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.
- In this episode, you’ll learn:
- 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
Get The Investor’s Podcast blog posts and podcast episode updates on your Facebook feed by liking We Study Billionaires.
WHO IS GUY SPIER AND WHAT IS HIS BOOK, THE EDUCATION OF A VALUE INVESTOR, ABOUT?
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.
WHY GUY SPIER AND MOHNISH PABRAI SPENT $650,000 ON A LUNCH WITH WARREN BUFFETT
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.
Podcast Transcript and Summary
Preston: [00:02:38] So going into the questions so we open 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 out because I think this is so fundamental to where we’re at in space and time here in 2017 Akash. He asked how does an investor patience and temperament. 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 is attuned to their teachings they hear the word temperament and 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.
Guy: [00:03:16] It is but you know of all the questions and put them out in front of me the this was the one that I was most nonplussed about actually because I mean I’d walk around saying oh I need it my patience and my temperament I’m going to try it it’s small. I would argue the case. I feel the forces that make me want to sell something just for make me want to buy back something that I’ve just sold. And I find myself having to you know just go back each time. Fundamental analysis that I did and focus on the logic with fundamental analysis. It was hard for me to think through I didn’t have any easy answers for our cash. Ashikaga cash it’s a great question but maybe what I’m reaching for is the new compote temperament and patience and isolations that would be related to something you know in sight. If you are 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 yeah no she’s going through a tough patch. And our relationship is going through a tough patch. I’m not going to do anything until another month more three months. And by the way that’s the same. If we think of long distance running long distance anything we know. If you at the beginning of a marathon and you say I’m going to run the whole marathon that can be devastating. If you say I’m just going to run to that lamppost or I’m going to do anything that I’m just not going to stop jogging.
Guy: [00:04:44] So if I bring it back to investing obviously the question is investing I go through I think of myself doing an actual crisis of 2008 9. You know one day it’s in my book my this comes into my office and he tells me he’s on the cash and I was kind of angry with him. I felt like I didn’t want to have somebody at my office going to cash when I knew intellectually that was the wrong thing to do. But I also was feeling a lot of fear and I just I’m just saying to myself and sang some investors like look I know that Nestlé as well. Enormous amounts of money. Way more than where it’s trading wrong for. I’m just long on a solid loan to start a great business just because people are panicking but I guess the key is that you don’t build it in isolation you build in relation to the specific challenges that you have on that day. And he kind of building the connection between what we intellectually know to be true for example buy and hold is the right thing to do down to the specifics so you know I’m feeding this incredible fear and feeding compelling need. So my stocks along with everybody else but I know intellectually this isn’t the right thing to do and that’s kind of a little similar to the idea of not wanting to break out of the wrong when you’re on the marathon.
Preston: [00:06:02] So the guy what do you think about people that write down their principles or trading principles before they put the position so if you’re talking specifically about nastily it might be something like I’m going to buy this. The reason that I might sell this would be reason X Y and Z and you list some of this stuff out in writing before you would put the position on that way you can reference that you can look at your principles and 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: [00:06:35] I mean I think it’s more generalized yes. It’s definitely a good thing to do. It’s not the only route to take but I think you’re just enunciating a specific general principle that the more conscious we are what we’re doing what’s going on the better it is and writing is a great way to become more conscious of yourself. Even better it would be keep an investment diary. And it’s just I’ve found it very very hard to keep an investment type but I do actually use unloads all my devices and on when I’m thinking something I feel like I ought to catch or I go and capture and never know. And some of this relates to investing and some of it isn’t right. Yeah actually now it’s kind of like I told my regulator here this is what they do. Now I kind of like I have to do it and I like that because it keeps me more disciplined than I paid to keep sounds before I buy any stock. I have to write a paragraph at least. And I go through an Excel spreadsheet and go through a checklist about 70 75 items and many of them I leave blanks. They just don’t apply. Many of them I write something. So I think that’s a really really big thing to do at the end of the day. You know our cash. The question is how do you build patients in the abstract. I would argue is how did you find the patients to that stop. It’s been in your portfolio of creels hasn’t moved. How do you resist temptation to sell and then that becomes a little bit more concrete. And then maybe there are some some strategies that one can come up with when one gets to some call it situation.
Preston: [00:08:17] Interesting. So let’s talk about kind of 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. And I like this one. You listen to any other podcasts.
Guy: [00:08:33] So you know one of my goals actually you know what you go to where you need to is you need to come and visit me all week that stay with us and you’ll see that my library is a great place to conduct some interviews. So anyway I’d love to have you over here and we would love to come out there. It would be great but when you come into my office basically you can go left you can get right to go left. Takes me to the room I’m in right now which is my busy. It’s where computers are. They go right to my library. There’s no electronic devices and there’s lots of books. And my goal is to spend more time going right and going left. As a matter of habit and I actually I and you know some days I don’t make it in there at all. But the thing is I just go in there and I sit needing 10 or 15 minutes. You kind of clears my head you know see what I’m supposed to be thinking about doing yes so this is like your form of meditation.
Preston: [00:09:31] You know there’s people that swear by meditation there’s other people that say that they have like 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: [00:09:50] I mean actually sometimes I do have my mobile phone with me but it’s a great point. It’s just that there’s no computers or there’s no phone in there. When I shut the door on that room what people in my office I tell them pretend that I’m outside the office. So you know if somebody calls I’m not here I doubt but sometimes I mean I sometimes think of my mobile phone with me. I didn’t actually think it through that far. I also say that it’s very mild meditation. I mean I’m deeply impressed. Well Harry Reid and his one month ear on that possible meditation retreat in India which he credits with two great books that he’s written and this a guy I know here the company is the capital of publicly traded company. He does regular a 10 day past meditation. And I actually have not managed to do that. I think that that’s what I really need is train my mind so I think I’ve got to figure it out. Meditation ultralight but it’s not much more than meditation light. It’s a place that makes me a little bit more quiet. But my point being that the I get into my son 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. I really try and locis whatever the hell I’ve printed out. Which might be a new report or a 10k or in my piece and background reading that I’m doing like now reading everything I can’t backlog’s smell or truck smells just amazing engineering mind we really think about the smog problems and I’m trying to understand more about oil.
