did the reviews of our whole research team, which is one of my favorite times of year, just to really sit and go in depth with each person about
You know.
how to help them get better.
and uh, you know, how to be learning machines, how to and every once in a while there's a theme that will run through each
one and and inertia was the theme that really
ran through it. We just said as a firm
we really still struggle with being held captive by our past decisions.
Um, you know, the
We're held captive if we
you know, chosen not to own something and it's gone up a lot. It makes it so hard for us to revisit that.
Uh if we own something and it's gone down, it makes it very hard for us to let go. You know, what are the ways in which inertia but anyway.
All a digression back to this idea of of framing that letter was of course from Charlie saying, you know, trying to avoid
things that will lead you to fail. And I think at a personal
level.
Really doing your best to try to figure out
where those blind spots are. And so for me
I am
Yeah.
I am the motherload of all ADD. I mean I you probably tell it. Very hard to keep me on topic. And that's one of the reasons I love this business. Everything's interesting, everything's relevant. No matter what article I read, it has some tentacles back that have investment implications and and um
And so uh uh
You know, for me the question was, well, how do I structure
my life in a way that uh
allows me to make sure I get things done that I don't really want to do or that are easy to put out of my mind. And so
For me, for example, physiquely.
Being in the office matters hugely.
I I'm
I do not
work well remotely. I don't do Zoom well. Uh it just
doesn't work for me.
And knowing that, I really try to structure my life to to avoid that.
And
I show up in person. I you know, if I'm working on a weekend, I just come to the office for half a day. It's like a very relaxing time to be there and I can get more done in a few hours. But if I'm at home
you know, trying to work and you know, the kids are there or the like I it's it's not that
Uh it's just I want to be with them, you know, and and so uh
physically putting myself in a different location matter it didn't matter to my dad at all. He could
tune out everything work anywhere, but for me being um that that's sort of a an easy
concrete example. I you know, I mentioned that I I dress differently when I go to work.
Again, even if it's a Saturday, I just feel like it's
You know, I'm in a different mindset. In when I was at university
Uh this is gonna sound very reactionary and old fashioned, but I was at a university where
uh even as undergraduates you you were
you could all wear a gown, you know, a robe.
An academic robe.
And uh you were required to wear it to certain things, to chapel or to a debate or to big university functions. But you could also choose to wear it. Uh and you know, it was quite warm and it was the east coast of Scotland, so you know, you didn't mind wearing your red robe. Originally I'm sure it was to
make sure that undergrads weren't, you know, getting drunk in the streets or something like that. So it was a little like a school uniform, like we were saying. Um, but to me, you know, wearing a tie is a little bit like that. It just so
Uh
Uh Granny's rule, work before play. That's probably the strongest.
Uh
You know, I joke that you know, that is uh you know, in our family six kids
That
People will say that over and over and over. Work before play. That was my gr my dad's favorite expression. Work before play. Well, it su it suits me. I just if I and it suits me whether it's
You know
Going to work or whether it's going to exercise.
You know, it's there's one thing on earth I love, I love a sauna. And so, you know, I only give myself a sauna after I work out.
Like there's no no other way I can get a sauna. And so it's amazing how effective that is and
manipulat myself into doing something I don't really feel like doing, which is, you know, going and
exercising. Uh
So
There's
All sorts of those sorts of influences of trying to look at ways
Things that would normally
sort of bring me down and and a big a big part of it is also the choice of friends. I a I don't mean you should choose opposites. I don't think that really works. Charlie once said, you know the saying opposites attract? They don't. I do think having, you know, colleagues especially
that you know, fill in the areas where you're weak.
And you know, by understanding the areas you're weak, you you you don't keep sort of you don't end up in a Peter principle sort of effect. And it's a big part of how we try to manage the team is
You know, to keep people
Away from the areas they're weak in, or at least
Take those away from being, you know, completely destructive.
said for many abstinence is easier than perfect moderation.
And you know, for some people that is the case. I'm I'm very lucky that way. I'm very good at moderation and
In most things.
Uh uh but
But I've watched addiction destroy.
people's lives and uh people that I love. And and uh so that's an area where, you know, I I keep a journal
Of every
alcoholic drink I have a week.
Uh
Because
I love alcohol. Should be clear. I mean, I just think it's such a wonderful gift. I don't think it's a coincidence that Jesus' first miracle was turning water into wine. It is
Every culture on earth, you know, a hundred and
fifty two countries or whatever it is, you know, invented alcohol independently of each other in many cases. I mean, it's just amazing. So I I love alcohol.
I would hate to have to give it up. And I'm such a believer that it will destroy your life if it gets out of control. And I'm a believer in what Charlie said about the bonds are too light to be felt until they're too strong to be broken.
Uh I'm a believer it can absolutely take you by surprise.
And uh so, you know, for me just keeping
Track of the
The drinks I have over a course of a week is a way of it.
you know, ensuring it never gets out of hand. I you know, I'm not
Weight obsessed as I
My children like to say I'm sort of threatened by the shower drain. Looks like a manhole cover. I've always been very skinny. Um
But I do you know, I do weigh myself probably once or twice a week.
Uh so that if
If I end up
You know, a couple of pounds above.
Where I was I just
Try to deal with that right away. And uh where I can all be in sort of moderation where I don't have to
go to an extreme. So that those are examples of some sort of self manipulation as well.
