27 May 2023

In this episode, William Green chats with hedge fund manager Christopher Begg, who is the CEO, Chief Investment Officer, & co-founder of East Coast Asset Management. Chris is also a revered professor at Columbia Business School, where he teaches the Security Analysis class that was originally taught by Warren Buffett’s mentor, Ben Graham. Here, Chris shares powerful lessons on how to identify high-quality businesses & build a life that’s defined by a commitment to quality.

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  • How Chris Begg came to teach an investing class originally taught by Ben Graham.
  • What Chris learned from his ten fireside chats with Berkshire Hathaway’s Todd Combs.
  • What Buffett & Munger taught Chris about focusing on a few great businesses.
  • How he finds undervalued stocks by asking, “Where are the clouds today?” 
  • Why he’s bullish on Meta & Google, despite an array of perceived threats. 
  • How he identifies great businesses by seeking 8 layers of competitive advantage. 
  • How to succeed through “persistent incremental progress eternally repeated.”
  • Why investors can’t afford to ignore a company’s impact on the environment.
  • Why consistent kindness is a potent ingredient of success, helping to build trust.
  • How Chris gains an edge by continuously compounding his interdisciplinary knowledge.
  • What he’s learned about the pursuit of excellence from surfing with Josh Waitzkin.
  • Why Chris structures his workday to include meditation & contemplation.
  • What studying Andrew Carnegie—once the world’s richest person—has taught him.
  • Why Chris believes that the world is headed in a better direction.


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.

[00:00:03] William Green: Hi there. I’m really excited about today’s episode of the podcast. This is a very rare in-depth conversation with one of the most thoughtful people in the investing world. His name is Christopher Begg, and he’s the co-founder and chief investment officer of a firm called East Coast Asset Management, which is based in the suburbs of Boston.

[00:00:24] William Green: Chris manages a hedge fund that owns a highly concentrated portfolio of about seven great businesses. He tries to buy them at attractive prices when they’re out of favor because there’s some kind of temporary cloud hanging over them that he believes will ultimately disperse. This is the type of ultra selective stock picking strategy that’s also practiced by famous investors like Charlie Munger, Nick Sleep, and Mohnish Pabrai.

[00:00:51] William Green: As I wrote in my book, Richer, Wiser, Happier, Munger says that an investor should be like a spear fisherman standing with a spear beside a stream. Most of the time, the spear fisherman does nothing at all. Then when a fat juicy salmon swims by, he leaps into action and spears it. Then he goes back to doing nothing at all, and it might be six months or more before the next fat juicy salmon swims by. Chris Begg has thought very deeply about how to play this game of identifying truly exceptional businesses and waiting patiently for the right moment to spear them.

[00:01:28] William Green: But the truth is, Chris is much more than a great stock picker with a discerning eye for high quality businesses. As you’ll hear in this conversation, his whole life is built around the pursuit of quality. This passion for quality drives the way he constantly compounds his knowledge by studying many different disciplines.

[00:01:49] William Green: It also drives the way he structures his time so that he can optimize his performance, and there’s a similarly powerful commitment to quality in his passion for writing, for drawing, and even for surfing, which he practices in Central America where he lives for several months of the year.

[00:02:08] William Green: There’s one other thing you ought to know about Chris. He’s also an extraordinary teacher. For the last decade or so, he’s taught a class on Security Analysis at Columbia Business School. This is actually the same class that was originally taught by Benjamin Graham, who as you know was the father of value investing and the author of a classic book titled The Intelligent Investor.

[00:02:31] William Green: Graham’s most famous student back in 1951 was none other than Warren Buffett, who was 20 years old at the time and looked about 13. Apparently, Buffett was such a dazzling student that Graham gave him an A+, which I gather was the first time he’d awarded an A+ to any student in something like 22 years that he’d been teaching at Columbia.

[00:02:54] William Green: In any case, I love the fact that Ben Graham’s class on Security Analysis still exists more than 70 years after Buffett took it, and I love the fact that the class is now taught by Chris Begg, who certainly belongs in this noble tradition of great value investors and great teachers. I hope you enjoy our conversation. Thanks so much for joining us.

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[00:03:21] Intro: You are listening to the Richer, Wiser, Happier podcast, where your host, William Green, interviews the world’s greatest investors and explores how to win in markets and life.

[00:03:41] William Green: Hi folks. I’m absolutely thrilled to welcome our guest, Chris Begg. I’ve been looking forward to this conversation literally for months, and so it’s lovely to see you finally. Chris, thanks so much for joining us.

[00:03:52] William Green: William,

[00:03:52] Chris Begg: thanks for having me on.

[00:03:54] William Green: It’s a real delight. I wanted to start by asking you about the class you teach at Columbia Business School, which I think you’ve taught since 2011.

[00:04:02] William Green: It has such an extraordinary history that involves all these investing legends like Warren Buffett and his great teacher and mentor Ben Graham. Can you give us a sense of the history of the class and how you came to be involved in it and how in a sense, it’s become this research laboratory for the deep study of what works in investing.

[00:04:23] Chris Begg: Brilliant. Great place to start, William. Yeah. It was about 12 years ago now, about 14 years ago now, that we got involved with the Heilbrunn School of Value Investing at Columbia Business School. And we were there because some of the best students that were really passionate about this craft of investing were there.

[00:04:43] Chris Begg: You know, the value investing program takes about 40 students each year that are kind of self-selected and then they apply in. And so those were the cream the crop students that we felt in the world, and we wanted to invite them in to have internships into our organization. So we would take two a year and got to know Bruce Greenwald.

[00:05:03] Chris Begg: Bruce asked me to be a professor, or he was the professor, and I was the independent work study companion to what he, he didn’t at the time. So, we kind of worked together on a few students. And at the end of, I think the second one, where I did this, he said, hey, would you like to do something with the school in the form of teaching?

[00:05:26] Chris Begg: And I said me? What would I teach? He’s like, oh, just teach what you do. He’s like, don’t worry. I’ll put you in front of just a handful of students in the beginning and we’ll see how it goes. And then there was an opening for Security Analysis that came up, and this is now 11 years ago, and that was my first year.

[00:05:43] Chris Begg: And I looked to Michael Mauboussin’s class in the spring, and I said, you know, I looked at his framework and kind of developed, something that really matched how we were implementing the art of investing and value investing. And one thing led to another in the, you know, the, that first year I was pretty nervous, kind of a little bit imposter syndrome.

[00:06:02] Chris Begg: And you’re just doing your best and really wanting the students to have a great experience. And then little by little the class has evolved and as you alluded to what the class took attack of really inviting in the best, what I thought were the best investors, not just the way I invested, but had a real deep understanding of their niche in value investing, as well as bringing in great operators and great operators would be CEOs, great capital allocators.

[00:06:31] Chris Begg: And then the third bucket would be great philosophers or thinkers or writers that were interdisciplinary and kind of bringing all of those three types of speakers in. So, the students would get this over the course of the semester. They would get not only the foundational principles that I could, you know, introduce them to in the beginning of the class, but they would get all this perspective as if the class was a laboratory of different ways.

[00:06:58] Chris Begg: And I think what has occurred since is these students have, each one of them takes something from the class that’s very unique to their temperament, the type of investor that they might be best suited to become. So, like you said, you know, I use it as a, I kind of invert the classroom, use it as a laboratory.

[00:07:16] Chris Begg: But back to your initial question of the history, Ben Graham taught the class from 1930 to 1960 and he would kind of come up from Wall Street, he would put a white lab coat on, so he didn’t get chalk on his, you know, on his suit. And he would sit in front of the classroom and really talk about practical examples of what he was working on real time.

[00:07:38] Chris Begg: And that really inspired me because it was, it made the classroom much more of a laboratory than me kind of communicating what I thought was truth. And so that’s the way it’s always been.

[00:07:51] William Green: And presumably, he had the great Irving Kahn as his teaching assistant, right. ‘Cause didn’t, Irving Kahn, who I interviewed very shortly before he died at the age of 109.

[00:08:02] William Green: He, I think, was originally Graham’s teaching assistant. And so, I mean, presumably also, this is the class that people like Bill Ruane went through, I mean, an amazing assortment of the greatest investors.

[00:08:12] Chris Begg: Absolutely. And you know, the most famous, of course in 1951, the spring of 1951 was Warren Buffett.

[00:08:19] Chris Begg: And, you know, Warren had recently read The Intelligent Investor. He had read the 1934 edition of Security Analysis, which Ben wrote. But that 1948 Intelligent Investor, you know, that he read in the Omaha Public Library, you know, really inspired Warren to kind of come to Columbia, to apply to Columbia to take the course from Ben, which was now his hero.

[00:08:41] Chris Begg: And at the end of that class, which was, I believe to be the only A+ that Ben had ever given a student. And he had asked, Warren immediately asked, I want to work for you, Ben. Hey, would you hire me? And at the time, the way I understand the story is Ben was only taking Jewish students because they weren’t getting the same opportunities.

[00:09:01] Chris Begg: So, he, he said, Warren, no. And, and Warren said, I’ll work for free. And he said, that’s still too expensive. So, but one thing led to another, and Ben did offer him, a position and, at Graham-Newman. And, you know, that was the beginning of Warren’s career. And maybe a couple years, three years after that, you know, Warren went back to Omaha.

[00:09:21] Chris Begg: And then shortly after that, you know, launched the Buffett partnership, which then became Berkshire Hathaway. You know, that 1951 inflection, I think Ben taught the class for another nine years. But I was appreciated about Ben and I learned this in a video that the school put together on the 85th anniversary, is he would open the class with a Spinoza quote and the Spinoza, he said, if you already be successful on Wall Street, you must see things under the aspect of eternity.

[00:09:51] Chris Begg: And I, when I heard that, I was like, oh, that is so brilliant. And what he meant by seeing things under the aspect of eternity, I believe, is seeing the whole picture, not just one piece of it, but how do I see the whole picture? So, I’ve taken that as a mantra of our course. So you’ll see that SSA, which is [inaudible], is kind of an overwhelming mantra of kind of what we’re trying to accomplish in this research laboratory is seeing the whole picture of investing, not just one piece of it, to try to understand business creation, value creation, and the evolution of what value investing means and how we define it.

[00:10:29] William Green: And you’ve had an astonishing array of guests. I was looking at your guest list for a few different years, and you’ve had people like Seth Klarman, who I remember Bruce Greenwald once telling me many years ago, was the best student he had ever had. Todd Combs from Berkshire Hathaway, Nick Sleep. Then you’ve had these amazing business operators like Mark Leonard, the CEO of Constellation Software, or Peter Kaufman, who is the CEO of Glenair, and a sort of a prophet of multidisciplinary learning and a very close friend of Charlie Munger, Mitch Rales, the co-founder of Danaher.

[00:11:05] William Green: And then these great authors like Iain McGilchrist who wrote this extraordinary book, The Matter with Things. And James Carse who’s obsessed with Finite and Infinite Games and Will Thorndike the author of The Outsiders. So, I just wanted to mention this because it gives our listeners a sense of what you’ve been able to put together in a way by drawing on the fact that it’s part of this incredible lineage that you’ve inherited this mantle from Ben Graham.

[00:11:35] Chris Begg: I think it’s the most wonderful calling card you could have, to invite a lot of people that wouldn’t naturally say yes to an invitation to at least contemplate it and hopefully say yes. You know, Todd Combs has been a guest in, you know, we’ve done a fireside chat now for 10 of the last 11 years, which is a wonderful streak given his schedule has only gotten more busier, but he looks forward to it every year.

[00:12:02] Chris Begg: It’s one of the few things that, that he does say yes to. And we have so much fun with the conversation, and it’s evolved so, so dynamically over time as he’s kind of gone from investor-to-investor operator and a CEO of GEICO now. And it’s a give back for him because he sat in the same seat Warren sat and all the students sat, when he graduated from Columbia Business School, and he actually took Michael Mauboussin’s class in the spring, of Security Analysis.

[00:12:29] Chris Begg: So, he can appreciate, and I think, you know, empathize with where the students are and what they’re, how important it’s to have this practical application of investing principles. And that’s what the class has always stood for.

[00:12:42] William Green: So, if you think of one kind of practical take home from hearing someone like Todd Combs speak, you know, Todd, who, I guess he, he’s running GEICO now, is that right?

[00:12:52] Chris Begg: Correct.

[00:12:53] William Green: And obviously one of the designated successors of Buffett to run the investment portfolio. What would be a memorable take home from a decade or so of listening to Todd speak?

[00:13:06] Chris Begg: Yeah. You know, one thing that comes to mind that always resonated with me when I think of team size. You know Todd, when he ran his fund, he said he had about five analysts.

[00:13:17] Chris Begg: And during his opening interview with Charlie Munger, he had shared that, you know, Charlie had asked the question, you know, how many analysts do you think you would need at Berkshire? And he said, I could probably do with three. He’s like, how about none? And it was, it was just very clear.

[00:13:33] Chris Begg: And the more that he contemplated the importance of the team size, he realized that the more that he would separate himself from the actual source material, the more he was outsourcing judgment. And it’s something that I’ve always come back to myself and with my team, is that usually when we’re coming up to speed on something that’s really important, we all want to be touching the source material.