Guy: [00:11:25] So I’m reading plenty about the oil industry and the publications though that are regular for me. I love the manual. Light is a lot of the new format but I have to say that at some point I love finding out about investors who are out there that at some point away from reading about investing and reading for investing. But on publications about two years ago I had subscriptions to Automotive News Scientific American New Scientist nature Advertising Age Gerbe publications done by kraines and I was kind of drowning in paper at some point I said right. Just going to go on the publications diet I’m going to get rid of the vast majority of them. And then if I decide to resubscribe or resubscribe some of them the industry publication is really like buried in paper and in some way another one was Aviation Week which is a great publication but on some level I felt like I was so like walking around the forest looking at the Fonz and not seeing the trees the complications I didn’t give up or The Economist and Business Week and I don’t like the design of BusinessWeek but I think there is an awful lot of great stories in it as a publication I get here in Switzerland called Lance like the Swiss version of Fortune magazine and from I think our room Fortune’s chirps and start I and I want back. I like what’s in there and I actually like daily publications. They still get news as I get the Financial Times we get no social science on a weekly basis. I get your Maund I get the New York Times International. So I kind of is a lying.
Guy: [00:13:16] The truth is I don’t read a daily basis but 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. Yeah but the thing is I used to get grants publications as. And then I think I’ve kind of reengage with my Bloomberg monitor and now I get grants on the Bloomberg monitor and every now and then I’ve printed out to read. I think what I have going on is that in spite of the magazines not coming in some time ago I decided to buy. I kind of pretty much any company I look out at Hoffe interests me go and buy one share and my Charles Schwab account. I make sure that my Charles Schwab account is set up to get a physical delivery of mail. So no I’m getting proxies and 10 Qs. I mean I just got a two inch think Prossy on the merger of two companies Praxair and Linda. So you know that’s a tracer to interesting document that’s been sent to me and I’ll I’ll find those things lying around along with whatever the hell else I’m working out. You’re looking at something you know the scope presentations to tout Sutent case and Qs and I have a really high quality large printer paper handling stapling so my printer 60 page printout and double side and that’s stuff I carry around myself. Now I’m looking out all the time so I say that’s the stuff that I’m trying to read trying to for some long odds to show us.
Preston: [00:14:50] Now it to me it sounds like the focus is really the 10 caves in the tent. You’re like you don’t miss it. And it comes out for any business you own. Would that be a correct statement.
Guy: [00:14:59] Oh I cried to miss quite a few but I’m printing out the ones I think are interesting and are important to look out by the way something is really important. But you know this was a written article I want this color. I gave it to the Swiss. If a society which I was quite pleased with came out reasonably very well for Brown prints that I made Prust. So I really appreciate your respect me it’s really kind of you. Thank you. Me What You have to do is read seem to love book all around us and it is very convincing that I have a 20 year old I’m centage points proximately better than the S&P. So that’s good return it’s not Omaha numbers but it’s still non-competing but there’s no way that you could prove to a who understands how the numbers work. I’m lucky smart so you know you’re interviewing me and I’m what I’m doing. The you know the story is you take 1000 people and you run a coin for Comcast. You can’t keep flipping coins round one run two and three and you find the person who’s flipped series of heads of the people go however many times it is the one guy who flipped series of heads when you don’t interview that guy and they’ve done this. All right. So the guy is flipped series of has really genuinely feels like he’s got some kind of skill and you like what is it the way you find just that stop even. So what am I trying to say is that your listeners the investor community should not necessarily troll less. What I’m saying is just interesting guys it does. But we cannot rule out lives just a coin. We have flipped a high heads. Many reasons I’ve got nothing to do with what I’m about right now.
Preston: [00:16:53] 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 in 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 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 you know I might be wrong my thought process might be wrong. That’s the turning point for me. We were reading Ray Dahlia’s new book The Principles book and in the book he talks about how he went through this just destruction of his company back. I want to say it was in 81 just literally lost everything. And 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. What am I doing right now. That proves that I’m wrong. And 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: [00:18:10] Yeah. So that you know well the way I was data is you can’t rule out I don’t know the confidence interval is you call rule out. I was just lucky coin. And your listeners the listeners should take that into account when you ask me questions about what I do when I get up every day do I turn left or right. That’s my meditation process. All of those things. And then you know I get the feeling. I mean I if you take monish. Right. It’s a lot more than I do. And iTunes has an impact on retailers. And why does it need a lot more. I just want a plane crash on a wall. I mean I’m not saying I don’t read a lot. I think I read a law. But I think that he reads more and it’s kind of like it’s cumulative. I mean if I read I don’t know 300 I read 300 maybe I read a hundred books here he’s reading 150 200 here yeah. And that does make a difference. I’m not saying that I don’t absorb the ideas as well as he does. But on the other pulls I think is what is really important for some is that whatever it is you’re doing you’ve got to be doing it intelligently and I think that’s something that when Coombs talks by his 500 pages a day I think it stimulated a lot of people just fine. I approach 100 pages a day to read. But you’ve got to be intelligent about how you really mean if he’s called a nanny or a pool with Fiorinia a Tengku and you know there’s a change in the business. Ferocious I’ll treat everyone and be smart.