That's interesting. T uh w how how long ago did you start the drinking thing? Oh, a long time ago. Okay. I mean, you know, probably
Twenty.
Let's see.
You know, probably
In my
I was probably forty.
I would say somewhere in there. It was around that age where I started seeing it.
Um
begin to take some people down. You know, the

college buddies and always a lot of fun and life of the party and every time you're with'em you drink too much and and you know, but it's always a great time and there were somewhere in the late
thirties or so where
You know, it
It stopped being so funny.
And you realize they couldn't stop.
And uh that's when I was like, Who I don't want to be in that business. This can get away. And uh you know, it's a uh
Uh so that's interesting'cause that's been something I've been thinking a lot about recently too, in terms of like
Watching people
And then also like
Loving wine and at the same time like
How do I prevent myself from being in that position which I don't want to be in and yet
Not having feedback on turn especially during Covet, right? Where it was so easy to so easy. And wine's the most dangerous of all because the portion sizes grow and the alcohol content has grown.
So, you know, you end up with wine now that is being drunk out of much bigger glasses, and the wine itself is twenty or thirty percent more potent uh uh than it was I try that's a good example of something where you can do the opposite, which is
smaller portions. Yeah. Smaller glasses. Uh, you know, I love cocktails, so you know, I will
Craft some.
Beautiful.
spectacular work of art, but I serve them in very small glasses, which in the fifties was often how things like martinis were served.
uh was in these very much, much smaller glasses.
Um even recently.
feel I've been trying to craft
I I've not succeeded in a no alcohol cocktail that's any good. I I would say there is good no alcohol beer.
Uh the Athletic Club. I mean that by the way, that's a company that probably's got a
probably worth over a billion dollars today or two billion dollars, a couple guys in Connecticut.
Just how do we make really great non alcoholic beer where it's not an afterthought, where it's a our mission.
Yeah.
That stuff's amazing.
I mean, what a great gift. So but uh but I I I spent a whole weekend with a friend of mine. We we bought every one of the fake spirits, we tried all different combinations, and uh where we landed was we developed a very good low alcohol uh where it was basically making a Manhattan
using fake bourbon, but real amaro or real vermouth. Okay. And then chili bitters.
Uh and the the chili gives it that bite that gives you the little burn and there's some psychic
Connection.
with that. The Amaro has alcohol, so it gives you this. But it you know, the total cocktail probably has twenty percent of the alcohol of a Manhattan but
Probably eighty percent of the
Satisfaction.
But you know, you think about I love what uh
Hemingway said, You know, it's it's not finishing the bottle that gets you in trouble, it's opening another one.
And uh there's a lot to that too.
I agree with that. Most of my I'm always like if I wake up and I'm like a little groggy, not hungover, but you know, you just mental fog. It's like man, that second bottle of should have kept that one closed that after dinner, that is a yeah.
But those are good and so I mean I
I always had a glass of wine with Charlie and
And I I enjoyed that. That was one thing that surprised me. I was fortunate enough to to be in his presence a few times and have dinner with him. And I was surprised the first time I saw him with a glass of wine. Yeah.
Yeah, and by the way.
There's there's one other thing which I never ever got to ask him about, but he never seems to go to the bathroom. Well, you've been sitting with him that breakfast.
When he got up at noon,'cause he said he had to go to a lunch,
I
ran to the bathroom. But I kept thinking at the time he must have been
You know, he was probably only sixty, now that I think about it.
Which is sort of hard to believe. Maybe he was a little older. Maybe he was he was probably sixty five.
But
But I remember thinking, I'm not gonna
Get out like as long as he wants to sit at this breakfast table, I'm staying here. But it almost killed me. And
It and so just over all the years it's sort of amazing. I don't know what his trick was on that. No idea.
Talk to me about raising privileged kids. How do you how do you raise kids in in a world where I mean you're the third generation of this in a in a way. Your grandfather is very successful, your father is very successful, you're very successful.
And but you live in a different era where I know a lot of my friends are sort of struggling with like
How do we raise kids in an environment where we have affluence?
Well I like what
You know, Charlie said that that money doesn't ruin kids.
You know, parents do.
And
I would add genetic scan too.
I mean it you know, they're
you can look at siblings from the same family that make totally different choices. They've had roughly the same home life, roughly the same genetics, and something is
is different. Maybe it's peers, maybe it's, you know, just some nuance in the
one or the other.
I feel like
For me the
That was an area that
You know, I I
I I could I could get pretty emotional about it because it's there are a lot of people
that I know who are very successful investors.
And their basic view was
Thank God I married that could.
You know, raise my kids, right? That was not me.
I actually married a woman that had a four and five year old.
When I was only twenty.
Eight.
And then we had a child together.
We actually
Uh um
You know.
functionally adopted a boy in there as well.
That
to me was m you know, maybe the greatest source of joy in my life. I mean I love I talk to
Almost all my kids, almost every day. Uh
I don't think I was ever a helicopter parent. In fact, their line was I somehow managed to turn every activity into a helmet sport. Uh and there's some truth to that. And um
But I just loved raising kids. And I've actually got three grandchildren now. Uh and uh
And it just, you know.
