9 December 2017

When we first started our podcast, Guy Spier was one of the first guests on the show. He is the founder of the Aqua Marine Hedge Fund and he’s a Warren Buffett Style investor. Guy is the author of the best selling book, The Education of a Value Investor, and he’s a graduate of Harvard and Oxford University. During our discussion, we cover a wide array of topics like, what kind of daily readings he looks at, the impact of statics and humility, credit cycles, cryptocurrencies, and much more.

Subscribe through iTunes
Subscribe through Castbox
Subscribe through Spotify
Subscribe through Youtube


Subscribe through iTunes
Subscribe through Castbox
Subscribe through Spotify
Subscribe through Youtube


  • What publications Guy reads on a daily basis.
  • How to think about intrinsic value calculations.
  • What Guy thinks about cryptocurrencies.
  • Guy’s opinion on writing letters.
  • How to think about temperament.


Guy Spier is the author of the book, The Education of a Value Investor. Currently, Spier is the CEO of Aquamarine Capital. His fund concentrates on investing in publicly traded equities. Today, it is implemented according to the ideas represented in Buffett’s original 1950’s partnerships (Buffett ran multiple partnerships during that decade). With amazing credentials from Oxford and Harvard and an impressive record of stock returns, Spier is considered a worldwide authority in value investing. His book is a very honest account of his transformation to become a successful investor. Spier is very open about his initial setbacks and experiences, which have guided his investment approach to what it is today. Every year, hundreds of thousands of people travel to Wall Street in droves to achieve something in their life. Obtaining a degree from Harvard, Stanford, or Oxford is definitely not a piece of cake, so most students who graduate with their shiny diplomas usually head-over to Wall Street to master the tricks of the trade. Similarly, Spier, fresh out of Harvard University, stepped into the world of investments, determined to become the Gordon Gekko type.

Most students who graduate from prestigious universities are usually driven with high ambitions. Guy was no different. After he graduated with an MBA in Economics from Harvard, Spier took up a job at D.H. Blair as an investment banker. While there, he gradually realized that the working environment was compromising both his personal values and ethics. Now this is where the book is different. Instead of dishing out advise about investing, Spier talks about how he was forced to take a good look at himself. He rose to the challenge and devoted most of his time reading and understanding more about ultra-successful investors – like Warren Buffett. Since then, Spier hasn’t looked back and has modeled his life after powerful people like Buffett, Munger, and Benjamin Franklin. Most importantly, he has worked hardest on becoming a more authentic version of himself.

While Spier talks about a variety of investment principles he adopted from Warren Buffett in his book, what’s more fascinating is how he focuses more on personal growth and development from Buffett, rather than stock investing. He stresses that it’s vital to have an inner scorecard instead of an outer scorecard in life. An outer scorecard is used when you compare yourself to everyone else’s accomplishments, whereas an inner scorecard is all about judging yourself and seeking self-improvement. Simply put, you either live your life on your own conditions or care about what others think and have. The book talks about how investing is not all about money, but has a larger and deeper meaning. It advocates how authenticity can help you become a better investor and a better person. Authenticity cannot be taught, but it’s something that should be ingrained in an individual. Being authentic helps a person accept his own mistakes and learn from them. This truly is one of the most important elements for an investor as he/she strives to become a better version of themselves, instead of copying others. To prove his point, Spier describes how Buffett has conquered stock trading all while being true to his own self. He was successful with Berkshire Hathaway simply because it suited his temperament and not because it guaranteed high, profitable returns. Sure, we should all learn from our idols and heroes, but at the end of it all, we should never compromise our own essence.


Every year, Warren Buffett holds a charity lunch to raise money for a worthy cause. While winning bids have reached up to $3.5m in recent years, it’s important to note that the benefits go to the Glide Foundation in San Francisco. Guy Spier and his friend Mohnish Pabrai were among the lucky people to bid and earn a ‘power lunch’ with the brilliant philanthropist.

Spier and Pabrai met each other at Pabrai’s shareholder meeting a few years before the lunch with Buffett. Over time, their friendship blossomed and they also formed a Mastermind Group about investing. As of today, Pabrai is the managing partner of the prestigious Pabrai Investments, which was founded in 1999. You can read more about how Pabrai was also inspired by Buffett’s principles. Pabrai has managed to crush the market since 2000 by 1100%. Also, in Episode 4, we discuss Mohnish Pabrai with Hari Ramachandra.

So why did Spier and Pabrai invest heavily in the lunch with Buffett? First, it was a great opportunity to donate to a very worthy charity foundation that offered a lot of support to underprivileged people. Second, Spier and Pabrai wanted to show their gratitude to Buffett for everything he had taught them.

Spier and Pabrai, along with their families, met Buffett at Smith & Wollensky, a steakhouse in Manhattan. To Spier and Pabrai it was a family event – not a business deal. In, The Education of a Value Investor, Spier mentions a memorable moment during the special event. To provide a little context, it’s important to note that before the lunch with Buffett, Guy felt compelled to change the management fee structure of his fund. Generally, most hedge fund companies charge a 2% management fee along with an extra fee once profits go above a specified rate. Either way, the manager is getting paid if the fund performs or underperforms. Inspired by Buffett, Guy changed the structure of his fund so that investors only pay a fee if he produces returns higher than 6% (annually). Anything less than that, and Guy is working for free. As a result of this drastic and difficult change to his fund, Guy told Warren about this decision and how difficult it was for him. Buffett responded, “People will always try to stop you from doing the right thing if it is unconventional.” Guy then asked Buffett if doing the right thing would get easier with time. After a long pause, Buffett responded, “Just a little.”

For most people, spending $650,000 on a lunch may seem ridiculous, but for Spier and Pabrai, it was an experience of a lifetime. To them, it was a priceless event that was more symbolic and appreciative for what they had learned from their mentor. The next lunch auction with Buffett closed at $2.1 million, so I’m sure Guy and Mohnish can take great joy in knowing they purchased their intellectual property for a 25% discount of the following year’s market price.




  • Support our free podcast by supporting our sponsors.

P.S The Investor’s Podcast Network is excited to launch a subreddit devoted to our fans in discussing financial markets, stock picks, questions for our hosts, and much more! Join our subreddit r/TheInvestorsPodcast today!


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Preston Pysh  0:03  

Today is a really exciting show for us because we’re talking with one of our good friends, Guy Spier. When we first started our podcast, Guy was one of the very first guests that came on the show. He’s the founder of the Aquamarine Hedgefund and he’s a Warren Buffett style investor. Guy is also the author of the best selling book, “The Education of a Value Investor,” and he’s a graduate of Harvard and Oxford. 

During our discussion, we cover a wide array of topics like what kind of daily readings he looks at, the impact of statistics in humility, credit cycles, cryptocurrencies, and much much more. So I’m excited to bring you guys this episode. Stig was out of town and unable to participate in the call but he’ll be with us again next week. If you’re ready, let’s go ahead and do this.

Intro  0:48  

You are listening to The Investor’s Podcast where we study the financial markets and read the books that influenced self-made billionaires the most. We keep you informed and prepared for the unexpected.

Preston Pysh  1:09  

All right, so we are super pumped to have our good friend Guy Spier back on the show again. It has been a very long time since we last talked to Guy. I want to say it was like Episode 15, or it was very, very early in the show. I distinctly remember this interview because we got so many emails from people saying that interview was insane and that it was so good. 

Guy, it’s been way overdue. I know when we were talking in Omaha back at the Shareholders’ Meeting this past year I said, “When are you coming back on the show?” Then you said,” I’m going to come back on in the fall.” And I said, “I’m going to hold you to it.” So here you are. You’re a man of your word and we appreciate you taking time out of your very busy day to talk with us.

Guy Spier  1:53  

I was delighted to accept the invitation to come back on and *inaudible* don’t have the other podcasts too much because then people might just be disappointed by this one. For the listeners, well, it’s worth saying that this year I got to meet Preston at the Berkshire Annual General Meeting. 