Preston: [00:19:39] So just for context for the audience. Todd Combs who dies mentioning that’s who everyone thinks is going to be the replacement the buffet. This is who Buffett has basically tapped as being his replacement after he dies. And you know 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 to highlight when Buffett was asked well how did you make your selection of Todd and Ted and Buffett came back he said you know these two are the only two guys we could find that read more than Charlie and I and I loved that quote. It is such a profound quote. What he values and what he values is people that are just going through an enormous spurt of learning at all times. And I just think that’s just so incredibly important and I think it goes back to our first point of temperament.
Guy: [00:20:27] You know like you’re going to have great temperament if you know what the hell is going on and the way I think that I want to answer that question is. I mean I don’t know. I live inside my brain and inside anybody else’s brain. I feel like my brain is kind of like an unruly horse that is galloping around the enclosure. Every now and then every now and then you know the host notices a good objective in the distance and I’m in a position to ride the horse and then I go to Africa and ride the horse to that objective. And the key is actually I would argue to get the worst thing is to read something that says to 500 pages a day is not the objective of the horse I’m writing you know and like in some way right towards meaningful object or pay attention towards meaningful things and when it’s meaningful objective changes then don’t keep moving towards the same thing out of the same kind of sense of duty or slavish desire to follow some precept that you’ve read somewhere we want you to know in a certain way maybe it’s encapsulated this into a learning machine which has changed directions vending machines stopped halfway through books from Israel realizes nothing else the Lovefilm machines don’t waste time reading stuff that’s not worth reading and what it’s saying is that your audience is. I’m not saying that I’m a learning machine. To me it’s an aspiration is much as it is for everyone in the end I think it’s this podcast thing that I’ve thought to read books but I actually find myself reading a novel a Kindle because I get into bed next to my wife she’s never let me switch the lights on but Kindles fine. So now I find that so I love it. So I found two copies of Kindle in hardcopy.
Preston: [00:22:24] So awesome. So this is a question that came up on Twitter and I guess I’m going to just kind of change it a little bit. Related The credit cycles. So one of my frustrations with the value investing community is the complete lack of respect for macro. I think that when you talk to most really hard or Warren Buffett investors they just say Yeah I have no idea what Maccarone is going to do I just ignore it and I just focus on the small cap large cap business and I look at it from that vantage point just buying equities. And so Howard Marks wrote his incredible book and he talks about Punit knowing where you’re at and accredits like when he really goes against a lot of the literature that you see with Buffett and Munger. And so I really applaud Marx for this because I’m in the same camp as him I think that it’s very important it almost be like if you were looking at a spectrum and value investing is in one part of the spectrum then you’ve got macro investors in 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 work inside of your environment better.
Preston: [00:23:29] So I’m curious to hear your opinion on that idea. And then I’m also curious that if you kind of think that it’s important to kind of know where you’re at and 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 and signaling that I’m seeing is that the U.S. 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 out money is the ECB. And it’s looking like they’re going to start winding down which for me is signaling the end of the credit cycle that we’re at the top of the credit cycle. So 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 knowing the risks that are associated with it if you like reading about the credit or you enjoy graphs because it has a central page and you see a central bank to.
Guy: [00:24:26] The resource again Grant’s Interest Rate Observer to ground. I mean what do we call him. He’s part of the scaffolding of Wall Street. I mean he’s been around so long is an incredibly talented fighter the rising occasion for a very long time includes low macro stuff related to the credit cycle actually. And then he’s always connected up some interesting idea or rather the heel print on his pages. It’s kind of over time that one of his conferences it predates a lot of the new media stuff. Surprisingly and try and sell I think that I can do that. Hey Preston come out saying that I’m better off not allowing the site to determine my last decisions. I think it’s the end of it. Ignoring the critics is if you ignore the credit cycle neutral try and buy cheap stocks that will do well no matter what. And if you pay attention to the credit side is this huge danger that you end up becoming some kind of closet timer on kind or another. And so if you’re super pretty and you’re capable of paying attention to credit cycle and allowing that to steer you in way you pay attention. Stocks you buy. And that’s really fantastic. But I think the vast majority of us and many of us in the credit cycle which in itself is not a terrible thing to do. Lead to the next step which is not time the market should probably a terrible thing to do.
Preston: [00:26:01] And 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 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 a hundred billion dollars one hundred billion dollars 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 percent 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. And I hear that argument all the time always just sitting on too much money. He can’t move. Well you know you could move it into an ETF which is priced at a 3 percent or three and a half percent return today. You could do that. Which is better than a negative 1 percent return. But he’s not doing that. That’s where unlike now it seems like he’s saying one thing and doing something different.
Guy: [00:27:08] I’m curious to hear what you think the goal is to pay dividends. You know he was just sending it by now 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 100 billion dollars to it or most of it to some it is either right now he can see what conditions will arise will make that possible. No it would be something like buying back America or buying J.P. Morgan or buying general may be enormous purchase. And he’s basically implicitly saying I believe I’ll get Tuesday so somebody said a CFO of a business inside Berkshire Hathaway that I met a long time ago. So that’s why it’s was me which get out as well. Which is pay attention to both. It does. It’s more important than what he says he calls and I get Steria picture. But yeah there is a bit of a dissonance there.
Preston: [00:28:12] Whenever I started out in 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 and whatever that is I take my cash flow for this month and I stuff it into whatever that asset is. And so if that was a true statement today because that’s what all the literature says is that he knows his approach. I don’t have to predict anything. I just have to know what’s in it give me the best yield today and that’s what I buy. But 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 is yield there but now there’s not really any yield in bonds that’s worth the spread the cash. And you’re seeing them sitting in some bonds that are short maturities of it. I mean it’s cash equivalents. I don’t know I guess I’m just having a hard time understanding these actions maybe.
