25 May 2024

In this episode, William Green chats with Christopher Tsai, President & Chief Investment Officer of Tsai Capital. Christopher, who’s beaten the S&P 500 over the last 24 years, explains why Tesla is his biggest position; why investors routinely underestimate the impact of disruptive technologies; why it was so challenging to be the son of America’s first celebrity fund manager; what 3 habits help him most; & what he learned from his famed mentors, Peter Kaufman & Charlie Munger.

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  • How Christopher Tsai’s family survived war & oppression in China.
  • How his father became America’s first celebrity fund manager.
  • What lessons Christopher drew from his father’s successes & failures.
  • Why Tesla is Christopher’s biggest investment.
  • Why we tend to underestimate the impact of disruptive technologies.
  • Why the costliest mistake is to sell great compounders too early.
  • How his views on diversification have changed.
  • What tailwinds he’s riding with Microsoft, Visa, & Mastercard.
  • What 3 habits help him to be focused, peaceful, & productive.
  • How he became a money manager at 16.
  • What Peter Kaufman taught him about the 7 steps to success.
  • Why Christopher won’t invest in China.
  • What Charlie Munger taught him.


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, folks. I’m delighted to be back with you here on the Richer Wiser Happier podcast. Our guest today is Christopher Tsai, who’s the President and Chief Investment Officer of a firm in New York called Tsai Capital. Christopher has beaten the S&P 500 by a wide margin since he launched his firm nearly 25 years ago.

[00:00:23] William Green: How has he done it? Well, he owns a pretty concentrated portfolio of about 21 stocks that he typically holds for long periods of time. He tends to invest in dominant, high quality companies like Amazon, and Apple, and Microsoft, and MasterCard, and Visa, and Danaher and Markel and Costco, which he expects to outperform over the long run.

[00:00:47] William Green: His biggest and most controversial holding is Tesla, which he started buying back in early 2020. When the stock was plummeting at a time when the stock market was crashing because of fears about COVID, since he bought it, Tesla stock has risen more than four times in four years. In this conversation, Christopher explains in depth why he’s still extremely bullish about Tesla, despite all of the skepticism surrounding the company and its deeply polarizing CEO, Elon Musk.

[00:01:18] William Green: Whatever your views about Elon and Tesla, it’s very instructive to hear Christopher analyzing the business and explaining what he thinks other investors have misunderstood about it, and also why he believes that humans repeatedly underestimate the impact of disruptive technologies, whether it’s the printing press, or the internal combustion engine, or electric vehicles.

[00:01:41] William Green: We also discuss how Christopher handles the emotional pressures of investing. We talk about three key habits that help him to maintain his peace of mind. We discuss the importance of simply not interrupting the process of long term compounding. He explains why his views on diversification have changed over the years, and he shares what he’s learned from his friendship with two of his legendary mentors, Peter Kaufman and Charlie Munger.

[00:02:10] William Green: We also talk at some length about Christopher’s extraordinary family background. As you’ll hear, he’s the son of a famous momentum investor named Gerald Tsai, who is often described as America’s first celebrity fund manager. Gerald became notorious when the stock market crashed in the early 1970s and his super-hot mutual fund imploded.

[00:02:33] William Green: But he then went on to become the first Chinese American CEO of a Dow Jones industrial company, and he made a fortune as a dealmaker. So in many ways he was a massive success, but as you’ll hear, he also divorced four times and didn’t speak to Christopher for something like eight years. One thing that makes this conversation special is that Christopher is wonderfully open and thoughtful in discussing his family’s complicated and tumultuous history.

[00:03:02] William Green: And sharing what he’s learned from it about how to build a truly happy and successful life. As this wide ranging conversation unfolds, I think you’ll see why I’ve come to like and admire him so much. In any case, I hope you enjoy our conversation. Thanks a lot for joining us.

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[00:03:24] Intro: You’re 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.

[00:03:44] William Green: Hi, everyone. I’m very happy to be here today with Christopher Tsai. Christopher is the President and Chief Investment Officer of Tsai Capital, the prominent art collector, a good friend and a wonderful human being. Christopher, it’s lovely to see you. Thanks so much for speaking with us.

[00:03:58] Christopher Tsai: William, it is so wonderful to see you. We’ve had wonderful, memorable, opening conversations in the past, and it’s just a privilege for me to be here with you. I’m so grateful for this time with you, William. Nice to see you.

[00:04:15] William Green: Thank you. I’m really delighted to be doing this. I wanted to start by asking you about your family because you have this fascinating family background, including an immensely successful father, Gerald Tsai, who is a famous, iconic investor and a CEO.

[00:04:30] William Green: But it’s extraordinary, I think, what your family actually went through that led you to be here today in the US, and I wanted to start really by asking you about your family’s tumultuous experience in China and what your grandmother Ruth lived through and how you all ended up here.

[00:04:47] Christopher Tsai: Well, that’s a long history. It was very fortunate for my grandmother. Her name was Ruth. She gave a speech to her church when she finally made it over to America. She lived in Scarsdale, New York, and the title of her speech was reminiscences of her time in Hong Kong, China, and the United States. Without that speech, I would not have known as much as I know today.

[00:05:16] Christopher Tsai: What I know is, as you alluded to, my grandmother and my grandfather went through a lot to get my father to America, his sister to America, and I’m truly grateful for all the sacrifices that they made. To give you a couple of examples, it was, I guess, in the late 1930s, when Japanese troops took over northern China, my grandmother really wanted to get my father out of the country and it wasn’t easy.

[00:05:54] Christopher Tsai: It wasn’t easy to get an exit visa. Nobody knows this, but she forged my father’s passport. So he was born in 1929 and somehow she made the nine look like an eight, got him out of the country one year early, but It wasn’t an easy process and she needed money as well to help pay for the tuition, so she started trading real estate because you didn’t need a license at the time, apparently to trade real estate and she was fairly well connected from what I understand. So she started in that area. She made some money traded real estate eventually became a trader of stocks, bonds and commodities on the Shanghai stock exchange.

[00:06:41] Christopher Tsai: She was a pioneer in the sense because she was the 1st woman to trade. On the floor of the Shanghai Stock Exchange. This was all happening when various international concessions in China were being formed. So there was the Dutch settlement, the Portuguese settlement, the Italian settlement, the British settlement.

[00:07:01] Christopher Tsai: And in order to keep my father and his sister in school, they had to move around from different settlements. So it’s hard for us, I think, to understand that. But from what I’ve read. In the speech was that it was incredibly humiliating to be forced to move around within your own country. Then, you know, after she had accumulated some money, she bought a farm in in China, not far from Shanghai, I believe in Suzhou and 1 night there was a knock on the door and the was the communist authorities and communist authority said you have like a night to vacate the day to vacate the property. We’re confiscating your land, so she was stripped of her possessions after she had accumulated money and she had to kind of start from scratch. So they went through a lot and, my grandmother and my grandfather were separated for multiple periods of like 10 years. Each. She was separated from her children once the kids made it over to America. So it’s a long history of separation of being interrogated by Chinese authorities. She had this kind of connection with America because.

[00:08:15] Christopher Tsai: Her husband, Gerald Tsai, not my father, but my father’s father, Gerald Tsai, worked for Ford Motor Company, so there was already this connection to an American company, then my father went over to the States and so grandma Ruth was then interrogated for three hours a day for over a year by the communist authorities. There’s a little whole ordeal and needless to say, like when everybody was eventually reunited, it was a, just a joyous occasion and that was years later.

[00:08:46] William Green: It was an extraordinarily intense time. I was reading about it the other day, and there was this period, I guess, of two and a half, three years where your grandmother Ruth was trading stocks and gold and other commodities on the stock exchange. And then basically the Japanese invaded the Shanghai international settlement, which was kind of an autonomous region at the time. I guess it was more or less controlled by the British and the Americans. And so even though the Japanese had occupied Shanghai a few years earlier in 1937, you’d had this kind of oasis where you could just about live normally.

[00:09:23] William Green: And then trading just gets halted completely, and so it’s a fascinating example where you realize when you study history just how tumultuous things are, just how much we’re subject to uncertainty and change in every era, and I was wondering how that sense of your family’s history, the sense Uncertainty, the sense of external circumstances that can come up and ruin markets, ruin economies, upset families, overturn everything. How that’s affected your view of the world, of life, of how to invest.

[00:09:57] Christopher Tsai: Well, a couple things on that. So, Important to remember, my father was born in 1929, and this was all happening when he was roughly 10 years old, right? So he was old enough to remember that. You know, if you’re born in tumultuous times, and you’re too young, you’re not going to remember certain things.

[00:10:15] Christopher Tsai: He was old enough to remember that. And consequently, he was old enough to talk to me when I was a teenager about his life. In China, of course, growing up in a much more privileged, stable environment even today, like I’m not able to fully grasp. what he spoke about. But I think I have enough knowledge to understand that my grandfather, my grandmother, my father, they’ve made extreme sacrifices to allow me to live the kind of life that I’m living today.

[00:10:56] Christopher Tsai: Where I wasn’t uprooted in my childhood. I wasn’t forced to move from home to home. I didn’t have to worry about a bomb dropping or what was going to happen. I wasn’t cut off from the news. I wasn’t cut off from my friends. So I’m totally grateful for the everything that they’ve done for me and I understand like how hard it was for them to create that initial kind of pot of capital that allowed the whole family to kind of do what they what it’s done and this idea of like capital preservation.

[00:11:33] Christopher Tsai: It was instilled in me very early. Like how important it is to preserve capital and we can talk like a lot about preservation of capital and compounding and the importance of, you know, Not having to go back to go in life and in, in with not just your life, but with money, but this idea of capital preservation was instilled in me at a very early age and certainly through these stories that my father told me about his life growing up and the difficulties that him and his mother and father faced.

[00:12:04] William Green: I thought it was fascinating also as I started your family’s story to realize how incredibly adaptable they had to be so that there was this amazing story that you’ve told before about what your grandmother did for example with the topsoil in the farm where it can you tell that because it’s such an it’s such an interesting example of how feisty and formidable And resourceful she had to be really to get you in this position that you’re in today.

[00:12:34] Christopher Tsai: Yeah, totally. One quick story before we talk about the topsoil story and I actually just learned about it today. I must have read it before but as I was preparing for our talk, I was reading this speech that I had mentioned that my grandmother. And I came across a little section about how when she was just a child, you know, she really wanted to go to boarding school and get because the boarding schools were the best schools in Shanghai or around Shanghai at the time, but her parents didn’t want her to go.

[00:13:06] Christopher Tsai: And her grandmother said to her that if you’re too educated, you’ll never find a man. Can you believe like how different the times were then? But she fought to go to boarding school. How did she do that? She locked herself in her room. And refused to eat until she was given the okay. So this kind of feisty and she got her way and she wound up going to the same school, that madame Chang Kai-shek went to.

[00:13:39] Christopher Tsai: The very prestigious school in China. But that kind of feisty mentality stayed with her. So, to the topsoil story, so the Chinese authorities knock on the door 1 night, they say, you know, you have to vacate the property that she had been saving up to buy for years, the vote, the most valuable part of the land is the topsoil.

[00:14:04] Christopher Tsai: So she didn’t put up a fight with the authorities. She said she’ll do as she’s asked. But what she also did was that the night before they were going to confiscate the property, she hired a bunch of guys to strip all the soil off the topsoil and sell it so she could recoup some of her investment.

[00:14:27] Christopher Tsai: And this nobody knows, but apparently, she took that money. She bought jewelry, which she eventually put in her hair when she left from China and eventually got her exit visa to go to Hong Kong. So she was able to take the money with her to Hong Kong.

[00:14:49] William Green: Amazing. Amazing and you spent a fair amount of time with her as a child, right?

[00:14:52] William Green: Cause she died at 93. So I was wondering what, when you look back on the influence that she had on you and the things she taught to you as a kid, is there anything that you’ve carried forward with you? That’s been helpful to you either as an investor or in life beyond investing? Not that there is life beyond investing.

[00:15:13] Christopher Tsai: Well, she was a great cook and I must have been maybe like 10 or 10 years old or something like that, maybe even younger and I’m sitting around her. She lived in a very modest apartment, by the way, like, she could have had any home she wanted. My father had already made plenty of money by the time she was living in Scarsdale, but she chose to stay in her modest apartment in Scarsdale as actually part of the projects.

[00:15:40] Christopher Tsai: They weren’t like the worst apartments in the world, but they were part of the projects. I was there many times. So I’m sitting at this little dining table and it’s a square one and she was making some of my favorite dishes. And she looked at me and she said, you know, look at this table. I should have bought a round table.

[00:16:03] Christopher Tsai: She said, in life, why be a square table when you can be around one? She was talking about, I think what, I mean, she intuitively knew Dale Carnegie, right? She knew how to deal with people. She knew that it didn’t make sense to be abrasive. And that kind of mentality, that understanding of how to deal with people actually helped her get her exit visa.

[00:16:33] Christopher Tsai: So just a quick example, when she was being interrogated, I mentioned earlier that she was being interrogated for like three hours a day for about a year, from what I understand. Well, one day the one of the guys in the room apparently said, you know, there are rumors about the Chinese children not having access to food.

[00:16:50] Christopher Tsai: What do you think about that? And so she pulls out photos of her plump grandchildren. And she says, look at my children. Do they look skinny to you? And apparently, they shut up. So she was very good with people and that lesson about, you know, why be a square table when you can be around one. The lessons of Dale Carnegie and how to win friends and influence people.

[00:17:13] Christopher Tsai: I think there are all very good lessons to you know, appropriate and apply it in one’s own life. So she’s was totally influential to me and how I think about, you know, dealing with interacting with building relationships with people.