So for the listeners and any of you who haven’t been to Omaha, I walked into the spire and I thought… I walk into the back and find this kind of nerdy guy with maybe three friends, and then we’ll have a nice chat until they realize that a whole bar, all 120 people are Preston and his gang. They are just totally pumped and everyone there is totally pumped. It’s actually an inspiration.

Preston Pysh  2:38  

Going into the questions, so we opened this up to our Twitter community. A lot of them are very big fans of yours. and they had some really interesting questions. 

One of the first ones that I really want to hit at because I think this is so fundamental to where we’re at in space and time here in 2017, *inaudible* asked, “How does an investor build patience, integrity?” 

This is something that we know Buffett and Munger talk about so much, but I think for a lot of people that maybe aren’t as attuned to their teachings, they hear the word temperament. They hear the word patience, and it’s just kind of cliche. So can you talk to us why this is such an important concept?

Read More

Guy Spier  3:16  

It is, but of all the questions and I’ve put them out in front of me, this was the one that was most nonplussed about actually, because, I mean, I walk around say, “Oh, I need to build my patience and my temperament. I’m going to try…” It’s more, I would argue the case that I feel the forces that make me want to sell something I’ve just bought, make me want to buy back something that I’ve just sold.  I find myself having to just go back each time to fundamental analysis that I did, and focus on the logic or the fundamental analysis.

Though it was hard for me to think through I didn’t have any easy answers for *inaudible. It’s a great question, but maybe what I’m reaching for is you can’t build temperament and patience in isolation. It is going to be related to something. It’s like if you’re in a difficult marriage, and everybody’s marriage is difficult sometimes, the way I would argue that one builds patience and temperament there is to say, “Well, no, she’s going through a tough patch and our relationships have been going through a tough patch. I’m not going to do anything until another month, another three months.” 

By the way, that’s the same… If we think of long distance running, long distance, anything, we know that if you’re at the beginning of a marathon, and you say, “I’m going to run the whole marathon,” that can be devastating.” But if you say, “I’m just going to run to that lamppost, or I’m going to do anything, but I’m just not going to stop jogging.” 

So if I bring it back to investing, because obviously the question is investing, I go through and I think of myself during the financial crisis of 2008-2009, one day it’s in my book, my analyst comes into my office and he tells me he’s *on to cash. I was kind of angry with him. I felt like I didn’t want to have somebody in my office *getting cash. When I knew intellectually, that was the wrong thing to do but I also was feeling an awful lot of fear.  

I just remember saying to myself and saying some of my investors, like, “Look, I know that Nestle is worth enormous amounts of money, way more than where it’s trading from for, I’m just not going to sell it. I’m not going to sell a great business just because people are panicking.”

However, I guess the key is that you don’t build it in isolation. You build it in relation to the specific challenges that you have on that day. It’s kind of building the connection between what we intellectually know to be true. 

For example, buy and hold is the right thing to do. But down to the specifics of,  “I’m feeling this incredible fear. I’m feeling this compelling need to sell my stocks that along with everybody else, but I know, intellectually, this isn’t the right thing to do.” That’s kind of a little similar to the idea of not wanting to break out of the run when you’re on a marathon.

Preston Pysh  6:02  

Guy, what do you think about people that write down their trading principles before they put the position on? So if you’re talking specifically about Nestle, it might be something like, “I’m going buy this. The reason that I might sell this would be reason X, Y, and Z.” You list some of this stuff out in writing before you would put the position on. 

That way you can reference that and you can look at your principles then you can say, “Hey, this wasn’t one of my principles. This wasn’t something that I’m thinking about. So this is probably an emotional thing.” Is that something that you believe would work and is that something that you do?

Guy Spier  6:35  

I think it’s a more generalized “yes,” it’s definitely a good thing to do. It’s not the only route to take but I think the *inaudible* test of just pronouncing a specific to a more general principle that the more conscious we are, what we’re doing, what’s going on, the better it is. Writing is a great way to become more conscious of yourself. Even better would be to keep an investment diary. 

I found it very, very hard to keep an investment diary but I do actually use Evernote. I have it on all my devices. When I’m thinking [of] something that I feel like I ought to capture, I go and capture it in Evernote and some of it’s related to investing and some of it isn’t. Actually now, it’s kind of like I told my regulator here, this is what I do. Now I kind of like, I have to do it and I like that because it keeps me more disciplined than I’d be able to keep itself. 

Before I buy any stock, I have to write a paragraph, at least a paragraph and I go through. So in an Excel spreadsheet, I go through a checklist about 70 to 75 items. Many of them I leave blank, they just don’t apply. For many of them, I write something. So I think that’s a really, really good thing to do. 

At the end of the day, *inaudible, the question is, how do you build patience in the abstract? I would argue it’s how you find the patience to own that stock being in your portfolio for 3 hours and hasn’t moved. How do you resist temptation to sell? Then that becomes a little bit more concrete and then maybe there are some strategies that one can come up with when one gets to some concrete situation.

Preston Pysh  8:17  

Interesting. So let’s talk about your daily routine. When you get into the office, one of the questions we saw on Twitter as well was what publications do you read daily? I like this one: do you listen to any other podcasts?

Guy Spier  8:34  

One of my goals, actually, you know what you got to do. What you need to do is you need to come and visit me for a week. Stay with us. You’ll see that my library is a great place to conduct some interviews. I’d love to have you over here.

Preston Pysh  8:49  

We would love to come out there.

Guy Spier  8:51  

It would be great, but when you come into my office, basically, you can go left or you can go right. To go left, takes me to the room I’m in right now, which is my busy room, where computers are. If they go right, get to my library. There’s no electronic devices and there’s lots of books. My goal is to spend more time going right than going left, just as a matter of habit. 

Actually, there’s some days I don’t make it in there at all. But the days I just go in there and I sit, even for 10 or 15 minutes, it kind of clears my head. It helps see what I’m supposed to be thinking about doing.

Preston Pysh  9:29  

Yeah, so this is like your form of meditation. There are people that swear by meditation, then there are other people that say that they have a different routine that’s similar to meditation. This is fascinating. I love this idea of not carrying an electronic device into the room. When did you start doing that and talk to us about this whole idea because I love this?

Guy Spier  9:50  

Actually, sometimes I do have my mobile phone with me, but it’s a great point that it’s just that there’s no computers or there’s no phone in there. When I shut the door on that room, [the] people in my office, I tell them pretend that I’m outside the office, so if somebody calls I’m not here. I doubt. 

I sometimes do have my mobile phone with me. I didn’t actually think through that far, but also say that it’s very mild meditation. I mean, I’m deeply impressed with Yuval Harari and his one month here on the passive meditation retreat in India, which he credits with the two great books that he’s written. 

There’s a guy I know here, the company is Visary Capital, a publicly traded company. He does regular 10-day meditation retreats. I actually have not managed to do that. I think that that’s what I really need to train my mind. So I think I’ve figured out meditation, ultra light, but it’s not much more than meditation ultralight. It’s a place that just makes me a little bit more quiet. 

However, my point being that the minute I get into my office, and you can see some of it, I’ve gone through so I had an enormous amount of publications coming in but they’re not the first thing I look at. 

The thing that I really try and look at is whatever the hell I’ve printed out, which might be a new report or a 10K, or it might be some background reading that I’m doing like now reading everything I can from Vaclav Smil.

Vaclav Smil is just some amazing engineering mind, who really thinks about societal problems. I’m trying to understand more about oil. So I’m reading plenty about the oil industry and the publications that are regular for me… I love the manual of ideas. I love the new format. But I have to say that at some point, I love finding out about investors out there. At some point, you have to get away from reading about investing and reading for investing. 

On publications, about two years ago, I had subscriptions to Automotive News, Scientific American, New Scientist, Nature, Advertising Age, I mean, there are publications that are *done by cranes.  I was kind of drowning in paper. At some point I said, “Right, I’m just going to go on a publications diet, I’m going to get rid of the vast majority of them. And then if I decide to resubscribe, or resubscribed, some of them…”

These industry publications really sort of bury you in paper in a certain way. The other one was Aviation Weekly, which is a great publication. But on some level, I felt like that was the sort of walking around the forest, looking at the ferns, and not seeing the trees. 