Guy: [00:29:15] I mean I’m not sure 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 cash is building up because. You know profits are coming through and he’s not getting any. But he has not made a move like he’s never said it was fitting we’ll talk. I’m going to sell my portfolio securities.
Preston: [00:29:40] Well the guy with with all due respect that’s due to the cap gains. You know like he’s not going to sell Coca-Cola because his cap gains are just going to. I mean he’s making more on the dividend than his purchase price for some of these things like Coca-Cola. So he’s not going to sell out of those just because he’s going to get murdered in taxes. But when you look at the companies like IBM he had no capital gains. He’s selling that. You know what I mean.
Guy: [00:30:03] I don’t know I’m just saying that for fundamental reasons he decided it’s not as the side of the poacher you know meetings decide it’s not as good a business as he thought originally thought he was. Donahue that was the kind of asymmetry when it comes to investing. I mean you got it. When people talk about price being a good entry stock kind of thing once you’ve entered into it you know pay attention to March whether it becomes a phone call. And I think it’s far hard to sell stocks well than it is to buy stocks. Well I think Warren Buffett saying I’m going to let this cash disappear. I don’t want to sign anything in my portfolio on the stuff like what’s to. Like all businesses that are good businesses I’m going to let them ride baby sometimes like who are overvalued. I’m going to add significant chunks to my investments and I know being really really ready this is my dream that you buy when things are cheap. We don’t necessarily sell things is expensive. And I think that that’s what he’s doing the cash builds up. And here is the point. I think for me I just think it’s really really important. I don’t know how to square this this awareness of the credit cycle so I think we can all agree that 2008 was a trough in the credit cycle credit contract in a massive way. And credit continued to track in a massive way the system sort of like how cell XXIV mechanisms like the drawing in of credit the banks more stringent requirements more stringent requirements on bond ratings meant that it was just much harder to get money.
Guy: [00:31:47] Many many people. And now we’re probably five years into a very long credit churn. And I think that the danger of thinking about that and 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 and for yours. And obviously we knew that it was coming to an end in six months you might want to position ourselves very differently in our portfolios with this Comintern ending for yowes. And I think that’s where it’s really hard to tell. And I think for myself there are so many times when I felt like I’ve had so much evidence that we were at a turning point in terms of stocks going up the last time was when so many of my friends felt like election of will trump that it was time to get out of the market because is going to be a total disaster and the market totally surprised everyone and I can’t say that I didn’t have the same feeling I did. I was like oh gosh I’m not feeling very comfortable about a Trump presidency and house work workout. I never let to interfere with a 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 whatever the hell exclamations I’m trying to give you and your point is when you look at the behavior of Warren Buffett he appears to be looking at the credit cycle making decisions in relation to that cycle. And you know I can’t prove it to you but maybe somebody who’s super well tuned to valuations.
Guy: [00:33:18] Obviously that is going to look that way even though they are not consciously aware they’re doing it. But just to address something that you’ve talked about central banks this idea the central banks 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. That’s nothing new. I agree with you but it’s not something that we can settle out and manipulated. They believe that they are doing the right thing at the time and now there’s an honest debate goes on in academic circles around what the right thing to do is 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 something I don’t remember what it is. Central banks have this towering is very hard to comprehend. Just what is wrong with you. As much as they like they have enormous enormous enormous power and one should never be against them. And you have this kind of dichotomy. They open through a major major way. Nobody can really understand why inflation didn’t take off. The results of explanations are nothing definitive. Japan’s been in that kind of state for more than 20 miles. So exactly what point they stop the QE and what would make them responsible again is hard to understand and again you just don’t want to get on the wrong side of that as I would say.
Preston: [00:34:53] Now I think it’s a major concern.
Guy: [00:34:55] So my sense is press and that you’ve been telling some truth in the whole world you’d call them gold Hounsell gold something gold bugs. Yeah. And monetary peers if you like to them you know and I was one of those guys I was like these people just praising the currency. You know it’s just terrible to me. It was one of the worst meetings that somebody asked hatemongering is purchasing power the nominal U.S. dollar the last hundred years. So what the dollar was well 100 years ago is like two cents now. So cash is constantly depreciating Charlie Munger looks up the room he says and this is good. I don’t know why you are complaining. It could be a lot worse. That’s what central banks do. Is that a over time debase currency and they do it in the interest of horses. And we as investors can’t get upset about it. I would argue that the answer to that is that clearly you should see that currency there’s a way of transactions off but don’t stick around in that cash too long do you know which way it’s going. Something very serious. The South which to come back to you know in a the day that Bitcoin bounced about ten thousand dollars. You know great sailor. And that just came back to Warren Buffett’s Berkshire Hathaway. It’s again an incredible statement from Warren Buffett saying I know the cash is depreciating at some rate PR so hold it. I think it was something within a reasonable period of time. Can it make it worse.
Preston: [00:36:37] Well so the whole point thing is probably one of the Crase discussions happening right now. I recently did a Google Trends and a search was going in it the kind of see the global map the heat map of where it’s being discussed. And when I did that it’s literally being discussed almost in every single country around the world and no more so 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 it. Now I want to throw out an idea and I want to hear your thoughts on this. So all these fiat currencies are the pay and they have been for a very long time and so there’s no incentive for countries domestically no incentive whatsoever to be responsible with their spending because they devalue it. It manufacturers growth domestically. So we basically have a race to devalue currencies that’s happening around the world. And now all of a sudden this technology enters the space group bitcoin. BLOCK gene technology coined 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 300 and 15 billion dollars. So this is not 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. And if this becomes real we now have a peg and we don’t just have a peg domestically we have a peg globally and so I guess my question is this Are we seeing a re-enactment of 1921 in Germany but only on a global level.