[00:13:57] Chris Begg: We always want to, we want to be reading the important things because each of us are going to garden an insight that might be a little different. We may hear it differently from our own perspectives. And so, you know, one of the things that Todd always says, you know, you can’t outsource judgment. And so that, that has always resonated me.

[00:14:15] Chris Begg: And as far as like what is effective at, you know, generating true insight into. You know, especially if you’re running a concentrated portfolio that’s going to lead to that one of those, you know, 10 or 20 punch card ideas that you might hopefully find in your lifetime.

[00:14:31] William Green: You’ve met many of the most successful and eminent investors of our time, whether it’s a Seth Klarman or, or a Nick Sleep, or Todd Combs or countless others.

[00:14:41] William Green: And they obviously approached the game of investing in strikingly different ways, whether it’s a matter of diversification versus concentration or high-quality companies, or less high quality companies. So many differences in how to slice this. You also did a 10-year apprenticeship before setting up your own investment firm, East Coast Asset Management back in 2008.

[00:15:03] William Green: So, you had thought for a tremendous amount of time about what works in investing before you even got into this laboratory to study it up close at Columbia. And I’m wondering, when you think of the solution to the puzzle that you came up with, how it fits your personality, why you solved the puzzle this particular way, because you’ve ended up with this very concentrated portfolio of very high-quality compounders.

[00:15:30] William Green: Much more like the approach of, say, a Charlie Munger who described himself as a spear fisherman waiting by the side of the stream, kind of waiting for a fat, juicy salmon to swim by, and then you would spear the salmon and then go back to doing nothing for months. It seems like there’s a real parallel in your approach. How did you come up with that solution?

[00:15:50] Chris Begg: Yeah, what a great introductory question to that. Like you said, that 10-year apprenticeship that I had prior to launching East Coast, you know, I had this luxury of sitting in a place where I could read a lot and I was hired as a research analyst, but I was hired by someone that really was trying to figure out what the evolution of the firm might be.

[00:16:13] Chris Begg: And I was able to contribute a lot. And so in my reading, the probably most lucky discovery of my in career was discovering the letters of Warren and Charlie. And I say that because I had looked at a lot of things and when I read those letters, it just resonated that this wasn’t something that was separate from building businesses.

[00:16:37] Chris Begg: That this was very much about how do we find great businesses, act in a business like way and then a vest alongside these businesses in a way that’s intelligent by paying close attention to how much you pay, what the compound return would be, or could be based on that price.

[00:16:57] Chris Begg: And so all of these, you know, things were coming together that, you know, that aligned me with, wow, my temperament was much more about finding a handful of great businesses, exceptional business businesses that I could then kind of follow along that journey with them. And pay close attention to this basket of companies that I thought were exceptional in the world.

[00:17:20] Chris Begg: And, you know, if I had an idea of what they were valued at, what the IRS would be at a certain price, you know, I could align a concentrated portfolio around the ones that I thought were going to be the most attractive compounders over time. And that’s kind of what we’ve done now for the better part of 20+ years.

[00:17:38] Chris Begg: And, you know, that means not a lot of trading, looking for that one or two exceptional ideas that may come along per year, that you have a, you know, you’ve completed enough work that you can act with some level of confidence when an operating opportunity presents itself.

[00:17:58] William Green: You’ve talked a lot about clouds, which is, I guess your image for these, or almost like a storm system coming in with uncertainty that kind of obscures the beauty of a company’s long-term process for a while.

[00:18:13] William Green: Can you talk about that? About how clouds this sort of stormy weather seems actually an important part of helping you actually to find these great opportunities?

[00:18:27] Chris Begg: This is actually something that’s in the current letter that I’m trying to articulate right now. And, you know, internally, you know, with my team, my partner Scott, with our analyst Jimmy.

[00:18:39] Chris Begg: We kind of talk about this vernacular of clouds, like where are the clouds today? And clouds are just things that are obscuring that may obscure in short-term vision, but is obscuring the long-term, really extraordinary parts of the business. And so, the focus is on this thing, and it’s obscuring something about the business at the time, which gives us valuation opportunity.

[00:19:02] Chris Begg: So, when you think at any one time, you know, you might just say, you know, where’s the fear today? Where’s the anxiety today? If we’re going into a milder or severe recession, what are those things that would be uncomfortable to own? And you kind of look at that basket and you’d say, oh, okay, this area of the market’s down 50% or down 40%.

[00:19:21] Chris Begg: That makes sense. This is kind of a scary place. Is there anything in there that is really attractive long term if we live through the uncomfortableness of this period? And so, I call this, there’s actually this wonderful Christianistic book by an anonymous author called, uh, The Clouds of Unknowing.

[00:19:41] Chris Begg: And it’s this wonderful piece, I think it was written around 1375. And I think a lot about the clouds of knowing, right? The things that we know to be true, I think we know to be true, which is kind of based on our knowledge and our wisdom. You know, it’s looking backwards at this pattern, recognition of experience, and that’s really valuable.

[00:20:01] Chris Begg: I think most of what we’re doing when we model a business out is we’re taking all of those things that we know. And those clouds of knowing, and maybe we’re getting an investment opportunity around the clouds that exist around, around the business at the time when you look forward and you kind of look forward at what might happen in the business is kind of a cloud of unknowing.

[00:20:23] Chris Begg: And I think those clouds of unknowing create asymmetry, you know, especially, and that’s when you look at how we deconstruct setting ourselves up for a lot of asymmetry in a business or asymmetry in the IRR of an investment opportunity is we want to set ourselves up for a lot of inevitabilities in the unknowing that I think could present themselves.

[00:20:44] Chris Begg: An example of that would be something like, you know, we’ve been longtime investors in a company called TransDigm, you know, and TransDigm is a, aerospace parts company. They have sole source often on most of their products. And you know, if you were to underwrite that on what you know to be true, like the current businesses that they own, you know, you may have a certain IRR profile.

[00:21:06] Chris Begg: And over the years, the return profile of what has actually been about 10% better than what you might have modeled from the existing businesses. And that’s come from really, really good capital allocation among the team. The things they have been able to buy a create value creation out of. And now you go from something that may have looked like a 15% IRR and something that ended up being a 25% IRR.

[00:21:30] Chris Begg: So, you know, clouds of unknowing are—

[00:21:33] William Green: And for people who don’t know what an IRR is, can you just explain for the non-business school students here?

[00:21:40] Chris Begg: Absolutely.

[00:21:41] William Green: What it is and the significance?

[00:21:44] Chris Begg: Yeah, so, you know, when we look back at an investing holding period from the day we buy something to the day that we, you know, so I’ll take it the way that we actually build our IRR assumptions.

[00:21:56] Chris Begg: So, what we’re looking at in any business is we’re kind of trying to assess what the 10-year free cash flow growth of the company is going to be. And if we understand, if the company say you’re going to grow 15% free cash flow growth from top line assumptions to margin improvement to financial leverage if they have any.

[00:22:17] Chris Begg: And that’s a 15% growth rate of free cash flow. You know, what is today’s price that we’re paying for that and what is our terminal value or our future price based on what we think is a fair multiple for those free cash flows in year 10? And then what you derive from that equation is what is your compounded annual return from that purchase price to that future price based on the free cash flow growth.

[00:22:42] Chris Begg: And that’s your, that’s basically your IRR, your internal rate of return of the holding period. And what we try to do at entry is buy things that are 15% or better, IRR and you know, if things, if price gets bid up over time and now we’re looking at a portfolio holding that may have, you know, a single digit IRR, you know, that’s going to be something that might, you know, suggest that it could be replaced, trimmed, and just something that could be brought in that, that we could improve on that.

[00:23:12] Chris Begg: And that’s kind of the process with which we are always upgrading the portfolio for higher IRRs that are going to lead to, you know, great or hopefully superior compound returns over time.

[00:23:24] William Green: And one of the challenges obviously is to buy these very high-quality companies with high rates of return, potential rates of return is really difficult in terms of valuations because they tend to be bid up.

[00:23:37] William Green: And so, part of the insight here is that you are not waiting for good weather, you are actually waiting for bad weather. Where these short-term clouds are temporarily obscuring the fact that these future cash flows are likely to be very, very strong. And so—

[00:23:55] Chris Begg: That’s correct.

[00:23:55] William Green: There’s kind of an important lesson here, right? That during a lot of times when there’s despair in the market or a lot of uncertainty, people tend to think, well, let me just wait for the clouds to dissipate. And you are doing something very different, right? You said at one point in one of your investment letters, we are consistently looking to venture where short-term clouds are present in a business or industry as a source of opportunity, we then assess the probability of when, if and to what extreme these clouds will dissipate.

[00:24:26] Chris Begg: Correct. Yeah. And I think there’s two types of clouds that we’re looking at today. It’s, you know, we have macro clouds, and we have micro clouds. You know, macro clouds today are, you know, recession, you know, China, Taiwan, Russia, Ukraine. You have, you know, potential of a stagflation. You have interest rates.

[00:24:44] Chris Begg: How high would they rise? The persistency of inflation. And all of those things are contributing to volatility in, you know, markets as well as industries. The micro clouds are all, you know, often business or industry specific. So, if you look at the advertising businesses, you know, they’re thinking about what is it, what’s the length of a recession, what does that look like for, you know, business that’s associating their revenue from advertising, housing related businesses.

[00:25:14] Chris Begg: So, these are all areas that are producing, you know, what we’re seeing in our 10 year models is ticking up of those IRRs that are, we’re, you know, in general, you know, we’re not seeing a lot of things that are above 15. We still, we think we’re in a middling period of valuation given the uncertainties that still exist, and that means we’re just working off, I think some of the excesses that still are here from a period of very low interest rates or zero interest rates.

[00:25:43] Chris Begg: There wasn’t a lot of, I think, focus on free cash flow over that period of easy money. And so that’s still unwinding in our opinion. If you were to ask us, from a universe of businesses that we’d like to own, where do we think are things are on a quality of IRR basis? Right now, we’re kind of in that, you know, if it’s zero to 10, we’re kind of in a, a six as far as attractiveness on IRR for that universe.

[00:26:09] Chris Begg: It doesn’t mean that we can’t own, you know, right now we own seven companies and we found seven companies that we think are, you know, really attractive. But I think, we think the overall market is somewhat fairly valued.

[00:26:21] William Green: When Covid struck in early 2020, I guess it was, you invested heavily in TransDigm, I think, and another airline parts manufacturer at a time when airlines were grounding their planes and it was the last place you wanted to invest for most people.

[00:26:37] William Green: And that’s obviously been a very attractive way to exploit the clouds that were there. Then I remember you were looking at things like Meta more recently when people had turned against, these big companies that were sort of ripe for regulation and there’s a sense that the recession was going to hit them.

[00:26:55] William Green: Can you talk us through how something like a Meta or a Google, which I know have been kind of in your wheel household, I don’t know whether they’re in your portfolio now, whether those would be good examples of how you go through this process of looking at the clouds and trying to tell whether this is really an opportunity or whether it doesn’t really merit being in your very concentrated portfolio.

[00:27:16] Chris Begg: Yeah. And since you brought up that, you know, March 2020, ’cause I think that was a really good example of what we look for and how we act. So in March of 2020 when we had the, you know, the shutdowns escalating, everyone was fearful of travel and you know, we basically went through, you know, TSA visits dropped 96% very quickly and all the aerospace stocks were being sold off, you know, so TransDigm I think went from 650 to shared a 206 day in March of 2020.

[00:27:50] Chris Begg: And we’re immediately on the phone with, you know, the investor relations and we’re just working through the balance sheet ’cause we really wanted to understand the duration of pain. If this was a three-year shutdown, what was the, our exposure to maturities on debt. We just really wanted to understand and more or less in a course of a couple days, once we got more comfortable with the balance sheet, they had a small capital raise.

[00:28:14] Chris Begg: We allocated 25% of our portfolio over a course of two weeks to aerospace parts names. And so, the reason I bring that up is just an example of how quick a portfolio can change based on events and clouds that are if you have, you know, kind of done some work understand it. In the case of TransDigm, we had, you know, owned it in size in previous years based on different valuation profiles.

[00:28:38] Chris Begg: And that’s kind of what we’re trying to do with this universe of companies where the, you know, we do have a pretty thorough understanding, you know, so you brought up, we have had exposure to, the two platform advertising businesses that we think have, you know, durable competitive advantages.

[00:28:51] Chris Begg: Google and Meta both have different, both macro and micro clouds associated with them. So, when you look at the start of last year with Meta, I think we identified seven clouds, but I mean, seven, usually there’s one or two, there was seven. And we had them in order. And actually, as we looked at each seven, we dissected, what does this look like?

[00:29:11] Chris Begg: What is the real risk of impairment here? And then we actually got comfortable with almost all of them, and as the year played out, almost all of them became the clouds dissipated. But the one thought that didn’t dissipate with meta was the size and cadence of the spending. And it was the third quarter of 2022 where I think investors just threw the towel because it made no sense where they, when they came out that earnings report, and they said that not only are they not lowering the spending, but they were also increasing it. The stock I think fell off another 15 or 20%. We were quite frustrated as well, to be honest. It didn’t make sense, but you saw a quick reversal in from management in how they would be communicating, what kind of cuts they were going to make.

