16 March 2024

In this episode, William Green chats with renowned hedge fund manager Guy Spier, who has run the Aquamarine Fund since 1997. This conversation has been split into two episodes. Here, in Part 1, Guy discusses the art of compounding wealth over decades, drawing on lessons he’s learned from Warren Buffett, downhill ski racers, & his own mistakes. This is an unusually candid conversation between William & Guy—old friends who collaborated on Guy’s classic book, “The Education of a Value Investor.”

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  • Why it’s so intense for Guy Spier & William Green to collaborate.
  • How telling the truth changed Guy’s life.
  • Why the Global Financial Crisis terrified him.
  • Why it’s hard to invest rationally in the real world of chaos & confusion.
  • How Guy deals with his emotions when making investment decisions.
  • Why his default position is to hold his stocks indefinitely & resist meddling.
  • Why he didn’t sell his stake in Alibaba.
  • Why he’s pleased with & disappointed by his investment returns.
  • How excessive risk destroyed a fund manager he once knew.
  • What Guy learned from investing in a company that went bankrupt.
  • Why his mission is long-term compounding without catastrophe.
  • What the fastest skiers can teach us about success & survival.
  • What we can learn from Warren Buffett about financial resilience.


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

[00:00:03] William Green: Hi there. Welcome back to The Richer, Wiser, Happier Podcast. I’m your host, William Green, recording this on the first wonderfully warm and sunny day of the year here in New York. It’s a special pleasure to bring you today’s guest, Guy Spier, a well-known hedge fund manager who runs the Aquamarine Fund.

[00:00:20] William Green: This was a particularly memorable conversation for me because we recorded it in person at Guy’s beautiful house in the heart of Klosters, which is a gorgeous ski resort in the Swiss Alps. We were sitting together beside a log fire in his living room, looking out on the mountains covered in snow. Guy is one of my closest friends and I just spent a week with him, so what you’re listening to here is an unusually personal and candid conversation between two friends who know each other incredibly well and have built up a great deal of trust over many years.

[00:00:55] William Green: A decade ago, I helped Guy to write his memoir, The Education of a Value Investor, during an intense period when I more or less lived with him and his family for several months at their home in Zürich. I also edit Guy’s annual report every year, and I’ve been an investor in his fund for something like 23 years.

[00:01:15] William Green: Guy launched the Aquamarine Fund back in 1997. By the end of February 2024, the fund had returned a total of 932 percent. To put that in context, this means that he’s beaten the S&P 500 Index by 157 percentage points, and the MSCI Global Index by 396 percentage points over the last 26 years or so. That record puts Guy in a tiny minority of fund managers who have outperformed the market over more than a quarter of a century.

[00:01:49] William Green: It also means that 1 million invested in the Aquamarine Fund back when Guy launched it has now grown into more than 10 million. Which gives you a very tangible sense of just how lucrative it is to continue compounding at a solid rate of return over many years. As you’ll hear in this conversation, what’s distinctive about Guy’s investment approach is this emphasis on sustainable compounding over decades.

[00:02:16] William Green: He’s not trying to shoot the lights out by taking huge risks, which could lead to disaster. In many ways, he’s the absolute opposite of a high rolling gambler at the casino. Instead, he wants to be sure that he and his investors survive and thrive no matter what, even in an incredibly unpredictable and uncertain world where anything can happen.

[00:02:39] William Green: To achieve this goal, he draws on survival skills that he’s developed by studying everyone from Warren Buffett to downhill ski racers, who can teach us invaluable lessons about managing risk and avoiding catastrophe, so that we actually make it to the finish line. One reason why Guy has this relatively conservative, risk averse mindset is that over 40 percent of the money in his fund belongs to his family, so he has an enormous amount of skin in the game.

[00:03:08] William Green: In any case, this focus on resilient, long term wealth creation makes him an ideal person for us to study if you’re interested not only in getting rich but staying rich. One thing I should mention is that this is a long, wide ranging conversation, so I’ve broken it into two episodes, both of which are being published today.

[00:03:30] William Green: What you’re about to hear is part one. I hope you’ll also enjoy listening to part two, which is full of valuable insights about how to build a truly rich and meaningful life. Thanks so much for joining us.