Guy: [00:38:28] You know I think Bitcoin is a complex phenomenon. When the history is written when we have the perspective of a hundred years we’ll see that there are many things going on and so I don’t think there’s any one way to describe it. But here’s what I in the past underappreciated the simple facts. So more bitcoin gets embedded in all sorts of different things the more the currency is created using Bitcoin as the reference the more software embeds bitcoin the network effect to being the first mover. It’s the cyber currency with the largest reach and that involves the south making it an intrinsic value that it didn’t have before. So that same principle exactly is everything. Much smaller network and it could be blown out of the water with the intrinsic value in this is the same as intrinsic value of writing or Ionesco writing for Windows rising or androids or any of those. So there’s no question in my mind that I probably does land Bitcoin an intrinsic value even though the process itself would be replicated by thousands of people in it and it is being replicated by thousands of people with all the work. So the next thing that I feel I want to say about bitcoin is that you know I don’t think anybody disagrees that the underlying block chain technology is extremely valuable and we can separate out the block chain technology and what that means for transactions and King system and many other systems and separate that from the client and people say that we’re in that age the block chain is where the Internet was in the 19 the early 1990s and I think that’s probably true. There are a couple of Ethereum based currencies that I am really interested in. Ogar A.G. You are kenosis us as it yes. I love these political betting markets and they keep getting shot down proposals are reasons. I’m really looking forward to those two companies getting going. I think there’ll be so many ways to use it.
Preston: [00:40:46] I’m excited about that and I want to comment on that because that’s a really important point because a lot of the smart content 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 block chain protocol theory. It seems like 3M is one that’s doing this but I completely agree with you so we’ll have the links to those in the and it’s for people that check it out. This is not in any way investment advice. All this stuff with no end block chain is extremely risky but it’s interesting stuff that people need to be aware of. I’m sorry to interrupt but keep going there.
Guy: [00:41:35] So here’s another sort of what I think about bitcoin is that you have to distinguish between Hons. So you have economies in the world. We should all Dariusz anyway like in Zimbabwe nobody actually use our currency because it isn’t worth the paper it’s written on. The only reason why you would kind of hold Zimbabwe notions is that the central bank makes the promise to automatically exchange into some either dollars or euros. And that’s the same in a was the same last time I looked closely in places like Tintina and those are countries where the governments don’t stand for much all the federal governments capable of nationalizing property Gingles things. I see a move to hard currencies are more trusted currencies and those countries and well saying that those countries will be pretty good at preventing the dawn of the euro the yen being a legal tender in those countries. But Bitcoin gives people a way to go to something that is a much watch at least from the perspective of being living in Zimbabwe or Argentina much more safe bet. So is it easy to see why Bitcoin would displace some soft currency. Zimbabwe Talo the Argentinian peso range find out how at all if you ask me if I can see a world in which bitcoin displaces hollyhocks because like the Swiss franc the dollar the euro the yen and it much much harder to see because.
Guy: [00:43:09] Let’s not underestimate what stands high in the U.S. dollar. Now some of those helicopters that you are fighting in China behind the U.S. dollar and a whole bunch of other stuff and if I just want second a pocket cup 300 billion dollars. What I’d like to know and I have not seen. I don’t know if hunger exists is what have been the flows in bid on so what are the flows the money flows in and out. And I would suspect that what we see in the last three as a period where the allness the inflows have been far greater than the outflows. It will get to two point sometime in history when the outflows will be enormous and will the currency they will decide that and again day and you hold a dollar what you hope is the ability to claim splitting from the U.S. government and the U.S. government has real power. You know it has a military. It has tax it has all sorts of things the whole all of the instruments of state. And you have the ability to claim splitting from them. Bitcoin. I think the only thing that needs to intrinsic value is this idea that somebody who’s excited. You would expect but it’s a very real difference between Bitcoin and real currencies.
Preston: [00:44:32] You know when we think about how the universe works in general there’s a balance to everything. There’s a plus side there’s a negative side. So whenever I think about what we’ve experienced in 71 it’s like we’re living in a world that’s lopsided. You only have central banking. You have nothing else that’s eating that and 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 it you know 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. But 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 ying and yang to currency. It’s going to peg it. I guess that’s how it’s going to act as a global Peg and who knows if this actually happens is just a theory and I agree with you. I think that 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 no more euros or whatever. I don’t see that happening. I do see there being this equilibrium that all eventually occur. Now when that happens who knows in the inflows you’re talking about are just I mean that’s the thing that 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: [00:45:57] But just to be aware you have a true market cap no cash flows. It’s just a market cap is just the price of which people are trading or exchanging bitcoin for dollars today.
Preston: [00:46:09] Wouldn’t that be true. And I’m sorry to interrupt you but wouldn’t that be true if if we actually controlled the money supply. I agree with that statement if I can contract the money supply I like the way that the central bankers do it. If they contract the money supply they can actually boost the value of it. And you’re not really adjusting the inflows outflows. Those could be neutral by just adjusting the money supply. When we look at Krypto the supply that exists isn’t something that anyone is actually manipulating or controlling. It’s something that’s completely not the only crypto that’s out there that’s like that is RIPL. That’s the only one that has a central authority was pre mined coins so they can adjust the supply and they can boost the market price because they’re are adjusting how many are outstanding in the marketplace. But when you look at all the other ones they’re not like that.