Covid, I had all of my children come and lived with me.
and uh uh and my grandchildren and my mother. Uh
And it was a glorious time. I mean, I just so I've always loved loved kids. I've loved little kids. I I uh um so
You know, I would say that um
I think
I think having grown up in New York and really not been a part of that that I think we I think we felt a little bit like outsiders growing up. Um
I think you know seventies everybody was an outsider, so there was probably some of that. But um
But I look at my kids and I'm I'm so proud of them, and they all
They all worked through, you know, we did have the same rule like
Three weeks.
without a job as long as you're in school and then three months without a job.
Uh uh
you know, is how long you can live at home. And and
You know, my parents were very straightforward about that and and so
You know, and I look at Charlie Munger's got great kids. Like they're all approach, right? He he gave m a lot of money to his kids. He gave money to his kids, but they
You know.
They're just
They're good citizens, you know, on balance, that's swing a cat through the
Munger clan and you're hitting above average people.
um in their value system in their
um in their intelligence and I so
You know, I I would say I don't know the secret. I know what doesn't work. What doesn't work? What doesn't work is
Giving your kids a lifestyle
where they will feel like a loser if they are unable to maintain that lifestyle on their own merit.
I just think that, you know, if you do the
Southampton, Palm Beach, uh uh Aspen.
Uh like
You're creating
You're creating kids.
That
Either you're gonna have to leave them a hell of a lot of money to maintain that lifestyle. But even then, even if they maintain the lifestyle,
They do so purely because they can brute afford it.
Not because they are interesting or substantial people, and I think you surround them
With a lot of
I I think unhappiness. I will I you know I had both sides of my family I was very lucky that we never I to this day I like to brag that I've never been east of Bay Shore on Long Island and somebody would have to be a New Yorker to know what a humble brag that is. But
You know, basically east of Bay Shore is where the Hamptons are. And you know, I've been a lifelong New Yorker. I've never been to the Hamptons. I've never and uh
Yeah, I
You know, my father once made a very off color comment, but I'll share it because of he said, you know, I don't
I don't go to uh uh uh strip clubs because
If if I don't like it, it's a waste of time. And if I do, it's gonna be very expensive. And uh you know, why do you wanna create an environment where
you know, you would have to endow.
I mean think of what that lifestyle would cost.
And maybe you endow it for the next generation, but then they're they can't do it for their kids and they can't do it for their ki you know, sooner or later you're creating people that feel like failures.
And I feel like
You know, so for me I
You know, we have a falling apart farm in upstate New York and I l I live a fabulous life, but I I just think
I don't think we raised our kids in an and you know, Charlie talked a lot about not having sold his house.

And that was very much true with me. I mean, I the you know, what my kids would describe as our family home, I bought in nineteen ninety-three or nineteen ninety-four, and it is not a fancy place, but it's sort of a farmhouse about an hour and fifteen minutes north of New York. And
It's got you'd roll a marble through the house and it's a very gracious, beautiful place, but it's a farmhouse and and that feels very
Realistic. I mentioned, you know, I have this
old wooden sailboat that we jokingly call the Wasp Winnebago, but it is kinda like a Winnebago. I mean it's it's fifty feet and you sort of drive it to campsites and you pump out the toilet. We sleep all in two little rooms and and uh
But
So I feel lucky that way. I I definitely
And and I I had a good group of kids that I grew up with, and we all raised our kids together, so I think we also had a peer group
of friends that
Achieved different things in different ways. So, for example, we do a trip every 18 months. The same group of friends does a trip together, and we've done it since we were.
teenagers. Um we would spend some time together in the summers, but then everybody lived. So we would always
you know, have a weekend where we all got together. And
And uh you know the
the way we pay for that trip is it used to be that, you know
Whoever what you know, what friend who's a teacher, you know, that he would dictate the the amount of the trip. But you know, as as I said, how many times do we need to canoe down the housetonic? Can we do something more? And so and we all decided we would contribute one week's pay.
Uh so it was uh
You know, sort of.
You know, from each according to his ability.
And so everybody made an equal sacrifice.
And then that was the trip kitty.
Uh
But I just think having a f in group of friends that has persisted from childhood to in fact three of three of us were baptized together as infants. I mean that's
Uh one is a partner at work of you know, we've been partners for thirty years. He runs all of our client side.
Um
But there are people that that I admire and they're truth tellers and so we raised our kids all together. I think that
Helps a lot. I just think this idea that you make a lot and then you begin to separate yourself, separate yourself more and more.
I think that
That's the message that you're sending your kids, is that there's no continuity or they're more special than their cousins who didn't do so well, or the I I think it's uh
How how how do you avoid that lifestyle creep from sort of like setting in?
Well, it's gonna be whatever. I mean, of course, one of the great things about making money is you can sort of have what you want.
And I think the question is how do you try to do a good job deciding?
What you want.
Um, you know, obviously the I mean and you know him, I mean one of the great gifts to
humanity has been uh Morgan Household and uh uh you know the psychology of money is like the perfect reminder.
that what we really want, you know, what kids crave is time with their parents. And you know, you end up in the Hamptons on the cocktail circuit and, you know, biking in your lycro with all your private equity buddies. I mean
Can you tell I got a chip on my shoulder about that? Um but uh you know, and all your business school buddies. So I just think
You know,
Yeah, I'll I'll give a good example.
Uh
We grew up loving skiing.