The publications I didn’t give up are The Economist, Business Week. I don’t like the design of Business Week, but I think that has got an awful lot of great stories in it. There is a publication I get here in Switzerland called *Glance, just like the Swiss version of Fortune Magazine. I think our Fortune subscription stopped and I think I need one back because I like what’s in there. I actually sort of like daily publication, I still get for newspapers, I get The Financial Times. I get *inaudible. On a weekly basis, I get Lamond, the New York Times International. So it kind of is piling up there. 

The truth is I don’t read on a daily basis. Though every now and then when I fly somewhere, I’ll take eight of them, all the magazines, and I’ll read through them, because I find that I am reading more and more of those news publications on my iPhone.

However, the thing is, I used to get grants publication physically. Then, I kind of re-engage with my Bloomberg Monitor, and now I get grants on the Bloomberg Monitor and every now and then I’ll print it out to read. 

I think that what I have going on is that in spite of the magazines not coming in some time ago, I decided to buy, kind of pretty much, any company I look out at that half interests me. I go and buy one share [with] my Charles Schwab account, and make sure that my Charles Schwab account is set up to get physical delivery of mail. 

So now I’m getting proxies and 10Qs. I mean, I just got a 2-inch thick proxy on the merger of two companies. That’s sort of a 2-inch document that’s been sent to me, and I’ll find those things are sort of lying around along with whatever the hell else I’m looking at.

If you’re  looking at something, there’s some corporate presentations to print out some 10Ks and 10Qs. And I have a really high quality, large printer that has paper handling, stapling. So when I print out a 60 page document, printout in double side, and that’s stuff that I carry around myself and I’m looking at all the time. So I’d say that’s the stuff that I’m trying to read, trying to focus on a long answer to a short question.

Preston Pysh  14:50  

Now, but to me it sounds like the focus is really the 10Ks and the 10Qs. Like you don’t miss a 10Q that comes out for any business you own. Was that a correct statement?

Guy Spier  14:59  

No. I do miss quite a few. But I’m printing out the ones that I think are interesting and are important to look at. By the way, something that’s really important is this is a written article, I’d want this to be a call out. I gave a talk to the Swiss CFA Society, which I was quite pleased with. It came out reasonably very well I thought.

Well, *inaudible* Preston… So I really appreciate your respect for me. It’s really kind of you and thank you, but we only have to do is read Nassim Taleb’s book “Fooled by Randomness.” It is very convincing that I have a 20 year track record. I’m two percentage points approximately better than the S&P. So that’s a good return. It’s not Omaha numbers, but it’s still market beating. Though there’s no way that you can prove to a person who understands how the numbers work, whether I’m lucky or smart. So you know you’re interviewing me and what I’m doing. 

The story is you take 1000 people, you run a coin flip in a contest. You keep flipping coins, round one, round two and three. Then you find the person who’s flipped a series of heads with the 1000 people, however many times it is…only one guy, who flipped a series of heads. 

When you go and interview that guy, and they’ve done this experiment in academic circles. The guy flipped a series of heads, really, genuinely feels like he’s got some kind of skill. He said, “What is it the way you flip a coin?” And no, humans are just creatures. We stop leaving stuff.

So what am I trying to say is that your listeners, The Investor’s Podcast community, should not necessarily draw lessons from what I’m saying. This is just interesting to hear what Guy Spier does, but we cannot rule out I’m just a coin flipper, who happens to have flipped a high number of heads. For many reasons, I’ve got nothing to do with what I’m talking about right now. 

Preston Pysh  16:53  

I think the learning point for me when I hear you say that is you have to be self aware. You have to know what those probabilities are, and then you have to have zero ego and total humility to be at a point where, after 20 years and you’ve beat the market after 20 years, but you’re saying you don’t have statistical proof that you’ve beat the market with high probability, a large confidence interval to basically say there’s statistical proof. 

I think that that’s insanely profound and the reason I think it’s profound is because it’s telling people, even after 20 years, if you’re not looking at things through that kind of lens, and saying, “I might be wrong, my thought process might be wrong.” That’s the learning point for me. 

We were reading Ray Dalio, his new book, “The Principles” book. In the book, he talks about how he went through this just destruction of his company back, I want to say it was in 1981. He just literally lost everything. He said, “I went from asking myself, ‘Why am I right?’ to asking myself,  ‘Why am I wrong?’” 

And that became his thesis for everything, like, “How am I wrong?” But what am I doing right now that proves that I’m wrong? I think that that’s what you’re really getting at with your comment is, am I wrong right now? Is all this information that I’m talking about just dead wrong?

Guy Spier  18:10  

Yeah. So that you know what the way I would state is, you can’t rule out. I don’t know what the confidence interval is, you can’t rule out that Guy is just too lucky a coin flipper. Your listeners, the listeners should take into account when you’re asking me questions about what the hell I do, and I get up every day do I turn left or right? Was my meditation process all of those things? 

I get the feeling. I mean, if you take Mohnish Pabrai, he reads a lot more than I do. I do think that has an impact on returns. Why does he read a lot more? He’s just got a brain prep. I’m not saying I don’t read a lot. I think I read a lot but I think that he reads more. It’s cumulative. I mean, I don’t know. If I read 100 books a year; if I’m reading 100 to 200 a year, that does make a difference. 

I’m not saying that I don’t absorb the ideas as well as he does… I think here’s what’s really important is that whatever it is you’re doing, you got to be doing it intelligently. I think that that’s something that when Todd Combs talks about his 500 pages a day, I think that it stimulates a lot of people to find 500 pages a day to read. But you have to be intelligent about how you read it. If you’ve got a report, where if you’re reading a 10Q, and you know there’s nothing’s changed in the business, don’t force yourself to read every word. Be smart.

Preston Pysh  19:39  

So just for context for the audience, Todd Combs is who everyone thinks is going to be the replacement of Buffett. This is who Buffett is basically tapped as kind of being his replacement after he dies. Talking about this idea of education, which is just a huge theme for our show, an ongoing theme of our show. I think this is really neat, the highlight when Buffett was asked, “Well, how did you make your selection of Todd and Ted?”

And Buffett came back, he said, “These two are the only two guys we could find that read more than Charlie and I.” I love that quote. It is such a profound quote of what he values and what he values as people that are just going through an enormous spurt of learning at all times. I just think that’s just so incredibly important. I think it goes back to our first point of temperament. You’re going to have great temperament if you know what the hell’s going on.

Guy Spier  20:32  

Another way, I think that I want to answer that question is that… I mean, I don’t know. I live inside my brain. I don’t live inside anybody else’s brain, but I feel like my brain is kind of like an unruly horse that is galloping around an enclosure. 

Though every now and then, the horse notices a good objective in the distance, and I’m in a position to ride that horse. Then I go ride that horse to that objective. The key is actually I would argue to get… the worst thing is to read something that says to 500 pages a day, which is not the objective of the horse that I’m writing, and like, in some way, ride towards meaningful objectives or pay attention towards meaningful objectives. 

When a meaningful objective changes, then don’t keep moving towards the same thing out of some kind of slavish desire to follow some precept that you’ve read somewhere. Move on to the new *inaudible. In a certain way, maybe this encapsulated idea in a learning machine.

Learning machines changed directions and stop halfway through books, when there’s really realize there’s nothing else in there for them. Learning machines don’t waste time reading stuff that’s not worth reading. 

For what it’s worth saying, [it] is your audiences. I’m not saying that I’m a learning machine. For me, it’s an aspiration as much as it is for everyone in the community. I’ve been telling that I’d far prefer to read books, but I actually find myself reading an awful lot my Kindle, because when I get into bed next to my wife, she’s not going to let me switch the light on. But Kindle is fine. So now I find myself *inaudible* books. I love buying two copies, a Kindle copy and [a] hardcopy. 