[00:29:56] Chris Begg: And it felt much more aligned with the current environment and what we’ve seen since, you know, since that intraday low of, you know, in the third quarter, you know, Meta is now up a hundred percent or so from that period. So, they’re gained a little ground back. They’ve gained some, I think, some credibility back among investors and, you know, so that’s been a, you know, an interesting one.

[00:30:20] Chris Begg: Plenty of macro and micro clouds to, to follow, you know, start this year. We’ve had a sizable position in Google, and I think that’s one of the more attractive businesses in our universe to start the year. You know, we have a big micro cloud there with ChaptGPT, you know, and ChatGPT is a very real threat to search, or at least perceived threat to the search monopoly.

[00:30:41] Chris Begg: And, you know, it’s something that’s deserved a lot of time. Understanding what, you know, the large language models mean. What does it mean to search, how has this evolved? And I think as the investors have gained more understanding of what open AI’s solution here versus what Google has already had built.

[00:31:01] Chris Begg: And now released with Bard, it’s becoming clear that, you know, the LLMs are not necessarily different. They’re quite commoditized. And now there’s probably five or six or seven of these. But we don’t think that they’re going to take material share from the monetization of core Google search. And so that’s something that we continue to work through.

[00:31:25] Chris Begg: It’s something that’s topical daily with us. And we’re always, want to ask the questions and not believe we have answers, but just ask better and better questions.

[00:31:34] William Green: Part of your philosophical focus, I think, is on entropy, the fact that things are on a path towards decay and destruction.

[00:31:43] William Green: And it seems like you’re looking for a handful of companies that somehow can defy this, this great force of the universe. And I’m wondering, when you look at companies, when you look at the businesses in your portfolio or in what you call the grove of titans, of these, a couple of hundred stocks that you follow, that you think are great businesses that you would take advantage of if the price got attractive, if the clouds seemed likely to disperse.

[00:32:09] William Green: When you look at all of those companies, what are the kind of traits that they have in common that allow them to defy this overwhelming force of entropy?

[00:32:20] Chris Begg: I just love the term entropy. And the way I thought about entropy. You know, I think about as a coin, right? If you had a coin and you had entropy on one side in information on the other, these are two sides of the same coin. So, when you reduce entropy, you increase information through a system. So, while entropy is often defined as being this natural course of going from, you know, something beneficial to something average, and this, you know, I think about it differently.

[00:32:49] Chris Begg: I think all value creation is the source of reducing entropy in actually increasing information and therefore creating value. And so how do you reduce entropy? Well, you do something cheaper, better, or faster. And so think of Amazon like when Amazon, you know, decided to sell books online. Well, that was way cheaper, way better, and way faster in the vertical books.

[00:33:12] Chris Begg: And then can we expand that? And, you know, when they developed a 1P marketplace and then, you know, created a portal that was cheaper, better, faster, and then a bridge to third party sellers. And then what I call a dome, which was Prime, where you reduce search costs for people by giving them a place, a trusted place to find things online that is going to be at or better price than anywhere else and have it available to your house in two days.

[00:33:41] Chris Begg: And now one day. Enormous entropy reduction and what do you, what’s on the other side of entropy reduction? Enormous value creation. So, when we think about the eight layers of moat that a company might have, we’re looking for layers of competitive advantage. The first one we look for is entropy reduction or a better or more evolved mouse trap.

[00:34:02] Chris Begg: And it’s always the one that we’re, you know, is this in the scheme of making life better for customers by doing, you know, creating something better.

[00:34:12] William Green: So, this is something like MasterCard or Visa would be good examples.

[00:34:17] Chris Begg: And it’s great. So, the entropy reduction also lends to just kind of our second pillar beyond competitive advantage, which is secular tailwinds.

[00:34:25] Chris Begg: You know, so what MasterCard and Visa were doing is they were doing something cheaper, better, faster, because you were taking cash and check and creating a means to, you know, transact through credit and debit, which had enormous entropy reduction information, flowed more easily through their network, and therefore created enormous value, which could be attributed to the value creation of MasterCard and Visa, which is something that we’ve owned, you know, on and off for almost 20 years.

[00:34:54] Chris Begg: And Dee Hock was a speaker in the class, by the way, William, who was one of the architects of the network, one of my favorite speakers of all time. He’s since passed away, but I remember in his last years, you know, he did a Zoom call with us and one of the most special people I’ve ever encountered as far as his heart.

[00:35:12] Chris Begg: And, if any of your listeners want to, you know, his book One From Many is one of my favorite books of all time.

[00:35:19] William Green: I have it and I’ve totally forgotten to read it. Someone told me to get it, so yeah, I have to find it on my bookshelf, which is always a challenge. So, sorry, sorry. I interrupted you as you were going through these se seven or eight layers of moats.

[00:35:31] Chris Begg: So, evolve mousetrap is the first one which we talked about, which is really cuts down to entry reduction. The second one is structural competitive advantages. So, what are structural competitive advantages? We have four that we look for, or five actually duopolies. So when you think of MasterCard, Visa, you have this, the competition evolves to, you have two players that are acting rationally with each other most of the time rationally.

[00:35:55] Chris Begg: So, duopolies, it’s actually one of the first assignments that we do in the classes. I ask the students to make a list of all the duopolies that exist in the world, ’cause it’s a wonderful place to look for, you know, a place where value creation, where you have two parties acting rationally, splitting a large market.

[00:36:13] Chris Begg: The second is oligopolies, which is also very similar to duopolies, but more than two generally three, when you get over three gets a little competitive. You have, you know, more chance for one player to act irrationally. Monopolies, you know, we talked about TransDigm, they have position in monopolies. You have exclusive rights where you have an exclusive right to sell something over a period of time, which, you know, you could call a cornered resource.

[00:36:39] Chris Begg: And then the fourth one or fifth one now is we call Switzerland of X. So, when you think of what, when Snowflake, you know, really came into the market in the data cloud, you know, they say it sat on top of the three public clouds, which was, you know, AWS, Azure, GCP. And it allowed for a customer say, I don’t have to choose, or do all of my data layer through one of the three.

[00:37:03] Chris Begg: I can use Snowflake. They’re the Switzerland of all my data, and I can [incomprehensible] my data through that. So, you know, certain industries, we like that Switzerland of exposition. Third layer of competitive advantage that we look for is scale. Scale’s pretty obvious. You gain scale and you scale on your R&D, you scale on advertising, you can scale on distribution, logistics, information and data.

[00:37:26] Chris Begg: So, we kind of walk through those and see how scale advantages manifest in businesses. The next one, which is one of my favorite chapters that you wrote, I get full credit to, Nick Sleep for the fourth one, which was Scale Economies Shared businesses that have, a scaled advantage, but instead of taking more profit return, those scale advantages in the way of lower prices or more goods and services available to the customer, which widens the moat and it delays gratification on the free cash flow perhaps in the short years or a bigger reward down the road.

[00:37:59] Chris Begg: I think Nick did such a beautiful job explaining kind of how Amazon was patterning after Costco in his letters and articulated the Scale Economies Shared. It was such a brilliant insight and epiphany for him. And in reading that real time, it helped me illuminate on that subject as well.

[00:38:18] William Green: It’s funny, when Mohnish Pabrai read the book the first time I sent it to him before it came out and, he sent me this very lovely note about it and he said, yeah, it’s actually going to change the way I invest.

[00:38:30] William Green: And I said, how come? And he said, well, ’cause of that chapter. And he said the three most important words in your book, a Scale Economies Shared. Which is kind of funny ’cause I think there are more important things in the book. But it was interesting that one concept really shifted Monash’s attitude to, how he would play this game going forward.

[00:38:49] Chris Begg: Yeah. it’s a beautiful concept. And that’s a little aside, you know, when I had Nick in this year, he was trying to communicate short-term versus long-term thinking to his, to a business that he was helping, you know, evolve their culture. And he just started making a list of short-term versus long-term thinking.

[00:39:10] Chris Begg: He’s since published this to his foundation website, but it was such a beautiful example of what that delayed gratification or long shelf life of a business looks like versus the norm. And it was one of my favorite exercises that as he articulated to the class, shared it with the class.

[00:39:28] Chris Begg: I since had, and I actually touched on it today cause it’s open in my computer here. But I’ve made now 12 pages of notes on short-term versus long-term thinking. And, you know, this Scale Economies Shared is a very long-term orientated culture that, that can actually do it. And very few people are willing to do that.

[00:39:47] William Green: I’ll include a link in the source notes for this episode to where Nick’s breakdown on this is available on his website. He sent it to me shortly before it came out. And it’s very striking because part of what Nick is getting at is something that’s incredibly profound in business and investing, but it’s also incredibly profound in life because it sort of taps into this whole idea of thinking long-term in a sort of, in a world that’s more and more short term and more and more susceptible to these hits of dopamine for, from everything.

[00:40:21] William Green: And I, it really struck me the other day, Chris, ’cause I took my son to see, the New York Knicks play. I’ve only ever been to about three basketball games. And it was just unbelievable fun. And you could see that it’s Dopamine Nation, you can see the fact that you can’t go more than 10 seconds without dancers coming out or a cannon to fire t-shirts into the audience, or, you know, and so in a world where we need constant bombardments of entertainment activity likes on our Twitter feeds, and, you know, notification reminders and stuff like that, I think part of what Nick is tapping into that’s so powerfully is actually, a totally different approach to living our life individually, and as companies and as investors. Does that make any sense?

[00:41:08] Chris Begg: Oh, hundred percent. Hundred percent. And I’d love to return to that. I think we’ll finish the layers of competitive advantage. Yeah. I’d like to touch on another topic that I think Nick really understands well, which is quality.

[00:41:19] Chris Begg: Yeah. So, the Scale, Economies, Shared is network effects, which are quite obvious, but in a very important layer. Certainly, MasterCard and Visa enjoy those. The next one is customer mind share, so you know, the reputational trust aspect of a brand. And then finally we have the high switching costs, which we see in software, particularly lots of, you know, softwares and service businesses, or software in general, you know, enormous cost to kind of ripping that software out and bringing it in.

[00:41:48] Chris Begg: That’s why those businesses, once they’re kind of built, installed base, they could be really incredible, you know, long-term free cash flow generator businesses. And then the last one, the eighth one, which is the one that we don’t start with, which it becomes really, really valuable over time as culture and culture is.

[00:42:06] Chris Begg: You know, it when they have a good one. You know, and I think about, you know, you mentioned Mitch Rales, who’s now been a perennial speaker in the class. And you think about the culture of Danaher and Danaher and now Fortive and, and you know, they’ve built a business system around continuous improvement.

[00:42:25] Chris Begg: And it’s so deep in the culture of their business as far as how do we get better, how do we iterate? And now I think more recently they’ve even adapted these applications of innovation as well and how to be creative and how to think about what areas are growing, which was, which have now become more static and constantly just improving the entire culture of the business.

[00:42:50] Chris Begg: It’s wonderful to see. And you know, you look at the compound returns of, you know, Danaher since early ’80s. It’s, it’s extraordinary. I mean, it’s first year level of returns or better, depending on timeframes.

[00:43:03] William Green: This idea of constant improvement is obviously central to your way of thinking about business, but also central to your way of operating yourself individually.

[00:43:13] William Green: And this is something that, that I think has been influenced by another speaker in your class, Peter Kaufman, who mentioned before who said that, you know, dogged incremental progress over time is one, one of the great forces in the universe. And you’ve written your phrase for it is the piper mentality with the P I P E R standing for Persistent Incremental Progress Eternally Repeated.

[00:43:37] William Green: And you’ve said this is truly the secret to anything that grows, as it explains compound interest, evolution, and anything that is improving with time. And I wondered if you could talk about this, because I think it’s one of those deep truths in life that once you understand and you align yourself with this force of, continuous dogged improvement, it’s pretty unstoppable.

[00:43:59] Chris Begg: And I give full credit, when I came up with the PIPER mindset, I was doing something I do in regular learning as I was trying to create a memorable acronym or tool to remember Peter’s dogged incremental improvement. I said, that’s too long and clumsy. I can, we can do better than that. So, in my goal of reducing entropy, I came up with something a little bit more memorable, at least to me.

[00:44:20] Chris Begg: And it’s, but it is everything. One of the things about compound interest that I’ve just found so incredible over time, the more I work with it, the more magical I find it. And it’s this thing that I don’t think is just lives in the world of investing. Compound interest is something so innate to the source code of the universe.

[00:44:39] Chris Begg: It’s driving everything. It’s driving evolution. You know, I think if you were to, you kind of follow the thread all the way back and you’d probably have some interesting equation that looks like compound interest. That’s just been played out to the power of n and it’s, that’s pretty magical.

[00:44:57] Chris Begg: And we are all fractals, right? We’re fractals of these general principles and laws. So we are just in our most aligned way, in our most enlightened path. We are living the truth of interest. We’re living it, of evolution, and we’re trying to remove these frictions that are getting in the way or get, getting in the way of our own improvement.

[00:45:15] Chris Begg: You know, I read something today as I was revisiting one of my favorite books here, by Robert Pirsig, where he said something like, the realization that we’re all enlightened. It’s just the falling away, a way of thinking that we’re not. And I think that that’s the secret of compound interest that’s at work here.