And uh and my dad is a fabulous skier, and so my grandparents were good skiers. Um, but they were so worried about spoiling us. So that I grew up skiing in upstate New York in a town called uh well, by a uh the snow mountain the mountain was called Snow Ridge. It's in Boonville, New York, or near Boonville, New York, which is
You know, it's just a farm hill.
Uh
But you know, as we were doing better, my dad wanted us to ski in nicer places and so on.
And uh and we went to all different places, but we always stayed in a pretty modest way. We he would, you know, make a big deal out of buying our ski equipment, you know, secondhand at the end of the season so that we would have and
Um, but we ended up in Taos, New Mexico.
Uh now there were some other reasons we ended up out there. We had an office in Santa Fe for various reasons and
And uh and Taos, New Mexico is a very old school kind of place. It's steep, it's technical, but
It is the opposite of aspen.
And so
You know, for me it was this sort of idea, well
I could just keep going to Taos.
My kids are going to be great skiers.
But it's gonna be a place that they could likely afford for generations. You know, we've got a
Condo with
are in shag carpet, and my daughter met her husband is from Taos, and you know, and so it feels like a family spot.
Whereas if we ended up with in Aspen, I just think it the total cohort would change. And then what?
How the hell are my kids or my grandkids gonna afford all a four to have homes in Aspen?
So they're gonna instead end up going to a place like Taos and feeling like failures.
Where's my kid feel like Townsend's the greatest place on earth? Well, they've never been to Aspir to try just as well. And so
Going back, I'm very prone to envy in myself.
I'm not proud of that. I'm I'm I it's a
Yeah, I uh
I can be a very competitive person.
And um
And so a big part of
checking that weakness in me.
uh is not to get in that pool.
And so, you know, I don't go
to Southampton, not because I don't think it would be lovely, and not because there aren't some amazing, interesting people that I admire hugely that live there and they live beautifully there. It's because if I got there, I would feel like
I wanna be here. I gotta do this and you know, and I gotta get a big house here. And then, you know, now what? Now my kids are all trying to figure out well, can we get so
You know, instead we have we literally have a campground in Maine.
you know, little cabins and and it's it's a place that we're very happy'cause it feels sustainable. So but my going not going to Aspen is is not because I don't think I would love it.
Right. I know I would love it. And you know, uh and you know
Southampton, Aspen, you know, Palm Beach.
I I'm sure I would love it. Look, people are not crazy.
If people go to Palm Beach, it's because it's pretty great. And they pay a lot of money to go there. It's probably pretty great. I just feel like
Why do I want to get on that?
Trolley. I I feel like Crystal Math is probably pretty great, too. I just think it's probably better not to not to get started.
I've been thinking about it a lot, but I mean I I went with um the my kids who are thirteen and fourteen. They were twelve and thirteen at the time to Europe last summer.
and we rented this dingy Airbnb without air conditioning. And I was like, you know, I wanna I wanna sort of like I want them to be able to be flexible no matter where we're standing. Yeah.
And I remember like lying there trying to sleep and it's like thirty three degrees. I was like the only problem with this is like I have to suffer with them. Well, you know, this is a this is a trick. I don't know how well this would work for your kids. But we had that with uh uh
Airline travel because my grandfather famously wrote his will, and the beginning words of it say, I'm writing this myself on TWA flight three two three economy class underlined.
So, you know, first class was always an absolute no no. It was like ordering filet mignon down a menu, like it would still I could still feel my dad's blood pressure going up if any one of us tried to order a steak at a res But you know, it got to where
Travelling coach.
You know, is
Yeah.
Today is a
A lot worse than traveling coach thirty years ago.
But I hated the idea of
Having my kids in
business class. It just felt like
It didn't feel right either. So I hit on this idea about when they were your kids age of I'll split the difference with you.
Like I literally will write you a check.
You can choose like we'll get you a seat in business class, or you get seven hundred dollars.
And uh
It is amazing how into that they were. Uh they they even started with this view of, what if we find a cheaper flight? I was like, No, no, no, no, no. Um
But I don't I think it is okay. And again, you know, going with the
The the like
Travel is a huge gift.
And slumming it isn't necessary. It's trying to find that line of what you feel is reasonable. Like what we all want to be is at the high end of value.
I uh you know, uh David Brooks wrote a beautiful article about traveling in Africa.
eight or nine different places.
And he asked his kids at the end what their favorites were, and it ended up
Начали на королев.
To the amount that the place cost, but to be inversely correlated. And he said the reason is the nicer the place, the more they tried to isolate you.
Like oh, you're in our private villa bungalow out here with the private and this stuff. Whereas the lowest end place was one where the kids ended up playing soccer with the people that worked in the kitchen and running around in the scru and the dirt and sort of having a great time. And he talked about there was a Yiddish word.
And of course, I don't remember what it was.
but he talked about that's what people really crave. They crave connection.
And so it's not really about the luxury.
It's about the connectedness.
And so
you know, staying in a very luxurious place that feels very simple and connected.
fabulous use of funds. You know, staying in the
four seasons where your children are given a butler and a ski valet.