Preston Pysh  22:24  

Awesome. Sothis is a question that came up on Twitter. And I guess I’m going to just kind of change it a little bit. Is it related to credit cycles? So one of my frustrations with the value investing community, is that complete, just lack of respect for macro? I think that when you talk to most really hardcore Warren Buffett investors, they just say, “Yeah, I have no idea what macro is going to do. I just ignore it. And I just focus on the small cap, large cap businesses, and I look at it from that vantage point, just buying equities.”

Howard Marks wrote his incredible book, and he talks about kind of knowing where you’re at in a credit cycle, and he really goes against a lot of the literature that you see with Buffett and Munger.  I really applaud Marx for this, because I’m in the same camp as him, I think that it’s very important. It’s almost like if you were looking at a spectrum, and value investing is in one part of the spectrum, then you got macro investors. Another part of the spectrum…

My opinion is if you have knowledge of all those spectrums, you’re going to be more informed and more knowledgeable and can work inside of your environment better. So I’m curious to hear your opinion on that idea. Then I’m also curious that if you kind of think that it’s important to kind of know where you’re at in the credit cycle, where would you put us in the credit cycle today, as you think through this, because my personal opinion is whenever I look at this past credit cycle, it’s been completely manipulated by central banks. 

The signaling that I’m seeing is that the US specifically, the Bank of Japan, they’re done with their quantitative easing, for the most part. The only one that’s still in town pumping money is the ECB. Then it’s looking like they’re going to start winding down, which for me is signaling the end of the credit cycle or that we’re at the top of the credit cycle. 

So I’m curious, your thoughts on all that stuff. I know, it’s a lot of speculation, and we have no idea. But I think it’s important for people to be thinking about that and knowing the risks that are associated with it.

Guy Spier  24:17  

If you like reading about the credit cycle, you’ll enjoy Grant because he has a central page, where you see what the central bank did…

Preston Pysh  24:25  

Can you say the resource again?

Guy Spier  24:27  

Grant’s Interest Rate Observer. I mean he’s… what do we call him? This pile of scaffolding of Wall Street? I mean, he’s been around so long as an incredibly talented writer, writing this publication for a very long time, includes long macro stuff related to the credit cycle, actually. 

Then he’s always connected up to some interesting idea rather than he’ll print on his pages, but it’s kind of another attended one of his conferences, but he predates a lot of the new media stuff. Surprisingly influential…

I think that at the end of the day, Preston, [I] come out saying that I’m better off not allowing the credit side to determine my investment decisions. Or I think that he has the benefit of ignoring the credit cycle. If you ignore the credit cycle, and I try and buy cheap stocks that will do well no matter what. If you pay attention to the credit side, there’s this huge danger that you end up becoming some kind of closet market timer, one kind or another. 

So if you’re super brilliant, and you’re capable of paying attention to the credit cycle and allowing that to steer you in where you pay attention and what stocks you buy, and then that’s really fantastic. However, I think that for the vast majority of us, or for many of us, looking at the credit cycle, which in and of itself is not a terrible thing to do lead to the next step, which is timing the market, which is probably a terrible thing to do.

Preston Pysh  26:01  

I completely agree with what you just said, that makes total sense. But then whenever I look at Buffett’s balance sheet, which, for me is the truth, like when he goes on TV, and he says, whatever… That’s less meaningful to me than what his income statement and balance sheet say. That’s what I really pay attention to. I don’t necessarily listen to what he says. 

And so whenever I look at the balance sheet, and I see that he’s sitting on $100 billion of cash, that doesn’t make any sense. The argument falls apart. For me personally, it falls apart, because when you’re sitting in cash, you’re effectively saying, “I’m going to select a negative 1% or 2% return.” That’s what you’re physically doing by looking at that on the balance sheet. 

So why not take… and I know he has a huge problem, because it’s such a large amount of capital. I hear that argument all the time, always just sitting on too much money, he can’t move it. Well, you could move it into an ETF, which is priced at a 3% or 3.5% return today. 

You could do that which is better than a negative 1% return, but he’s not doing that. That’s where I say, “It seems like he’s saying one thing and doing something different.” I’m curious to hear what you think.

Guy Spier  27:10  

He goes to pay our dividend, you know, he would just start sending it back. I mean, it’s an enormously profound statement he’s making. He’s saying that he believes that at some point, within the reasonably near future, he’s going to get the opportunity to put $100 billion to work, or most of it to work in some opportunity. But right now he can’t see the conditions will arise that will make that possible. 

No, it would be something like buying Bank of America or buying JP Morgan or buying *inaudible enormous purchase. He’s basically implicitly saying, “I believe I’ll get that opportunity.” 

So somebody said, a CFO of a business inside Berkshire Hathaway that I met a long time ago, he said these wise words to me, which is pay attention to what Warren Buffett does, it’s more important than what he says, because, and ideally, you get to stare at a  picture. But yeah, there is a bit of a dissonance there.

Preston Pysh  28:12  

Guy, whenever I started out studying Buffett, from what I read, I was under the impression that I’m not ever going to think about what the market’s about to do. All I’m going to do is I’m going to look at right now, what is offering me the fattest yield with the lowest amount of risk. Whatever that is, I take my cash flow for this month, and I stuffed it into whatever that asset is. 

If that was a true statement today, because that’s what all the literature says is, that’s how he does his approach. I don’t have to predict anything, I just have to know what’s going to give me the best yield today, and then that’s what I buy. 

However, that argument falls apart when you look at his balance sheet at the top of credit cycles. When you go back historically, he starts putting a lot of money into liquidity. Now in the past, like you go back to 2008, he was buying bonds because there was yield there, but now there’s not really any yield in bonds that that’s worth the spread of the cash. You’re seeing them sitting in some bonds that are short maturities. But, I mean, it’s cash equivalents. I don’t know, I guess I’m just having a hard time understanding exactly. 

Guy Spier  29:15  

Maybe, I mean, I’m not sure that I can explain them, but maybe what I’m about to say will help a little. It’s worth also saying that he’s not sold anything. So the cash is building up because profits are coming through, and he’s not doing anything with them. But he’s not made a move like he’s not said, “If market is feeling a little *inaudible, I’m gonna sell my portfolio securities.”

Preston Pysh  29:40  

Well, Guy, with all due respect, that’s due to the cap gains. He’s not going to sell Coca Cola because his cap gains are just gonna… He’s making more on the dividend, then his purchase price for some of these things like Coca Cola. Therefore, he’s not going to sell out of those just because he’s going to get murdered in taxes. However, when you look at the companies like IBM, he had no capital gains. He’s selling that. You know what I mean? I don’t know. 

Guy Spier  30:04  

He is selling that for fundamental reasons. He’s decided it’s not, as he said at the Berkshire Annual meeting, he has decided it’s not as good a business, as he thought, originally thought it was. I’m to argue that there’s a kind of asymmetry when it comes to investing. Where I mean, you get it, when people talk about price being a good entry point for a stock kind of thing. Once you’ve entered into it, you’re not going to pay attention too much, whether it becomes overvalued or not. I think that it’s far harder to sell stocks well than it is to buy stocks well.

I think Warren Buffett’s saying, “I’m going to let this cash build up. I don’t want to sell anything in my portfolio, other than the stuff [with] positive return, but all businesses that are good businesses. I’m going to let them ride maybe sometimes, like, go to…they’ll go overvalued, but I’m going to add a significant chance to my investment, and I know that being off is really, really ridiculous. So, there’s this asymmetry, and they buy when things are cheap, but you don’t necessarily sell when things are super expensive.” I think that that’s what he’s doing. The cash builds up. 

Here’s the point, I think for me it’s really important. I don’t know how to square this with awareness of the credit cycle. So I think we can all agree that 2008-2009 was a trough in the credit cycle. Credit contracted in a massive way and credit continued to contract in a massive way because of this some had these self-reflexive mechanisms like the drawing in of credit of the banks, more stringent capital requirements, [and] more stringent requirements on bond ratings meant that it was just much harder to get money.

Now, we’re probably five years into a sort of a long credit chain and I think that the danger of thinking about that is then when is that credit expansion coming to an end. Is it coming to an end in six months? Is it coming to an end in four years? 

Obviously, we knew that was coming to an end in 6 months, we might want to position ourselves very differently in our portfolios if it’s coming to an end in 4 years. That’s where it’s really hard to tell. 