Guy: [00:46:52] I mean no. So you can manipulate supply. I don’t know about the other ones. The algorithm the way it’s written does not allow Bitcoin to change by the mice pointers. That’s just imagine. Just to give make a point. You and I are the only two people who trade bitcoin world and so had ten thousand dollars bitcoin. Let’s say say today a market cap of 300 billion. You I could trade one bitcoin to ten thousand dollars and set a market cap of 300 billion. Yeah we could trade one call for twenty thousand dollars set a market cap six billion but the total volume trading will be ten thousand dollars. So how much volume is traded and how much of the increase. So it’s kind of clear the liquidity of the market I guess is what I’m saying. And there are measures that you could look are so easy you’ve got to show how much money flowed into this commodity over the last month. Well how much money is flowing out of a commodity and are people removing any interest in the commodity on all. And how much money flowed out depends on the volume and the price at which it was trading at ten thousand dollars per bitcoin. When we showed that there was a 30 billion dollar inflow. That’s interesting imagine that at ten thousand dollars per bitcoin we could show that was I guess is it possible to show an outflow. Say that people sold bitcoin or calls for value of ten billion dollars. And there were enough new buys a coin and 10000 that it stayed 10000 for me is enormously significant. So if bitcoin had ten thousand dollars per bitcoin as a result of 1 billion dollars going in and only one billion dollars worth of bitcoin holders wedding. Oh that’s a very different story. If it stays up there and there are tens of billion dollars flowing in and so the people held it from zero is 10000 you know there’s tens of billions of dollars who are able to get out. So the liquidity coiners I guess what I’m trying to volume daily volume traded is impose on the answer.
Preston: [00:49:02] I mean we’d have to go to the exchanges to get the answer. We’d have to go to coin base in 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. I think that that’s the keys to this to understand how profound the movement really is.
Guy: [00:49:17] Well one last thing that I’ve been under recently is very very poor. So if I had a lot of my assets tied up in coin I don’t think I’d want to know what’s going on there and I want to pay attention to his numbers. When you economics of currency there’s been a spate of articles recently talking about how bitcoin is very inefficient in terms of how she turns out bitcoin uses more power than some small states because of this proof of work not to manufacturing declines and that’s not terrible and that erodes the minerals model take hold. And that was also currency. It’s not cheap in dollars to create Edge’s inside banks but I don’t know what the solution to over time but it may become something that Bitcoin is not frictionless Teralba. This is a new kind of pacts.
Preston: [00:50:13] Yeah now and I’ve heard a lot on the power argument as well and I think that it is a concern and I think it’s something that people need to think about is where is 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 to make a big block that exists is going to be proportional to the number of transactions that exist moving forward. And then the costs associated with that. One of the updates that they did specifically with bitcoin back in August with this segregated witness up the 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 block chain in order to have the transaction occur. Now the settlement worker on the block chain. But I think you’re going to 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 block chain and three years from now. But I think what they’re doing is they’re interprete leading 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 are 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.
Guy: [00:51:30] You know I just want to rewind back to the question that was in there that we didn’t answer and that was in the Gospels pardon me what podcasts I listen to. I want to hear this one. You know I listen to many podcasts like this listen to what I’ve just called my phone here. I just want to see what would come out and I’m just going to read out. So when that comes up top is 99 percent Invisible and you know like I wrote my mom’s now. So just really high quality production ideas I suppose. Tuttle’s then is BBC radio history. Mozart doesn’t know it’s just TED talks and I don’t actually listen to as some kind of thing. We’re now getting older right now so it’s a BBC radio because called Brecht’s guide for the Perplexed. I’m kind of it a guy called Ten car and he’s got a podcast called hardcore history show so enjoy. And then just waving down. So I think the guy I’m sure you must know him but I just find him really is a jolly ass. I don’t know if you know him.
Preston: [00:52:39] I don’t know him personally but I definitely know who John is.
Guy: [00:52:42] Yeah I think one of the things you know about John Reid is that what you see is what you get. He’s not pretending anything funny. I sometimes use his vocabulary. Now my wife even that’s kind of sad to say hey me I’ll catch yellow slips and haven’t yet. Time to lightning. The other thing I find really wonderful about Gianluigi mask that he’s not just bringing great casts. He’s kind of every cheerleader said he wants it and you’re like you want your listeners to succeed not just with their investing you want them to and you want to help solve. And I think the thing that is really incredible about you know the way technology has changed is that it allows the people who truly Sabahans want to be sovereign leaders to really shine. And that’s kind of why they invest because the school says what you guys do which only two months. So it really is for me. And often when I meet guests on this program I then go to that websites and stuff. And so then you know I listen to the first episode of of scale the read off. So that was really fantastic. It was really well produced. The name escapes me you know I mean it’s funny I didn’t listen to the also charm.
Preston: [00:54:04] I have it but I’ve seen it in. You know honestly guy this might surprise people. I don’t listen to podcasts like any podcasts they roll the podcast that I want to listen to.
Guy: [00:54:16] I’ll just leave you with the last one before showing you the results what I got on my phone. Hang on a second.
Preston: [00:54:22] Oh yeah look at that one. I know. I know that show you are one of them.
Guy: [00:54:27] Oh I see it is your description I’m big on and I’ll have to listen to that and I’ll just give you one last one is a guy called Mark biddable these are people who work in corporate environments across the innovation ecosystem. The end result really interesting piece about how to create the kind of enlightened environment that you are creating products that all need to mass 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 it kind of shows us. I just wanted to get that out is where we want to do now.