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[00:03:47] 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.

[00:04:07] William Green: Hi folks. Welcome to the Richer, Wiser, Happier Podcast. I’m here with my very old friend, Guy Spier, in the living room of his home in Klosters in Switzerland. Guy, thank you so much for letting us do this here.

[00:04:20] Guy Spier: It’s a pleasure to be here, William and when you said very old friend, I was thinking of the double meaning since it’s a long time, and also getting on in years.

[00:04:29] William Green: Both. We’ve known each other since we were at college more than 30 years ago but I think we became close friends more than quarter of a century ago. And actually, I wanted to start by asking you about this, the experience of actually spending this kind of intense time together in Switzerland, because we started doing this when we were working on your book, The Education of a Value Investor, when we basically holed up in your house in Zürich for many weeks on end, which is an incredibly intense experience.

[00:04:56] William Green: I was living with you basically for a while, more recently, the last couple of years, we’ve been meeting here in Klosters, I came in a week ago from New York, flew into Zürich, stayed with you there, and then we came here to Klosters, and we basically stayed with each other for the last five days, until finally I thought it was too much for you, and I moved into a hotel to give you some space.

[00:05:16] William Green: Can you talk about why we do this and what the experience is like? Because it’s so intense, and I don’t think most people are aware of what we’re even doing when we spend a week together, basically just talking.

[00:05:28] Guy Spier: Well, I think that what I’d start off by saying, William, is that I don’t…speaking for myself, is that I don’t think I was aware of what we were doing.

[00:05:37] Guy Spier: And so, you know, to tell the story, so there’s a movie with Patrick Swayze, I think, where he becomes, he dies early on in the movie, and in order to communicate with his girlfriend, he gets into, he uses a medium. And so why am I saying that? Because I’d finished, thought I’d finished my book, and I got in touch with William and said, William, I don’t know what you’re up to, but you edited this short thing that I did for time on the lunch with Buffett, and I’m about to submit this manuscript, and that is going to be me in the public eye, and I would just be grateful. Do you remember, I remember I said, any amount of time that you’re willing to spend on it, even five minutes, I know it will make it better.

[00:06:24] Guy Spier: And then by some miracle, and for me, my experiences of it is that sometimes I’d like to say that God is smiling at me, and for some reason you showed up not just for five minutes, but for three months. And the reason why I bring up that movie, whose name maybe you can help me to remember, which should it be, I think it’s maybe Ghost, is that what William did for me is what that medium does for Patrick Swayze in the movie, in that she sort of, William gave over his whole brain to rewrite chapters most of the book as if he was me.

[00:06:59] Guy Spier: And I’ve never seen somebody so intensely give over in a way, their own brain, such that William would go and rewrite a chapter of the book and he would come back the next morning, he’d go gray before he rewrote. Then he’d come back the next morning, we’d do a read through, and I’d say I don’t understand William.

[00:07:19] Guy Spier: Like I, I feel like you’ve, I feel like I know that you wrote those words, but actually. I feel like they’re mine. And there was this very interesting thing where, I don’t remember, you said, you know, Guy, it’s, you know, it’s both of us. So, what began there was kind of a very powerful, I’m going to use words I don’t really understand what they mean.

[00:07:37] Guy Spier: Psychologists would know what they mean. Transference, countertransference. The word that comes to my mind is mirror neurons, where there’s, William developed in his mind a very powerful model. You developed in your mind a very powerful model of who I am, and you kind of lived it for three months. I feel like for three months, there wasn’t much space for William Green.

[00:07:59] Guy Spier: In fact, the only space for William Green was, you would leave on the weekends to go visit your son at school in the UK. So that was the experience of writing the book. And I reiterate to people, they say, my gosh, Guy, you’re such a good writer. And I say, look, everything that’s in there is Guy Spier. But it was shaped and formed into something that is so palatable to the reader by somebody who’s an extraordinary, has extraordinary skills at doing that.

[00:08:24] Guy Spier: But that’s just as a backdrop to come back to this week. And William started editing my letters to investors and again, I felt it was the same experience as writing the letter, the writing the book. And we had, we already had that experience with us. And the previous few years, we’ve done it over Zoom.