I think myself, there are so many times when I’ve felt like I’ve had so much evidence that we’re at a turning point in terms of stocks going up. The last time was when so many of my friends… like the election of Donald Trump that it was time to get out of the market because he was going to be a total disaster. Then, the market totally surprised everyone. 

I can’t say that I didn’t have the same feeling. I did. I was like, “I’m not feeling very comfortable about a Trump presidency, and how’s it gonna work out.” I never let that interfere with the desire to basically be fully invested as much as I can. 

In terms of central banks, again, I think your point is well taken that when you look at whatever the hell explanations I’m trying to give you, and your point is, when you look at behavior of Warren Buffett, he appears to be looking at the credit cycle, making decisions [based on the] release credit cycle. I can’t prove it to you, but maybe somebody who’s super well attuned to valuations is obviously, their portfolio is going to look that way, even though they’re not consciously aware that they’re doing it. 

But just to address something, you’ve talked about central banks. This idea that the central banks are manipulating stuff, and central banks will always have manipulated stuff and always will manipulate stuff. That’s what central banks do. That’s why we went off the gold standard. It’s nothing new. 

I agree with you, but it’s not something that we shouldn’t get sad about. They manipulated. They believe that they’re doing the right thing at the time and there’s enormous debate that goes on in academic circles to figure out what the right thing to do. It’s a very, very powerful lever that they pull. 

I would tell you that someone, I don’t have the exact quote, but it’s along the lines of never get into an argument with somebody who prints money by the something. I don’t remember what it is. The central banks have this towering. [It’s] very, very hard to comprehend. They can just switch on the spigot as much as they like. They have enormous, enormous, enormous power, and one should never be against them.

You have this kind of dichotomy. They opened sluice gates in a major, major way and nobody can really understand why inflation didn’t take off. There are all sorts of explanations, but nothing that’s definitive. 

Japan’s been in that kind of state for more than 20 years. So exactly, at what point they stopped the QE and what would make them restarted again, is hard to understand. Again, you just don’t want to get on the wrong side of that, as they would say. 

Preston Pysh  34:53  

Yeah. I think it’s a major concern.

Guy Spier  34:55  

So my sense is, Preston, you’ve been talking to some, sort of say in the gold world, we call them gold hounds or gold something.

Preston Pysh  35:03  

Gold bugs.

Guy Spier  35:04  

And monetary purists if you like. I was one of those guys… I was like these people just pacing the currency. It’s just terrible QE and it was one of the Westco meetings. So somebody asked Charlie Munger… “If you look at the purchasing power, the nominal US dollar over the last hundred years, so what $1 was worth 100 years ago is like two cents now. Cash is constantly depreciating.” Charlie Munger looks up the room. He says, “This is good. I don’t know why you are complaining. It could be a lot worse.” 

What central banks do is that they overtime debase the currency, and they do it in the interests of all sorts of other [things]. Then, we as investors can’t get upset about that. I would argue the answer to that is that clearly you should see the currency as a way of transacting stuff. But don’t stick around in that cash too long. Do you know which way it’s going, spending very seriously south and which to come back to, and then on the day that Bitcoin bounced above $10,000… So it’s great to see that. 

And that just came back to Warren Buffett’s Berkshire Hathaway again, an incredible statement. Buffett said I know the cash is depreciating, at some rate PR, and I still prefer to hold it because I think I’ll buy something and get the *inaudible* to buy something. Within a reasonable period of time, that’s going to make it worth my while.

Preston Pysh  36:38  

So the whole Bitcoin thing is probably one of the craziest discussions happening right now. I recently did a Google Trends kind of search with Bitcoin to kind of see the global map, the heat map of where it’s being discussed. 

When I did that, it’s literally being discussed [in] almost every single country around the world. You know where the hottest spot was on the map? It was Switzerland. So I know there’s conversations happening in Switzerland that you’re hearing about Bitcoin. Now, I want to throw out an idea and I want to hear your thoughts on this idea. 

So all these fiat currencies are depegged. They have been for a very long period of time. So there’s no incentive for countries domestically, no incentive whatsoever to be responsible with their spending, because as they devalue it, it manufactures growth domestically. 

We basically have a race to the value currencies that’s happening around the world. Now all of a sudden, this technology enters the space through Bitcoin blockchain technology. It is the emerging protocol compared to all the other ones that are out there, and you look at the market cap of this space, and it’s now at $315 billion. 

We’re not talking about something that’s like a little science experiment anymore, like we’re approaching… At the pace, we’re going, we’re approaching a trillion dollars in this space extremely fast and this is becoming very real. If this becomes real, we now have a peg and we don’t just have a peg domestically, we have a peg globally. I guess my question is this, are we seeing a reenactment of 1921 in Germany, but only on a global level?

Guy Spier  38:29  

I think Bitcoin is a complex phenomenon. When history gets written, when we have the perspective of 100 years, we’ll see that there were many things going on. I don’t think there’s any one way to describe it, but here if… in the past, under appreciated the simple network effects. So the more Bitcoin gets embedded in all sorts of different things and more other currencies are created using Bitcoin as the reference, the more software embeds Bitcoin.

The network effects of being the first mover, it’s the cyber currency with [the] largest reach. And that, in and of itself, may give it an intrinsic value that it didn’t have before. So there’s [the] same protocol, exactly the same everything to a much smaller network.

They can be blown out of the water. But the intrinsic value in this is the same as the intrinsic value of writing for iOS or writing for Windows, or any of those things. So there’s no question in my mind that that probably does lend Bitcoin an intrinsic value, even though the protocol itself could be replicated by thousands of people.

Preston Pysh  39:46  

It is being replicated by thousands of people with all the *inaudible

Guy Spier  39:50  

So the next thing that I feel like I want to say about Bitcoin is I don’t think that anybody disagrees that the underlying blockchain technology is extremely valuable and we can separate out the blockchain technology and what that means for transactions banking system and many other systems and separate that from Bitcoin. 

People say that we’re in an age that the blockchain is where the internet was in the early 1990s. I think that’s probably true. There are a couple of Ethereum-based currencies that I am really interested [in] like Augur and Gnosis because I love these political betting markets. 

They keep getting shut down for all sorts of reasons. I’m really looking forward to those two companies getting going because I think there will be so many ways to use it so I’m excited about that.

Preston Pysh  40:48  

I want to comment on that because that’s a really important point because a lot of the smart contract piece of this is reliant on technology that proves whether something is true or false through these poll type protocols that are true or false type prediction markets. 

So, if you’re entering into a smart contract with something, and it’s reliant on whether something happened or didn’t happen, the way that that can be proven to be true is through some type of blockchain protocol through Ethereum. 

It seems like Ethereum is the one that’s doing this, but I completely agree with you. We’ll have the links to those in the show notes for people that want to check it out. This is not in any way investment advice, all this stuff with crypto and blockchain is extremely risky, but it’s interesting stuff that people need to be aware of. I’m sorry to interrupt. Keep going there, Guy.

Guy Spier  41:35  

Here’s another sort of what I think about Bitcoin is that you have to distinguish between *inaudible* currencies. You have economies in the world we should dollarize anyway. Like in Zimbabwe, nobody actually uses some public currency because it isn’t worth the paper it’s written on. The only reason why you would kind of hold a Zimbabwe note is that the central bank makes a promise to automatically exchange into some either dollars or euros. 

It was the same last time I looked closely in places like Argentina. Those are countries where the governments don’t stand for much, or the government is fickle and governments are capable of nationalizing property, doing all sorts of things that I could see a move to hard currencies or more trusted currencies in those countries. 

As well as saying that those countries can be pretty good at preventing the dollar, the Swiss franc, euro the yen, from being a legal tender in those countries, but Bitcoin gives people away to go to something that is a much more, at least from the perspective of living in Zimbabwe or Argentina, a much more safe bet. So is it easy to see why Bitcoin would displace some soft currency, like the Zimbabwe dollar, the Argentinian pesos, I don’t find that hard at all. 