Probably probably not as good. Yeah. We we we got upgraded once uh just because I fly a lot. So I have like crazy status on the airline and they're like, Hey, you guys got your seat changed and
I went up with my mistake was I went up with the kids and she's like Oh you're all you're all gonna be in like business class and the kids were like so excited and I was like
Oh God. And now from now you know, one of my sons is like lying back there, like more ice cream. He's like, Why haven't we flown this way before? But of course being able to love and
Cheer that you know, it's not gonna be perfect. I mean, that's one again where Charlie says, if you want your kids to be as ambitious and as hardworking, it's unlikely. But Barry Diller tells a great story. I don't think he'd mind my
telling it. Um you know Barry grew up in relative privilege, uh he would say.
Um, you know, and
Uh he had a friend that was from one of the wealthiest oil families in LA.
And the parents made him sleep in like the servants wing of their mansion.
And he just talked about how deranged it all seemed. Like it w it was signaling to the kids that you don't love them.
Uh or that they're not
trustworthy, or they're so I've I've seen just as much damage done by wealthy families trying to build character.
Uh as I as I've seen the the the opposite.
had a very difficult relationship with his own father, and I think a big part of that was his own father was so puritanical.
And you know, would make him carry his skis and walk up the hill for the first in order to get a lift ticket.
Or, you know, they're gonna build a pool and so they're gonna get out there and dig for
two weekends until their hands were sort of bloody and you know, the grandfather was always trying to
Teach them a lesson.
And it had felt false.
It felt false to my dad, it felt and so they ended up really not close. Whereas my dad
My dad just loved life and so he embraced and it's true we didn't stay, you know, I remember going uh to Switzerland and
You know, in Stad there's a very famous hotel, the Palace. It's up on this hill. And my grandfather, even when he was the ambassador of Switzerland, used to brag that he would never stay there because it's a terrible hotel for skiers.
He stayed at a little place called the Ark on Seattle because it was right at the base of a lift and he said this is a skiers hotel.
Well, it's not he was not suffering being slopeside, but it it made sense.
And so I think that's sort of the idea. It's that, you know, putting your kid in the servant's wing versus hey kids, we got upgraded. We got upgraded because I worked my ass off. And isn't this amazing?
You know, y and and letting them savor and laugh and enjoy that. You know, it's uh that's
And they weren't so happy on the way back. But you know
There's a lot of opportunities to have that conversation, but
It was Charlie who told me, and I had never thought of it this way. He said, You get into a lot of trouble when you want your kids to live a different lifestyle than you're living. Yes.
Uh, when you're getting a chauffeur to drive you to work and you're telling your fifteen or sixteen year old to go get a job at McDonald's.
Uh, he said that's gonna create a lot of resentment. Yeah. I think that's the real truth of it is that your kids are gonna imitate you.
And it's maybe the most important thing you can do as a parent is model happiness.
Not
desperation, not greed, not need for other people's approval, not you know, just try to model happiness and
whatever that means in how you live.
And you know, if there are people that develop money and it really makes them happy to have that big house, well, chances are that, you know, that they may have a view of their kids that I want my kids to have everything.
You know, I can't think of anything better.
than my children living in a mansion that I produced for them. And
You know, if it's sincere and happy, I don't think that I don't think you've created a miserable
Child if you're a happy
engaged human being. And so uh I d uh that's why I think the formulas, I think the
You know, the f the falseness is what kids sniff and and uh
When are you happiest? Well, I you know, I I've uh
I've I've had a lot of uh
um experience with
uh depression and others.
And uh
Uh some growing up and some through marriage and
And uh
And it's a little bit like insomnia. Like if you
I
I have almost a sleeping superpower. It's like I'm not even supposed to say that out loud because it I have a my my closest friend who's also my partner at work, and as I say, we were
raised together send infants and he's
hugely important person in in my life and and uh
He has a terrible time sleeping.
And uh
It's like I've learned that my talking about how I can fall asleep, like like if you told me I I can lie down here and have a nap for fifteen minutes, I would have a nap for fifteen minutes. Like I'm really good at sleeping. It helps me with jet wag. I can like you get anywhere you say it's time for bed, it's like I'm ready for bed. And um
And yet
I have even though I can't I can't physically I haven't experienced
uh insomnia.
I have a deep visceral sense of what hell that must be.
And similarly with happiness and depression,
Like
I I see people that are depressed and I feel so lucky.
I'm just going to do it.
Dispositionally.
Um
have a tendency towards happiness and and contentment and it certainly came from my dad had it, I grandfather had it, my grandmother I mean I just feel I grew up
very, very lucky that way. My sister, my closest friend has that. We talk about it a lot. It's like it
And so I know enough about
unhappiness and depression to know that it's, you know, saying, Well, why don't you just change your attitude does not
is not gonna work.
Um and so
I've I've learned enough to just simply
Not take it for granted, but just feel deeply grateful that
that I tend to wake up reasonably content. You know, there's a
Uh this is this is a little bit strange thing to say, but but uh there's a psalm
And by the way, I should say
I'm I'm actually quite agnostic. I'm not I'm not a uh deeply religious person. I always admired the church.
Uh uh.
as an instrument of social improvement. I think that
the fundamental message and it's danger society of victimhood, I think is is a dangerous message versus the empowering message of
the degree to which you have agency.
uh for your life. And
I feel like that is a message of Christianity historically that I really admired, especially uh
in uh Protestantism, you know, this idea of
taking uh uh uh being accountable for your choices and for your life. And uh um anyway.
All all all to say that um
You know this.
Uh I do think that it is
very often the case that people do not have control over their happiness.
Um but having said that, what I was gonna tell you is there's a there's a psalm uh that begins uh uh behold
Uh uh the day the the Lord has made.