[00:08:44] Guy Spier: I mean, you were living in the U. S. and for one reason or another, we managed to organize that William would come during ValueX and we would do it here. So, the first year that we did it, to come to your point, is that after about three days together, I came out of it and I was utterly exhausted and, in a way, it was more intense than writing the book.

[00:09:03] Guy Spier: And William was doing more than helping me with the letter. William was actually coaching me in life and, you know, where I was allocating my time and how I wanted to communicate to investors, but also how I wanted to communicate to myself and my family. And so I was exhausted by that experience because you can imagine it as being three days writing, three days psychotherapy, three days study, three days friendship with like all sorts of varying emotions all the way through.

[00:09:31] Guy Spier: But it’s only after the first time that we did it that I realized, William, that you were also exhausted.

[00:09:37] William Green: Yeah.

[00:09:38] Guy Spier: And so, it was just William and me for most of the time, and intense, sort of interactions on multiple levels of communication so that when something is said there’s actually three different things happening at the same time.

[00:09:53] Guy Spier: There’s what’s happening in the physical world or the tangible things that we’re discussing, but there’s also other things that going on below the surface. And yeah, I mean, I don’t think, yeah, very intense communication. I really, from my perspective, William, you can have your own opinion. I don’t think I can fully understand all the communication that is taking place there and I would say exhilarating and exhausting at the same time.

[00:10:17] William Green: No, it’s an extraordinarily intense experience and I’ve said this before that I think the thing that got me excited when we were working on the book a decade or so ago was that when I was first coming to see you, it was kind of a job. It was like, okay, I’m going to help Guy with his annual report with his book.

[00:10:34] William Green: And then after a day or so, I realized. Oh, Guy’s actually trying to tell the truth and he’s trying to get at something really honest. And really, you said to me at one point, you were very excited one day when we were talking in your dining room and we went into the kitchen and you were making one of about a thousand cappuccinos that we drank during that period when I only put on about 20 pounds, probably.

[00:10:58] William Green: And you said very intensely, I don’t care if this book ruins my reputation. I just want to give an honest accounting of myself. And that was when I got excited because I thought, oh, well, if we’re actually doing something that’s honest, that’s actually a search for truth. That’s a whole different register that we’re attempting to connect with.

[00:11:21] William Green: And that got really exciting for me. So then We had these extraordinary experiences, for example, where we’d be talking about the financial crisis, and I would read what you had written in your first draft, and you’d be sort of talking about how you had made these wise decisions when the markets were falling apart, and how it’s kind of obvious that these things were incredibly cheap, and you bought them, and then everything rebranded, and you made a fortune after the financial crisis.

[00:11:45] William Green: And because we’ve been friends for so long, and because I’ve been invested in your fund for something like 23 years, I knew what it had been like at the time, so I said to you, Guy, I remember calling you in the middle of the financial crisis and saying, how are you doing? And you said to me, we’re bleeding from every orifice, and I remember the intensity of that.

[00:12:07] William Green: And so I think sometimes people think that if you’re working with a collaborator on a book, you know, they’ll call it a ghostwriter. They think that in some way it’s shallow and superficial and less meaningful. It’s not really the person writing the book, that the subject isn’t writing it, that there’s something somehow fraudulent.

[00:12:23] William Green: I actually think it became more and more authentic because you wanted to find out something you were pursuing the truth, and I could kind of hold your feet to the fire and be like no, Guy, it wasn’t like that at all, and then suddenly you started to reveal stuff that I think you hadn’t been able even to remember because it was so painful that you’d suppressed it.

[00:12:45] Guy Spier: It’s a really fascinating phenomenon, actually, if I, and you’re kind of allowing, creating the space to see that. So if I can trace what I saw there was that first of all, so it begins for me with the autobiography of Mahatma Gandhi. And you know, the subtitle there is the story of my experimentations with the truth and a book that we’ve been talking about a lot recently, a book called Power Vs Force by David Hawkins.

[00:13:09] Guy Spier: And for some reason, I discovered in myself the courage. to want to write the truth. But then, and it’s interesting to me that so David Hawkins talks about when people speak truly honestly, people go strong. So what I’m hearing you say is that you went strong when you read the first few chapters, but then, so because I trusted you, because you’d taken sort of like my screed, my scrivenings, over the Buffett launch, and you turned it into really a thing of great beauty for time, I mean, I remember calling you up at the time and saying, Wow, William, you’ve made me sound so smart and so eloquent.