But if you ask me if I can fulfill A world in which Bitcoin displaces hard currencies like the Swiss franc, the dollar, the Euro, the yen, that I find it much, much harder to see, because let’s not underestimate what stands behind the US dollar. Some of those helicopters, the real fighting in sand behind the US dollar, and a whole bunch of other stuff. 

If I just go back to Bitcoin for a second, so market cap is $300 billion. What I’d like to know, and I have not seen and I don’t know if that number exists is, what have been the flows in Bitcoin? So what have been the flows? The money flows in and out and I would suspect that what we see in the last two or three years is a period whether the inflows have been far greater than the outflows. 

We get to a point some time in the history of Bitcoin, where the outflows will be enormous and will a currency be able to stand out? At the end of the day, when you hold $1, what you hope is the ability to claim something from the US government. The US government has real power. It has a military. It has tanks. It has all sorts of the whole all of the instruments of state, and you have the ability to claim something from them. 

There’s Bitcoin. I think the only thing that needs intrinsic value is this idea that there’s somebody who will accept it from you, broad acceptance, but it’s a very real difference between Bitcoin and real currencies.

Preston Pysh  44:32  

When we think about how the universe works in general, there’s balance to everything. There’s a plus side, there’s a negative side. So whenever I think about what we’ve experienced in 1971, it’s like we’re living in a world that’s lopsided. You only have central banking, you have nothing else that’s keeping that in check and forcing governments to be responsible in the way that they spend. 

So it used to be gold, but that really kind of became manipulated and then we came off the gold standard. Now you look at how gold functions, it’s not like you can go to Starbucks and use some ounce of gold in order to make a purchase. However, I think that this brings the balance to the equation. Whenever I think about how this is taking place, this is going to add the yin and the yang to currency, it’s going to peg it…

I guess that’s how it’s gonna act as a global peg and who knows if this actually happens? It’s just a theory. I agree with you, Guy, I think that the people who are these maximalists that think that Bitcoin is going to take over everything, and there’s going to be no more dollars or there’s gonna be no more euros or whatever. I don’t see that happening. I do see there being this equilibrium that will eventually occur. 

Now, when that happens, who knows? And the inflows that you’re talking about are just… I mean, that’s the thing to really pay attention to. When I’m looking at the inflows to Bitcoin in the last quarter, it’s been astronomical. I mean, this has tripled in market cap since the middle of the summer tripled.

Guy Spier  45:57  

But just to be aware, you have a triple in market cap, no cash inflows. It’s just the market cap is just the price at which people are trading or exchanging Bitcoin for dollars today.

Preston Pysh  46:10  

Well, wouldn’t that be true? I’m sorry to interrupt you but wouldn’t that be true if we actually controlled the money supply? So I agree with that statement, if I can contract the money supply, call it like the way that the central bankers do it, if they can track the money supply, they can actually boost the value of it. Then you’re not really adjusting the inflows, outflows. Those could be neutral by just adjusting that money supply. 

When we look at crypto, the supply that exists isn’t something that anyone is actually manipulating or controlling. It’s something that’s completely… The only crypto that’s out there, that’s like that is Ripple. That’s the only one that has a central authority. 

It was pre-mined coins, so they can adjust the supply and they can boost the market price because they’re adjusting how many are outstanding in the marketplace. However, when you look at all the other ones, they’re not like that.

Guy Spier  46:53  

Yeah, banks can manipulate the supply. I don’t know about the other ones and the algorithm, the way it’s written. It’s not allowed for Bitcoin to change supply. But my point is, let’s just imagine just to make the point that you and I are the only two people who trade Bitcoin in the world. 

At $10,000 per Bitcoin, let’s say for argument’s sake, today a market cap of $300 billion, you and I could trade one bitcoin for $10,000 instead of a market cap [of] $300 billion. We could trade one bitcoin, $20,000 instead of [a] market cap [of] $600 billion, but the total volume trading would be $10,000. So how much volume is traded? And how much of the increase? 

It’s calculating the liquidity of the market, I guess, is what I’m saying. There are measures that you can look at. The studies that you can look at and show how much money flowed into this commodity over the last month, or how much money is flowing out of a commodity, and people removing they’re interested in the commodity or not, and how much money flowed out depends on the volume. Also, the price at which it was trading. 

If at $10,000 per Bitcoin, and we show that there was a $30 billion inflow? That’s interesting. Imagine that at $10,000 per Bitcoin, we could show that there was… I guess, is it possible to show an outflow? Let’s say that people sold Bitcoin for dollars for value of $10 billion, and there were enough new buyers of Bitcoin at $10,000, that it stayed at $10,000. That, for me, is enormously significant. 

So, if Bitcoin hit $10,000 per Bitcoin, as a result of $1 million going in, and only $1 billion worth of the existing Bitcoin holders willing to sell, that’s a very different story. If it stays up there, there are tens of billion dollars flowing in. And so the people who have held it from zero to $10,000, there’s tens of billions of dollars you were able to get out. So, the liquidity of Bitcoin is I guess what I’m trying to volume, daily volume trading. It is important.

Preston Pysh  49:01  

The answer I mean, we’d have to go to the exchanges to get the answer, we’d have to go to Coinbase, and America and some of these other ones, because those guys definitely know those numbers. But I don’t think anyone else outside of the exchanges would know what that is. However, I think that that’s the key to understanding how profound the movement really is.

Guy Spier  49:18  

One last thing that I’ve only learned recently, that is very, very important. So if I had a lot of my assets tied up in Bitcoin, which I don’t think that I’d want to know what’s going on there, and I want to pay attention to those numbers…When you look at the economics of currency, there’s been a spate of articles recently talking about how Bitcoin is very inefficient in terms of power consumption. 

It turns out Bitcoin uses more power than some small states because of this proof of work in order to manufacture new Bitcoins. That’s not terrible, in that it also costs me an enormous amount of money to take gold out of the ground. That was also a currency. 

It’s a lot cheaper to print dollars or to create digits inside banks. However, *inaudible* the power consumption will do over time, but the major issue becomes something that Bitcoin is not permissionless to run. Just a new kind of *inaudible*.

Preston Pysh  50:13  

Yea and I’ve heard a lot on the power argument as well. I think that it is a concern and I think it’s something that people need to think about is where’s this going to be in five years from now? Now, a lot of the numbers from the articles that I’ve been reading, I think are a little bit misguided, because what they’re doing is they’re assuming that the current two megabit block that exists is going to be proportional to the number of transactions that exist moving forward. 

Then, the cost associated with that, but one of the updates that they did specifically with Bitcoin back in August, with this segregated witness update, is allowing off chain transactions to occur, which you’re getting a lot more transactions for the amount of energy consumption compared to what it was before because not everything has to be on the blockchain in order to have the transaction occurred. 

Now, the settlement will occur on the blockchain but I think you’re gonna see a lot more… In the articles, what they’re saying is based on the number of transactions that happened today, basically all power consumption will be consumed on the blockchain and three years from now

However, I think what they’re doing is they’re interpreting a line out that doesn’t account for adjustments in the software that allow more transactions per energy consumption. But there’s people out there way smarter than me on this and if you’re listening, and you want to point me to an article that proves me wrong, please send it to me so I can read it.

I just wanted to rewind back to the question that was in there, though, we didn’t answer. What podcasts I listen to? 

Preston Pysh 51:42

I want to hear this one.

Guy Spier  51:43  

I listen to as many podcasts as I’d like to listen to what I’ve got on my phone here. I just wanted to see what would come up and so I’m just going to literally read out, so the one that comes up top: 99% Invisible by Roman Mars. It’s really high quality production values. I first heard him on TED Talks and BBC Radio History of Mozart, and he doesn’t object. But everyone, just TED Talks. 

Sometimes I don’t actually listen to you. So as I’m kind of moving in alphabetical order right now, so there’s a BBC Radio called Brexit Guide for the Perplexed. There’s a guy called Dan Carlin. He’s got a podcast called Hardcore History, which I really enjoy. Then just moving down, so I think the guy I am sure you must know him, but I just find him really inspiring is John Lee Dumas. I don’t know if you know him.