[00:17:29] William Green: She also had a huge impact obviously on your father Gerald Tsai Jr. and I wanted to talk about him in some depth because he’s such a fascinating figure and people who don’t know just a brief snapshot of him.

[00:17:42] William Green: He was born in 1929, as Christopher said, and died in 2008. He was the first Chinese American to become the CEO of a Dow Jones Industrial Average company. And he did things like he bought Smith Barney and changed the name to Primerica, turned it into a financial services giant that was sold to Sandy Weill, who eventually turned it into Citigroup.

[00:18:01] William Green: So he did over a hundred deals, I remember Christopher telling me once, but I’m most interested actually in his investment career that ended Sort of his public investing career I guess ended relatively early probably in his early thirties but he was such an iconic legendary figure and in some ways was sort of the Cathie wood of his time and so both the good and the bad I mean it’s like a really complex interesting story.

[00:18:26] William Green: Can you tell us about his investment career and how he came to be, in some ways, the first celebrity fund manager in the country, I think?

[00:18:35] Christopher Tsai: Yeah, I mean, it’s hard to think about, like, real celebrity fund managers today to the same degree. I mean, he had, apparently, like, articles, I think it was in the cover of Businessweek.

[00:18:48] Christopher Tsai: He was in Newsweek. The press spoke about him as this kind of celebrity figure. He had a ponytail by the way. So, he had his, he had kind of crafted his own image. He’s a bit of a bad boy within the world of fund management, because you have to understand back then, you know, the institutions, the pension funds, the trust departments of banks were super, super conservative.

[00:19:15] Christopher Tsai: I mean, they’re kind of focus was on electric utility companies, gas companies, railroads, you know, very stable kinds of businesses. And here, my father comes in and he focuses almost entirely on growth companies and the way he trades them was unique. So there’s a guy by one of his close friends was John Rosenwald.

[00:19:41] Christopher Tsai: John Rosenwald was vice chair of Bear Stearns. He’s currently vice chair of JP Morgan. I’m still in touch with John today. John spoke at my father’s funeral, but John and my father did the first real block trips. So they would go in and they would buy. Huge blocks of these growth companies and really move markets.

[00:20:04] Christopher Tsai: And when news got out that my dad was moving into one particular company, these companies would soar. And conversely, when he. News got out that he might be selling these stocks would plummet. So he really moved markets and he shook up this institutional conservative mindset about Investing just in kind of utility companies and more stable more established Businesses and he did that at fidelity capital fund 1st.

[00:20:35] Christopher Tsai: So Edward Johnson, senior gave my father when he was, I think, 29 or so around that time. The role of running the fidelity capital fund fidelity investments was. Pretty small at that time, maybe like, I don’t know the exact figure, but I’m guessing maybe 50 million, 100 million in AUM, something like that.

[00:20:56] William Green: Yeah, compared to maybe four and a half trillion today. So this is really early, right? This is, so he, I mean, Christopher’s dad basically leaves Boston University. Where his parents had sent him and joins Fidelity in 1952 as an analyst and then starts this aggressive growth fund that Christopher mentioned, the Fidelity Capital Fund at the age of about 29 and it’s tiny, it’s like 12 million dollars and then grows to 340 million and he becomes the President of Fidelity and then basically leaves Fidelity around 1965 And launches a thing called the Manhattan fund, I think with encouragement from Ruth.

[00:21:32] William Green: And so this is kind of at the peak of the bull market. Can you tell us what happens? Cause in a way it’s like. It’s a sort of really important emblem of the go years that were not dissimilar, I guess, to the late nineties when you and I were starting to become fascinated by investing. Actually, you were fascinated by it from basically the womb, but when I was getting fascinated by it in the late nineties. Yeah. So tell us the context of what happened to your dad at the Manhattan fund.

[00:21:56] Christopher Tsai: Well, before we get to Manhattan fund just quickly. So why did he leave Fidelity. That was always a question that I had for him because from what I understand, he was a 25 percent owner of Fidelity, which, you know, back then when they have 1500 million under management sounds it’s less impressive than it is now.

[00:22:14] Christopher Tsai: But he wanted the top role and at Johnson, but the senior was he approached at Johnson and Johnson said, you’re never going to have the top role because my son net is going to take over that. So that’s what I understand to have transpired. And you mentioned my grandmother being influential in these decisions.

[00:22:34] Christopher Tsai: And he spoke to his mother about almost every decision that he made. These hundred plus deals, particularly this role at Fidelity and my dad always wanted to run the show and so that’s really why he left, plus he had circled the country. I mean, countless times going to all these regional broker dealers traveling to, you know, hundreds of cities.

[00:23:00] Christopher Tsai: Building his reputation while he was at fidelity, getting to know all the brokers and broker dealers throughout the country. So, when he was ready to leave fidelity to start his own thing, he had already the kind of network. So, he leaves fidelity. launches Manhattan phone. And so as you’re driving into Manhattan today, you go over the tribor bridge onto just before the FDR, which is now renamed.

[00:23:29] Christopher Tsai: And there’s a big billboard and you know, these big billboards that align the highway. So my father had that big billboard as you come in from when I was standing, and he had, you know, advertisements from a patent fund and he advertised all over the place. So the advertisements plus his relationships allowed Manhattan phone to launch with a huge amount of capital.

[00:23:54] Christopher Tsai: So they launched with about 250 million of capital, which was multiples of what he expected to raise. And it was the most successful offering in mutual in American mutual fund history at the time. So he launched his Manhattan fund after a great performance record at fidelity, into a bull market, and he was always very good at timing his purchases and sales, whether that be skill, whether it be luck, whether it would be whether it was a combination of both.

[00:24:30] Christopher Tsai: Which probably was a combination of both. Regardless, he was very good at that. And more capital flew into the fund. And he decided to exit by selling the management company, which was Tsai Management and Research. That was a management company from Manhattan Fund. He sold it to CNA Financial. At the top of the market.

[00:24:52] Christopher Tsai: And of course we know what happens afterwards. There were other momentum types of managers because he gets labeled with the momentum crowd, the two Fred’s, the Fred car, and they disappeared. But my father was unique in the sense that he took his capital from the sale and he went into an entirely different direction, which was building businesses.

[00:25:20] William Green: But the reputation kind of dogged him in a way that obviously plagued him, and I wanted to read something by one of my favorite writers, this is Joe Nassara, who, when I was a young journalist, I, before I would write a feature story, a long magazine feature story, my ritual was always to read stories that Joe had written for Fortune, because I could kind of get in my mind.

[00:25:42] William Green: Oh, here’s how a good story is written. So he was sort of my model of a great magazine writer in my late twenties and early thirties. And he actually edited a sort of eight or nine page profile of Bill Miller that I did for fortune back in about 2001. And so when your father died in 2008, the New York Times always does this annual feature about basically the greatest people who died that year.

[00:26:05] William Green: And so Joe was brought in to write a piece called the go investor. And he talked about your father as this symbol of an era, the great go years of the 1960s bull market. And he described him as becoming this symbol in much the same way that Michael Milken became the symbol of the junk bond fueled excesses of the 1980s.

[00:26:22] William Green: And Henry Blodgett, the symbol of the internet bubble. And then he talked about how basically from between 1958 to 65, your dad had, was on this incredible hot streak. And I’m just going to read you a few sentences. He says, People were dazzled by his squash buckling forays into the glamour stocks of the day, like Polaroid and LTV, which seemed only to go up and up, and his seeming ability to time the market’s every move.

[00:26:46] William Green: It was a beautiful thing to watch his reactions, Edward Johnson, then the founder, owner of Fidelity, said. What grace, what timing, glorious! Nobody had ever run a fund like that before, and the press in particular portrayed him as an investing genius. Gerald Tsai Jr. wrote Newsweek at the height of his fame, radiates total cool.

[00:27:05] William Green: He was the first fund manager to receive celebrity treatment in the press. Which probably made what happened next inevitable. After dazzling 1965, Si set out on his own, seeking to raise 25 million for his new Manhattan fund. He wound up with 10 times the amount, as investors clamored to get into the fund, etc.

[00:27:22] William Green: And so then he says that in these books by people like John Brooks and Adam Smith, who are both these legends after your dad’s fund had gone down 90%, he said Sy was a figure of scorn in their books. He says Brooks in particular portrayed Sy’s fall as a kind of deserved comeuppance for his investing style, a metaphor for the excesses of the age.

[00:27:41] William Green: Little did the authors realize that one day thousands of mutual fund and hedge fund managers would copy Sy’s investing strategies. Buying hot stocks primarily because they were going up, which works in good times, but not in bad ones, only they called it momentum investing. So I was just wondering what do you think?

[00:27:57] William Green: What does that raise both in terms of your sense of unfairness or fairness or any other thoughts that you have?

[00:28:03] Christopher Tsai: Well, let me first start with the side that would be most favorable to my father. And then I’ll give you another perspective from what I understand that is that my father stopped managing that fund.

[00:28:19] Christopher Tsai: He was still the management company was still involved. It was the sale wasn’t completed. But my father had stepped back from the portfolio management of that fund. And all of his friends who were in that fund. Had left. So when my father announced the sale, all of his friends, like Blary Tish, who became my sister’s Godfather and Harold Jeanine who eventually ran ITT and all these brilliant businessmen who were invested with my father immediately left So, unfortunately, yeah, the public lost whatever it was 90 percent or and I spoke to my father about that.

[00:29:08] Christopher Tsai: And he says, well, the number was less than that, because there was a dividend. And, but regardless, it’s, you know, it’s a lot of money. And the reason why they lost that is because underpinning these investments that were in the fund. Like Polaroid and LTV, as you mentioned had probably a, you know, very little intrinsic value relative to the market value of the holding.

[00:29:34] Christopher Tsai: So his approach was very much momentum by based as you said it’s certainly not my approach, but. You have to also keep in mind that look, this was a very now I’m trying to be fair to him. This was a very small part, a small but meaningful part of his career. In other words, these 10 or so years in fund management at Fidelity and Manhattan fund, maybe a few more than 10 years, but not that many more than 10 years that allowed him he was smart enough to capitalize.

[00:30:11] Christopher Tsai: And he was early to this kind of momentum trade was smart enough to raise a fund raised 250 million dollars during the period when the commissions, by the way, the load was like 6, 7 or 8 percent or something like that. Yeah, something huge like that. So they just raked in this money, the management company, sign management research was extremely profitable.

[00:30:35] Christopher Tsai: He was able to sell that for something like 30 million from what I understand in present value terms, that’s a lot of money, right? And he used that as the seed capital to do everything else that he did in life. It’s a small part of his career, but a very meaningful one in terms of being able to have that seed capital now to go on and do many more things.

[00:31:00] William Green: It’s also just so interesting in terms of your own life, because in some ways, you’re totally different from that as an investor, and so I’m really interested in, we’ll talk more about your investing philosophy, but I’m really interested in the similarities and differences, because in some ways, I mean, I remember your father talking about how he had this fairly concentrated group of very high quality growth stocks, but then he once said to you, you know, something about, you know, you shouldn’t feel like you have to stay with a stock.

[00:31:32] William Green: It’s like a wife, you know, you don’t have to stay and so he wasn’t, you know, he didn’t have the long term perspective that you have, but he also did have a respect for quality. And so can you just talk about how having this background of this father, who is an extraordinary and kind of iconic figure shaped your own investing philosophy?

[00:31:50] Christopher Tsai: Yeah, I mean, it’s the more I realize in life, like people are full of contradictions, right? To just full of contradictions, and they say one thing, they behave another way. His what I learned very early, because I did work for my father in my teens, and which he was by one of the hardest bosses I had two internships, one with Mario Gabelli, one with john Levin, who was a partner with Michael Steinhardt.

[00:32:18] Christopher Tsai: Those were tough bosses and I’m still in touch with them today and, but my father was a really tough boss. And I was looking at a company once and he, you know, I was it was a medical products company and he said, you know, was Do some research, come back to me, let’s talk about it. And in those days, you know, you couldn’t just go online and just download everything.

[00:32:39] Christopher Tsai: At least I didn’t have that access. So you’d call up the company. I’d get the 10 Qs, the 10 Ks, do all my research. I came back to him like a couple of weeks later, three weeks later. And I said, I really liked this idea. We should buy some for the foundation because I was helping, I was involved with his foundation and on the investment side.

[00:32:57] Christopher Tsai: And he said don’t worry about that. I sold that stock already. So he had already bought some, which I did not know. And then he already had sold it. So I realized that this is like, this is not the way I want to think about invest it. And I learned that very early, like that is not the way I want to think about investing.

[00:33:14] Christopher Tsai: That is not the way I want to. Spend my time, my life. And fortunately I was reading Ben Graham and Peter Lynch and Phil Fisher and a bunch of other, you know, investment books by other managers. And I just gravitated to, to call it the world of value investing. And so we went in very different ways.

[00:33:35] Christopher Tsai: But to answer your question, like I learned some very important things from him. I learned not to dismiss a company’s a company as a potential investment, just because on the surface, it’s valuation looks expensive. The best investments that he’s made in his life. And most of the money, by the way, he’s made.

[00:33:58] Christopher Tsai: In dealmaking, so I think that probably the public doesn’t really understand that, but most of the money that he’s made wasn’t dealmaking. I think that if I looked at his trades and publicly traded equities, not so good, but he was involved early and some private companies that became public. And then he wound up holding them for very long periods of time.

[00:34:19] Christopher Tsai: Because he was friends with the founder and the CEO, and he just would not sell something that he was close to the CEO. So that kind of forced him to, you know, stick with these holdings. And I can give you a bunch of examples, but he made most of his money in these private deals. That’s it.