[00:45:34] William Green: And you’ve talked about how if you studied stoic philosophers like Heraclitus, or Daoist, like Laozi, they also talk about the compounding benefits of virtue. So, this idea of finding things that compound. Or very consciously compounding, whether it’s kindness or generosity spirit or certain virtues.

[00:45:54] William Green: It’s such a profound idea, I think. And maybe because the benefits don’t show up very quickly, often we kind of ignore this low hanging fruit that’s right there.

[00:46:05] Chris Begg: I’d love to take you to a place. Have you ever been to Ephesus before in Turkey?

[00:46:10] William Green: I haven’t, I don’t think. No. I’ve been to Turkey, but not for a long time. And I went when Turkey was so popular. I remember our hotel cost like $1,200 a night. And luckily, I wasn’t paying for it, but it was, yeah. And then it kind of crashed. Now I think I could go for probably less. So, I’m due for a revisit of Turkey.

[00:46:29] Chris Begg: So, I’ll plant the seed and you’ll end up there someday, I think.

[00:46:31] Chris Begg: But it’s, there’s a library there. It was probably what it was called, it’s called The Library of Celsus. And all we know about Celsus, it was, you know, built shortly after about a hundred CE and it was built, and it was one of the biggest libraries of the time. And what we know of it today is this facade.

[00:46:47] Chris Begg: And there’s four Greek goddesses that sit in this facade. And if you order them, I think the order of the goddesses actually is the way that I think about the order of your path to inside or your path to critical thinking. And so, the first goddess is Episteme. She’s the Greek goddess of knowledge. And so, we spend the big beginning part of our careers kind of gathering knowledge.

[00:47:10] Chris Begg: We’re reading lots of books. And then the second one is Sophia. So she’s the Greek goddess of wisdom. And so what is wisdom? It’s applied knowledge, right? It’s let’s get experience. You know, I got 20 years experience investing, studying businesses. Now I have Sophia my wisdom to kind of accompany my knowledge.

[00:47:30] Chris Begg: So, this is that cloud of knowing, you know, this is everything kind of looking backwards now. And then we get into this cloud of unknowing or this period of, you know, the next one is an Ennoia. She’s the Greek goddess of intelligence. And so, what is intelligence? Intelligence is taking something that’s complicated and making it simpler and the opposite, or ignorant, or I’d say something that is unintelligent is taking something that’s simple and making it complicated.

[00:47:56] Chris Begg: And you see that as pretty common in life. And, but what is genius? You know, in that same framework, well, it’s taking a question or a problem, and it’s solving it. You know, it’s actually taking, if you think of like AlphaFold, when DeepMind and Demis Hassabis kind of solved protein folding, that was a form of genius.

[00:48:14] Chris Begg: It was augmented intelligence that actually made the problem go away. So, this idea of intelligence is forward-looking, it’s looking at the world and how it’s becoming, it’s reducing entropy, it’s creating intelligence. And so the fourth one, this comes around to your reference is the Greek goddess of, her name is Arete and she’s the Greek goddess of virtue. And what I define as virtue or Arete is also quality and dynamic quality specifically. And so when we think about Arete or we think about doing things with quality, you know, I think about Robert Pirsig, you know, two books, Zen and the Art of Motorcycle Maintenance, which is a book that Nick Sleep loves and, and we talk about every year.

[00:48:57] Chris Begg: And then his second book, which really was much more about the metaphysics equality or the philosophy of quality. And he felt it was his best book. And that is just when I read that, it just changed the way it was. Like, it’s like reading, you know, Nick, I shared like just the scales dropped from my eyes.

[00:49:14] Chris Begg: I’m like, this is it.

[00:49:16] William Green: And this book is Lila for people who don’t know. And there’s also an extraordinary book that I had a recent discussion with a bunch of great investors about this compilation of Pirsig’s called On Quality, which I would really encourage people to read ’cause it has, yeah, it’s great.

[00:49:30] William Green: I have it by my desk as well. It has excerpts from Lila, excerpts from Zen and the Art of Motorcycle Maintenance and then also excerpts from speeches and diaries and letters from his wife who survived him talking about what these concepts meant. And, they’re quite esoteric concepts.

[00:49:47] William Green: So, when you use a phrase like dynamic quality, it’s actually, it’s a little bit mystifying to a lot of us, but if you translate this into how this concept, this obsession with quality has actually how you’ve kind of weaponized what, it’s the wrong word, but how you’ve weaponized what Pirsig figured out about the pursuit of quality.

[00:50:07] William Green: How does it actually help you and how, what do we need to understand about what he figured out about, what he called the metaphysics of quality?

[00:50:15] Chris Begg: Brilliant. Great lead in, so in Lila, which was the second book, is where he started to delineate quality. There’s two types of quality. You have static quality and dynamic quality.

[00:50:28] Chris Begg: And the way I think about static quality is when we name something, we categorize it, it almost ceases to be dynamic. It’s not on the horizon edge anymore. It’s not on the leading edge of the train, which something that, that Robert talked about. And I think we have this notion that we know something that we categorize, we put it in a block, we put a circle around it.

[00:50:48] Chris Begg: When we do that, it cease it to become static. And it, when businesses start to create entropy in their, because they have bureaucracies. I mean, GEICO is a perfect example. When Todd took over GEICO as CEO, it had ceased to become dynamic. It had become static. This is the crown jewel of Berkshire, and it had ceased to become dynamic.

[00:51:08] Chris Begg: How’s that possible? This is one of the best businesses in the world. Well, bureaucracy, the leadership wasn’t driving change. And you had to reduce those layers of entropy that were created there. And luckily because they have this cost advantage and uniqueness because the ownership profile, that they can be more long-term oriented, they can go back to being dynamic.

[00:51:30] Chris Begg: But that’s, that delineations everything. And you know, the way Nick talked about it, and the way I think about it too, is, you know, when you live a life of dynamic quality, everything you do, everything you touch is his opportunity to express dynamic quality in your life. It’s the way you make a cup of coffee and it’s the way that you, every interaction being impeccable with your word, I think all of these things are contributions to a culture of quality, a culture of Arete.

[00:52:00] Chris Begg: So that’s how I think about it. And it’s one of those things where it’s hard to, it’s hard to like pinpoint it, but you know, it’s there and it’s an experiential quality. It’s an experiential observation that exists. And when it’s not there, you also know it.

[00:52:14] William Green: I was just going to say, I wrote about it in my book, both in the chapter about Nick and Zak, but also in the notes on sources, I guess called notes on additional sources and resources.

[00:52:24] William Green: ‘Cause it’s such a beautiful and profound idea and it’s so vague and nebulous, but actually incredibly powerful and helpful. And so for Nick and Zak, they would have this very simple filter where they would say, well, what’s the high quality decision here? And so, they would do things like changing their fee structure so that they made it just increasingly bad for him and Zak.

[00:52:44] William Green: And so they would say, all right, so how do we put on a hair shirt and make it tougher for ourselves? So, they would say, all right, we’ll take our incentive fee and we’ll put it in a holding pen so we won’t get it for several years. So if we subsequently underperform, we won’t get paid for years.

[00:53:00] William Green: And so they were just constantly trying to do things that were a high quality way to do it. And I don’t know, I found this an incredibly practical and helpful way to view things. So, when you’re thinking about something practical, like I remember having this debate where someone was going to buy a large quantity of my book to give as gifts.

[00:53:17] William Green: And I was like, well, I don’t think they’re getting the best deal, and I can see why my publicist is not giving them the best deal because it’ll help me more because if they buy it through this retailer, it’ll benefit me in terms of bestseller list and stuff. And so you’d just be like, well, what’s the high quality decision here?

[00:53:34] William Green: And so you would tell a person, here’s how this isn’t benefiting you, and here’s why they’re structuring this it this way. And then what was remarkable, and actually this is Mohnish Pabrai, I did this with Mohnish, then came back, and said, yeah, I’ll do it in the way that helps you, not me. And so, what was really extraordinary was, when you are dealing with really high quality people, if you do something that goes against your own interests, they then they don’t operate against their own interests to help you.

[00:53:58] William Green: It’s an extraordinary, does any of that resonate at all, Chris?

[00:54:03] Chris Begg: Oh, completely. Completely. And we have an internal framework that we think about with how you treat, how a business interacts with its counterparties. And so, we call this the essence of win-win. And you know, we think that anything that’s not win-win is unsustainable through time.

[00:54:20] Chris Begg: So do you interact in a relationship of quality with every counterparty, you know, that’s your employees, it’s your suppliers, it’s your shareholders, it’s your nature and community, which is becoming a bigger topic. And it’s something that, you know, investors are demanding a relationship with community, with climate change, with nature in general, it’s with the regulators.

[00:54:43] Chris Begg: Do you have a win-win relationship with regulators? Do you make it easy for the regulators to kind of do a hard job, which is to kind of find those, you know, actors that are not behaving, you know, make it easier for them and certainly the customers. And actually, a seventh one that we kind of include in our essence of win-win framework is competition.

[00:55:02] Chris Begg: You know, how is, which sounds kind of strange, but it’s not really, because if you are taking a short-term tact, Which is going to destroy the economics of your industry, well that’s win lose for you and for your competitor. And that’s not long-term sustainable too, you know, to building and creating value.

[00:55:20] Chris Begg: And you know, so we look at the win-win structure of competitive, you know, dynamics as well. That’s a, that’s an act of quality I think.

[00:55:28] William Green: Yeah. And it’s really easy for people to hear this and for their eyes to glaze over and not pay attention. And I really want to stop and pause here and have people pay attention to this ’cause it’s actually, this is one of the most important insights that I’ve learned from you.

[00:55:42] William Green: I think from reading, you know, hundreds of pages of your really fabulous year end letters is this focus on win-win relationships with all counterparts. And it’s a very profound insight. And there’s something where you wrote, the only system that is sustainable through time is one that has a win-win with all counterparts.

[00:56:01] William Green: Any other system structure is unsustainable and will eventually decay. And it’s such an important insight that, if you ignore, for example, the environmental thing or if you ignore the fact that a company treats its employees badly or squeezes its suppliers, there’s some form of fragility that creeps in.

[00:56:22] William Green: And so, I think there’s such a backlash at the moment with so many people attacking the ESG movement and saying that it’s in some ways deeply flawed and in some ways hypocritical and in some ways just greenwashing. And it’s very vulnerable to all of these criticisms. And as with all things on Wall Street, it’s very easy to manipulate and use it to sell, you know, these principles of ESG.

[00:56:43] William Green: But I think you’re tapping into something really profoundly important that you can’t really ignore these things like diversity and inclusion and equity, and being sensitive about the environment because if you do, it’s going to come and bite you in the butt sooner or later ’cause it introduces a form of fragility.

[00:57:01] William Green: Can you talk about that a bit? ‘Cause I think it’s, I think this is really profoundly important and it’s a recalibration of how we think about what’s sustainable.

[00:57:10] Chris Begg: Yeah. Thank you. That’s a great framing of it. One of the principles of Ben Graham that has always been most important to how we orient ourselves as margin of safety.

[00:57:21] Chris Begg: And, you know, that comes right from intelligent investor. You know, you had Mr. Market and margin of safety chapters 8 and 20, and when you have a win-lose dynamic with any counterparty, as you’re introducing this idea of potential for permanent loss. And so we always thought of that. And even something like Walmart, you know, Walmart for many years had a win-lose relationship with its suppliers and it worked, you know, they’d squeezed their suppliers and, it functioned okay until there was an alternative.

[00:57:49] Chris Begg: And when there was an alternative to Amazon came along, you saw just, there was a very quick. Supplier said, ah, okay, we have another Schwarz, here we go. So, the fragility was there. You see it with customers, you see it with how organizations, you know, treat the environment. And these are all just important.

[00:58:08] Chris Begg: So, we’ve always oriented ourselves from this margin of safety perspective. It felt really inauthentic to, you know, to advertise ourselves in some way that, that we thought, you know, we were anything better than us. We were just, we were doing it from value investing principles and we were doing it with our own values at stake is do we feel good about aligning our capital with these companies and what they stand for?

[00:58:31] Chris Begg: So, it’s always been a key part of our approach for many, many years, even before it became something that you had to, articulate specifically around,

[00:58:40] William Green: There’s a guy, I don’t know if you, you know, called Joe Koster who publishes an excellent newsletter called Value Investing World, which I highly recommend.

[00:58:48] William Green: I subscribe to it ’cause you get these sort of curated links every day. And he’s quoted you a bit in the newsletter over the years. And so, I knew that he was a fan and an admirer. So, I wrote to him a couple of months ago and said, is there anything you’d like me to ask Chris? And he honed in on this.

[00:59:03] William Green: He said, in one of your yearend letters, you were talking about this whole concept of win-win relationships. And you wrote be constant, be kind. And he raised the important question where he said, how does consistent kindness factor into this whole idea of fostering win-win relationships.

[00:59:21] Chris Begg: Yeah. I think constancy is such a brilliant ingredient for trust. And you know, I think this, when you deserve, I think trust with your, you know, all of those counterparties, like it just changes. I remember, you know, I learned this from Buffett early on. He said, you know, if you lose a shred of reputation for us, I’ll be ruthless.