Rejoice and be glad in it.
Well, that's not a terrible way to start each day. It's just to say that, you know, just
This is the day the Lord has made. Rejoice and be glad in it. And uh
I feel like I get
I've I've had such a superabundance.
in my life. Like it is
And that tomorrow
you know, the phone could ring and somebody could say it's malignant or they could say there's uh been an accident.
Yeah.
And uh
And everything will change.
And uh
And I don't want
in that moment to regret.
that I didn't appreciate just how lucky I had it.
Today.
the day before all that changed. And so that is sort of a driving part of my mindset. You know, the
I had, believe it or not, I had an English nanny growing up.
Uh I had a very strange upbringing in some ways, but uh so this is, you know, my dad had us out trying to gather kiddling and you know, and
My mom's gonna have this.
English nanny.
Named Ellen Wigglesworth.
And Ellen Wigglesworth was born in eighteen ninety eight.
And uh
And she lost her fiance in World War One.
And that's what when she came to the States and she ended up being my mom's nanny in the thirties. And
You know, she was in my life, uh, she died at about eighty.
Six, so she died in
You know, I was out of
high school I was priority in college when she died.
And um
But she would tell stories about World War One. And to this day, like I can even feel my heart rate going up as I'm saying it, how terrifying I was.
of that idea of the guy blowing the whistle.
and going up and over the top.
uh and in the mud and the rain and the machine guns and
And uh
And I used to say as a little kid, I would sort of you know, when you say your prayers at night, I would sort of say, you know, I
I I I hope
I would be brave.
But please don't ever test me.
Like I never want to be tested. And and I feel like that about
You know.
health about
depression, about contentment, about sleep, you know, I feel like
I'd like to think, you know, Charlie was so
Powerful.
about handling suffering and his stoicism, you know, this opportunity to behave well, that's what suffering is, an opportunity to behave well.
And I almost feel like I hear you, Charlie, but please don't test me. Like I just I just don't wanna be tested and and uh but of course
Life doesn't give you that option. Sooner or later we're all gonna be tested. It's it's it's a matter of whether it's sooner or later.
But uh uh but so I f I feel like dispositionally
Happy
so much of the time, like if you were to ask me the you know, what are those moments in a year
It's like there's so many.
Uh, you know, I love the people I work with. I can't tell you what a privilege it is to really love your colleagues, like just to be curious about, you know.
What they're up to in their lives we have, you know, a small team, there are eight of us.
on the research side, but they're in every decade.
One colleague in the sixties.

Fourties.
Some in their thirties and
Some in their twenties.
And it's like the island of misfit toys. I like have no idea how we could have found each other.
Otherwise.
You know, I think our average tenure together is something like fourteen years.
Uh yeah, but there are people that I've worked with for
Thirty and
twenty five and twenty and
The newest one is probably
uh been less than a year.

And so it's a very gradual turnover process. Uh and but you know, there is turnover and there has to be because, you know, we have a
responsibility to have the best team on the field. And that is the worst part of my job. But it's not
It's almost never the case that it's
Not because that person doesn't deserve success. It's just that they're doing the wrong thing.
I mean, if they have that credential and that work ethic and that level of IQ and processing speed and communication skill and, you know, value system, and they aren't succeeding.
They're they're just in the wrong job.
Like you know, it's a in fact we had one guy that uh it it's it's actually become a little bit of a sore spot in the company because it was that sort of situation, and we worked like hell. And I was like, You'd be so good in the corporate finance function of a of a company because
you know, you're you're not good at predicting how things could change, but you have a deep understanding of investing and capital allocation and, you know. And anyway, he ended up very early at Facebook and has done
Great. You know, he's like, I wish you had fired me sooner. So everybody the company's like, fire me next, you know, and and uh um but so it's you know, there's a a an expression in sailing that a uh
uh a a bad day at sea beats a good day at the office.
That's not true.
One, a bad day at sea is really scary. And and two, a good day at the office kicks ass. I mean it's just
Fabulous. It it's exciting and you're watching things come together. So you know, that whole column of life feels great. And then I've got this group of friends from baptism to today that I love.
got this experience of being on corporate boards of some of the greatest businesses on earth.
And
I never thought I would love that as much as I do. I mean, it's just I've loved watching how, you know, the Washington Post evolved. I mean, it was one of the great
Mm-hmm. Great examples in
All of corporate history of
fiduciary leadership.
and servant leadership of the Graham family to make the decision to sell the newspaper, that it needed to be in safer and better hands. And
It was just incredible thing to be able to sit at a table with people of that caliber.
And then watch a process.
Imagine
the gossip of the Washington Post just gonna be sold, the grams are gonna be sold. Imagine that taking six or seven months.
And imagine it never leaking.
I mean just that.
Unbelievable character.
the people involved in that. So, you know, and then of course Coke and Berkshire. I mean it's so that part's amazing. And then, you know, I've got a family, I've got two
Living parents that are amazing.
Uh uh uh you know they're
They they do totally different things. But and
Then I've got this.
group of kids where we've been able to transition. I would say the most dangerous thing in the world with a twelve year old is to try to be his friend. Uh
But you know, the worst thing with a forty year old is to try to be their parent.
Yeah you know, you've you've you've gotta figure out how to transition that relationship to being
you know, a person that you care about and admire and want to help and
And but that they're a peer.