Preston Pysh  52:39  

I don’t know him personally, but I definitely know who John is.

Guy Spier  52:43  

I think that one of the things you know about John is that what you see is what you get. He is not pretending anything. It’s so funny I sometimes use vocabulary now with my wife, even though it’s kind of [silly like I’d] say, “Hey, honey, I’ll catch you on the flipside.” 

The other thing that I find really wonderful about John Lee Dumas is that he’s not just bringing great guests. He’s kind of his cheerleader. So he wants a report, and you’re like you want your listeners to succeed, not just with our investing. You want them to live awesome lives and you want to help serve. 

I think there is something really incredible about the way technology has changed, that it allows people who want to be servant leaders to really shine. That’s kind of why The Investor’s Podcast becomes useful because that is what you guys do, and that’s what Johnny does too. So he really stands out for me. 

And often when I meet guests on his program, I then go on to their websites and listen to stuff. So then, I listened to the first episode of Masters of Scale, the Reed Hoffman Show. That was really fantastic. I thought it was really well produced with the name of the *inaudible*. I mean, it’s funny. I didn’t…have you listened to the Art of Charm?

Preston Pysh  54:04  

I haven’t, but I have not seen it in. Honestly, Guy, this might surprise people, but I don’t listen to podcasts.

Guy Spier  54:13  

Thanks for all the podcasts that I want to listen to. I’ll just leave you with the last one before showing you is also what I got on my phone. Hang on a second. Can you see?

Preston Pysh  54:24  

I know that show.

Guy Spier  54:26  

You’re one of them. Now I see you got a discussion on Bitcoin. I’ll have to listen to that.  I’ll just give you one last one is a guy called Mark Bidwell. He’s got one for people who work in corporate environments. He’s got a podcast called The Innovation Ecosystem. We interview some really interesting people about how to create the kind of enlightened environment that you’re creating and that John Lee Dumas creates. 

But in this case, for people in the world [who] are trying to make it a little bit more and more dynamic, a little bit more open, trying to bring new ideas and he kind of shows practice. So I just wanted to get that out back. This would be fun to do.

Preston Pysh  55:03  

Now that’s cool. And you know John Lee Dumas, he was a former Army officer. We need to invite John to the Berkshire meeting in May. Stig’s making it this year. Stig wasn’t able to make it last year so he is coming this year. 

One of the things that I talked with Stig, and just so you know, he is out of town. He wasn’t able to be with us for the discussion today, but Stig shot me a message right before we chat, and he said, “Remind Guy to tell our audience about going to the Berkshire meeting, because here in December is when we start spreading the information about how can you go get your tickets now. Get your hotel room.” So put a plug, tell people what, from your vantage point, what is the Berkshire meeting like. 

Guy Spier  55:44  

Preston, I meet so many people. I’ve actually got an intern in my office right now, and they kind of want to make a change in their life. They want to have a better career. They want to have a more meaningful, more soulful career. They want to get on two different paths. [Not] the one that they’re on. They come to me looking for advice and insight, and I kind of tell them, “Go to the source. Don’t come to me. I’m not worth it.”

So the expression is, don’t seek out the masters. Seek out the masters’ thought. And the source is Berkshire. If you don’t know where you’re going into Berkshire, you’re going to be just fine because you’re going to be enveloped. Probably from the minute you get onto the flight to Omaha, wherever it is you’re flying from. 

You’ll just be in a crowd of people who are your crowd. There will be these meetings everywhere, from the airport all the way to the Sunday evening bar event that I’m looking forward to attending. You’ll hear awesome people saying *inaudible* I think all chapters in my book; about how the books have been [transforming] me. I was a New York City suit. I was a guy who went to the Berkshire meetings, trying to drum up business. I don’t go to Chatwin meetings [for] business. I go to the Berkshire Hathaway meetings to be with my tribe, and it’s a big tribe. 50,000 of them.

So you like to remember the tribe. I’m not saying it’s the only tribe one should be a member of. But it’s such an awesome tribe to be a part of. I actually heard from somebody, whether they get this, I’m going to go and speak at the Bob Miles Conference this year at the Berkshire meeting, and I think that he can contact Warren Buffett’s office. 

The meetings are not going to stay like that forever. Warren and Charlie are on in years. At some point they’re going to stop doing the meetings that way. So come experience the atmosphere before maybe when they just don’t do it anymore. 

Preston Pysh  57:46  

I think you’re exactly. You had a really profound point there about seeking out the knowledge of the master. And like, where did they acquire from what book that they read? I absolutely love that point. I think it’s super important for people to understand how profound that was, can I ask you one more question before you go? I know you’re under the weather, and I’m grilling you with all these questions,

Guy Spier  58:07  

But my voice is surviving fine and we haven’t gotten through to..  I’m loving this, Preston. I have a great time with you really.

Preston Pysh  58:16  

We had a person on Twitter asked that they want to have a little bit of a discussion about intrinsic value. So my personal approach is through an IRR calculation, trying to figure out what the yield is based on the price today. I’m curious if that’s kind of the approach that you use. 

I get very frustrated whenever I read, like Morningstar, and they say, “Oh, the price of the stock is $115 per share,” but then they don’t even talk [about] the discount rate or what that under 15 even means. So I’m a big fan of IRR for that reason.  I’m curious if you are and then what is the one thing that you think people mess up the most, when doing that calculation or their intrinsic value calculation?

Guy Spier  58:55  

The story there’s nothing as dangerous as an MBA with a spreadsheet. I really believe if you’ve got a runner, you’ve got to run the numbers on a spreadsheet. It’s not cheap enough. What I’d say is that I think that the vast majority are really good investments. 

It comes down to insanely cheap. Nobody disputes insanely cheap. It’s just this horrible thing staring you in the face that you have to overcome or you have to see or understand or reason with. 

So one of the moments for me that was a very teachable and learnable moment was when Warren Buffett made this huge investment. $6 billion investment in preferred stock of Goldman Sachs. It was right in the middle of a national crisis.

Preston Pysh  59:38  

$115 on the book, I remember this. Right back in 2008.

Guy Spier  59:44  

I was like, wow, right in the middle, and I think when we’re in the middle of a financial crisis. Companies are going bankrupt all over the place. Everybody knew [it] was cheap. Nobody was going to buy it.

Warren Buffett didn’t do an IRR calculation. One is the company that…, and I’m not going to mention the name. I looked at it in my checklist. I did my write up. I started buying, then I was like, “Wait a second, I need to figure out the price of oil. I need to figure out where it’s going.” And the thing is so cheap, you can’t believe it. But it’s trading, like, oil is going to stop being mined tomorrow. Then within five years, people are going to stop needing oil. 

So the real question is not is it cheap. The IRR is not going to change that. It’s what is my opinion on oil? Can I take the other side of this path? So I tried to get away from these kind of finely tuned *inaudible on what the IRL will be. There’s nothing wrong with saying, “I think I want to own Berkshire. I think I want to own some, whatever it is. I’m just going to buy a bunch of it.”


That’s where I tell you at the other end of the spectrum. I’ve done this a couple of times on Amazon, and I’ve done all the adjustments that you need to make in order to kind of understand Amazon as a *inaudible* business, and I just couldn’t bring myself to buy it, you know, because it’s still too expensive. But without being an IRR saying, “Well, you know, the business has to perform this well, for this long this valuation to make sense.”

Preston Pysh  1:01:14  

Yeah, it’s a momentum play. I think yeah a value investor to look at that, you’re always going to have a hard time with the numbers based on how high the premium is today, right?

Guy Spier  1:01:23  

What should be a famous and extremely successful value investor called Nick. He made a call on Amazon 5 years ago. Put a third of his portfolio into it. I don’t know how much because he doesn’t talk about it. The shutdown is fun. [It] sent an enormous amount of money back to his investors. I think [I] made enough money for a few lifetimes of his, not extravagant but not an unextravagant lifestyle. He’s a value investor, and he called me up, and he said I was listing the pricing, and you have to look. I just couldn’t see it. 