[00:59:43] Chris Begg: And it’s, it’s so true. You know, I think it’s a, is something that when lost it, it takes a while to get it back. And so, I think to be constant, to be kind is, you’re building kind of the seamless web of deserved trust. And I think that’s something that is, incredibly valuable for any person or any organization.

[01:00:02] William Green: I think it’s underestimated as well. You suddenly find that someone you were kind to 20 years ago does something to you. That’s absolutely extraordinary and it’s remarkable where I see friends of mine, like Guy Spier, who really very consciously have been talking about the compounding of goodwill or Tom Gayner.

[01:00:19] William Green: It’s, again, it’s one of these things where it may not seem very striking initially. Maybe it’s like exercise or good nutrition where, you know, 20 years later you see the overwhelming benefits that accrue to the people who actually understood the power of compounding good habits.

[01:00:36] Chris Begg: Yeah. I I, you know, we talk a lot about the joys of compounding, which is, you know, I think first articulated by, you know, Warren and his early Buffett partnership letters.

[01:00:46] Chris Begg: But I think about the compounding of joy too. And, you know, I think that those little bits of kindness that you can offer others, whether it’s, you know, a student who’s coming through uncertain about what he wants to do, and you can be, you know, spend a little extra time and then maybe lend yourself to be a reference.

[01:01:03] Chris Begg: And I just wrote a reference for, one of my former TAs who’s interviewing, different places around the world. And man, that fills me with joy, you know, to be able to do that. So, it’s cool.

[01:01:12] William Green: Yeah, it’s a lovely thing. I thought, another interesting thing on a side note related to this whole issue of win-win situations with all the counterparts is that you had a prism on your desk that I think was this six-sided object that had been on a whale ship.

[01:01:30] William Green: And can you talk about that, because I think it’s such an interesting idea that you have physical objects that can remind you of certain principles. Can you talk about what the object is and what the, how it reminds you of this principle of all of the counterparties?

[01:01:44] Chris Begg: Yeah. I wish I had one in this office, ’cause it, I’d have a prop to show you, but it’s, I love symbols and I love, you know, the way I learned, and this was an inflection of my own learning, is, you know, I would be like, I think most people is reading and devouring as much reading as possible, but there was one point in my life where I said, am I really memorizing this material? Am I really able to recall it? And this is something that Peter Kaufman’s just so brilliant at. And so I needed to create a mechanism that I could have in a memory palace, a way to recall information. And once I started to develop an architecture and framework to do this, that worked for me.

[01:02:22] Chris Begg: My learning in recall just went exponential. And so for me, what works is, you know, you’ll hear me, this is internal cause I often don’t share, but I create acronyms for things I’m trying to remember. And, you know, it could be something as simple like, PIPER, if you actually were to dissect the win-win counterparties, you’d see that they spell ESSENCE.

[01:02:42] Chris Begg: You’d see that the eight layers or the seven layers of competitive advantage actually spells ESSENCE. And so, when I’m thinking, it kind of wings at me in a way because I’m, you know, that’s essentially what we’re doing is trying to find the essence of business, their competitive advantage. So, these strikes me as truth.

[01:02:58] Chris Begg: And so, the question you have about the deck prism. The deck prism is this wonderful that you’d saw, you saw on sailboats, but it was a way that, that in those days, pre illumination, that light from a deck of a boat would strike this clear glass object and it would illuminate the bottom quarters of a ship.

[01:03:23] Chris Begg: And it actually served as a pretty cool, device because if there was a fire below deck and everyone was above decks, they could see the fire as well. So it’s just is this wonderful thing. And the Charles W. Morgan Whale boat, which is, the only surviving whale ship that we have, it’s at Mystic Seaport in Connecticut.

[01:03:40] Chris Begg: They have one replica that I found that’s a hexagon, and it’s this beautiful clear hexagon. You can actually buy one and I, it sits on my desk. It’s almost like a paperweight, but it reminds me of those six-sided attributes with the center being the seventh point. And essence just happens to be this beautiful seven letter word.

[01:04:01] Chris Begg: And so the essence of win-win or the essence of moat, these are things as I look at the deck prison around like, okay, this is illuminating something that otherwise would be dark.

[01:04:12] William Green: I think this idea of how to structure your physical environment is such a powerful and underappreciated one. And I remember talking about this a lot with Guy Spier when I was helping him with his book, The Education of a Value Investor.

[01:04:24] William Green: And he, at one point, he was going to have photos of all of his partners in the fund taken so that he’d have them on the wall of his library. So it would remind him, this is who I’m investing for. And so, we talked about Warren having in his office, a picture of his father, for example, who obviously had tremendous integrity.

[01:04:44] William Green: And I literally, I mean, as I say this, I mean, in my hand is a rock that fell from the ceiling of a cave in the north of Israel where Shimon bar Yochai, the author of the Zohar, revealed the Zohar, which is like this great sort of spiritual text that I read kind of most days. And the rock fell on my mother’s head when she was there.

[01:05:04] William Green: And so I have it. And so, you know, when I’m doing an interview, I’m kind of fiddling with it. And part of the reason is it’s, you know, it’s trying to get me beyond my own ego in some way. And likewise, you know, ’cause it’s a reminder of spiritual principles that, that, you know, to try to be less of a schmuck myself and to be a little bit more righteous, which is a tough path.

[01:05:22] Chris Begg: I love that.

[01:05:23] William Green: And then I think of my friend Bryan Lawrence, who, um, who I think Guy introduced me to originally. And Bryan has about four offices in different parts of the country. And I remember him showing me one of his offices, in a home of his, and it had a little statuette of Lennon.

[01:05:38] William Green: And he told me he has them in each of the, the offices. And he said, it’s a reminder to beware of dogma, which I thought was such a powerful idea, right? These physical objects that remind you of certain lessons you need.

[01:05:52] Chris Begg: Think of the two, you know, the bus that Charlie Munger talks about that he has in his office, you know, he has one of Benjamin Franklin and then, the former Prime Minister of Singapore.

[01:06:03] William Green: Lee Kuan Yew. Yeah.

[01:06:04] Chris Begg: Lee Kuan Yew. And, you know, they’re just symbols of excellence. And you know, as I look around my office here, you know, there was one symbol that I found when I was kind of looking at Egyptian hieroglyphs and it’s a hair over a wave.

[01:06:19] Chris Begg: And when I saw the hair over the wave, and I’m like, that is a beautiful symbol. And I started reading about it and, you know, the hair over the wave hieroglyph is the letter w or the Greek goddess Wenet, and Wenet was the goddess that was believed that gave fertility or renewed, basically the renewal of water to the Nile, which then irrigated crops.

[01:06:41] Chris Begg: So, it was the symbol of rebirth. And so when I look at the symbol, which I’ve kind of taken to be my own, I think about what are those ideas or dogma that you say that I might have confirmation bias around that I’m willing to die to those ideas, meaning let them go away so I can be reborn to something that’s more true, more profound, more, more insightful.

[01:07:02] Chris Begg: ‘Cause we all hold onto these biases that are kind of static in nature. And so that hair over the wave is just a symbol for me to remind me of, am I being dynamic or static in my expression of, you know, maybe it’s an investment portfolio that I have or ways of thinking and just constant renewal.

[01:07:22] William Green: One of the things that’s very distinctive about your approach to investing in life is, this multidisciplinary type of learning where you are studying, you know, gods and goddesses in temples, in Turkey, or you are studying Egyptian hieroglyphs or different areas of science like physics and biology, or you’re studying Eastern philosophy or history.

[01:07:41] William Green: And, I remember you saying at one point, that you think that this kind of interdisciplinary compounding of knowledge, maybe an individual’s greatest enduring advantage, can you talk about the importance of this idea that I think is very much inspired by Charlie Munger and by Peter Kaufman and how you develop this advantage yourself of going into these different areas, doing these deep dives, and then drawing different ideas and mental models out of these areas that have, a practical resonance for you as an investor.

[01:08:17] William Green: Because, and we’ll talk about Josh Waitzkin more later, ’cause Josh uses this beautiful phrase where he talks about thematic interconnectedness. And I think this is one of the things that you are tapping into is that when you study an area like, you know, Egyptian hieroglyphs, you’re able to see some sort of thematic interconnectedness that, that illuminates something in investing.

[01:08:37] William Green: And it’s unusual, but it’s a very powerful advantage, I think for you.

[01:08:42] Chris Begg: Yeah. I remember early on in my learning process; I was frustrated with being one dimensional in my thinking. And one dimensional can manifest by being, having one depth of knowledge. So, you know a lot about an industry perhaps, but you can also be one dimensional by having a breadth of knowledge, but you just know a little about a lot of things, and that, that felt very inadequate.

[01:09:05] Chris Begg: So, I, right away I was like, how do I build a system where I can actually have a depth of knowledge and a breadth of knowledge? And so I had to reformulate how I was learning. And so, I developed a method for, you know, taking blocks of time. So, I would take three blocks, three months, and I would go as deep as I could on a subject in those three months.

[01:09:24] Chris Begg: And I would set a deadline and I would move on. But the subject could be something like evolution. And I would approach the subject from a 360-degree view. Sometimes I’d approach it through the arts, sometimes through poetry. I would look at it through, it’s the history of it, and I just wanted to touch it from all different, well, to find it from its origin story on, take it to the present.

[01:09:46] Chris Begg: And those would be, I could be in areas of human history. I could be in biology; I could be in physics. And then over time I was like, okay, I’m developing more, I’m more two dimensional in my thinking. And I’ve developed a little bit more depth, more breadth of knowledge. But then I realized that that wasn’t really the final expression of learning.

[01:10:06] Chris Begg: And, you know, Peter kind of introduced me to this idea of looking at a timeline and how there’s an interconnected thread through time about how things manifest. So, this third dimension is height. And so when you view things from a height, not just depth and breadth, but height, you start to see the whole picture.

[01:10:23] Chris Begg: And I talked about that, that Spinoza quote, to see things under the aspect of eternity is to see the timeline of evolution. How things have evolved, how they’ve progressed. This is very much a contextual expression of learning. You know, and I, when I think of left brain versus right brain, which is you had mentioned Iain Gilchrist’s amazing work, The Matter with Things.

[01:10:44] Chris Begg: I think when you’re left-brain orientation, you can be fixated on one, one dimension. Right brain, which is the creative side, but it’s also the contextual side, can see the whole picture. And so that to me was a real next level expression of learning. And then it gave rise to a fourth dimension, which was an expression of networks.

[01:11:07] Chris Begg: And when you look at, say, Geoffrey West, wrote a beautiful book called Scale, and he works at the Santa Fe Institute. When we think about, you know, this idea of networks, you know, anything that scales is scaling through a beneficiary of, of how things are distributed. And so, when I think about learning, now I can learn through my own mediums, those first three dimensions, but also I can increasingly find that things shared to me. Things that are really interesting are shared to me through a network of people that know what I care about and love. And so, I’m constantly being, if it’s an idea, if it’s, you know, 800 students that have come through the class, they know what kind of exceptional companies that we’re on the lookout for.

[01:11:49] Chris Begg: So, we’re getting, you know, those kind of things. We’re getting readings. And that network of learning has really been enormously beneficial to, kind of parsing really interesting knowledge through the system.

[01:12:02] William Green: I also love some of the weird insights that you’re able to draw from different areas that turn out to be incredibly relevant to investing.

[01:12:10] William Green: So, I was struck, for example, when I was reading one of your old year-end letters, which I really love. I wrote to you about this yesterday. I think in some ways, they’re my favorite investor letters I’ve ever read, with Nick Sleep’s. They’re pretty close. They, those are pretty amazing too, but they’re really beautiful letters and one of the things that’s great about them is the idiosyncrasies and auditors that you include.

[01:12:32] William Green: And so, there’s one thing where you’re talking, for example, about the lessons of lemmings and snowy owls and how there are these cycles of scarcity and abundance where, you know, this is a bit like, Howard Marks talking about these pendulums where things go from greed and euphoria and ecstasy and complacency to fear and pessimism and the like.

[01:12:52] William Green: And you describe how this happens with lemmings and snowy owls that prey on lemmings. And then you said the conclusion that you drew from this, in part is all sentient creatures seek abundance and fear, scarcity. And so then you were talking about the importance of being prepared for these periods of scarcity so you can survive and exploit them.

[01:13:12] William Green: And I just was really struck that you would take this lesson from nature and then you’d say, well, so look, there have been all of these panics, like 1857, 1873, 1884, et cetera, et cetera, going up to 2008. And so, when you look at the most successful businessmen, the Buffetts and the Mungers and the like, they’re prepared for these periods of scarcity because this is built into the structure of life in this world.

[01:13:39] William Green: Am I summing that up in, in a kind of adequate way?

[01:13:43] Chris Begg: Very adequate and very beautiful, William, thank you. And thank you for the, how deeply you read the letters that was and what you said. It’s very, gratifying to me. So, thank you.