[00:13:46] Guy Spier: I’m blown away. So I trusted you and I think that there must have been something else coming back because I remember exactly where I was sitting and it’s this wooden dining table in Zürich where we were doing a read through of the financial crisis chapter and you it didn’t explode but you, you harumphed in indignation and it’s like you’ve totally flubbed that chapter Guy.

[00:14:08] Guy Spier: You, I remember you called me up and you said, or I called you up and you said, we’re bleeding from every orifice. So, up to that moment, I had no recollection of me saying that, and I remember feeling slightly uncomfortable. I wanted to protest and say, I didn’t want you to be doing what you were doing.

[00:14:27] Guy Spier: But at the same time, at that moment or around that moment, I started realizing that I had said that to you. And now I think I can recollect where I was when I said that to you. And then I wanted to resist. I was like no, stop. We’re not writing about this. They’re like, we’re not writing about this way.

[00:14:44] Guy Spier: William, you’re doing a great job but I held onto it somehow you were gentle enough with me and I was trusting enough of you because effectively what I’d done already previously and I was doing with you was I was entrusting you with my reputation and I’d given you a baby and as best as I could have done and then I knew that you would I was trusting your kind of like both professionalism and friendship to continue with the project of honesty.

[00:15:15] Guy Spier: But at the same time, not making me look like a complete and utter fool, an idiot. And so there was a transition, where I grudgingly, it was difficult for me, but I knew I had to continue with what I’d started. In a way you seems to me that you had the courage, And the willingness to go to kind of like a scary place because we didn’t know where it would go.

[00:15:36] Guy Spier: And that was, you know, again, there’s this feeling. And so I’m calling up the editor of the book, Laurie Harting, and I’m saying, Laurie, I know you’re waiting for the manuscript, but there’s really important stuff that’s happening here and it’s making it so much better. But, yeah, so, so that is just like, for me, a kind of a microcosm of something very powerful that took place there, which is kind of like miraculous because I could not have expected that to happen and I didn’t know at that moment what the outcome would be.

[00:16:04] William Green: What’s that quote you often quote from Jordan Peterson about if you, it’s something like if you want to have an adventure, try telling the truth.

[00:16:12] Guy Spier: Correct. That’s exactly right. And it’s just such, it struck me when he said that and it’s so true and it’s so scary to tell the truth.

[00:16:20] Guy Spier: So scary because you don’t know where it will go. And my experience has been that whenever you do tell the truth, God smiles. So, you know, my experiences as somebody who is not very good with time, I hate the fact that I’m not very good with time and sometimes speak to my wife about it. And I just, it’s an aspect of my brain that I’m unable to plan time properly.

[00:16:42] Guy Spier: So I often end up late somewhere because I just didn’t budget the half an hour that I needed to get there and thought somewhere in the back of my mind, I could get there in 10 minutes. So with this power versus force telling, being honest, I learned that, you know, rather than say, oh, there was traffic, I missed the train was cancelled, something I say, I am so sorry, I’m 15 minutes late, I have a terrible issue with time, I really thought I could leave 10 minutes beforehand, I should have left at, half an hour beforehand.

[00:17:13] Guy Spier: And that makes people go strong. They kind of understand. So even in the most simple things, and suddenly they’re like, wow, this Guy’s being real with me. Now I’ll be real with him. So my life, when I started telling the truth, and I know where I was again, when I decided that I’d write that first chapter of Belly of the Beast, which scared the living daylights out of me and in a sense, since then, life has been an extraordinary adventure.

[00:17:37] William Green: One very interesting thing that I remember coming out of our discussions. about the financial crisis was as we deepen the discussion because you wanted to tell the truth about it and you were open to letting me kind of cut into the vein there, we started to discuss the moment where Bear Stearns looked like it might go under.

[00:17:59] William Green: And the money in your fund was if I’ll get the details wrong, but it was basically you, even though legally you would have been fined, you might’ve got caught up for many years, all of the money in your fund being sort of stuck somehow in bad stands. And I started to ask you about what the experience was, like where you were sitting at the weekend when you were watching to see whether it would be rescued and how excited you were when Jamie Dimon decided to step in and how I think you told me you sent him a Christmas card to thank him.