So some value investors do it. But so my point today to the listener, and my point to you is you gotta be all over this stuff. You have to be willing to look at value 5 ways, 5 different lenses, [and] do the IRR. 

But look at it in other ways as well. Look at replacement value. Look at just all different ways you could value it and then just decide is it seemingly cheap malt. If it’s not really cheap, I’m not saying don’t buy it, but I’m just saying be aware of what you’re doing.

Preston Pysh  1:02:27  

Alright, so Guy, one of the major themes of our very first interview years ago, was this idea of writing letters. If I remember the quote correctly, you said something to the tune of if I had to choose between writing letters, and value investing, I would choose writing letters every day of the week. 

I’m curious and one of our members of the audience wanted to know, are you still writing letters, and do you still put as much emphasis and weight on the power of writing letters and explain to people what we mean by writing letters?

Guy Spier  1:03:00  

So I mean, there’s my book, right? This is why I said that comment…it’s only because I wrote a thank you note to Mohnish Pabrai that he knew I existed. And after I wrote a thank you note to Mohnish Pabrai, he invited me for dinner. It turned out…that dinner changed my life.

In fact, in my case, if you asked me that I’d rather have that dinner with Mohnish Pabrai or lunch [with] Warren Buffett, the dinner with Mohnish was way more important to me. He introduced me to so many valuables in that dinner, I would have never have gotten. 

So the way I write about in the book, writing thank you letters, writing notes of appreciation increases optionality in your life.  The thing is, is that part of why I wanted to write the book because people think, “Oh, yeah! Mohnish Pabrai. And then, he had lunch, Warren Buffett. So he’s a very lucky guy.” 

What I wanted to convince people to know, well, there’s a certain element of luck with the house. Do you work like you get? And I wanted people to know that I didn’t write one random note. 

At that time, I was writing like 15 thank you notes a week, so like 3 a day. So when you add that up, that’s the order of hundreds a year. When you compound over 5 years that’s getting into the thousands of letters, thousands of people being touched. So I’m into [a] sufficiently strong habit of doing that. 

What is it? The chains of habit are too light to be felt until they’re too hard to break? That funnily enough, I have a hard time leaving the office unless I’ve penned something. Somebody stuck it into the tooth, and I’ve streamlined some of it.

So any person who meets me passively will get some piece of physical mail from me at some point. Well, let’s say that 80% of them. Well, 20% one reason or another. I’ll decide. I want to send them something because they’re not people that I want in my life. 

But the vast majority of people I do want in my life, and I send them something. So yeah, I still do that. The core of it is whether it’s a thank [you note]…a book…[or] a small token of appreciation, [it’s] giving people a little bit of joy. A little bit of a sense of I’m glad that they exist. I think it’s extremely powerful. 

I think it makes the world a better place and gives me a far more beautiful life. I feel like as a result of doing that, I’m living my life bathed in an environment of people who have an initially positive reaction to me. So I’m curious and I really… as of right now, I can’t confirm it, but did you receive stuff from me?

Preston Pysh  1:05:45  

Absolutely. You know what the highlight of my mail for the year is whenever I get the Guy Spier Christmas card. I know I’m probably not the first person to ever tell you that because Guy’s Christmas card is on epic levels. It’s something that no one has ever seen. I think the one last year, when you get it, it actually turned 3 dimensional, whenever you were able to unfold it. It was quite incredible to say the least.

Guy Spier  1:06:13  

I just want to tell you that the designer of that cause is somebody called Cecilia Wong. She’s also designed the cover of my book. She’s brilliant in ways that you and I cannot understand when it comes to visual communication. So, I have so much fun with that card. 

One of the problems that we had is that she started designing the cards, and they were getting better and better and we’re on this Sisyphean treadmill. Like how the hell do we top what we did last year. So I hope you like this year as well, Preston. We’re doing it, and it’s so much fun because…and this was the talk that I gave at CFA Society, which I think might turn into an article which is… He made a nice point to close this podcast. 

That so many of us in the financial world don’t actually add value. That was the nature of that whole Warren Buffett and protege partners, and that’s a scary thought. Also, if you combine that with the idea that you can’t tell if I’m lucky or skillful. I really do hope that I’ve added… at the end of my career, value to my investors because of superior investments. 

But I have to prepare for the possibility but at the end of my career, can probably be shown that was not the case. And given that, that is a possibility, I think is really important to have been a decent human being to make the world a better place in other ways. So starting off with writing notes of appreciation is a great place to start. The best place to be is when you’re doing on industrial scale the way China does with Mohnish’s *inaudible*.

However, it doesn’t matter what scale you’re doing it so long as you’re doing it and I think that the professionals in our industry, in my industry, I hate for good reason because people consider that we caused the financial crisis. I don’t believe that I’ve caused the financial crisis. But I think that, as an industry, we have a very strong obligation to redeem ourselves in the minds of society by at least trying to make the world a better place. It’s just really important to do. 

And so the thank you notes is a good place to start. It’s not a place to end. I think I’ve done a very good job with that. Knowledge is a far better job of that. But at least I’m trying and we should make some progress. The great news is, it’s not just about making the world a better place. It’ll make your life a [better] place. You are living in the world. We want to live in a world where people are grateful that we exist. 

I can point to a few financial tips, famous corporators, but nobody’s happy they exist. We don’t want to be that kind of person. Walk to the bar in Omaha on a Sunday night, and you’ve got 120 people or more. They’re all glad that Preston Pysh exists [and] is chained alive. But we can all be that way. And here’s [the thing]… 

We can’t all start the Gates Foundation. We all will start the China Foundation. But we can all see individuals say, “You know what? I’m going to tell that person that they did great today. I’m going to write to that speaker and say they did. I’m going to write to XYZ person and say you know that they had an impact on me, or whoever it is.”

And when you do it in a thank you note, when you do it in a written document, such as the person puts [it] in a desk drawer. They read it again. They put it up on the notice board. They reread it as permanent evidence of something very special and lasting, truly lasting. It’s not a zero-sum game. If your listeners do more of it, the TIP community, more of it, it doesn’t take away from anyone else. It just makes the whole world a better place.

Preston Pysh  1:10:02  

Insanely profound comments, Guy. So folks, Guy Spier, the humble, very humble Guy Spier. Thank you so much for coming back on our show. For people, if you want to learn more about Guy, he has an incredible book. It’s called “The Education of a Value Investor.” Stig and I read this. And what? It’s been a few years now right, Guy? Two or three years?

Guy Spier  1:10:25  


Preston Pysh  1:10:27  

It’s been a few years now, but I’ll tell you, you want to read a fantastic book. Pour into this and you’re going to be very, very happy that you did.

Guy, where else can people find out more about you? I know you’re very active on… Well, you’re not very active, but you’re active on Twitter right? 

Guy Spier  1:10:41  

Actually,  I am active on Twitter. I don’t know if it’s a good thing or not. You can find me on @GSpier on Twitter. I do answer questions there. Most of the stuff that I put up, it’s not… I can’t put up on my websites on guyspier.com. So you can always go to that website to see stuff, but it’s quite likely that you should message on Twitter. I’ll respond. 

Preston Pysh  1:11:02  

Awesome. Okay, thank you for your time and safe travels tonight.

Guy Spier  1:11:06  

Oh, thank you for having me on your show again, Preston. You’re a good guy to have in the world. Grateful to be your friend.

Outro  1:11:14  

Thanks for listening to TIP. To access the show notes, courses or forums, go to theinvestorspodcast.com. To get your questions played on the show, go to asktheinvestors.com and win a free subscription to any of our courses on TIP Academy. 

This show is for entertainment purposes only. Before making investment decisions, consult a professional. This show is copyrighted by the TIP Network. Written permission must be granted before syndication or rebroadcasting.


Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it!



P.S The Investor’s Podcast Network is excited to launch a subreddit devoted to our fans in discussing financial markets, stock picks, questions for our hosts, and much more! Join our subreddit r/TheInvestorsPodcast today!


  • Support our free podcast by supporting our sponsors.





Check out our latest offer for all The Investor’s Podcast Network listeners!

WSB Promotions

We Study Markets