At that point, you know.
Take me behind the scenes of no particular company in general, but a board meeting, and what makes for a really good board meeting versus a really bad board meeting? Well, th the the board meetings, I mean, I've been
I think that a lot of average
companies board meetings are basically the lights go down, the PowerPoint comes on.
there is a focus on
Pageantry.
process. Um uh
And
You know, sort of checking the boxes.
And I'd rather shoot myself in the face. I just I mean going back to the ADD, you know.
And um
But the first board I ever
came and I do think that's the way a lot of corporate boards work. And I think it's gotten even more so.
Because I think
Investors are discouraged from going on boards.
by the regulations. I think the SEC is makes a
It I think it's a terrible mistake.
To discourage
Money managers.
Uh especially long term investors.
uh from getting involved in the governance of the companies that they they manage. And it's it's
The compliance issues are real.
because you've got to be very careful about disadvantaging your clients or if you're burdened with inside information. But I think the importance
of having owners of the businesses represented on the boards versus academics and lawyers and politicians. You know, you want people that have a real skin in the game and are advocating and representing their investors, their clients. So
It's a very but it it ain't easy. I mean, we're in a world where often regulation is for its own sake.
And so
Um I was very lucky that
the gateway drug, it was like starting
You know, at the absolute
top which was you know the Washington Post. So
You know, there's Warren.
was on that board and Ron Olson. I mean to a
Barry Diller?
At the time Melinda Gates.
I mean and and uh and of course the Graham family. I mean h w it just
And so they had a tradition
Where
The night before the board meeting there's a dinner.
The dinner was held at
The CEO's house?
And
Nobody else is invited, just the directors.
And you sit.
And you
have cocktails and you talk and you sit at the table and
You talk about business and you talk about the world, and you develop a deep
Culture of trust?
You also develop an environment where you talk about the real issues.
And
Then what happens at the board meeting
becomes much more now it's perfunctory's not the right word.
But
To me it was a way of orienting a board that your focus is really
on you know the long term you know do we have the right people running the business.
Are we able to stop them from overreaching? Are the shareholders getting the information they should have to make an informed decision?
Uh the
records being presented honorably, transparently, um, and then to weigh in on the big strategic decisions.
Um then the rest is
Whatever hygiene.
needs to happen. So that tone got set.
There it
Ed Graham and of course
I would expect that that was always the case at a place like Berkshire.
Where there's so much c candor, certainly that's been my experience. Um, and then at a place like
Coke, I would say that
You know, there have been different phases in Koch's histories. And you can read some of the things Warren has said about sitting on those boards in the past, and they're not always super complimentary.
Um
And uh but I think that
You know, one of the ways that I I try to contribute or be part is to try to bring that gram
Culture.
to these big company you know, to a big company like Coke. And it's been fabulous. The the it's a great
group of people. It's a great
uh board. They've gone into this, you know, having a small din dinner of directors only.
uh the night before. And it's just amazing how important that is and the degree to which you get trust and accountability and candor. And Jamie Diamond famously said, the bigger the group, the better the news.
So
You know, that is Oh, that's interesting. I've never heard that before. Yeah. Isn't that a good expression? And uh so smaller functioning boards.
You know
people being you know, you look at what happened at places like Hewlett Packard.
And you know, Intel for that matter.
I mean these these companies that you know uh
It's quite a well known expression that, you know, a a a great board can't make a great company, but a bad board can ruin a great company.
And uh
You know, I would certainly argue that
both Hewlett Packard and Coke.
The boards.
had a lot of accountability.
Sure.
Decades of
Oh of of bad decisions.
And it was bad decisions on what is the board responsibility, which is
Who's in charge?
Talk to me about the third generation of a family business. Usually the expression is like shirt sleeves to shirt sleeves. Three generations. And yet you're an exception to that in part. What are the lessons that you've learned of having
That success.
You you've all created your own success in a way.
Well, I don't think there was any sense of a family business.
Um
You know, when I joined uh
The mutual fund company was called uh
Venture advisors.
Um
My father had a partner.
He had had a firm called Davis Palmer and Biggs, but that's he sold it in the seventies. Uh really
Pretty near the bottom.
uh that was another opportunity for me to learn, you know, differently. Like we're we wanna
We wanna get through, we wanna build something and stand for something and
And you know, my grandfather w you know, was so clear that everything was being given away anyway.
that so I don't think we ever grew up with a sense, you know, if I look at
You know, my dad has six kids.
And
You know
Two or
One one's a medical doctor, one's a uh
psychiatric pr uh practitioner.
Um
You know
Yeah.
By and large they're
Good parents, like good it's a but
They all live differently, do different
Yeah.
Um
And I think that you'd be glad to have any one of them as your neighbor, you know. It's it's it's I think I give him a lot of credit.
For that. And and the way that you all made money was really different. Like your grandfather was fifty percent margin for most of his career.
Dad had a lot of margin too. And how do you think about that, Well, it's terrible, I have to say Do you have a lot of margin? No, and my grand my father to this day thinks I'm the biggest sucker on earth. He just and that is often the way. You know, the the generation
You know, what happens is you know, you if you
started with nothing, you had to be such a risk taker.