[00:18:30] William Green: And we started to talk about your father, who was the biggest, was and still is the biggest investor in the fund, and it became clear in our discussions that there was a certain point where he could have pulled the plug. And just said, no, I can’t take this anymore and I want to take my money out of the market.

[00:18:48] William Green: Everything’s going to hell. And you realized as we were having this discussion that your father, who in a very interesting and complex past and among other things, been someone who dismantled bombs, had this extraordinary temperament and stood strong at a moment where he might have, where most people in his situation would have been much more vulnerable to, to panic and fear.

[00:19:17] William Green: And I think. You then went to your father and kind of told him how grateful you were, in a sense, like, in a way, it deepened your relationship with your father and your appreciation of your father. Does, am I getting that right?

[00:19:30] Guy Spier: Yeah, absolutely. I mean, so just briefly on Bear Stearns and then to move on to my father.

[00:19:36] Guy Spier: So all of the assets were [Inaudible] which is at the time was a brokerage firm, very well-known and storied brokerage firm run by a guy called Ace Greenberg who at the time that this financial crisis happened, apparently was playing bridge with one of his directors. Which is kind of shocking, but in the event of a bankruptcy of a brokerage firm, then the client assets should be secure, but any reasonable judge I could have imagined would have frozen everything to make sure that they’re actually client assets, you know, there’s a priority that is established according to law, and it might have taken, I mean, I know people who had Trades going on through Lehman Brothers during the financial crisis, where the money that they, it was caught up in Lehman Brothers for a period of years until they got paid out, which it was just an annoyance if it was a relatively small trade, but it’s when it’s 100 percent of your assets, and I just remember calling my father up and saying, you know, I am going into the office both days this weekend, and I’m super scared that this may be bankrupt on Monday morning, and if that’s the case, I would have to start researching legal firms that are experts in the bankruptcies of brokerage firms to represent us.

[00:20:55] Guy Spier: And so it was 5 p.m. when that call came through. So my experience of my father, who’s, yes, he was a sapper at one point in the Israeli military and did other things as well. But so, so, and I think that there’s some wisdom that we can all get out of this. So my father was the type who 30 years ago, before I did discovered Warren Buffett, before I had learned anything about investing, who thought that the way you make money in the market is you trade.

[00:21:25] Guy Spier: So you buy and sell, you buy low, sell high, buy low, sell high, and the idea of investing in a good business and holding it for a long period of time was something that would have been anathema to my father, and that’s not I was good at mathematics and was a decent financial analyst if you like, my father’s incredible in relationships, but In a sense, my father didn’t need to understand that.

[00:21:48] Guy Spier: He basically just, when I came to my father saying, the proverbial has hit the fan, and this is a very difficult situation, and my father didn’t try and focus on, he first of all gave me the domain of, I understand that in principle my son understands what he’s doing, and he’s run into a roadblock, he’s run into difficulties, and went straight into, The emotional side of leadership, if you like.

[00:22:15] Guy Spier: And so he did two things. One is, and I think this is true, probably in all crisis situations is you only make it worse by losing confidence in the person who’s in the driver’s seat. You have to give the person in the driver’s seat the opportunity to see what they need to see, take the decisions that they need to take and not make them feel like they’re about to be removed from the driver’s seat.

[00:22:41] Guy Spier: And effectively, he did that without really understanding the consequences or the outcome. So his focus was on, I need to empower, in this case, my son, my partner, the Guy who’s managing my capital, to be aware of all the important information and to make, the most important decisions that he needs to make and he knows he needs to know that I’ve got his back.

[00:23:03] Guy Spier: But interestingly enough, we were talking before about forgiveness and judgment and it’s occupying a place where it’s not saying everything you do is going to be fine. Don’t worry. I’ve got your back. It’s like we’re in a grave situation and you’re in the driver’s seat and I’ve got your back to help you to make the most important decisions.