[00:34:37] William Green: I just wanted to stop, stop you there. Cause that’s such an interesting thing. It’s a little bit like the realization that we often talk about that Ben Graham, you know, the patron saint of value investing and buying cheap as Charlie Munger would often point out, made much of his money off Geico, a really high quality stock, and it’s really interesting here that I just wanted to pause and ponder the fact that Gerald Tsai Jr., the great icon of momentum investing actually made much of his money. From investing in businesses and then sticking with them for like, what do you make of that? It’s such an interesting insight.

[00:35:11] Christopher Tsai: Like I said, people are full of contradictions. And so Ben Graham was You know, preaches diversification to students, and yet he’s highly concentrated in Geico personally. So the businesses that my father made money on were again, the private ones that became public or in dealmaking.

[00:35:33] Christopher Tsai: He made money there. But I learned and he made a lot of money I mean, not relative to the whole pie, but he did very well in real estate and in art, incidentally, like really well in art and what people, what I learned from all of that, if I look at his mistakes and successes, I learned a couple of things.

[00:35:51] Christopher Tsai: The first is most of the money he’s made by holding onto things. Not the momentum trading that he was known for in public equities. And number two, he made most of his money buying quality. Like quality is was very important to his success. And that’s something I’ve taken from him and I truly believe like the environment in which you grow up dictates the kind of person and mentality you will have in life.

[00:36:23] Christopher Tsai: So, let me just quickly expand on that. If you grow up during the Great Depression, I would presume you’re focused on saving every penny and looking for cheap. And I think I’m just taking a guess that you’re going to be. Much more focused on buying cigar butts in life than you might be on buying the highest quality asset you can find and maybe paying up for it.

[00:36:53] Christopher Tsai: Somehow my father figured out that the real money is in the best businesses and the higher quality assets. And he instilled that in me very early and sometimes these things look expensive. And so my point earlier is that he taught me very early not to dismiss something that might look expensive on the surface before you do the deep work and really understand what you’re buying and what it’s worth.

[00:37:24] Christopher Tsai: And the problem that a lot of value investors have, I think is that they all screen for low P ratios, high dividend yields, you know, low Evita cash flows, whatever it is. They’re screening and they will miss because the kind of any value in that area is going to get competed away.

[00:37:46] Christopher Tsai: And so I’m more interested in businesses that might look expensive on the surface, but actually aren’t. And you have to be careful because a lot actually are expensive, right? And there’s no margin of safety there, but there is Peter Kaufman said there is there’s margin where there’s mystery. I think that’s so true.

[00:38:05] Christopher Tsai: There’s margin where there’s mystery. Okay. And so sometimes the best investments are those that are misunderstood and might appear expensive. And they’re often quality kinds of businesses. So I gravitate toward quality partly as a result of that influence he had on me, if that makes sense.

[00:38:25] William Green: So, so let’s jettison about four pages of my questions for you and go straight to Tesla, which is really an important embodiment of this, an illustration of this.

[00:38:34] William Green: And Tesla, when we were hanging out in Switzerland a couple of months ago was your largest position and your highest conviction idea. Aaron. Had gone up about six fold since you bought it. Can you talk about how Tesla is in some ways a perfect illustration of what you do? That it’s something that maybe looked expensive has been regarded as overpriced by a lot of people.

[00:38:57] William Green: It’s been a favorite of short sellers and you looked at it. And thought, actually, no, and this is much more disruptive than people realize, it’s a much, it’s got much broader potential than people realize, it’s much more than a car company, it illustrates so much in the way that you do things, but if you could, so, so yeah let Rip tell us what Tesla illustrated about, for a start, something that seemed expensive on the surface, but actually maybe wasn’t.

[00:39:27] Christopher Tsai: Well, I wish I were smart, smarter than I, you know, I wish I was smart in the sense that I think that I was linked to Tesla. I started looking at the company in 20. 18 or so had this huge run up as it turned profitable in 20 end of 2019. And so I missed this run up was interesting to me for a lot of reasons, which I’ll get into.

[00:39:52] Christopher Tsai: But then we had this COVID sell off in February, or we had a selloff in the stock in February 2020. That’s when we took our initial position. Yeah, we, our average, I think, is about 41. 66 a share. So we’ve done very well since that time, but I think it’s early innings and I could totally be wrong, but I think that his company is definitely one of the most misunderstood companies that I’ve seen in my 25 years or so of managing money for others.

[00:40:18] Christopher Tsai: It’s such an interesting company and it’s so misunderstood. And I think it’s misunderstood for a few reasons. One, you have this kind of overarching personality where people start to formulate opinions based on what Elon is. Is has decided to say during the day, they people think about it as a car company, and we can talk about that.

[00:40:41] Christopher Tsai: I don’t think fundamentally that it is. And that might seem like, this crazy statement, but I’ll get into that. And 3rd, it is a. Most people haven’t actually dived in, right? They’ve not spent. The hundreds and hundreds of hours on this company, and they haven’t really gone through the financials to understand that the economics of the business.

[00:41:07] Christopher Tsai: So there are a few, there are a few things coming together where I think that this company still remains misunderstood, but there’s a reason why it’s up whatever, 15, 000 percent or so since the IPO, and there is a reason why it continues to go higher. Over time, because there are plenty of people that do get it right and that it’s just getting more and more concentrated into what I would probably call hands of smart money but again, I could be wrong, but the market seems to agree that this is something very special.

[00:41:42] William Green: So let’s break this down a little bit. So, one thing that you’ve said is that the skeptics and critics and the short sellers and the like fail to understand that it’s really not just an electric vehicle company. So what is it? And I’m agnostic about all of this. I’m just unpacking this. I don’t have a dog in this race.

[00:42:02] Christopher Tsai: I’d say it’s not just a car company. It is very much an EV company, but it’s not just a car company. So let me give you the framework or let me explain the framework that I use at least to rationalize my decision to be invested whether right or wrong in the early 1900s, you know, there’s this ice vehicle Henry Ford comes out in 1908 with the Model T and people were really skeptical about the Model T. There was a magazine called carriage monthly and the editor in chief of carriage monthly, which was like, this was a very popular magazine at the time.

[00:42:35] Christopher Tsai: The editor in chief said that human beings have been carried by this by. For thousands of years, why would the future look any different? And of course it did. Why were people skeptical? Well, there were no paved roads, supply chains were very limited. There were very few fueling stations. There was very little manufacturing capacity.

[00:42:59] Christopher Tsai: Kind of sound familiar, right? Today in EV terms, but ICE vehicles Henry Ford disrupted the horse and carriage very quickly within 20 years, which is happens to be pretty much the timeframe during which S curves take formation. This is a 20 year disruption period with respect to pretty much all these transformational technologies going back to the Gutenberg.

[00:43:25] Christopher Tsai: Printing press and the steam engine and spinning wheel. It’s all about 20 years So my point is that there’s all of this skepticism and you had horse and carriage Competing against this noisy ice vehicle both were forms of transportation Both gotten you from point A to point B But one was fundamentally different.

[00:43:48] Christopher Tsai: It was fundamentally different because it was a much more efficient process of getting you from point A to point B. And that is the lens from a kind of very high top down level that I look at Tesla and electric vehicles in general. They’re just a much more efficient way to get you from point A to point B than ICE vehicles.

[00:44:11] Christopher Tsai: And what I mean by that is the cost of ownership and cost per mile is just much lower. And so then it’s a question of what are the risks? What are the competitive advantages Tesla have over the rest of the competition in EV? And how will Tesla Survive and thrive against ice vehicles, which to me are going the way of the dinosaur that is a big assumption that I believe is true because I think that adoption is following the traditional S curve adoption phase and there’s not a lot of time left for ICE vehicles to exist.

[00:44:50] William Green: So you’ve written a lot in the last couple of years about disruption. And can you talk a little bit about why, in a way, we just have trouble as humans understanding disruptive companies?

[00:45:03] Christopher Tsai: It’s an evolutionary process. Issue that we all have because evolutionarily our brains are wired to think in linear terms.

[00:45:15] Christopher Tsai: They’re not designed to think in exponential terms, which is how disruptive innovations and technologies are. Take there for as an escort. And so there’s typically in any disruptive technology again, going back to the, you can go back to the printing press. You can look at the spinning wheel and the steam engine, the adoption of cable, the adoption of ice vehicles the adoption of cable, the adoption of streaming, they’ve all happened within roughly a 20 year period. And by all happened, I mean, they’ve gone to 90 percent adoption. So typically, you start out pretty slowly. And then there’s a tipping point where this S curve formation really takes, the exponential component of the S curve takes place.

[00:46:05] Christopher Tsai: And there’s just massive very fast, widespread adoption. And our brains are not wired to think like that. And that’s another reason why we can’t understand the power of compounding. Like, we have to sit down and actually take the calculator out and we can do the math. And we can do the math and look at look what happens if you put 1 and you’d have 630 today.

[00:46:26] Christopher Tsai: So you have 630 times your money. 66 years and that’s 10 percent compounded. So we just don’t think like that. I think the same thing is happening with the adoption of electric vehicles.

[00:46:40] William Green: When you and I had dinner in clusters in Switzerland at the value X event that guy spear hosted a couple of months ago.

[00:46:50] William Green: I remember at one point you mentioning that without Marcel Proust, who’s my favorite writer probably, you might actually not have invested in Tesla. And it’s a, it’s an unusual comment that was perfectly designed to pique my interest and approval. Tell us why, what the what the great insight was from Proust when he was writing around 1913 about, well, you tell us.

[00:47:14] Christopher Tsai: Well, I have this problem. Like whenever I read fiction, I’m looking for a little anecdotes of what I can take from that fiction and apply it to the world of investing. I should stop. I should stop doing that, but, and just enjoy the fiction. But in this case, Proust, who was the monumental French author who wrote in search of lost time, as you said, he wrote, I believe it was in you’ll know more better than I, like the fourth or the fifth book within in search of lost time.

[00:47:42] Christopher Tsai: He said. The real voyage of discovery is not in seeking new landscapes, but in having new eyes. That is so when I read that, I said, wow, this is Marcel Proust speaking about acid light growth businesses that are reinvesting now. earning power now to create a higher intrinsic value later.

[00:48:07] Christopher Tsai: And Adam Cecil, by the way, gets it. Adam Cecil totally gets that. And the thing to remember, like with asset like growth companies, especially software companies, the investment is often hitting the income statement fully. So by that, I mean that there’s no capitalization of the expense. So if you have a, let’s say, if you’re talking about a drug company, pharmaceutical company, the R and D is flowing through the income statement and hitting the income statement.

[00:48:39] Christopher Tsai: When you have a software company, the same thing is happening. But if you have, let’s say a steel company or a very asset heavy company. You’re capitalizing that expense over 7, 10, even 15 years, right? And so the consequences, like the multiple is going to be lower because just you’re going to have a higher earnings power today.

[00:49:00] Christopher Tsai: If you’re penalizing all of your income statement now, your earnings are going to be lower and your multiple is going to be higher. So that’s often why a rapidly growing asset light in particular growth companies have a higher multiple. Then other companies do, and it’s super important to understand that, like, and that’s, that was proof to me, just understanding that you have to think about valuation with new eyes to align with the kind of world that we’re living in a world that has moved away from acid heavy to acid light.

[00:49:33] William Green: In a way, it reminds me of what Bill Miller said to me back in 2000 and 2001 when he was getting pilloried for buying 15 percent of Amazon. And Bill was hugely influenced by philosophers like William James and Wittgenstein. And that was one of the reasons why he could be so agnostic about these things, because he could say, let me look at amazon with new eyes let me look at it without bias and say what really is this is it a money losing company that’s doomed to fail and is the embodiment of the excesses of the dot com era or is it something that actually has this unbelievable CEO who’s very long term.

[00:50:13] William Green: And is deferring the rewards because he’s incredibly patient and it has a cost advantage that’s going to become apparent down the road and so because bill is such a free thinker and had a different set of sources that he was drawing on philosophical sources that enabled him to see things. More agnostically, without bias, he was able to understand Amazon, and so it, it seems to me and, I mean, he told me last year or so that basically he’s the biggest single individual shareholder of Amazon, who isn’t called Bezos this, before Jeff Bezos, his ex-wife changed her name from Bezos, because she’s obviously a huge shareholder, but so, I think this gets at a really important issue, which is, Which I think Proust is getting at, and Wittgenstein, and William James got at in the field of philosophy, which is that you have to try to actually define, like, what is it that I’m looking at, like, and if I look without bias and with fresh eyes, will I see something that the crowd isn’t seeing?

[00:51:14] William Green: But it’s complicated here in some ways, because as you’ve pointed out in some of your writings, we’re in this age of incredibly rapid technological change. We’ve never really seen this happen. And so it’s very hard to see Tesla and be like, well, what really is this? Because as you point out, is it a car company or is it you know, what are the other fields that the Tesla can actually revolutionize?

[00:51:36] Christopher Tsai: So I gave you the first kind of like lens at which I’m looking at Tesla as. competing as an EV company against ICE vehicles and EV as a whole being much more efficient than ICE. But the other lens I should share is that I don’t think you can understand this company if you don’t understand assuming that I’m assuming that I’m right?

[00:52:02] Christopher Tsai: It could be totally wrong. Assuming that I’m right. I don’t believe you can understand the company if you don’t understand that. To me, it’s an advanced electronics manufacturer and software company competing against a traditional automobile manufacturing company. And so why is this important? And there’s a reason why I believe that and I can talk about that.

[00:52:23] Christopher Tsai: But why is this important? This is super important. It’s an electronics slash software company competing against traditional auto. It’s super important to understand that because there’s certain things that kind of like come into play. There was an aeronautical engineer by the name of Theodore Wright.