Preston: [00:55:05] And you know John Lee Dumas he was a former army officer. We need to invite John to the Berkshire meeting in May. And you know Stig’s making it this year Stig you know he wasn’t able to make it last year Stig’s come in this year. One of the things that I talked with Stig and Ticino Stig’s out of town he wasn’t able to be with us for the discussion today but still 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.
Guy: [00:55:40] From your vantage point what is the Berkshire meeting like when you know press them I mean so many people invested in internal mail try now and they kind of want to make a change in their lives. They want to have a better career. They want to have a more meaningful more soulful career. They want to get onto a different path one that they’re all and you know they come to me looking for advice and insight and I kind of tell them you know you’re just looking and you know go to the source they’ve come to me you know I’m not well. So the expression is don’t seek out the Masters seek out them off the store and the salsa is there. And if you don’t know what are you going to share you’re going to be just fine because you’re going to be relevant. Probably from the minute you get onto the flight to Omaha wherever it is you’re flying from unions be in a crowd of people who are to a crowd. You meet these meetings everywhere a Mapley a shield pool all the way to the Sunday evening bar that I’m looking forward to attending.
Guy: [00:56:46] And some people saying you know so much from that side to the cases I think all chapters in my book about how Bush has been using trons for me I was a New York City suit. I was a guy who went to Hathway meetings trying to drum up business. And you know I don’t go to church meetings business. I go to the Berkshire Hathaway meeting be with my tribe. And it’s a big tribe. She calls them saying you like every remember the tribe. And I’m not saying the tribe one should be a member of but it’s such an awesome tribe to be a part of. And I actually think somebody and I get this I’m going to speak. Role models conference this year a to meet. And I think that he had contact more on both of his meetings not like that Trevor you know aren’t Chardy only as some print that going to stop the meetings that way. So come expands the atmosphere before maybe one day they just don’t do it anymore.
Preston: [00:57:45] No yeah no I think you’re exactly right. You had a really profound point there about seeking out the knowledge of the master. And like where did they acquire from what they read. I absolutely love that point. And I think it’s super important for people to understand how profound that was. Can I ask you one more question before you go and I know you’re under the weather and I’m grilling you with all these questions but my voice is surviving fine and we haven’t gotten through to her may we.
Guy: [00:58:12] Oh I’m loving this. I have a great time here really.
Preston: [00:58:15] We had a person on Twitter asked that they want to have a little bit of a discussion about intrinsic value. So you know 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 the approach that you use. I get very frustrated whenever I read like Morningstar and I say all the price of the stock is one hundred and fifteen dollars per share. But then they don’t even talk. The discount rate or what. That 15 even mean. So I’m a big fan of IRR for that reason and 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: [00:58:55] You know the story of this is dangerous an MBA spreadsheet. I really believe if you are the runner you’ve got to run the numbers on the spot. It’s not cheap. What I’d say is that I think that the vast majority is really good investments. It comes down to insanely cheap. Nobody disputes the cheap is just is horrible things are in your face but you have to overcome what you have to see or understand or reason with. So you know one of the moments for me it was a very teachable moment was when Warren Buffett made this huge investment six billion invest in preferred stock of Zak’s. I was right in the middle of an actual crisis.
Preston: [00:59:38] Fifteen dollars on the book. I remember this was not right back in 0 8.
Guy: [00:59:43] Yeah and I was like wow right in the middle. And people like you know we’re in the middle of a financial crisis. I mean he’s going bankrupt all over the place. And you know I agree but he knew it was cheap. Nobody was going to buy it. You know Buffett didn’t do an IRR calculation well has the company and I’m not going to mention the name. I looked at my checklist. I did my right thought. I started buying and I was like wait a second. And he figured out the price of oil and he’d figure out where it’s coming. And the thing is so cheap you can’t believe it but it’s trading like oil is going to stop being mined tomorrow. Within five you know those people are going to stop eating oil. So the real question is always a cheap oil isn’t going to change that. It’s what is my opinion on oil. Can I take the other side of this path. So I trying to get away with this kind of I need to get patients along the aisle. There’s just nothing wrong with saying I think I want to own. Sure. I think I want to own some whatever it is I’m just going to buy a bunch of that. And you know that’s where tell you the other end of the spectrum. Got it done this a couple times on Amazon and I’ve done all the adjustments you need to make it to kind of understand them as well as all businesses.
Guy: [01:01:01] And I just couldn’t bring myself to buy it because it’s still too expensive without me and I are saying well you know the business performed this well this law this federation makes and it has a momentum. Yeah it’s a momentum play and I think yes for 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 at a rate that is famous or should be famous and extremely successful value investor called Nixie and it made a call on Amazon five years ago. Put it out of his portfolio into you know made I don’t know how much he does about it but shut out from the center an enormous amount of money back to his investors. He made enough money for a few lifetimes. His you know not extravagant baloney an extravagant lifestyle. He’s a bad investment and he called me up and you see this team. He said You know I just hear some somebody invest but to my point the listener my point is I have got to be all over this. Are you going to be willing to look at my new five ways find different lenses do the IRR look the other ways as well. A replacement value. Just different ways you can value it and then just decide this is a cheap malt and it is not really cheap. I’m not saying don’t buy oranges. Be aware of what are you doing.
Preston: [01:02:27] All right so buy one of the major themes of our very first interview years ago was this idea of writing letters. And 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 you still put as much emphasis and wait on the power of writing letters and explain to people what we mean by writing letters.