[01:13:53] William Green: They’re very lovely. The letters, I mean, they’re so, they’re so odd. And you’ll go into these long, long, you know, these footnotes that explain the origins of weird words. And there was one, one of my favorite bits I think was when you were, you know, your, your games with numbers where you would say, I’m publishing this on the 2nd of February 2022, and this is the first time in whatever, 970 years that the date can be expressed as 02020 or whatever it is, you know, the first time since 11, 11 11, you know, 970 years ago or whatever, that we’ve seen this kind of number repetition. So there’s a sort of peculiarity to what you’re doing. Like what’s going on here? Like, why, how has the writing enabled you to kind of express your, your essence and kind of articulate what you believe?

[01:14:43] Chris Begg: Yeah, I think the, whatever craft that you are seeking some level of mastery at, it becomes like an unobstructed self-expression, right? It becomes, it probably looks as close to play as you can get. You know, this idea of what Lila was this idea of like, eternal play. And I think that that’s, you know, the letters are manifestations of the learning process, and it’s a bit fun for me to write up something that I’m learning about, that I’m interested in, that I think is applicable to the investing process.

[01:15:17] Chris Begg: So that’s been an enjoyable medium to share those ideas. I just was rereading, you know, Buffett’s 50th anniversary annual letter. And it’s a beautiful, and some of your audience may want to revisit that because he spends a lot of time articulating the reason why financial stability and security is so important to Berkshire.

[01:15:39] Chris Begg: And he goes into very detailed on why, you know, why they hold US treasuries and why they don’t invest in annuities. And you start reading that and it’s very applicable to the period that we’re in, you know, the bank and so forth on anticipating when there will be a difficult period and preparing for that because it’s inevitable.

[01:16:01] Chris Begg: And, you know, that’s part of the asymmetry that we’re seeking in our, in the businesses that we seek to is that they’re patient without tiring of being patient. You know, I think most, in most people, it’s really hard to be patient. It’s uncomfortable to be patient. But if you’re patient without tiring about be being patient, that’s kind of the quality that I think a lot of these, you know, certainly or Charlie have demonstrated.

[01:16:26] Chris Begg: So, you know, scarcity and abundance. You know, I think that one of the, if you look at a spectrum, you know, I think about kind of a spectrum from fear to love. And in that fear to love, you know, in that realm of fear is our instincts. And we are instinctually driven for two things to survive and to procreate.

[01:16:47] Chris Begg: So, find a meal, find a mate is what William Durant said. And I think when we can evolve from this state of instincts, we go into a state of reason. And reason is, is now we’re using knowledge and wisdom and we’re making, you know, very intellectual pattern recognition. And that’s great. We’ve evolved from these instincts.

[01:17:06] Chris Begg: We can control the instincts so we can make intelligent decisions. I think this next phase out of reason is, is into a state of insight. An insight is where we’re starting to arrive at a flow state. We’re starting to arrive at intuition. Intuition instincts are two on two, two ends of the spectrum away from each other.

[01:17:25] Chris Begg: Like people confuse those things. But I think, you know, intuition is learned. It’s where we’re starting to act in a creative way, in an abundant way. And our fears aren’t factoring in our to our decisions. It’s pure expression. It’s pure play. It’s pure. You know, anything that’s not love is fear.

[01:17:43] Chris Begg: It’s the same other way when you can eradicate fear that you’re in this kind of realm of abundance. And, so that’s kind of a way that I’ve helped to, you know, distinguish spending more time in that right category. And it kind of orients the same way our brains are behaving too, because, you know, instinctually is our left-brain kind of categorization and naming, and we’re kind of arriving into this right brain co-creation, contextualization where I think has been atrophied.

[01:18:09] Chris Begg: You know, Iain would, Iain would tell you that possibly the reason that our left brain is a little bit more active than our right and our right has atrophied, is the evolution of language and the importance of language in our, and so our, now our left brain is a little bit overactive, which, which generates some of this other activity that doesn’t serve us well.

[01:18:29] Chris Begg: And so how do we nurture more right brain activity that might not be commonplace in our own, you know, our own beings.

[01:18:37] William Green: I feel like I have the opposite problem ’cause the more I discover about myself, the more I realize that I kind of seem to have like no functioning left brain. For me it’s all like creativity. No, no systems, no order, no logic. It’s all intuitive, creative. So, I have the opposite problem, but this is very much related to the teachings of another guest in your class, James Carse who also talked about timelessness and this idea of infinite games. And it’s a, you wrote once about how these outliers, I guess among executives and CEOs and investors and businesses operate outside of time as they perform with no finish lines, they’re playing an infinite game.

[01:19:19] William Green: Can you talk about this concept of infinite games versus finite games in a world where most people are pretty short term and then there are these outliers like the Berkshire Hathaways or the Danahers or the Colgates or whatever that are thinking in a much more timeless way.

[01:19:38] Chris Begg: Yeah. James Carse maybe one of my favorite guests I’ve ever had in the classroom. And he was in his early nineties, I think when he came in and we shared this time in a fireside chat that was just so beautiful. And, you know, he shared with me the story when he wrote that book. It was originally like 400 pages, and he was, just about to take a sabbatical in France. And he had taken the manuscript with him and he lost it.

[01:20:03] Chris Begg: He lost the original Finite and Infinite Games, and he came back from sabbatical and, you know, he had this due date that he had to produce a book and he just wrote it with what he remembered it to be. But it became much shorter. And if you’ve read Finite and Infinite Games, it’s almost like a, it’s almost poetry, prose.

[01:20:21] Chris Begg: It’s so beautifully succinct and cryptic in a way, right. it’s just leaves you thinking like, some of my favorite books of all time are this way. Right. The Fragments of Heraclitus or Laozi Tao Te Ching. It’s, you sit with a passage, and it just works on you, right? Like The Zohar, right? For you.

[01:20:39] William Green: Oh yeah. And yeah, we read a little Zohar before we started and yeah, these things that are enigmatic. Someone once said to me, as a spiritual teacher of mine, said, you have to torture the vessel sometimes.

[01:20:52] William Green: And there is a sense where, you know, when you don’t really understand, maybe it’s like Zen kōans, right? Where these kind of mystifying things, like the sound of one hand clapping. It’s like what? I mean may, maybe it’s good, it dismantles our arrogance about what we know and understand.

[01:21:08] Chris Begg: And I think what’s fascinating about of these important written pieces is they are very paradoxical, right?

[01:21:17] Chris Begg: It’s not something that can converge to an answer, but often diverges to a paradox. So, it gets you thinking with both sides of your brain, right? Your left’s like, oh, I see it this way, but your right sees it something different. Cause it sees it in the context of the whole. And that’s why some of my favorite books are that way.

[01:21:33] Chris Begg: And certainly, Finite and Infinite Games helps to, you know, share words around this spectrum from short-term to long-term thinking. And, you know, and I think one of the things that is so fun about that is, is there’s such a delineation between this world of instinct and, you know, that we’re kind of driven this way to act in this more abundant way, which is on the other side, no finish lines and it’s a clear delineation of that delayed gratification and benefiting from compound interest versus a short term award. This concept of no finish lines, constantly learning, you know, and Jim and I developed a beautiful friendship afterward. We were kind of going into the pandemic at the time. We met just before, and he had asked me to read a manuscript of a book that he was working on called The Poetry of Money.

[01:22:26] Chris Begg: And I remember he was giving me chapters as we’re going into the pandemic, and it was so beautiful and just to be sharing this time with him. And then he stopped producing, you know, and then he passed away shortly after that. I don’t think the book was ever published, but, maybe someday it will be.

[01:22:41] Chris Begg: But it was, it was just a great friendship and to share that time with him. He’s such a, he’s wrote some of my favorite books and she was such a thoughtful, thoughtful person.

[01:22:50] William Green: So, when you try to think in your own life about how to approach investing and running a business and being a teacher as an infinite game and not a finite game, what does that actually look like in your life?

[01:23:02] William Green: Like, in the same way that we were discussing quality before on how you actually take this principle of the, you know, the metaphysics of quality and Pirsig, and apply it in your own life. When you think about how to play this game of investing in life as an infinite game, not as a finite game, what does that look like in your life?

[01:23:18] Chris Begg: Yeah, to me it’s balance. And, you know, when I think about what the compounding of joy looks like, it is this balance of a number of different roles and responsibilities. So the first is my craft of investing, which is how I employ myself, is really a beautiful expression. And that is deeply important to me, but also like thinking about family and, you know, time allocation to friends and community service and what I call total wellness, which is, you know, the mind and body and investing in that, and then, you know, spiritual and so, you know, how does time allocation look across all of those so that there, it’s a balanced approach to life.

[01:23:59] Chris Begg: And, you know, and we’ve tried to orient our family around that, you know, that we create spaciousness so that we can, you know, enjoy all parts of that. And, you know, and the habits around each one of those categories and how I kinda orient my week and learning and so forth is all kind of to try to create that balance.

[01:24:17] William Green: In terms of habits. You’ve obviously learned a lot, I think, from your friendship with Josh Waitzkin. And I wanted to stop and talk for a bit about Josh because he’s such an important thinker in many ways for our audience hasn’t studied Josh. He’s had a profound impact on me, even though I’ve never met him.

[01:24:36] William Green: ‘Cause his book, The Art of Learning is terrific, but he is done a handful of interviews with, Tim Ferriss, and other than that, basically the only person he talks to, the only public appearances he makes are in your class every year at Columbia. And he is also obviously one of your very closest friends.

[01:24:55] William Green: And I think you’ve spent the last two days with him in Latin America, which is where you’re calling from. And so you’re in this unusual position where you have very close contact with one of the most remarkable thinkers and learners continuous learning machines around. So can you give us a sense of who Josh is and then let’s talk a bit about some of the habits and the ways in which he’s influenced you.

[01:25:19] Chris Begg: Absolutely. Yeah. Josh is a great friend and great human, and I’ve learned a lot before I met him. And now since after, you know, we met in, I was like doing the math, yeah. August of 2015. And it was, it was in August that I had, as I usually do, I was kind of thinking of books that have influenced me.

[01:25:36] Chris Begg: And so, I reached out to Josh to see if he’d be a speaker in the class in the following semester. And, you know, right out, right away, which I think is his normal tendency is, you know, he said no. And I said, oh, okay. And we just happened to be in a very similar geography that summer. So, I said, I’d love to grab lunch.

[01:25:53] Chris Begg: So, we agreed to lunch and, after, you know, a beautiful conversation, we were walking out and he’s like, I’ll actually do your class. And one of the things that, I think both of us were very passionate about at the time was he was taking up the art of surfing. And, you know, it was something that I had always, always loved, and really had, you know, spent more time doing over the couple years before we met.

[01:26:17] Chris Begg: And so, we had that in common. And, you know, and Josh takes on a mountain like you had with chess and martial arts and jiujitsu and that, you know, he takes it very seriously and, it’s a very much a learning curve. It’s a training process which is all encompassing. It’s very, very serious.

[01:26:33] Chris Begg: And so we took on the art of this very stylistic individual, which is was surfing. And we did it together in the sense of traveling together and thinking about best practices and how can we get better. And I think it was one summer where I suggested we, we try out foil surfing and I brought a foil and we tested it behind the boat and we’re like, it was a wild learning curve. And that was about five years ago. But that was an art that we both took on at the same time.

[01:27:04] William Green: And this is where you sort of float a little bit above the water, right. I watched a video of it last night in preparation. And so there’s this weird contraption that goes under a short surfboard and you kind of float above the water, but at high speeds.

[01:27:17] Chris Begg: Exactly. Exactly. And it’s a wonderful expression of flying, you know, it’s a very similar. Engineering technology to like a wing of an airplane. And so a lot of the fluid dynamics are very similar. You have no friction from the board. The board is above the water. You’re riding about three feet, two and a half feet above the water, and you’re riding on a wing, and there’s a front wing and there’s a back wing.

[01:27:39] Chris Begg: So, it’s this, there’s a complexity to it, which is very satisfying because you’re now, you’re kind of surfing above the water. You’re surfing on a wing. There’s a lot of very engineering tweaks that can change the dynamic of what is a successful flight and what isn’t, and what is more, you know, effortless and frictionless.

[01:27:59] Chris Begg: So, we took this art on together and, we continue to do it today, and it’s been an incredible journey of frustration, of learning, of elation. Probably one of the most amazing sports that I’ve ever done. I compare it to powder skiing where you have this, like, this effortless flow state that kind of lasts over a long period of time.

[01:28:20] Chris Begg: And, you know, some of our, you know, when we’re tow foiling or being towed in by say a jet ski, release the rope, you know, our rides on this small board on wing, you know, can be over two minutes long, which is just miraculous when you think of a, say, an average wave that you may surf could be less than 15 seconds.

[01:28:40] Chris Begg: So, it’s been an incredible journey and he’s gotten incredibly. He’s a gifted learner, so he’s certainly taken this on. He’s beautiful foil surfer, surfer in general. And we both progressed, and it’s been fun, fun doing it together.

[01:28:54] William Green: So, Chris, when you think about Josh as a proponent of relentless growth of, as he would say it being, you know, world class and pursuing quality as a way of life and pushing your limits and relentlessly living on the other side of pain, these are the sort of phrases he’s used in the past in talking about foiling, but also other things like Tai chi chuan push hands where he was a champion and jiu-jitsu.

[01:29:19] William Green: What have you learned that’s applicable for the rest of us about the pursuit of excellence, the pursuit of quality as a way of life?