And then I think what happens is that propensity to risk falls over the generations, but often so does the corresponding ability to build wealth. And that did not happen with my father. I think partly because of the rivalry with his father. So they both went through life
you know, with a lot of margin calls and a lot of
You know, I took on quite a lot of debt to buy
you know, to buy out the partners of the management company. So in that sense you could argue I was on margin. Uh
And as my father said, nothing focuses the mind like a little dad. I was like, Oh, you know and that was in, you know, we're all on merg on mortgage is a merged. Yeah, that's true. That's true. Although believe it or not, I didn't even have a m uh mortgage.
Uh because I always
I always wanted this idea of just having a a very stable and never wanting to go back to go, and going all the way back to the dog walking and like how important it was to me to to have money, you know. I just
And so uh you know, my father would say that it's
I should be embarrassed at how conservatively I've run my financial affairs.
And that
you know, I would have a dramatically different net worth.
If I had uh
uh been willing, by the way, not just to be on margin, but not to have my money in the funds.
Yeah.
uh because it being in the funds meant that I was
running the portfolio my portfolio as
theoretically quite a high net worth individual that
would be willing to have forty percent in a single stock easily. Wouldn't it wouldn't make me nervous at all.
I can't run a fund that way. Or I felt I couldn't.
And so what that meant is that
If I had simply bought
each stock that I ever bought for the funds in a personal account.
Uh
And held it.
then I simply never would have sold.
simply because something was getting too big. Whereas in the funds, I do that all the time. And it's been a terrible mistake. So
If I had never done that, you know, Costco would be
you know, whatever forty percent of my worth, Amazon would be forty percent. You know, Google would probably be, you know, twenty percent and the you know, Berkshire would be twenty percent, you know, there'd be
Pretty much everything in there, you know, those four or five positions.
Um
But in s it I felt it was the right thing to put the money in the funds.
And so the result is I have this enormous tax inefficiency. I'm selling things and realizing gains that I wouldn't do in my own life, but I'm doing it going back to the idea that, you know.
We have a a client where that's all all they have. They can't take and by the way, they might have gotten in the day before. So you know, if I say I bought something at a four percent position and now it's 40 and it goes back to 20, I'm still fine. But the person that got in that day before isn't fine.
But I
I I feel
intellectually at peace that that was the right way to do it. But of course I still have my father's voice in my head saying, What a sucker, you know, you should have you know, as I say, my father is
giving away a a scale of fortune every year that's just mind blowing. And and it is incredible the impact that he's had on a lot of kids.
Lives doing that.
I will have less ability to do that, relatively probab you know, in all likelihood. But that's okay. I've I've I've liked doing it this way. And I think I've ended up with great colleagues and great clients and a great board as a result of all of those things being aligned. That's a great segue into the question we always end with, which is what is success for you?
Well, I mean it it for me that is one where Charlie shaped that from the beginning. It's just living your funeral backwards and
thinking thinking about, you know, uh well.
I I'll give you a an image that that was true image. I I you know

Yeah, I

uh house after being out for a dinner and and all all my kids were there and
And I you know, it was glowing on the inside. It was like Courier and Eve's, you know, it was so beautiful. And
And I saw all my kids at the
dining room table with their significant others and laughing and
And
it was this moment where I felt like I didn't even need to go in. And so
That
you know, in that dimension of life, just this just the intense
love and admiration I have for for them and my curiosity at how it's gonna play out and
Uh, the fact I mean one of the things I love is that my
My daughters are friends even though they're thirteen years apart and it's a very uh
very unlikely friendship. You know, one is that Princeton kid running a big residential real estate operation and like, you know, and the other one is a
Invented a uh
Uh you know it.
the founder and CEO of a
What is a I can only be called a sex toy company. You know, and I I just but she is just
She is just a crazy exuberant.
kid living in a totally different world than one that I can
Grasp, but you know. Um
So there's a lot there. And then of course I love

building a place where the people that have invested their careers there
have felt like they've made a difference and that they've lived meaningful and substantial lives'cause I'm with them every day, I feel and then
Finally were you know the clients that
come along there, feel like they were treated well and that
That they
you know, the advisors got a little better at their jobs because of how we did things and you know, it's just it's
There was a I I'll end really quickly by saying there w there was a m a a man who ran one of the big accounting firms, I can't remember which one, and he died very young. While in fact, he died within becoming a a year or two of becoming the managing partner of the firm. I can't remember if it was E and Y, maybe, but
Uh, and he wrote a book called Chasing Daylight in his last year. He only lived for a year. It was a bad brain cancer.
And
He wrote this book about
Shutting down his life.
And uh and it was very
unusually positive. It's not a great book, but it was very emotional. I knew him a little bit. And uh and he talked about these concentric circles. So he's like, you know, when he first found out, he's like, okay, I've got to get the the firm secure. And then, you know, I've got to
uh work on these, you know, relationships that I left hanging in different ways and I want to make peace peace with these things. And it sort of got smaller and smaller and smaller down to his immediate family and then just to his spouse. And you know, I think that's sort of the right mindset to think about is these sort of concentric circles. And
You know, in some ways the outer circle you think it's the biggest, it matters the most. I have a feeling
The end it may matter the least.
But you still want to get it right. So so I I think about him and and those circles and that chasing daylight idea.
That's a beautiful way to end this, Chris. Thank you so much for your time.
Are you kidding I was so glad to be here. This was just a complete pleasure.
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