[00:52:39] Christopher Tsai: And Theodore Wright devised this concept called the Wright’s Law, which states that for every doubling of cumulative production, that costs fall by a constant percentage. And when you understand that Tesla is an electronic software company. You understand, like, where is this company along this Wright’s Law curve?

[00:53:04] Christopher Tsai: Tesla is so much further along the curve than any of the ICE vehicles that are constrained because they’re not electronic in software companies. They’re traditional auto companies. And it’s Tesla’s so much further along the curve with respect to other EV companies. And so as ICE vehicles, traditional auto catches up, Tesla just moves much Further along the curve.

[00:53:28] Christopher Tsai: And so the spread between the competitive advantage of Tesla, the other EV companies and traditional auto is actually widening. It’s not getting more narrow. It’s widening because of its massive scale, which allows it to push itself out. Along the cost curve further than anybody else. And so one of the major competitive advantages that the company has is that it’s a low cost producer.

[00:53:56] Christopher Tsai: Like that is a very important to understand. And the street sees that the street sees that they spend a 7 billion for a factory. A factory can produce a million vehicles and the gross profit per vehicle right now is about 7, 200. Which means that they put up a factory for 7 billion and they’re making their investment back in a year.

[00:54:24] Christopher Tsai: Nobody else can do that. Ford is losing 36, 000 or so on each e vehicle. While Tesla is making 7,200 or so gross profit per vehicle. And that’s the, that’s like the I’m not a fan of like looking at unit economics in terms of CAC and long term value and blah, blah, blah. But I am a huge fan of thinking about what are the unit economics of like the, what they’re selling.

[00:54:54] Christopher Tsai: You know, if you’re selling a soda can, how much is Coke making per can, right? If you have a McDonald’s, how much is it making per restaurant? If you’re thinking about Tesla, well, how much is it making for each factory? Which really is its core product is the factories, you know, how much are they making per factory that they put up and what’s that worth.

[00:55:14] Christopher Tsai: You know, what’s the present value of that? So I think it’s super important to understand that this, you know, when you think about Tesla as an electronic and software company, different things come into play, like, like Wright’s law and second law of thermal dynamics is also super important to understanding this company.

[00:55:31] William Green: So you’ve said that there are a lot of, there are a lot of things going for the company, right? I mean, they they’re in the early stages of this massive migration towards electric vehicles. They’re very formidable in power storage and generation. There are all these other kind of unique optionalities that you’ve talked about.

[00:55:49] William Green: Like you’ve said that it may be that they can eventually license their technology for self-driving vehicles, full self-driving vehicles. So there’s a lot of, there’s a lot of tremendous upside. So let’s say we buy that. But then at the same time, the market is telling us that there’s something deeply wrong, right?

[00:56:06] William Green: There was an article in the New York times yesterday. Okay. That was headline Tesla’s troubles raise questions about its invincibility and they were pointing out the stocks fallen from 299 back in I think July 2023 to about 172 today we’re talking in late March 2024 so it’ll probably be a few weeks before this comes out.

[00:56:26] William Green: So there are all of these, there’s this tendency obviously as the momentum in terms of perception of Tesla has changed, there’s all this criticism, sales growth is, the sales growth rates are slowing, there are all these brands like BMW and BYD that are flooding the market with electric cars, Musk is obviously an incredibly divisive figure and people always say he’s too thin stretched and unfocused and so on and so forth.

[00:56:49] William Green: So I think there’s I guess his pay package for over 50 billion dollars got struck down by a judge recently, and the New York Times is complaining there have been no new models of the car since 2020. What do you make of all this? Is this just an opportunity to buy more at a reasonable price, or is there something that’s gone wrong here?

[00:57:10] Christopher Tsai: Well, first of all we actually did buy more around current prices and these arguments, most of them, at least, except for the 50 billion compensation package. Most of these arguments sound like the same arguments that you could go back and read since the company went public, they’re probably less negative articles today than there were around 2011, 2012, 13, but they seem very similar.

[00:57:37] Christopher Tsai: And yet the stock continues to go higher up 15, 000 or so percent since its IPO. And what is, what’s the case with pretty much every growth company. From Amazon to Microsoft any great growth company, there are always periods when the stock is not going up. There have been so many massive drawdowns in Tesla since its IPO.

[00:58:06] Christopher Tsai: Like there’s about to be a couple dozen, at least 40 percent drawdowns. Since its IPO or at least 30 percent drawdowns, and that’s just part of investing in growth companies, no, no businesses. And I wrote a paper called the power and challenges of compounding, which is on our website and growth companies just don’t go in straight lines.

[00:58:30] Christopher Tsai: They move more like in a step formation. And if you look at the kind of longer term chart of Tesla. Tesla’s just kind of in a step formation, just like Amazon was and Microsoft was.

[00:58:43] William Green: Let’s talk a bit more about that paper on the power and challenges of compounding. You mentioned the statistic in there that you talked about before that over 66 years, 1 dollar invested in the S&P 500 in 1957 would have grown 630 times.

[00:59:00] William Green: And so then you raise this very important question where you said, why then are there not more millionaires or even billionaires? And you said, the answer, I believe, is because the vast majority of investors interrupt the compounding process unnecessarily. And you quote Charlie Munger saying, nervous money never wins.

[00:59:15] William Green: Can you talk about the importance of simply not interrupting the compounding process? Because it seems very central to your philosophy of investing, whether it’s in Tesla or anything else.

[00:59:27] Christopher Tsai: Well, I can tell you that I’ve made so many mistakes. I mean, I’ve been investing since I was 11 years old. And I use the term investing loosely, you know, when I was 11 years old, I invested like 100.

[00:59:41] Christopher Tsai: But when I was in my late teens, I actually had a fairly sizable chunk of United healthcare, for whatever reason, I was spent a lot of time on Managed care companies, publicly traded managed care companies. And I put quite a bit of money for me at the time in United healthcare. And they had this, they had a massive sell off like shortly thereafter.

[01:00:05] Christopher Tsai: And I panicked and I sold everything and that stock must be up hundreds of times. I decided not to look cause I, it’s too painful, but that stock must be up hundreds of times since I sold that. I’ve sold many other companies over my, you know, over the years, the three decades plus that I’ve been involved in equities.

[01:00:27] Christopher Tsai: I’ve sold many companies prematurely. And what I came to realize that’s the real cost. The, these Peter Keefe, who I had this wonderful conversation with recently Atlantis work calls it the silent killer, right? Selling great compounding machines too early. So I’ve made that mistake many times in my life, and I’ve come to the point where I realized that’s a huge cost.

[01:00:51] Christopher Tsai: So you don’t want to interrupt the compounding process unnecessarily, but that’s easier said than done. Like, how do you do that? And I have my own system for doing that and it’s an evolving system, but that’s not easy. And you’re talking about all of the negative press regarding Tesla, but there’s plenty of negative press regarding other buildings.

[01:01:12] Christopher Tsai: And the longer you hold something, the more you’re going to come across negative articles you’re going to come across friends who will try to influence you, and, but at the same time, you have to be totally open minded, right? You don’t want to get just in this commitment consistency bias, you don’t want to have commitment consistency yet.

[01:01:34] Christopher Tsai: You also don’t want to interrupt the compounding process unnecessarily. So it’s not easy, right? And Charlie said, why should it be easy?

[01:01:41] William Green: You asked an important question to Peter Keefe, who’s a, I would really encourage our listeners to learn more about Peter was a guest on this podcast and is just an amazing long term investor, incredible investor and very thoughtful person.

[01:01:54] William Green: I’ll include our interview in the show notes. But when Christopher was interviewing him, I was listening to a recording of the interview last night from the Latticework conference, and you said to him, how do you resist the temptation to sell compounding machines, and to what degree are you comfortable letting market value exceed your estimate of intrinsic value?

[01:02:13] William Green: And I wonder if you could answer that yourself, because that seems to me an immensely difficult, challenging question, what to do when these companies that you love, that are great businesses, Become really pricey and how do you think of that because I’ve seen you in the past in your letters to shareholders blaming yourself for selling true panion before it quadrupled again I’ve seen you kind of holding on to some of these great growth stocks that people complain about.

[01:02:42] William Green: And then at the same time, you know, you could say that in a way you’re guilty of the same thing that your dad was guilty of buying these very high priced stocks that were beloved and having a concentrated portfolio, although you stay wedded to them for much longer. How do you unpack that for us?

[01:02:57] Christopher Tsai: Yeah, so I think investing is a super personal journey and you have to figure out the style that meshes or aligns with your own personality and your own approach to investing. The way I have minimized the chance of selling great compounding machines too early and is to have a fair number of positions.

[01:03:27] Christopher Tsai: So, yeah, I’m very concentrated with respect to how most people would think about the portfolio, but I’m also pretty diversified with respect to some other managers. So we have about 21 holdings today. I have found that having more holdings actually allows me, it allows me to be able to hold on to businesses that might be experiencing difficult times or might be in periods of overvaluation.

[01:03:56] Christopher Tsai: If I had all of my money, let’s say you go the opposite direction, all of my money in one stock, it’s going to be a lot harder to not interrupt the compounding process. Then it would be if you had 21 companies, so that’s that diversification across 21 companies is the key ingredient as that has helped me hold on to compounding machines.

[01:04:23] Christopher Tsai: And so, if you think about Tesla, you know, our average price, our average purchase price around 4,166. It was much, much higher than it is now. And I’ve ridden through different periods already, but would I be able to do that had I had all of my money in one stock, be a lot harder. But when you have 21 engines firing, you know, and building intrinsic value over time, I think that it’s, at least for me, it’s a lot easier just to hold onto them when, you know, the businesses might not be firing on all cylinders or when there might be a drawdown.

[01:05:01] William Green: You’ve explained in your shareholder letters, which I was reading earlier in the week, that there’s a common denominator among those 21 stocks. But basically these are exceptionally high quality companies that are typically growing sales and earnings per share at above average rates for the foreseeable future.

[01:05:17] William Green: And they tend to have high return on capital addressable markets. And so your top five positions when I was looking most recently were Alphabet, Amazon, Apple, Costco, and Tesla in no particular order that I may have got the order totally reversed. You’ve written, we want to be aligned with where the world is headed, aligned with world class management teams and aligned with scalable, saleable, and useful technology.

[01:05:44] William Green: So when you look at these we talked in some depth about Tesla. When you look at these big holdings like Amazon, Alphabet, and Microsoft, how do they illustrate this very central theme for you of trying to align yourself with where the world is headed so that you have these big tailwinds at your back?

[01:06:03] Christopher Tsai: During the time of Cornelius Vanderbilt and you know, Rockefeller and so forth. The railroads were really the infrastructure of the economy. And today the infrastructure of the economy, I believe resides in some of these large tech companies because they are the backbone of the cloud. And that is where the world is moving.

[01:06:26] Christopher Tsai: Frank Slitman had this. Short interview, I forget where it was, maybe it was on CNBC or somewhere, but he had mentioned how we’re so in the infancy of the migration of data from server to cloud. And so we want to participate in that migration of data from server to cloud. We want to align ourselves with the infrastructure of the economy today, as it was during the time of Jay Gould and Cornelius Vanderbilt and so forth.

[01:06:57] Christopher Tsai: very much. That’s why we own, partly not just why, but it’s partly why we own companies like Alphabet and Microsoft and Apple and so forth.

[01:07:08] William Green: And when you look at things like Visa and MasterCard, like, what are the tailwinds you’re riding there?

[01:07:15] Christopher Tsai: Interestingly, like, the tailwinds haven’t really changed. When I, we bought Mastercard pretty much at its IPO. And we bought Visa. not too far after visa went public. When MasterCard went public, some of these tailwinds were not as understood as they are today. They were the same tailwinds. So when MasterCard went public, I think it went public probably like at 15 times or so, earnings, maybe less, maybe like 12 times my estimate of earnings at the time.

[01:07:47] Christopher Tsai: And now it’s, you know, much, much, much higher. But the tailwinds are the same. The tailwinds are the migration of as the world moves from a cash-based society to a cashless society. That’s pretty much what it is. And they’re essentially a toll operator, right? They get a piece of every single debit and credit card transaction on the planet, except in China.

[01:08:08] Christopher Tsai: So they’re like you know, very acid light company that, that collects a fee on pretty much every transaction. So we own both of them.

[01:08:18] William Green: So I’m trying to, I’m trying to think about some of the essential principles that we should be sharing with our listeners that you’re. You’re investing in bodies right so there’s this idea of not interrupting compounding there’s the idea of buying these great compounders letting them run there’s this preference for in action but as you say in all of your letters it’s all in the swing so there’s also this willingness to swing really hard when there’s a good pitch so you bought something like Tesla. During the COVID downturn in March 2020, February. [Crosstalk]

[01:08:51] Christopher Tsai: And that was so, I have to say like that was so hard, like really hard because the stock was cratering at the time. It’s just, it’s, you just, my dad had this expression, like, you have to reverse your head with your stomach. Easier said than done. So when your stomach says sell, you have to use your head and think about buying. Do you think about that consciously?

[01:09:13] William Green: Are you looking at your body and thinking, oh man, I feel sick here.

[01:09:19] Christopher Tsai: I, I definitely like, when I am very it’s not often that I’m, I feel uncomfortable. It’s not often, but when I am uncomfortable about something or I get a lot of calls about a particular company that might be going down, I know that’s very close to the bottom.

[01:09:38] Christopher Tsai: It usually is and so I forced myself to, to buy more. And I remember like, I remember sitting because COVID started, COVID already broke out and Tesla was cratering when we bought it and we were up in the Adirondacks because we left the city. And I remember sitting at this hotel and this little desk in the Adirondacks and pushing the buy button and doing that across 60 accounts or so that was really hard.