[01:29:27] Chris Begg: Yeah. When I think about, you know, Robert Pirsig’s book, Zen and the Art of Motorcycle Maintenance, there was an expression in that where what Robert was trying to say was like, you know, it was getting, understanding the details and quality of say in the art of motorcycle maintenance, or it’s the same with foiling.

[01:29:45] Chris Begg: Like, one of the things that I’m so impressed by Josh is he deconstructs this every aspect of the sport. And so down to equipment playing with shims, I mean, there’s not a time that we’re not on a different piece of equipment. Like, we’re constantly testing, constantly iterating, and trying new things to get little increments of improvement.

[01:30:05] Chris Begg: And that’s a beautiful gift. That he has in the learning process and has taught me to kind of think about that in any art that I’m trying to get better at is what, you know, what are those incremental little bits of improvement? And you add all those up over time. They make an enormous effect.

[01:30:21] Chris Begg: And he also approaches, I think anything that he does from a world class level. I think he, when he has what success looks like in foiling, you know, he’s probably thinking in realm of what does the best in the world look like in this art? And so that’s the progression that he’s taking. It’s something that, you know, that I see as, you know, when we’re in a tow partnership, we need to bring each other to the highest level.

[01:30:47] Chris Begg: And it’s a very shared experience when we’re out there and we’re putting ourselves each other in very dangerous places and critical places that we need to develop a partnership that’s in, very much in sync. So that’s taken a long time to kind of get to the level that we’re at.

[01:31:02] William Green: He also talks a lot about how to spend time, how to architect your day and create habits and daily routines that allow you to use your, your energy properly and to do your most creative thinking at the most important times where you’re actually likely to do it. Well, you obviously think a great deal about these questions too. And you were talking before about how you think about using your time. Can you talk about some of the ways in which you’ve actually structured your day? That could be helpful for the rest of us, ’cause I feel like you are getting to learn from your own experience and from watching this kind of master up close.

[01:31:41] William Green: So, I’m trying to hack this by getting you to do the thinking and the, you know, you are the test guinea pig so that I don’t have to do all of this stuff myself.

[01:31:49] Chris Begg: So, I think Josh has a slightly nuanced approach. So I’ll answer the way that I’ve approached time management in the day and I’ve learned things from Josh as I applied this.

[01:32:00] Chris Begg: But, you know, so my morning usually starts quite early. It’s about a 4:30 wake up and at that point it’s really my most productive time. So I’m devoting time to journaling. I’m devoting time to reading, really important reading. That’s the, usually the first hour and a half of the day is really usually things that I’ve been developing in my subconscious overnight.

[01:32:21] Chris Begg: Things that I have, questions I’ve put to my subconscious and how to maybe something’s unlocked that I’m able to kind of work through, whether it be investment related or creative thinking related. And so my first hour is kind of in that thinking space. Usually at that time, if it’s a normal day, I love to, you know, if I’m in a place where I can surf, that’s a nice expression for an hour to just have an embodied workout.

[01:32:48] Chris Begg: There’s three things that I’m trying to do throughout the day as I’m going through what I call an kind of an embodied experience, which is something that’s very physical. That could be surfing, could be foiling, could be yoga, could be, you know, something that you’re just physically active.

[01:33:03] William Green: For me, it’s eating and walking to the refrigerator and the coffee machine.

[01:33:07] Chris Begg: Hey, that works.

[01:33:09] William Green: Not very well. It turns out.

[01:33:12] Chris Begg: The second is contemplation or, you know, a contemplative exercise. And that’s where the mind is active, right? The mind is engaging in creative thinking. And sometimes I have a couple different things that I’ll do here.

[01:33:25] Chris Begg: I’ll do a Metta contemplation, which is kind of an act of loving kindness to people in my life. And that’s kind of a nice way to kind of express gratitude and that’s. So active mind. And then I try to have a practice of meditation daily where you’re trying to quiet the mind and the ego to almost zero and try to engage kind of in a very deep, kind of mindless spaciousness to your thinking.

[01:33:49] Chris Begg: And I usually use breath work to start in a contemplative exercise leading to a meditative exercise, which is the breath I find to be a really incredible portal to deeper meditation. And so I, after our conversation, for example, I’m doing a conscious connected breathing session with someone that I really respect and you know, that’s about an hour of very deep circular breathing that is contemplative in the beginning.

[01:34:16] Chris Begg: And then I lead it into a meditative exercise that’s been really profound as I’ve kind of brought this into my usually that’s a couple weeks that I’ll do something like long period like that.

[01:34:27] William Green: It’s interesting ’cause so many people are in such a rush, right? They’re just going from meeting to meeting and here you are, you’ve built this kind of, there’s very spacious life where you’re able to exercise, you’re able to meditate, you’re able to think, you’re able to journal.

[01:34:41] William Green: And I can hear some people sort of, you know, griping in their heads saying, yeah, well it’s ’cause he’s rich and successful and he runs his own firm and stuff. Like, then there is an aspect of this, right? Like, how do you think about this question for regular folks like most of us, of bringing these lessons into our lives so that we can get some of the benefits of these things while also acknowledging the fact that a lot of people don’t have that opportunity for spaciousness and freedom.

[01:35:09] Chris Begg: Yeah, I think the three really important lessons that I bring to a daily practice, embodied experience and a meditative experience and a contemplated experience are all free. You know, they can be all done. In a small room with 45 minutes of time, even if embodied experiences doing pushups and stretching and then, you know, leading a breath work.

[01:35:32] Chris Begg: Wim Hof is a great, he’s got an app that I use once in a while that’s a beautiful portal to a meditative practice. So, you know, I think these things are quite accessible and, you know, we’ve really oriented, you know, our life to live quite simply and you know, to have nature in close proximity.

[01:35:50] Chris Begg: So, a lot of what we’re doing is spending time outdoors in nature where, you know, the access is just there and it’s not something that is, there’s a charge for. And that’s, that’s been really important to us.

[01:36:04] William Green: It’s also worth noting that you’ve set up your investment portfolio in a way that’s not hyperactive, right?

[01:36:11] William Green: I mean, it’s a concentrated portfolio where, as Joel Greenblatt would say, you’re not paid for activity or hyperactivity, but for the quality of your decision making. And that seems to me kind of an important factor in creating a life that’s aligned with who you are that allows you to live the way that suits you, your personality.

[01:36:33] William Green: Does that make any sense? It seems like there’s a really important alignment here that your investment style actually allows you to live this way.

[01:36:41] Chris Begg: Yeah, I think it certainly aligns with my temperament. I think the amount of time that, that Scott and I spend on thinking about the portfolio is probably at the same number of hours as anyone else that’s running an active portfolio.

[01:36:56] Chris Begg: You know, we’re, it’s never off. The mind is never off. It’s constantly thinking of how do we lose and how, how we’re thinking through, you know, that dynamic nature of a competitive situation. And it just doesn’t lead to activity. It leads to us just calibrating qualitative assumptions, making sure that we’ve thought through it holistically, and then just wrapping, you know, all of those other responsibilities and roles so that we can, you know, have balance and I think geography is really important, William, to be honest with you, it’s something that has always been a priority is that, you know, we look at East Coast is headquartered in a little suburb of Boston.

[01:37:36] Chris Begg: And as you alluded to, I love spending time in the jungle. And the jungle has been an inflection for our family and kind of having, you know, two geographies that lend itself to a real diverse experience with nature and with a community. And yeah, so geography, I don’t think it’s, I think it’s by design when Warren moved to Omaha and the experience he’s had in Omaha and Charlie and, you know, Santa Barbara in LA and what’s that contributed to their, you know, productivity I think makes a big difference.

[01:38:05] William Green: Josh Waitzkin used a phrase that I love that you mentioned in passing before, which is this idea of unobstructed self-expression, which I think is such a powerful idea to live in a way that somehow true to ourselves and to release what he calls the crimps to unobstructed self-expression.

[01:38:23] William Green: I think about this a lot with writing that a lot of writing is about getting out of your own way, removing your fear, removing your ego, removing, you know, your dread of the blank page and your dread of being judged. And a friend of mine once said to me before I started working on Richer, Wiser, Happier, the book, he said, you’re asking to be a clean pipe so that stuff flows through you. And he said, you know, is the book going to be just a vehicle for the ego of William Green? Or are you trying to be a clear pipe for something more than that? And that was incredibly helpful to me. And obviously ego comes into this stuff always in these very sneaky ways, even when you’re congratulating yourself on having you overcome your ego.

[01:39:03] William Green: And I’m wondering how you think about this whole question of investing and living in a way where unobstructed self-expression is at the heart of what you do.

[01:39:16] Chris Begg: Yeah, so beautifully articulated it. The, you know, I always, I think of this thing that, I think it was Meister Eckhart said that, you know, that we want to be transparent to the transcendence of light.

[01:39:28] Chris Begg: And I think that we all have this, like this inner light, and it’s unique to us, but when we filter it with our ego and we filter it with our expectations on who we are supposed to be or who we’re trying to emulate, it loses the sense of who we are. And I think if you, by knowing yourself, know thy self, you start to remove those obstructions, then you can become the essence of your full capability.

[01:39:54] Chris Begg: So that’s kind of how I think about it. And, you know, the ego is not just I, it’s not just an enlarged version of I, but it can be an enlarged version of we, like you think that when there’s a we, there’s another side of that. There’s they. And I think that all of these manifestations of ego get in the way of our true expression.

[01:40:12] Chris Begg: And, you know, that’s the goal for, I think for me, and for anyone is just to, is to have what Josh calls that un unobstructed self-expression that is unique to you. That’s the full expression of your art. And that’s what art is. It’s really on that leading edge of dynamic quality. It’s an expression of you becoming and your fullest self.

[01:40:34] Chris Begg: So yeah, it’s something that, I think is a progression and none of us are perfect at it, but it’s a nice objective and goal to have.

[01:40:42] William Green: It’s also interesting because it’s very easy for listeners to think there’s something kind of mystical and otherworldly about this, and maybe it’s not really practical or maybe it doesn’t really have anything to do with the investment business.

[01:40:54] William Green: And then you look at someone like Buffett, and he’s the absolute embodiment of this idea of living by an inner scorecard being aligned with his own particular gift. And you quote this beautiful passage from Buffett in, I think it’s the 2019 year-end report that you wrote, where he said, I love painting my own painting.

[01:41:13] William Green: I come down to the office and I start painting, and I think I’m in the Sistine Chapel. It’s my painting. Now, if somebody says, use more red paint instead of blue painter seascape instead of a landscape, I would hand them the brush in five seconds and I’d say, do your own painting. I’ll go paint what I want to paint.

[01:41:30] William Green: I get to do my own painting, and then I get applause if I deserve it. So, this is not some sort of mystical, abstract thing. This is like Buffett has, Buffett has tapped into this very, very powerfully, more powerfully than probably any of us. Right.

[01:41:44] Chris Begg: It’s such a beautiful expression. I was thinking about that exact line the other day. You know, Josh and I think both approached foiling very differently and we’re each painting our own canvas in how we even look at a wave. And the way that the lines that, he’s carving on a wave are different ones that I’m looking to cover. And there’s no right way. It’s just a how we’re expressing the art.

[01:42:06] Chris Begg: And I think investing’s the same way as is. I’m not trying to do it the way Buffett did it. I’m trying to do it the way that makes sense for us. And we’re going to tweak that over time. And our expression of, of what value investing is going to be is evolving and hopefully getting better and iterating and the kind of businesses that we want to invest in are going to look different in the future than they did in the past.

[01:42:27] Chris Begg: The way that Nick, you know, really was able to evolve looking at Amazon, which was reinvested its good deal of free cash flows. And that was a very unique way to, to think about value creation. And I think that’s really just an important kind of artistry, the way you expressed it, you know, it’s painting your own canvas.

[01:42:46] William Green: You’ve also studied Andrew Carnegie in great depth and have written about him and he talks, again, very similarly about, I mean, I was very struck by something in your writing about this, where he said, I believe the true road to preeminent success in any line is to make yourself master in that line. I have no faith in the policy of scattering one’s resources. And in my experience, I’ve rarely, if ever met a man who achieved performance in moneymaking. Certainly, never one in manufacturing was interested, who was interested in many concerns. The men who have succeeded are men who chose one line and stuck to it.

[01:43:21] William Green: And that really struck me, like, again, like here’s a great mogul. You know, I think Andrew Carnegie, when he died in 1919 was maybe the richest man in the world. And here’s a guy again saying, you know, play your own game. Can you talk a little bit about that because he’s obviously had a powerful impact on you, Andrew Carnegie.

[01:43:40] Chris Begg: Yeah. Carnegie is such a great hero for many reasons. He was not just a hero of capital creation, but a philanthropy as well. I mean, they’ll, he’s someone like, you know, that retired at almost at 50 years old and spent the rest of his life, you know, giving his fortune away, in a really thoughtful way, building libraries.

[01:44:00] Chris Begg: I think over 2,500 libraries were built, you know, he was a great thinker as well. If any of your audience is ever in Terrytown or upstate New York, I highly recommend going to Sleepy Hollow Cemetery. I’ve been there maybe five times to his grave.

[01:44:15] William Green: You realize I live about five minutes from there and I’ve never been. So next time you come, you have to visit with me.