Guy: [01:03:00] I mean I in my book all right. And this is why I said that comment is that it’s only because I wrote a thank you note to longish writing that he knew I exist. And after I wrote a thank you note I brei invited me to dinner. It turned out that dinner changed my life in fact in my case if you asked me where I draw I have acted with monish O’Brien will that lunch buffet dinner with Monasch. Roy was way more important to me. He introduced me to so many so many variables in that dinner I would have never bought it. So the way I write about in the book writing thank you letters of appreciation increases optionality in your life. And the thing is is that part of why I wanted to write the book is that people think oh yeah my monish Brian then he had not shown that. So he’s a very nice guy. And what I wanted to convince people not to know. Well this is one element of luck but the hard work like that and I wanted people to know that I didn’t write one random note right. At that time I was writing like 15 thinking once a week. You know so like three a day. So when you read that out of the hundreds of Yaşar when you pound over the five years that’s heading into the thousands of letters thousands of you’ve been touched.
Guy: [01:04:24] So I’m into sufficiently strong habit of doing that. What does it change of habit to live to be felt until it too hard to break. But funnily enough I have a hard time leaving the office unless the hand thing somebody stuck into that tooth and now an extreme find some of it. So any person who meets me possibly book had some piece of mail from me at some point. Well let’s say that 80 percent of them well 20 percent. One reason on the I’ll decide I want to send them. Thing is they’re not people that I want in my life. But the vast majority of people I do want my life and I send them something. So yeah I still do that and that the real at the core of it is whether it’s a thank you note whether it’s a book whether it’s just a small token of appreciation is giving people a little bit of joy and a little bit of a sense. I’m glad that they exist. I think it’s extremely powerful I think works makes the world a 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 are as of right now I can’t find it veers off from me.
Preston: [01:05:45] Oh yeah absolutely you know what the highlight of my mail the year is whenever I get the guy Speir Christmas card and I know I’m probably not the first person to ever tell you that because nice 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 three dimensional whenever you were able to unfold and it was quite incredible to say the least.
Guy: [01:06:13] I just won’t tell you that the designer that cause is somebody who’s a serial wall. She’s also designed the cover of my book. She’s brilliant you know in ways that you and I cannot stand when it comes to visual communication. So I have so much of what I called one of the problems that we had is that she started designing the cards and they were getting better and better and we were on this a and treadmill like how do we talk. We could last year. So I hope you legacy is one plus. I have no way of knowing it. And it’s so much fun because this was the tool that I gave it was a face society which I think might turn into an answer which is and they have made a nice point close. This podcast is that you know so many of us in the financial world don’t actually add value. That was the nature of that whole thing Warren both protege partners. And that’s a scary thought. Combine that with the idea that now you can’t tell if I’m lucky or skillful or lucky and you know I really do hope live at the end of my career. How did I do to my investors. Because it’s invest. But I have to prepare for the possibility that at the end of my career be be be and that was not the case.
Guy: [01:07:34] And given that that is a possibility I think it’s really important to have any decent human being to make the world a better place. No other ways. And so signing up for the writing notes for appreciation is a great place for the best place because when you’re doing on industrial scale the way it actually does arise Dacian matter will scale you doing it so long as you are doing it. And I think the professionals in our industry in my industry. I hate a good reason because people consider that equals a financial crisis. I don’t believe life was a financial crisis. I think that as an industry we have a very strong obligation to redeem ourselves in the minds of this. I see it he’s trying to make the world a better place. It’s just really important to do so. You know this is a good place to stop. And I think I’ve done a very good deed that I’ll get a job with that but at least from trying. You know we should make some progress. And the great news is is that it’s not just making the world a better place to make your life.
Guy: [01:08:43] You are live in the world. We want to live in a world where people are grateful that we exist. You know I can point to find that it’s famous co-operators. Nobody’s happy they exist. We don’t want to be that kind of person walking to the bar in Omaha on a Sunday night. And you go 120 people or more. We’re all glad that a certain parish exists. He’s changed a lot and we can all be that way. And he’s. We called the Gates Foundation. We called Stalcup Chunuk Foundation. We all see individuals who say you know what I’m going to tell the police that they did it. I’m going to write to that speech and say they did win a right to X Y Z plus say you know that they had an impact on me. Whoever it is. And when you do it and you know when you do it you’re right. So look as the president puts it true. They read it again. They put it up. We’ll notice all they reread it as permanent evidence is that something very show blasting Trudy asking questions. It’s not a zero sum game. If your list is more of a typing community it doesn’t take away from anyone else. It just makes the whole world about it.
Preston: [01:10:00] And insanely profound comments. So folks die Speir. You know the humble very humble guy Speir 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 what it’s been in a few years now. Right guy who three years 2014. Oh yes it’s been a few years now but I’ll tell you want to read a fantastic book pour into this and you’re going to be very very happy that you did. And 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: [01:10:41] Actually I am I am active on Twitter I don’t know if it’s a good thing. You can try and just here with Twitter. I do answer questions there. You know most of the stuff that I put up small I can put up on my website some guys appeared on Conan so you know we go to that Web site see stuff but it’s quite likely that you shoot me a message on Twitter I’ll respond.
Preston: [01:11:02] Awesome guy thank you for your time and safe travels tonight.
Guy: [01:11:06] Thank you for having me on your show again Preston. You’re a good guy to have in the world. Grateful to be a friend. Thank you.
Preston: [01:11:14] Thanks for listening to the IP to access the show. No it’s horses for forums. Go to the investors podcast dot com. To get your questions played on the show. Go to Aspe investors dot com and win a free subscription to any of our courses on Antti IP Academy. This show is for entertainment purposes only. Before making investment decisions consult a professional. The show is copyrighted by the IP network. Written permission must be granted with Syndication or rebroadcasting.
Books and Resources Mentioned in this Podcast
Guy Spier’s book, The Education of a Value Investor – Read reviews of this book