[01:10:06] William Green: How do you handle this stuff emotionally? Because I mean, you had a very tough year a couple of years ago, right where you were down about 50%. So over, over the long run, you’ve outperformed the market by a decent amount. But there was a period where you were sort of way ahead. And then you got kind of creamed like a lot of people who had concentrated positions in these very attractive growth companies.

[01:10:28] William Green: When you were going through that when you were down like 50 percent or in the last couple of months where you’re watching this huge position of Tesla get cut by a third, how do you actually deal with it emotionally to keep yourself with your eyes on the horizon and not like go nuts?

[01:10:44] Christopher Tsai: Well, as I said, in this paper, which is on our website about power and challenges of compounding, I totally focus on the business fundamentals.

[01:10:52] Christopher Tsai: I really don’t I don’t let the stock prices dictate like what I’m thinking about the business. And when I’m looking at a business, a potential company to buy, I try my very best, like, not to pay any attention to the stock price and just come up with my own idea of what I think that the business is worth.

[01:11:09] Christopher Tsai: And so the key is really to focus on the fundamentals. And if the fundamentals are moving in the right direction, then the stock price will take care of itself over time. The problem is that if you have all your money in one or even five companies, or maybe even 10 companies, it’s really hard to deal with that emotionally, and it’s even harder if you’re managing money for other people, but if you have 20 companies or so, you know, and you get.

[01:11:32] Christopher Tsai: One position gets cut by a third and you might have 15 percent in it then you’re going to take four or 5 percent off of the portfolio. That’s easily manageable.

[01:11:44] William Green: I was looking back at your old shareholder letters and it seemed like I think back in early 2022 before all hell broke loose for a while you know, you had this amazing record of outperformance over 22 years and you basically had all of your money in 12 great compounders.

[01:12:01] William Green: And you’d written this incredible period where I think you’d made 37 percent in 2019 percent in 2020 and then 18 percent in 2021. And since then since the market fell and you took a big hit, it looked like you’d gone from 12 stocks to 21. So is that a real reflection of the fact that you’ve actually changed your approach to diversification because of the pain of that period?

[01:12:27] Christopher Tsai: Yeah, partly you know, it’s interesting when I launched Tsai Capital more than two decades ago now, we started out with roughly 20 positions. And somehow over time, we kind of pared that down to what was roughly 12, as you mentioned, and the bear market that you’re referring to that we had a couple of years ago, that bear market allowed me to buy companies that were on our wish list.

[01:12:52] Christopher Tsai: Without sacrificing upside, because there’s so many companies that really got a hammer during that period that we’re not at prices or values that I thought made sense in the past, but now all of a sudden were so I said to myself, look, why not use this market sale off? Not just to play defense, but to play offense.

[01:13:11] Christopher Tsai: In other words, why not. Buy a few more companies, diversify the portfolio into names which have. Great asymmetry, just because the valuations for were attractive. So I use that period to go from 12 to roughly 21 positions. And I think it was also to your point, a reflection of not wanting to have to deal with so much pain when it wasn’t necessary.

[01:13:39] Christopher Tsai: And so today, like we’re able to, in many ways, because of this bear market, we’re able to withstand much rougher waters in the future. So it really was a period in which we could plant more seeds.

[01:13:53] William Green: It seems like you’ve also been very conscious in terms of your own personal habits about structuring your life so that you’ll be calm.

[01:14:02] William Green: So that you’ll be focused and I know that you have this pretty regimented routine that revolves around exercise and sleep and meditation and the like that gives you the clarity to be able to focus on your research the rest of the time. Can you talk about that about how you actually structure your day so that you can be focused and calm and productive so you can kind of handle these waves that come in every now and then and threaten to overwhelm us.

[01:14:33] Christopher Tsai: Well, there’s the way I want to ideally structure my day and the way my day actually unfolds and there could be a divergence between those two. Nevertheless, I am, I’m, I try to be as conscious of where I want to go. For me, like it’s my, you know, what gives me peace is pretty simple.

[01:14:53] Christopher Tsai: Actually, it’s just exercise and meditation and good sleep. It’s just the three things, exercise, meditation, good sleep. Those are the three things that give me peace. And I try to, I’ve tried to set up the business in such a way where a lot of the elements that are within the critical path of running a business, don’t fall on my shoulders by that.

[01:15:18] Christopher Tsai: I mean, I’ve tried to outsource a lot of the functions. That from portfolio accounting, clients, legal, all this stuff I’ve tried to outsource as much of that as possible so that my day is. As peaceful as it can be. So that’s the goal, right? It doesn’t always work out that way. And I’d be happy like, you know, if you have any ideas of you know, how to improve upon that please share them with me.

[01:15:44] William Green: You always seem very centered and grounded to me. I don’t know how much this is temperamental and how much you think it’s from all these years of doing Transcendental Meditation.

[01:15:54] Christopher Tsai: Well, I forget who said that, you know, if you are exposed to a certain level of stress, that becomes your baseline, and it’s no longer stressful.

[01:16:04] Christopher Tsai: And while I have, I think, done a fairly good job of structuring my life in a non-stressful manner, I can tell you that there had been periods of extreme stress over 25 years of running this business, because there are always Things that are unforeseen. I can give you an example. Like we talk, you know, our community, the value investing community, all of the mutual friends that we have, we all seem to talk about this importance of alignment, right?

[01:16:38] Christopher Tsai: Between client and investment approach. But sometimes you could communicate that as much as you can, like, till you’re blue in the face. With the perspective investor, and it’s only during a massive drawdown, or maybe even a small drawdown that you realize that there’s not an alignment that has happened to me only twice.

[01:17:08] Christopher Tsai: In roughly 25 years, but I can say it was in both situations, extremely unpleasant and extremely stressful to deal with. And so now we have a letter on our website, it’s a letter to investors, but it’s not just to perspective investors. It’s to current investors, and I encourage everybody to reread it who’s invested and everybody who might want to invest to read it.

[01:17:37] Christopher Tsai: And it’s designed not to attract investors, but to discourage them to be very transparent about our investment approach, which happens to be very similar to the investment approach of many of our friends. It’s just maybe not aligned with what some other people might be thinking or what they might need.

[01:17:59] William Green: I think one aspect to go back to this question of dealing with stress that’s distinctive about you is that you seem to have recognized early on in the same way that our mutual friend Guy Spear recognized that for you to have a stable family life really loving relationships is a really key aspect of you being able to operate calmly and.

[01:18:19] William Green: And think and do your work and in some ways there’s a really interesting contrast between you and your dad right because your dad his personal life in a way was sort of a disaster I mean he divorced four times there are these amazing stories of him getting engaged I think in 2006 when he was about 78 years old to I think George W. Bush’s brother’s ex-wife and there was a lawsuit because they broke off the engagement then he [Crosstalk]

[01:18:46] Christopher Tsai: Oh, I’ve got a story for you on that one. I’m happy to share.

[01:18:50] William Green: Yeah. Yeah, Tell me.

[01:18:52] Christopher Tsai: But yes, you’re totally right and you know, I unfortunately, like, you know, I was old enough. We were talking about being old enough to remember things earlier.

[01:19:00] Christopher Tsai: I was old enough to know what was going on. Like when my mother was getting a divorce and they were separated for a while before they got a divorce, but I was old enough to see what was going on. I was old enough to watch my mother just be in tears from time to time, totally stressed out. Having sciatica as a result of the stress with the relationship with my father.

[01:19:24] Christopher Tsai: Watching my mother being so nervous trying to make dinner for us in the kitchen that she almost chops her finger off and there’s blood everywhere and she has to go to the emergency room. And so I saw like how horrible and she would say like, you know, the first 10 years of her life were great with my father, but the last 10 were really miserable and it was unfortunate.

[01:19:45] Christopher Tsai: And I saw that and I, you know, I guess subconsciously, like, I did not want to have that life, family, friends, stability was more important to me. And to be fair, like, you know, I was also in a position where I could say that, and, you know, I wasn’t struggling to get out of China and to, you know, survive. And so I understand that as well.

[01:20:07] Christopher Tsai: But I’ve always placed from the very, very beginning a huge importance on relationships and perhaps at the sacrifice of career in some way, but I have no complaints, but my story for you quickly. Yeah. So he had four wives. He was on his way to a fifth, which who was Sharon Bush. Sharon, let me see.

[01:20:30] Christopher Tsai: So Sharon and my father were engaged and President Bush was not happy about this. And so my dad was on his boat in Penny Blancourt actually, and it was apparently like five or so in the morning. And I’m not sure I should say this, but I’ll do it anyway. So he gets a knock on the door.

[01:20:47] Christopher Tsai: At around five in the morning from his captain, captain says, you know, I’ve, you have a visitor and my father says, I don’t take visitors at 5 a. m. And the captain says, apparently this visitor you want to take and it was President Bush on the, on a little speed boat with a couple of machine guns on there.

[01:21:07] Christopher Tsai: And he said, come with me for a ride. And so they go, you know, about apparently Kenny bunk port. My dad had bad back and I guess President Bush made sure that the boat went as fast as possible and as bumpy as possible and he said, you know, you’re dating Sharon Bush and he wasn’t very pleased about it.

[01:21:26] Christopher Tsai: And he said to my father, looking at the boat and he says, you seem to have done very well for yourself. And my father is, you know, learning from my grandmother how to be how to think about things, not as a square table, but to be a round table. He quickly replied. And not as well as you, sir. And they talked about this relationship and President said, you know, they’re two sides to a pancake.

[01:21:52] Christopher Tsai: And apparently that was it. And he never heard from it from him again, but so he continued with this engagement, but it broke off for other reasons. I have so many, like so many crazy stories.

[01:22:06] William Green: I mean, in a way, I’m fascinated, you know, the thing I read about in the news was that then, He sued for the return of an 11 carat diamond ring that he said was worth something like 434, 000 dollars. [Crosstalk]

[01:22:19] Christopher Tsai: And she got it at a discount. He got it at a discount too. He’s a value investor at heart. He got it at a discount because he was on the board of Saks and Saks offered discount to its board members. So he made sure he bought the ring through Saks.

[01:22:33] William Green: That’s brilliant.

[01:22:33] Christopher Tsai: Nobody knows that.

[01:22:35] William Green: That’s brilliant. So, I mean, you have a complicated story here that I wanted to ask you about. If you don’t mind feel free to cut me off at any point if you don’t want to talk about it. But you obviously had a rift with your dad at a certain point and then became close to him in the last three years of his life. Can you talk about that? Because in a way, I think there are so many lessons that you’ve learned from your father that are positive lessons about how to it.

[01:22:59] William Green: Live your life well and invest well and be smart with money and then there are these examples where you know, if you apply Charlie Munger’s inversion approach, you’re like, well, if I want to have a miserable life, let me not feud with my children. Let me not be a terrible husband. Let me, you know, so if you wouldn’t mind unpacking that story for us and telling us, you know, what you’ve learned about relationships, family, a successful life and the like from those experiences.

[01:23:27] Christopher Tsai: Yeah, I graduated from Middlebury college in 1997 and just shortly like after there, after that point I came out to my father, told him I’m gay. His response was that nobody gay can be serious about money and he refused to talk to me.

[01:23:46] Christopher Tsai: And so, you know, I had met somebody at that time, roughly around that time, and I prioritized, you know, that person is now my husband, André, and so we’ve been together for 25 years. We just celebrated our 25th year of anniversary, our time together.

[01:24:03] William Green: Congratulations. And he’s lovely. I have to say one, one of the great treats of becoming friends with you is I also got to meet André. [Crosstalk]

[01:24:12] Christopher Tsai: Thank you. He loves speaking with you, William about Proust because you both are Proust fans. So, yeah, we didn’t speak for six or eight years.

[01:24:21] William Green: Wow.

[01:24:21] Christopher Tsai: It was very hard until his goddaughter convinced him to come to my wedding in Berlin in 2005 and at that point, we you know, we right, actually right before then we reconciled.

[01:24:36] Christopher Tsai: So it was very interesting. I had not spoken to my father for many years. I guess it was like beginning of 2005 or so and André, my husband and I are going out for, going to see a concert with Ivana Trump, actually, at the time. And Ivana, we had met Ivana after she went to dinner and she was at the Russian Tea Room and she said that she just saw my father.

[01:24:58] Christopher Tsai: So, it was actually André who said, you know, you need to go to the Russian Tea Room now. And see your father. So André walked me over to the Russian tearoom. That’s the first time I saw my father in whatever, six, since between 1997 and 2005, beginning of 2005. And we started talking again from that moment.

[01:25:18] Christopher Tsai: Then his goddaughter convinced him to come to my wedding, which was not easy for him. But it changed everything. And we became super close and he became super close with André and we had a fantastic relationship for the remaining years of his life.

[01:25:35] William Green: And you said to me when we first met and we were talking about this you don’t think he was really a homophobe, you think it was more about his worry that he wouldn’t have grandkids and like, like, what’s going on there?

[01:25:46] Christopher Tsai: Yeah, I think you’re totally right, William definitely not a homophobe, definitely not. He definitely wanted grandchildren, and he did know about my plans to have children, and when he heard that our children, we were in the process of having children. He was super, super happy. Unfortunately, since he died in 2008 and my kids were born in 2009, he never got to see them, but he was aware that they were on the way.

[01:26:15] William Green: I’m sort of thinking of your life and thinking of just how one of the great challenges for you Must have been to define your own identity and prove yourself and I know that you were setting up your company’s like capital management probably around the same time that you and your dad were estranged.