[01:44:22] Chris Begg: I’ll take you there. And it’s this, I don’t know why I always find myself, it’s a very peaceful place, but it’s a very nondescript gravestone for this wealthy person at the cemetery Sleepy Hollow, there’s these big, you know, mausoleums and he’s got this very tiny, you know, two gravestones.

[01:44:37] Chris Begg: But he set this rock that was carved from Skibo, which was his estate in Scotland. And it always just reminds me of just how humble he was, how much he gave back, but that comment that you have about depth of knowledge and being very good at, you know, over his career, he developed an expertise in a number of different things.

[01:44:56] Chris Begg: He was a bridge builder. He mastered the telegraph before anyone did. He could do it by ear. He kind of went into steel at a time where a lot of the speculation was kind of rampant in steel. And he was able to cobble up the industry after a lot of the quick money was made. So he kind of reinvented himself in the course of his career as he was kind of developing and iterating and painting his own canvas.

[01:45:21] Chris Begg: And, you know, certainly when he sold the US Steel, that was the culmination of this incredible career. And actually, we’re going to go to Scotland this summer and do a learning retreat. And one of the big focus of the learning retreat is going to be kind of revisiting very close to where he lived, in Skibo, this life, Andrew Carnegie. So, I’m looking forward to that.

[01:45:40] William Green: I also thought it was really cool in your summary of, I think it was 24 different lessons that you’d learned from him. There were a few that really struck me. One of which was just his sheer drive and intensity where he said, whatever I engage in, I must push inordinately.

[01:45:54] William Green: Which really resonates me ’cause I see all of the great investors I’ve interviewed over the years. They’re pretty maniacal in certain ways. I mean, there is this tremendous intensity and competitiveness. And then another one that I really loved was when he talked about his trust in progress and evolution where he had this motto, all is well since all grows better.

[01:46:14] William Green: And he said that became his motto and his true source of comfort. Can you talk a little bit about that? Because that, I think it’s so easy for people to fall into the trap of thinking everything’s going to hell. And here’s this guy, one of the great creators of wealth and one of the great philanthropists of all time saying, no, no, no, things grow better.

[01:46:34] William Green: And it reminds me of something that Nick Sleep said to me where he said, look, I don’t know whether I believe in God or not, but I believe in good and I believe that good things grow. And I do think, actually Nick probably believes in God, but he was trying not to be polemical, you know?

[01:46:47] Chris Begg: That was so beautiful. I got to find that passage or you got to send it to me. Cause that’s lovely.

[01:46:51] William Green: Yeah. It’s in a footnote in, my chapter on Nick and Zak. It’s something that Nick said to me. He said, I believe in good, and I believe that good things grow. It’s a very profound insight.

[01:46:59] Chris Begg: It is. And Carnegie nailed it. And it’s interesting ’cause I had a long conversation yesterday about this very subject ’cause we were debating about the fears of artificial intelligence. And I don’t have, this overly optimistic view that it’s good for the world. I have a real, a realist view of it. But I think like anything, when you look at the evolution of social media and you look at the art, the evolution of artificial intelligence, as you have big change, you could see it in both ways, but it is along a path of evolution.

[01:47:35] Chris Begg: It’s natural that we are using, that we’re augmenting intelligence using tools and technology and, you know, artificial intelligence is a manifested manifestation of additional tools, additional technology that’s bringing to bear to, to do more things. And I think it needs to be oriented in a way over time to be improved.

[01:47:58] Chris Begg: The same with social media 1.0 can be improved. And there are side, there’s second order effects that aren’t positive for humanity. And those things get tweaked. But the world, I do agree with Carnegie, and I agree with Nick that the world does grow better and it becomes more abundant.

[01:48:14] Chris Begg: And that we continuously solve toward this asymmetry of good, which is kind of this sec, this tailwind that’s behind us. And yeah, I feel that very strongly.

[01:48:25] William Green: Bill Miller has spent a lot of time studying pragmatic philosophy. And one of the great insights from the pragmatic philosophers like William James and the like, was to say, well, ideas are like tools.

[01:48:34] William Green: They’re like forks and knives. And so, you want to pick ideas that help you, rather than ones that hurt you. And I think, you know, it’s not saying everything is empirically true and provable. It’s like find a helpful idea. And to me, this idea of being kind of optimistic and assuming that things are going to get better, it’s not about being a Pollyanna and being in denial, but I think it’s a actually an incredibly helpful tool in life to pick this idea instead of being a pessimist and assuming that everything’s going to hell.

[01:49:03] William Green: And I don’t know, there’s a, I read the rest of Carnegie’s quote before I let you go in a minute, ’cause I think it’s so beautiful where he said, and you quote this in your year and letter where he said, all is well since all grows better became my motto. My true source of comfort man was not created with an instinct for his own degradation, but from the lower he had risen to the higher forms.

[01:49:24] William Green: Nor is there any conceivable end to his march to perfect. His face is turned to the light, he stands in the sun and looks upward. And I love that. Right? That idea that, yeah. So, okay, we screw up, we mess up, we trip up. But in some way, we are standing in the sun and looking upward. We are not, we’re, you know, you look at the improvements we’ve made in healthcare, longevity, all of these different areas, the standard of living. I don’t know can you comment on any of that? What’s your view?

[01:49:54] Chris Begg: Yeah. Thank you for reminding me that, of that mantra. And that became the, his coat of arms and his seal is this beautiful thing. And I think I had, I put it in the letter as well, the, you know, the final line of Lila that when Robert Pirsig said, you know, anything I name will cease to be dynamic quality, but that’s the best I can offer you, is this word.

[01:50:15] Chris Begg: And he is like, if I could offer anything, he said, on what dynamic quality is. It’s good, but good as a noun. And it was interesting cause that’s one of those enigmatic things that you’re just like, what does he mean by good as a noun? But good is that leading edge, that horizon edge of where we’re going, where we’re becoming and where we ought to be.

[01:50:36] Chris Begg: And that ought to be is somewhere, it’s a more beautiful world that our hearts know as possible, which is a aligned by Charles Eisenstein that I believe that that’s the direction that we’re headed. That’s the vector we’re on. And it’s an uneven path, right? it doesn’t look perfect. It’s kind of, you’re kind of, it’s a jagged path, but that’s the asymmetry of the path.

[01:50:55] Chris Begg: And I truly believe that I think that some of what, we’re seeing in our own states of augmented intelligence, both individually and collectively, I think consciousness is at a space where, you know, I’m not sure five years from now, 10 years from now, what that’s going to look like. But I think we’re going to have profound change our collective intelligence, as humanity.

[01:51:20] Chris Begg: And I was just reading a book called How to Speak Whale. And you know, one of the cool things about that book, ’cause I, one of my studies this last three-month period has been on kind of a species umwelt or their umwelt in their ability to sense the world. So what does it feel like to be a bat or a whale?

[01:51:38] Chris Begg: And you start to think about all their sensory apparatus or their magnetic reception, how they see magnetic lines. And imagine a future where we are actually having a conversation with whales or conversation with dolphins. And this isn’t far off. I mean, I have an app on my phone where just through spectography, I can tell the exact sound of a bird and what species it is.

[01:52:00] Chris Begg: You don’t think we’re going to be with machine learning, figure out what they’re communicating to each other. That’s not far off. And that’s what, this book, How To Speak Whale, was, was raising the question of, you know, at some point, we are able to have a conversation with species that can see our system differently than maybe we can see our own and we can solve problems that are really unique.

[01:52:23] Chris Begg: You know, so I think about these, these really abundant outcomes that are potential from machine learning, data collection, augmented intelligence and consciousness.

[01:52:35] William Green: I think also we don’t have that much control necessarily over the outcome, but as the stoics would say, we have control over our own behavior and our own attitude.

[01:52:43] William Green: And I like the fact that I see you running through your letters and earn your life, this effort to do things in a more high-quality, upstanding way. And I love at the end of your, or I think it was at the end of your year-end letter for 2021, you were writing about things like love and integrity and gratitude and humility and trust and simplicity.

[01:53:02] William Green: And you said these words are truly at the heart of great partnership and a purpose-built life. We endeavor to embody them daily. And I sort of think that’s about as much as we can do, right? Like we don’t know really what’s going to come of AI or the situation in Ukraine or any of these other things, or inflation, but you are, it seems like you’re trying to structure your life around qualities like that.

[01:53:26] Chris Begg: Yeah. And I think that when we talked about finite and infinite games, I like those words. I chose those words very carefully because they were words that I thought had no opposite. They could exist on their own. It’s like happiness. Happiness has like a counter of unhappy, but like, what’s the counter of joy?

[01:53:43] Chris Begg: Like true joy is just, it’s like this internal quality that kind of lives on its own. And I think love kind of exists in that same realm. And integrity, gratitude, humility, trust, simplicity. These are words that feel infinite to me and like, and so they, they have a special place. And I think that’s why I chose those carefully.

[01:54:05] William Green: Also, if you think of someone like David Hawkins writing books like Power vs. Force, they’re words that make you go strong in some sense. So I do think they probably have an opposite. Like, you can think of words or opposite, but they make you go strong. They, you know, when you see someone behaving with integrity or gratitude or trust, you feel it.

[01:54:23] William Green: I mean, I think there’s a reason why, probably the most popular chapter of my book is the one about Nick and Zak because there’s some sense in which you see the kindness of their relationship and the sense of honor and the lack of greed and the sense of philanthropy. They make people go strong.

[01:54:40] Chris Begg: I’m glad you brought that up ’cause I was recently, I did a kinesiology session with a great practitioner and, where he was kind of going through the body and doing those tests. He’s like, oh, what happened to your shoulder? You know? And he knew exactly like, ’cause I was going weak.

[01:54:54] Chris Begg: And he is like, oh yeah, that was an injury, you know, dating back five years ago. But what Hawkins did, which from reading those books is he would actually read certain books and certain books had a strength to them, right? The Bible, Zohar, like all of these incredible texts, sacred texts.

[01:55:09] Chris Begg: And so I started reading these books just to read them because they, sometimes your mind doesn’t even know what your, what you’re conscious of, right? And so sometimes reading these classic important books, they’re working on you in a way that, that is very powerful because the words and the mythologies and the metaphors are so profound and deeply felt.

[01:55:33] William Green: Yeah. And again, if you know, if it sounds too abstract and impractical, then you look at Charlie Munger and he’s talking about hanging out with the eminent dead by reading about people like Ben Franklin and, you know, great figures from the past. And then the same thing you have Warren Buffett at his charity lunch with Mohnish Pabrai, and Guy Spier saying, hang out with people who are better than you and you can’t help but improve.

[01:55:55] William Green: And so I think it gets at this idea of placing yourself in an ecosystem in terms of the books you read, the people you hang out with, that’s going to bring out the best in you. Right. You know, so that you’re more likely to behave in an admirable way. I don’t know, is there any final word you’d like to add before I let you go? Do some much-deserved breathing.

[01:56:16] Chris Begg: Yeah. Much-deserved breathing. That’s right. And I’ll, I just have to say that, you know, you’re such a wonderful researcher of people and preparing for discussion like this. And I, this is probably one of the most best conversations I’ve ever, you know, shared with someone.

[01:56:31] Chris Begg: All your preparation and what you’re doing and providing for your listeners is profound. So, I’m very grateful.

[01:56:38] William Green: Thank you so much. And I’m enjoying hopefully the prospect of many more conversations. ‘Cause as you know, I started the day with something like 26 pages of notes that I’d synthesized with questions from all of my readings about you.

[01:56:49] William Green: And so I barely scratched the surface. So there’s so much more to discuss over the years to come and I’m just, I’m really looking forward to, learning more from you and being on this journey with you. So thank you.

[01:57:00] Chris Begg: Yeah. Thank you so much, William. And, our first lunch, your audience should know that, you know, William and I had our first breakfast in New York and our connection on so many things that were. I mean, I think we went out for two and a half hours. It was just such a fascinating conversation and so a lot of connection points.

[01:57:17] William Green: Yeah. And so much more to discuss down the road, and I’ve just really tremendously enjoyed talking to you, so thank you so much.

[01:57:24] Chris Begg: Thank you. We’ll see you soon.

[01:57:25] William Green: Take care.

[01:57:27] William Green: All right, folks, that’s it for today. I hope you enjoyed this conversation with Chris Begg and found it as illuminating as I did. Chris keeps a really low profile and very rarely speaks in public, except his class at Columbia Business School. So I’m hugely grateful to him for sharing so many valuable insights with us.

[01:57:46] William Green: As I’m sure you could tell, chatting with him is just an absolute delight for me. In any case, I’ll be back very soon with some more terrific guests, including Chris Davis, a prominent investor who’s also a director of Berkshire Hathaway. In the meantime, please feel free to follow me on Twitter at @WilliamGreen72.

[01:58:06] William Green: And do let me know how you’re enjoying the podcast. It’s always a pleasure to hear from you. Until next time, take good care and stay well.

[01:58:14] Outro: Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday we teach you about Bitcoin, and every Saturday we study billionaires and the financial markets.

[01:58:29] Outro: To access our show notes, transcripts, or courses, go to This show is for entertainment purposes only. Before making any decision, consult a professional, this show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.


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