[01:26:32] William Green: And can you just talk about that process of kind of trying to define who you are as a, maybe this is one reason why we’ve become friends, because I always regard myself as a little bit of an outsider and an insider as a kind of Jewish Englishman from kind of, you know, family that fled from Russia and Ukraine and the like, but went to Eton and Oxford and stuff like that, sort of inside and outside, You’re a gay Chinese American guy by origin, you know, how do you deal with that question of, you know, finding your place in society, figuring out who you are, defining yourself as someone independent of your father in the way that you invest, in the way that you are, in the way that you live? It’s a big question, but if you would ponder that, I’d be most grateful.

[01:27:16] Christopher Tsai: I don’t have a, I don’t have a roadmap. I mean, I just kind of had to figure things out right over time. And it was a long process. I think that if you’re born today, it would be a lot easier. But I went to a very traditional, wonderful private school where I felt that it would not have been very easy just to be open about things.

[01:27:38] Christopher Tsai: At that period of time, very, you know, jockey school and very tough school and very great school. Obviously, today, it’s much more open than it was in the past. So it just took some time. And I think it was the college years that helped me kind of find my true self and figure out who I wanted to be personally and who I was personally.

[01:28:01] Christopher Tsai: And at the same time, I, as I mentioned earlier, you know, during my teens, I was working for my father and I realized, like, I really loved investing and I realized I decided that his approach was just not, you know, my approach to answer your question. I was like, it’s a long process and I don’t have a real math. I just figured it out.

[01:28:21] William Green: And I mean, when I see you, I don’t feel like I don’t feel like you came out of all of this very damaged. Like, it seems to me you came out, you know, as a decent, well-adjusted person. Is that because you great therapy or you married a great husband or like, or your mother was amazing? Like, how did you manage to come out of this actually? Is a There’s a really decent productive member of society.

[01:28:46] Christopher Tsai: Well, I think we’re, we all have some damages, right? And I think that those stay with us. I’m pretty comfortable with me, myself today. I was reading a book recently and on the, on a plane coming back from Europe.

[01:28:59] Christopher Tsai: And I read these last three pages, beautiful pages about ashes. Floating through one’s family and one’s past and I, as I was reading these pages, I started crying and they hit me so hard because I think that in many ways, like, I do. I did not have the time with my father that a lot of kids have growing up because he was constantly working.

[01:29:24] Christopher Tsai: And so I still long for that, right? There are a lot of things that this period when we were not talking that still is somewhat painful. I mean, I’m, it’s in the past, but I mean, I would have preferred that not to have happened, right? So we all have these. I think moments from our childhood that still that are still deep rooted and probably painful, but overall, I think that I’ve gotten through them and I’ve gone through them because of having the right people around me and certainly marrying the right person.

[01:30:00] William Green: We talked quite a lot recently about. Fred Rogers, Mr. Rogers and Mr. Rogers’ neighborhood, which I didn’t grow up watching because I was growing up in London. I don’t think it was a thing there. And you were talking about the influence and I started researching it. And I’ve been reading a biography of him.

[01:30:15] William Green: That’s really interesting. And I wonder if you could talk about why, it resonated so deeply with you his story and his character and what he did. Cause it’s in a way related to these issues of feeling like an outsider. And yet Being included and welcomed and it seems like he was an absolute master at doing that of creating a good neighborhood in which we could all kind of feel welcome.

[01:30:41] Christopher Tsai: Yes, so Mr. Rogers was a, not just a TV host who was the central figure for Mr. Rogers neighborhood, but he was also a Presbyterian minister. And I think that. That upbringing education and that way of life influenced how he dealt with people. And he had this wonderful expression. He said that there are three ways to ultimate success.

[01:31:08] Christopher Tsai: The first is to be kind. The second is to be kind and the third is to be kind. I thought that was really interesting and very powerful and it meshed with how I wanted to try to live life. And it also messes meshes with. You know, this idea of reciprocity, which is deep rooted human condition, right? If we give kindness to the world, we’re going to get kindness back.

[01:31:34] Christopher Tsai: I truly believe that. And so he was and has been influential to how I think about life and how I try my best. I don’t always succeed, but I do try my best to live my life according to Mr. Rogers values.

[01:31:50] William Green: I started to read this biography of him by someone called Maxwell King. That’s very nice. It’s called The Good Neighbor and the subtitle is The Life and Work of Fred Rogers.

[01:31:59] William Green: And I was particularly interested in the accounts of a scene that you had described to me that then I watched on YouTube with this guy, Officer Clemens, that you and I talked about over dinner a few weeks back. Can you tell us what happens in the scene and why it’s so moving and embodies this kind of spirit of kindness?

[01:32:17] Christopher Tsai: Yeah, I didn’t realize it at first until I saw another documentary on Mr. Rogers. So there’s this, there’s a scene on one of his TV shows that he, it’s a very hot day. He’s in, in the neighborhood at his house and there’s a little. pail of water. And he says, I’m just going to take my shoes off, put my feet in the water and I think that’s a postman comes by.

[01:32:46] William Green: No, it’s actually it’s this guy, Officer Clemens. So he’s an officer, African American police.

[01:32:52] Christopher Tsai: Yeah, so the African American Mr. Clemens, Officer Clemens comes by. And Mr. Rogers says to him, would you like to share this? this footbath with me. And he says, sure. And so you, the camera zooms in.

[01:33:10] Christopher Tsai: And you see a pair of white feet and a pair of dark feet and that was a very kind, but also a very political statement because at the time you see African Americans and white people were not allowed in the same pool.

[01:33:28] William Green: Yeah, this is literally I think this was in 1969. So this is a year after the assassination of Martin Luther King Jr.

[01:33:36] William Green: And so I was watching a snippet from a documentary last night and it said you know, it showed this extraordinary scene of some white supremacist guy pouring, you know, chemicals into a swimming pool where these black kids were swimming to make it as inhospitable as possible. And so, so apparently this policeman, sorry, the guy playing the policeman goes and talks to Fred Rogers and he’s like, we got to do something.

[01:34:06] William Green: And so. So there’s this, so this was a deeply subversive thing for them to do. I mean, it was very consciously sticking the middle finger up to white supremacists. And there’s something really sweet when you, sweet is the wrong word. You’re listening to this kind of sweet, gentle, childlike music in the background.

[01:34:24] William Green: And then you realize that they’re actually doing something profoundly radical. And, you know, officer Clemens says, oh, I don’t have a towel or anything. And Mr. Rogers says, oh, you can share mine. And then. Officer Clemens who’s played by this guy who Was by his own explanation by his own account he said you know I had grown up in a ghetto I had no education I thought policemen were the enemy and he was an opera singer and came out later as being gay he’s sort of there in the pool with his white friend and then later when they reprised it many years later they filmed it again and that time Mr. Rogers actually dried his feet for him and so there’s something really beautiful about it and you know, I, there was that line that I mean would be much more familiar to you and other listeners to other fans of the show where of Mr. Rogers neighborhood where he would say you make every day a special day just by being you and I like you just the way you are. And it said in the biography of Mr. Rogers that when they filmed it in 1993 when they sort of reprise this scene in the wading pool officer clement said something to Mr. Rogers like are you saying that to me because he was looking at him directly and he’s like yeah, I’ve always been saying that you just didn’t listen.

[01:35:43] William Green: And so there’s something so beautiful about the you know, and it was very clearly, as you were saying, he was a Presbyterian minister, apparently Mr. Rogers saw it as a reference to Jesus washing the feet of disciples.

[01:35:58] Christopher Tsai: Yeah, incredibly powerful moment on his show, and like you said, subversive.

[01:36:04] William Green: And it made me think that, you know, for you as someone who had, you know, felt like an outsider in some ways, it was probably that much more powerful.

[01:36:13] William Green: And there’s actually a beautiful thing in the documentary where officer Clemens, who was played by a guy called Francois Clemens. Actually quotes that line from Psalms where he talks about it’s something that actually it became a song by Bob Marley that I love where he says something like the stone that the this in the Bob Marley song says the stone that the builder refused will always be the head corner stone and so the temple actually had this corner stone that was the rejected stone and Bob Marley who actually had a white father who, as I recall, you know, got his mother pregnant when she was like 16 and then never wanted to see Bob ever.

[01:36:51] William Green: You know, like it turns out that Bob Marley also was the stone that the builder refused and then he becomes the headquarters. And we were, we only remember his father because he was this kind of, he was this giant. So I don’t know. Sorry to go off on a long riff on this, but it’s so rich.

[01:37:07] Christopher Tsai: It’s funny you mentioned Bob Marley because besides investing when I was 11 years old at roughly the same time, I was obsessed with Bob Marley. I tracked down Rita Marley’s phone number and managed to call her when I was 11 and talk to her, which was amazing.

[01:37:24] William Green: What did she say?

[01:37:26] Christopher Tsai: We spoke for about 60 seconds and I just said I was a fan of her husband’s music and could I speak to him and that didn’t happen obviously.

[01:37:37] William Green: I once did this where my wife Lauren who you’ve met and I when we were first dating in our early twenties we went to Morocco and we decided to visit Paul Bowles who is this great novelist who wrote an amazing novel called The Sheltering Sky and he’d ended up living in Tangier. And for some reason, we had the cheek to go and knock on his door, but he had done the same thing with lots of famous writers in his youth, so we sort of thought it was appropriate.

[01:38:03] William Green: And I just remember him coming back, coming to the door as this kind of aggravated old man and saying, I have sciatica! And getting us to leave. And it was like the least romantic visit to a great artist, but I’ve sort of always remembered that I have sciatica. So it’s dangerous to go see your heroes, to approach them.

[01:38:21] Christopher Tsai: These experiences that when I think you’re younger are a lot more powerful than you realize at the time. Yeah. What things that happened to you, they could be negative or they can be positive. I was very interested in music. I was very interested in writing. I was also very interested in investing, but certain events happened over the next years.

[01:38:45] Christopher Tsai: That kind of reinforced the investing path 1 was coming across this value line subscription, which I still have today. I still get value line today. And at the time, like, my school library had it, so I would go to the school and I would bring it home and I go through it after class. And I just fell in love with Value Line, that was like a positive experience.

[01:39:11] William Green: And you amazingly convinced someone to give you their life savings when you were 16. Can you tell us what happened? Because the early years of your discovery of investing are kind of crazy.

[01:39:23] Christopher Tsai: Yeah, like looking back, I’m just thinking about certain things that happened. They were all very positive when it came to investing.

[01:39:31] Christopher Tsai: And so, Value line was one. I really wanted to get some hands on experience. And so there was a company called I’ll get to the raising money, but there’s a company called water house securities, which had just gone public. So I was aware of it. And they opened a branch at the Stanford mall in Connecticut.

[01:39:55] Christopher Tsai: So I applied for a job there. And I got a job. And my job was to stuff the trade confirmations in the envelopes. And the person who had that job before finished every day, like around 3 30 and I finished around noon, which meant that from noon to 4, I could just watch. And what I saw was that every day, more and more people are coming into the office.

[01:40:22] Christopher Tsai: There are quote machines. So you could sit like, it’s not so unusual now, but you can come in, you can sit and look at your quotes and people would trade. It. People trade and I would see every single morning I would get more and more confirmations to stuff into my little envelopes. And so I thought, gee, business is doing really well.

[01:40:40] Christopher Tsai: So I bought the stock. And the stock symbol was WHOO Waterhouse Securities. And it just was crazy. Went crazy. And that was another positive, formidable experience for me. Like that was very positive. And Kevin Waterhouse actually ran that branch. He was the son of Larry Waterhouse. Who sold the company to TD.

[01:41:00] Christopher Tsai: So that’s how I met Kevin Waterhouse and we became friends during that time. And then I really wanted to manage money. I thought for some reason I knew what I was doing crazy me. And so I thought I should be managing some money. But no one would give me any money. So I started just kind of knocking on doors to use a, an expression.

[01:41:22] Christopher Tsai: One of those doors was a restaurant called Lotus East in Greenwich, Connecticut on Greenwich Avenue. Lotus East was run by this wonderful guy, Johnny Chang. And Johnny knew I loved orange beef. And so I would go in after school and I would try to work or, you know, I would order orange beef from him and he would go out and he would actually buy filet mignon just for me to make orange beef, which is, I don’t know, usually made with skirt steak or something. So he would make me orange beef and when I was eating orange beef, we would talk stocks. And William, you know how like, Chinese like to gamble, right?

[01:42:00] William Green: Yeah. I used to live in Hong Kong.

[01:42:03] Christopher Tsai: So I was telling Johnny, look, you’re not going to get wealthy gambling. And of course I had already read Graham and Fisher and so forth.

[01:42:11] Christopher Tsai: So I convinced him that, you know, the way to make money is not to trade, but to buy good companies and hold on to them. So about a year later, about a year of conversation, he gave me 400, 000, which was his life savings.

[01:42:27] William Green: And you were 16, right? I mean, really?

[01:42:29] Christopher Tsai: I was 16. I was 16, so he was my first client. The 400,000, though, came with a, now that I’m thinking about it, the 400,000 came with one string attached.

[01:42:41] Christopher Tsai: And that was that I had to take his daughter to prom. She was another school. So I took her daughter to prom, and I took the 400,000. And I roughly tripled his money. So he was happy and his daughter was happy and I was happy. And so he became my first client, really. And then I knocked on other doors, I went to a hairdresser who cut my hair, he gave me like 50,000 or something.

[01:43:10] Christopher Tsai: I went to a couple other people eventually had five clients. And that was the maximum you could have in Connecticut. And I formed a company called site asset management, and I had five clients and that is all I could have under Connecticut or sec law. I don’t remember. I think it was Connecticut law and I managed that money.

[01:43:30] William Green: And your mom chipped in a million, something like that, or was that later?

[01:43:34] Christopher Tsai: No, that was later. That was later. And so now I’m at Middlebury college and so I asset management is still operating. And I have these five clients. And it was just way too much for me to do. So I gave that money back. And I focused on majoring in philosophy and international politics at Middlebury philosophy, because I read pure legend George Soros majoring philosophy.

[01:43:59] Christopher Tsai: So I said, I better give philosophy a try. And I loved it. And after graduating from Middlebury, I went to work for Bear Stearns on the sell side covering packaged food companies. But for various reasons, we can get into that if you want. But for various reasons, I decided to leave Bear Stearns very quickly and launch my business.

[01:44:17] Christopher Tsai: I went back to those five original clients. This was before I came out to my father, this was Autumn of 1997 and I went to my father to ask him for money. He said, no, I went. So I said, okay, I just called my mother asked my mother for money. She gave me 1, 000, 000 and I raised the other couple million dollars from the people that I knew in the past and a couple new people and so we launched with 3 million.

[01:44:44] William Green: Why do you think your dad didn’t want to back you in any way?

[01:44:47] Christopher Tsai: Well, that is very interesting question. I will tell you and I’ll be pretty open about this because he’s passed away, but he had a falling out over money with his first son, who he, who was with Loretta side, and he disowned him.

[01:45:06] Christopher Tsai: Unfortunately, we don’t talk today. He is a lot. We don’t talk today. I never really got to spend much time with him for whatever reason. My parents never really connected us. But he had a falling out with his first son over money and he wanted to make sure that his other two children, myself and my sister, were not handed anything and that we had to, you know, kind of do things on our own and so that’s why.

[01:45:36] William Green: I mean, in some ways, it’s an interesting situation you’re in, right? Because, I mean, I think it’s fair to say that your father was a billionaire. At least that’s how he’s been written about. He was immensely successful, important CEO, iconic investor. And so you grew up in this incredibly privileged environment, but it’s weird.

[01:45:52] William Green: So you were around very rich, very successful people. You grew up seeing people like Larry Tisch. You know, around the dinner table and the like, and yet it sort of wasn’t really handed to you on a plate. Like, I mean, you don’t have a huge amount of assets on a management. You’ve had to kind of struggle and hustle and build your own ecosystem and a network and the like, how do you feel about that in, in retrospect?

[01:46:16] William Green: Like, are you glad that it’s been a struggle? Do you sort of resent it? What like, what’s it been like?

[01:46:23] Christopher Tsai: Well, I truly have, I truly feel that happiness comes. My children asked me about happiness recently, and I said that happiness, for me at least, comes from the overcoming of struggle. It’s not like struggling, it comes from the overcoming of struggle.

[01:46:39] Christopher Tsai: And I think that, in many ways, my father did me a huge advantage by not backing me up front. And not backing me at all, basically. But on the other hand, you know, we would be probably much, much larger. And so there’s like George Bush said, two sides to a pancake, right?

[01:46:58] William Green: Yeah.

[01:46:59] Christopher Tsai: But I have been able to build the business. The really positive aspect of not having. influence from my father during those years when he wasn’t talking to me was that I was able to build the business in a way that I thought made sense for me, not only from the investment philosophy standpoint, but just kind of the structure of the business, not having this kind of huge infrastructure, but trying to manage money in a way that I think is aligned with Many of your friends and in many of my friends

[01:47:38] William Green: In some ways you get in an interesting opportunity to kind of redo your father’s life, right?

[01:47:45] William Green: Like he in many ways was an immensely successful Person but in some ways his life was kind of a disaster right in personal terms I mean he had all these divorces he had squabbles with At least a couple of his, well, I think probably at different times, he was on the outs with all three of you, if I remember correctly.

[01:48:03] William Green: I mean, he wasn’t an easy father, clearly, it’s complex, and I was wondering when you think about kind of applying this lesson of inversion from Charlie about how to have a truly successful life, how you think about it, because I remember you mentioning Charlie’s friend Peter Kaufman, who I know has also become a mentor to you, and a piece that he’d written on the seven steps of the ladder in his book, one ladder presentation.

[01:48:25] William Green: Can you talk about that, about how Peter Kaufman, who’s a brilliant guy, who is the CEO of Glen Eyre, he’s still a great thinker, how he’s helped to clarify this sense of what actually constitutes a successful life and how it has to be multifaceted, it can’t just be like your dad making an enormous amount of money, becoming kind of famous, becoming An important CEO and dealmaker. It’s the success has to be broader than that.

[01:48:52] Christopher Tsai: Well, when you’re on your deathbed, nobody asks. Nobody says to themselves. I wish I had another week at the office. They reflecting on the quality of their life, the quality of the individuals that they might be leaving behind, they’re offspring, their relationships with them.

[01:49:08] Christopher Tsai: And so that’s inversion. But you mentioned Peter’s wonderful presentation called, I think it’s called 1 ladder. And for those of your listeners who are not familiar with this presentation, he talks about life as. And so most people they go through life and they say, okay, I’m going to try to make, yeah, I’m going to, I’m going to get great grades so I can go to this school and then I’m going to make so much money.

[01:49:38] Christopher Tsai: So then I could spend more time with my family or then I might do this and then I might do that. But Peter said that, look, you need to look at your life as. 1 ladder and there’s 7 steps to the ladder, and these 7 steps are pretty much in this order, health, and then family, and friends, career, community, spirituality, and hobbies.

[01:50:04] Christopher Tsai: The most important of those 7 steps is health, because health is. Multiplicative, right? If you take health and you multiply it by zero, everything else goes to zero. Not good. So you want to focus on that as first and foremost. But I really try to hit these seven pieces of the ladder as best as that I can.

[01:50:23] Christopher Tsai: And one of the areas that I think that are only two of the areas that I think that I’m lacking. Is on the community side and on the spirituality side, William, you and I had this really wonderful, open, meaningful conversation over dinner. You will call it value X and we spoke a bit about religion and spirituality.

[01:50:46] Christopher Tsai: And I was really touched by our conversation, which seemed to just go take us through the entire dinner. I think it was a whole dinner. We were talking like nonstop. Yeah. And during this conversation, I was thinking about this, these ladders and meditation is as close as I can get to spirituality.

[01:51:04] Christopher Tsai: I wish I hadn’t had more in that area. Not sure. Sure. How to figure that out and community. But over time, I think that these are the 2 steps that I really want to work on. I can help with both of those. You’ll have to help me. You’ll have to help me on the health stuff because you know, that can help each other.

[01:51:22] William Green: Yeah, we can help each other. That’s the thing I’m really good at sacrificing. Like if I’m given a choice between, meditating and reading, you know, profound spiritual philosophical books or going on the peloton. It’s like a pretty easy choice for me. I’m going to read. I’m going to sit. I’m like a master of the sedentary.

[01:51:41] William Green: And so for me, that’s a really hard thing. And so, I mean, I think it’s very helpful for us to know that a successful and happy and abundant life is multifaceted, that’s key, because I think a lot of people, a lot of people aren’t even that aware of it, and they’re just I think also there’s a sort of s A sort of survival stage of our lives where you’re just trying to hustle to get ahead and to get a foot on the ladder and so necessarily you neglect other stuff.

[01:52:11] William Green: But I think one of the things that happens, you’re a little younger than I am, five years, six years younger than me, but I think one thing that happens in middle age is you start to sort of pause and look and think like, no, actually. I’ve achieved all of this stuff, but I’ve neglected this area, and this area, and it just feels imbalanced.

[01:52:28] William Green: And so I think you, I think that’s one of the gifts of middle age, is that if you’re lucky, you get to think a little bit more about this balance. But it’s hard when you’re raising kids as well. You have 13 year old daughters, right?

[01:52:41] Christopher Tsai: 14 now.

[01:52:41] William Green: 14. So, I mean, that’s intense, work is intense, then if you have to exercise as well and you got to be a good spouse and stuff, you know, it’s something is likely to get neglected.

[01:52:54] Christopher Tsai: Why should it be easy, right?

[01:52:56] William Green: Yeah, but at least we sort of have a sense of what it is, and so I think That Kaufman thing on the seven steps is really helpful because it gives you a map. So at least you know what you’ve got to do.

[01:53:08] Christopher Tsai: It also helps when you grow up in an environment where you see that your father is not happy.

[01:53:14] Christopher Tsai: And I think that I did see that very early. And I remember this conversation, like, we were in his limo. And maybe when I was, I’m just guessing now around, I wasn’t definitely in my teens, early teens. And we were in his limo. And we’re on driving to either a movie or a dinner because that’s pretty much all we did when I was in Manhattan with him.

[01:53:41] Christopher Tsai: And he looks at me and it’s just out of the blue. He says, you know, I just crossed 100 million of net worth. What do you think of that? And he was looking for my approval and I probably didn’t realize it at the time, but I definitely realize it now because it was out of the blue. He asked me this question.

[01:53:59] Christopher Tsai: He was looking for approval, but I knew that he was never like, he was never satisfied with where he was. Financially, right? Didn’t matter, you know, how much money he had. He wasn’t satisfied with that. And he was unhappy about that and he knew he was successful, but he also thought he was not successful.

[01:54:17] Christopher Tsai: And the reason why he thought he was not successful is because I think he, he knew that he neglected. Certain areas of his life, and he was also told when he was a child that he would never amount to anything. And I like we were talking about early childhood experiences and how they can go in different ways.

[01:54:35] Christopher Tsai: Some of his experiences were probably very unpleasant for him, but they helped drive him to financial success. But also probably a life that he wasn’t very happy about. So one example, like I give you, I can tell you that I saw, I grew up in this enormous house in Greenwich, which was owned by Rockefeller’s partners.

[01:54:55] Christopher Tsai: I think his name was Teagle. I forget his first name. Teagle was his last name. And we had these 20 foot high living room ceilings and my father had just bought a Calder sculpture. He was very, like, very, had very good eyes. With respect to art, he was very early to art as he wants to most of the growth companies that he bought.

[01:55:14] Christopher Tsai: And so he had this Calder sculpture and. He paid, you know, quite a bit of money for it. And my grandfather comes over and Says to my dad, like, what’s this hanging on the ceiling? My father said, it’s calder. And my grandfather said, well, how much did you pay? And dad says, I paid 50. And grandfather said 51.

[01:55:31] Christopher Tsai: My father said 50, 000. And grandpa turned to my grandmother and said, you see, our son doesn’t know the value of money. He bought this piece of crap for 50, 000. He’s not going to mount anything. And when he was very little, apparently, you know, as his father said, you’ll never, you can’t even tie your shoes.

[01:55:49] Christopher Tsai: You’re not going to mount anything. So those were some of his experiences that pushed him into a certain direction. So I think these like early childhood experiences are a lot more important than we give credit to.

[01:56:01] William Green: That’s interesting. And you grew up. You grew up going to galleries and the like with him and seeing him collect and then you’ve become an important art collector and I, before I let you go, I did want to ask you about Ai Wei Wei, who’s really important and has become a really important part of your life.

[01:56:17] William Green: And for people who don’t know, Christopher has been described in magazines like Forbes as the world’s foremost collector of Ai Wei Wei’s art. And Ai Wei Wei is this incredible, Chinese artist and filmmaker and activist and dissident and architect and provocateur and just kind of, kind of a genius who was born in 1957 and became famous, I think partly because he got jailed for something like 83 days around 2011 for what were called economic crimes.

[01:56:47] William Green: And he’s written these he’s made these amazing films and stuff and I wonder if you could talk to us a bit about your relationship with him because he’s been a profoundly important figure in your life over the last 20 years and it’s unusual to have got as close to a great artist as you’ve got in this case.

[01:57:06] Christopher Tsai: Well, I was very lucky to meet him actually. Should have been around 2002, roughly, within a year. I went to China with an art dealer, and I thought that Chinese contemporary art was really interesting. And it appeared to me to be also just ridiculously under followed and consequently undervalued.

[01:57:33] Christopher Tsai: So I went with an art dealer to Beijing and went to many studios to visit. Artists just, and just see their work firsthand and one of those artists was Ai Wei Wei, who was well known. He was definitely somebody the other artists looked up to, but he was not. By any means, a global figure, not the global figure that he is today.

[01:58:01] Christopher Tsai: So our relationship started very slowly. We kept in touch around 2006 or so. I wanted to build a country house in upstate New York. And realize that, you know, you got to have an architect and build a country house. So I thought, well, wouldn’t it be great if Ai Wei Wei designed it? Because I saw the studio that he designed in Beijing and really loved it.

[01:58:29] Christopher Tsai: He’s not a trained architect, but he’s an artist, right? Artists can draw and come up with ideas. So I called him up and he said, yeah. And so he designed our house upstate, which has a really interesting story, actually. And this so called Tsai Residence won a whole bunch of awards.

[01:58:49] Christopher Tsai: And when the house was done, we didn’t have any Ai Wei Wei art, so we thought that was really weird. And we decided, look, maybe we should really learn about his art, a lot more than his, what he’s done for architecture. And we just started studying and talking to him and bought our first piece, bought our second piece, and bought our third piece.

[01:59:10] Christopher Tsai: And what’s been amazing, like, working with him and talking to him and having a close relationship with him is that he’s helped to curate our collection. So, our collection of Ai Wei Wei dates back, I mean, it covers every decade. It covers his 70s, 80s. There are very few works from the 70s that even exist.

[01:59:29] Christopher Tsai: We have a bunch of them. So seventies, eighties, nineties, every decade up to now. And he’s helped curate that collection. So what are the benefits of, you know, collecting an artist that’s still alive is you can really talk with him or her about that whole process. And you know, what means what to each period.

[01:59:47] William Green: I was really curious looking at some of the artworks of his, that you’ve bought over the years. One, one of I mean, you, you have these kind of iconic jade handcuffs that he had that are, I think, a replica of the shackles he wore when he was. In detention in 2011, but one of the things that really struck me was the Coca Cola vase.

[02:00:05] William Green: Can you talk about that? Or if I were American, I would say Coca Cola vase. Tell us what that is, because it’s kind of a really interesting sort of encounter between Chinese history and culture and American global consumerism and capitalism.

[02:00:22] Christopher Tsai: Yeah, for sure. And a lot of his work plays off of that theme. He has a company, by the way, called Fake.

[02:00:28] Christopher Tsai: Or at least he did have a company called Thick, I don’t know if it exists anymore, but a lot of his work plays on this contrast between consumerism and original and, you know, what’s fake and what’s not and his work’s been influenced by Marcel Duchamp for those who don’t know Duchamp.

[02:00:47] Christopher Tsai: He arguably, he changed how people think about art by making the idea as important as the actual object. So, Duchamp really is gave birth to contemporary art in many ways. And he said that a duplicate has as much value and is as, as important as the original. And so I think that way, wait, has been extremely influenced by Duchamp and you see these ideas of consumerism and what’s real and what’s fake play out in his work from the Coca Cola vase to the, his iconic Ai Wei, the Zodiac heads.

[02:01:28] William Green: So just to explain what the Coca Cola vase is for people who can’t picture it he took like, I guess it was a Han Dynasty Chinese vase, so thousands of years old, and then paints the Coca Cola logo on it.

[02:01:39] William Green: So it’s sort of got the ultimate symbol of American capitalism and global market domination from Coca Cola, but on this beautiful historic object. And then he did it. Yeah, sorry, you go on.

[02:01:51] Christopher Tsai: Yeah. And he’s in a way he’s erasing traditional Chinese culture, the original Han dynasty vase. He’s erasing that by painting over it but he’s also commenting on the fact that China as a government has erased so much of its own history.

[02:02:10] William Green: Does seeing the world through the eyes of Ai Wei Wei make you much less willing to invest in China? Because you used to invest in China a long time ago, like a decade or so ago, when you were investing in companies like Jardine Matheson and the like, which owned Lots of stuff in Asia, like the Mandarin Hotel, the Mandarin Oriental in Hong Kong, which is a lovely hotel.

[02:02:31] William Green: But it seems like you almost did a kind of reshoring, where you came back to the US and you focus on the US. And I’m wondering if in some way, you kind of fell out of love with China, partly because of Ai Wei Wei and you saw the way he was treated, or what happened there?

[02:02:46] Christopher Tsai: They, everybody has said, William, that you do such in depth research and you’ve, you found our old investment in Jardine Matheson.

[02:02:56] Christopher Tsai: I’m super impressed because that’s not out there easily find. So, yeah, I’ve focused much more on U. S. companies and because I’ve actually been influenced by Peter Kaufman in that, in, in that regard. And so, Peter is talking, has spoken about China, he’s spoken about countries like Russia, and he’s spoken about countries like, like Singapore, and he’s compared them to America and Europe.

[02:03:23] Christopher Tsai: And one thing that he has said is that, you know, for success, for there to be real success, you need to have a system that appreciates education. Newtonian style. You got to appreciate education and you have to have respect for intellectual property. You have to have respect for physical property.

[02:03:46] Christopher Tsai: You won’t get creativity if you don’t have respect for IP and you need to be in a system where the regulation is just below the tipping point, where you would force companies and people to go elsewhere, and you have to have taxation, what people consider confiscation. And if you think about that, and you think about that way, you don’t want to be invested in China.

[02:04:13] Christopher Tsai: I mean, at least I don’t. And I’m pretty sure that Peter wouldn’t either for those reasons. And so I’ve Increasingly over the years appreciated the system in which I’ve grown up, which is America, and I increasingly appreciate the rule of law here and the transparency and the tremendous innovation that is born here as a result of respect for IP and physical property and a system that does not confiscate.

[02:04:45] Christopher Tsai: Wealth to the point where people want to flee and go somewhere else. So we’re totally focused here and that might mean that we wind up with a lower rate of return There might be more fish in the pond somewhere else. There might be bigger fish in the pond somewhere else but for me, it’s been it’s not a question of just return, right?

[02:05:05] Christopher Tsai: It’s a question of duration of return and it’s a question of not having to go back to go so we want to make sure that You And the capital that we manage for individuals capital, we manage for retirement accounts and high net worth individual accounts. Foundations, we manage money for charitable organizations that we never have to go back to go and that number 1, the preservation of capital has to be the 1st and foremost thing.

[02:05:32] Christopher Tsai: And I would rather sacrifice some alpha for investing in in a system that encompasses some of these things that Peter talks about. So we’re almost entirely focused. Well, we are entirely focused on US companies. But they’re multinational companies, right? And they have revenue and earnings look through earnings from all over the world and that’s, that suits us very well and it suits our client base well.

[02:05:57] William Green: Before I let you go. I just wanted to ask you quickly about Charlie Munger, who became a mentor of yours after you had dinner with him at his home through Peter Kaufman back in 2018 and I know you, you must’ve talked about China over the years with him.

[02:06:11] William Green: I know you talked about Costco and MasterCard and Visa and Tesla and the like. When you look back on what you’ve learned from the time that you’ve spent with Charlie, what have you really internalized that you’ve tried to make a part of your life and how you live your life?

[02:06:27] Christopher Tsai: Less activity is better than more activity, and it totally goes against our kind of, you know, You know our ancestral heritage where we were constantly on the move right looking out for the next saber tooth tiger less activity is better than more activity and that I think goes that’s applicable to life as applicable to investing.

[02:06:48] William Green: How did you see that embodied in the way he both lived and invested?

[02:06:53] Christopher Tsai: Well he’s lived in the same home for you know forever like warren he hasn’t moved around a lot. He’s stuck to very, I mean, his enjoyment of life. It was, is when it didn’t really change over the years. He enjoyed certain things like contrary to his statement that you know, why would you take money out of your wallet to buy something that alcohol right that clouds your mind.

[02:07:18] Christopher Tsai: It wasn’t exactly true. He loved red wine. Like he loved red wine. And so he would have red wine a lot, you know, and that was one of his big enjoyments and he loved law and order and he would watch law and order all the time. He would binge watch law and order. Like how does this mesh with the Charlie that is out there in the public?

[02:07:36] Christopher Tsai: It doesn’t right. But these were like these simple pleasures. didn’t change. And to me, I have certain simple pleasures that don’t change. And we talked about them in exercise meditation. I love great food. But beyond that, you know, I’ve stuck to pretty simple things. And I think that’s important.

[02:07:57] Christopher Tsai: And so less is more less activity is more. That’s how you want to think about your life. That’s how you want to think about investing. That’s at least what I’ve taken away from him. And it might not be the right lessons, but that’s what I got.

[02:08:11] William Green: No, it’s profound and thought provoking. I also remembered when you wrote I guess it was your last shareholder letter, probably when you mentioned his legacy, and you use you talked about some of the things you had discussed, like him saying.

[02:08:24] William Green: You know, it’s the nature of the world for the large to get larger. So there were these business lessons. And then you said, but what I remember most was how kind and gracious he was to me. I thought that was really interesting.

[02:08:35] Christopher Tsai: Yeah, for sure. And he reminded me in many ways of Fred Rogers. I mean, Warren did not speak very highly of the momentum investors.

[02:08:45] Christopher Tsai: I think there’s a partnership letter in which he criticizes not by name my father, but he does criticize. Fidelity or no, he criticizes probably Manhattan fund. He criticizes the two frets who are running momentum funds at the time. I believe it’s in one of his partnership letters. And I presume that Charlie had a very negative view of that group of investors as well, at least their style, maybe not the people, but at least the investing style.

[02:09:13] Christopher Tsai: And so then when I first met Charlie, I said, I’m Christopher sigh, and he knew I was coming. But there are a couple of people who came to his team. Dinner that I was invited to and so I introduced myself. I said, I’m Christopher Tsai and he said, are you Gerry Tsai’s son? I said, yes, and he could have said anything, right?

[02:09:33] Christopher Tsai: He could have said anything, but he didn’t. And he treated me as a separate individual and asked me what my approach was to investing. What I’m interested in the companies that I own in the portfolio. He didn’t talk about my father. And that is what I’m referencing in the shareholder letter that you just mentioned.

[02:09:55] Christopher Tsai: How gracious and kind he was to me. I did not say that in the shareholder letter, but that’s why I wrote that because I specifically remember how kind he was to me. He could have gone in many other directions, but he treated me as an individual, my own person.

[02:10:11] William Green: That’s beautiful. That’s a lovely note on which to end because it’s interesting.

[02:10:14] William Green: I think that when we think of Charlie, we tend to think of. You know, the searing intellect and the grouchiness and the curmudgeonly wisecracks and stuff, and I, when I wrote about him in Rich or Wise or Happier, the thing that really struck me was this very profound sense that I was in the presence of an extraordinarily generous kind person and he had all when I saw him when I was writing that chapter I traveled to California and there are all these people who came to the Daily Journal meeting and I interviewed him briefly before the meeting and then I stayed on after the meeting and He just kept answering question after question is this old guy’s body is just falling apart and I’m at that point is probably answer questions like four hours and at one point there was a sort of gap in the conversation he said something like you’ll be okay you guys you’ll be fine you know it’s a challenge will be you’ll be fine or something like that.

[02:11:09] William Green: And you felt like he actually just wanted to impart more to make them feel like they were going to be okay and to teach them, you know, give hand on any wisdom they could, any encouragement. And I just sort of thought watching it, I was like, oh, that’s love, like these disciples, these weird disciples like me have come from around the world to see him.

[02:11:30] William Green: And far from him being the crotchety curmudgeon, he’s actually treating them with love. And it was very moving to me. I, and then I helped him off the stage, you know, cause he was sort of, so immobile at that point, and he had this enormous kind of cane, I guess, that looked more like a club, and I remember [Crosstalk]

[02:11:47] Christopher Tsai: When was that, William?

[02:11:48] William Green: This must have been 2014, I suspect, and so, mid 2015, so, I may be getting the dates wrong. But I it’s been quite a while, maybe 2017, I can check, but I helped him down off the stage, and I just, you know, When I ended that chapter, I think I wrote something like, you know, today I’ve been in, I realized today I’ve been in the presence of greatness, and it wasn’t because of the searing intellect, actually, although there was a searing intellect and like this unstoppable brain that could rove over anything and offer these Brilliant instant insights drawn from history. It was actually it was the kindness and it’s so it feels like you tapped into the same thing. You were sensitive to the same thing.

[02:12:33] Christopher Tsai: You definitely impressed upon me that characteristic, like it was like I said, he could have gone in different directions and I was truly grateful how to how he treated me then and afterward.

[02:12:46] William Green: Yeah, is there any final thing you’d like to say before I finally release you and let you go?

[02:12:52] Christopher Tsai: This has just been amazing. It’s, it feels like a continuation in many ways of the conversation that we had at Value X at Guy’s wonderful conference, and it just feels very open. Like it’s an open conversation and I love those kinds of conversations. So thank you so much for spending all the time and doing all this research and digging up our old holding on Jardine and probing into my life a little bit and helping me kind of think about, conjure up some of my memories. It’s really been nice.

[02:13:29] William Green: It’s been lovely for me and I really appreciate it. I really appreciate how open and sharing you’ve been and sharing all these rich insights and stories. It’s been great.

[02:13:38] Christopher Tsai: And I hope that maybe a 1 percent of this interview will be helpful to your listeners because I know that pretty much everybody on your podcast is smarter than I am. Not everybody. So, hopefully 1 percent of this will be helpful to your listeners.

[02:13:54] William Green: You know, if we’re getting [Crosstalk]

[02:13:55] Christopher Tsai: Then I’ll consider it a success.

[02:13:57] William Green: If we’re getting 1 percent wiser per interview, it’s a pretty good compounding effect. So that would be a high goal. All right.

[02:14:04] Christopher Tsai: Thanks William.

[02:14:05] William Green: Thank you so much. It’s been a real delight.

[02:14:08] William Green: Alright folks, I hope you enjoyed this conversation with Christopher Tsai as much as I did. As far as I’m concerned, anyone who discusses Marcel Proust, Mr. Rogers, and Charlie Munger in one conversation is definitely my sort of person. If you’d like to learn more from Christopher, it’s worth checking out his website,, which includes his investor letters and also a couple of very interesting white papers that he’s written.

[02:14:33] William Green: One of them is titled Investing in an Age of Disruption. The other is titled The Power and Challenges of Compounding. I’ll include links to both of these papers in the show notes for this episode.

[02:14:45] William Green: I’ll be back very soon with some more terrific guests, including an interview with a renowned investor named Bob Robotti. In the meantime, please feel free to follow me on X @WilliamGreen72, and as always, do let me know how you’re enjoying the podcast. It’s always good to hear from you. Until next time, stay well and take good care of yourself.

[02:15:06] William Green: And while you’re at it, don’t forget Mr. Rogers advice about those three ways to achieve the ultimate success. As he put it, the first way is to be kind, the second way is to be kind, and the third way is to be kind. Of course, as Charlie Munger said about investing, it’s simple, not easy. Anyway, thanks for listening. See you again soon.

[02:15:28] Outro: Thank you for listening to TIP. Make sure to follow Richer, Wiser, Happier on your favorite podcast app and never miss out on episodes. 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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