[00:23:24] Guy Spier: But there’s the element of judgment. It’s not just like, I’ll forgive you whatever you decide to do, and I’ve come to him on multiple occasions, I mean, most recently with a medical issue, and again, he’s, it’s incredible, because he might be at the gym playing tennis, but there’s a tone in my voice, and I know that he’s responsive to other people like that as well, where he knows that this is important, and he goes to that very special place, and In a sense, that’s leadership, it seems to me.

[00:23:50] Guy Spier: It’s extraordinary leadership and thank you for giving me the opportunity to thank my father again here for being that kind of partner. And I think that just to close that thought, I think that what’s really important is, I mean, you know, Warren and Charlie say to find a good partner, be a good partner, but also realize that the nature of exactly what the person contributes can be incredibly subtle.

[00:24:13] Guy Spier: And it doesn’t have to be the full range of everything that’s required. It might be just in a particular emotional slice or maybe another slice of the whatever difficulties and reality one is dealing with. So thank you for giving me the opportunity to talk about that.

[00:24:28] William Green: I think also one reason why it’s been fascinating for me to be behind the scenes watching you go through experiences like that with the financial crisis or with COVID or with family issues, all of this stuff is that, It’s allowed me to see as a, partly as a writer about investing that there’s the theory, right?

[00:24:48] William Green: There are all these principles about this is what works in investing. This is how you do it. And then once you get in the mud and you actually see what it’s like, there are all of these forces, all this turbulence that makes it incredibly difficult to be rational. And so one of the things that’s been a privilege for me is that I would see when you were having struggles in your own life or when the market was really hitting you.

[00:25:15] William Green: And you had these core principles, but it was actually incredibly hard to apply them. And so there was this sort of gap between the cold, logical, rational theory that we’ve all learned from people like Buffett and Munger, and the reality, which is that it’s a human. in a really murky situation, subject to lots of stress, lots of emotion, trying desperately to figure out what to do in the midst of chaos, rather than when we look back logically and we look back at the financial crisis and we’re like, of course, those things were incredibly cheap.

[00:25:47] William Green: When we look back at COVID, and we’re like, well, of course those things were incredibly cheap early in 2020, but when you’re actually living it and you’re there, it’s so intense. And I think that’s what I’ve tried to convey in writing about this stuff is that it’s like, no, this, these things are really hard because we’re humans in vulnerable, turbulent, unknowable situations.

[00:26:09] Guy Spier: Yeah and, you know, you were saying trying to decide what to do and over and above that, sometimes the best thing to do is to do nothing, but the nature of what’s happened in the financial markets, what’s going on in our minds, maybe conversations with clients or analysts is that whereas in many periods, the ability to say in this case, I do nothing, suddenly that there’s this voice screaming at you saying, do something, you idiot.

[00:26:34] Guy Spier: And actually, maybe one should do something, in which case, which course of action is it? And maybe actually one should ignore the voice completely. One of the things that comes up for me as you talk about that, and this is just my experience, and we need to say that I think that one of the things that one learns if one has the opportunity to be an apprentice, around a great mind of investing and I’m thinking of Tracy Britt and the time that she got to spend around Warren Buffett and Kiewit Plaza is to see the micro development of emotions or reactions to something that is unfolding and something that strikes me, makes me go weak in a David Hawkins sense when these great investors are described as being unemotional because everything I know about emotion is that human emotions are the key to decision making period.

[00:27:26] Guy Spier: We don’t take decisions. That’s the kind of part of the decision making mechanism. So to say that somebody like Warren Buffett is, say, unemotional in response to market trauma, I think that what I want to say is, no, he has a particular way of dealing with the decision making apparatus, which includes emotion.

[00:27:46] Guy Spier: I think that to say unemotional or emotional is far too rough a way of describing it or too, we need to get far more precise in that, that in between emotional and unemotional, there’s an enormous universe. Of different kinds of micro reactions to different things, and it’s actually learning that in the middle.

[00:28:07] Guy Spier: And so when I think of Tracy Britt, or I actually was, we talked a little bit about Chris Hohn, who in a way apprenticed with, I think his name is Richard Perry Partners, something that I feel like I would have liked to have experienced is There’s something that happens at Berkshire Hathaway, some important event, I don’t know, you know, the COVID and now precision cast parts as business is really awful.

[00:28:32] Guy Spier: The ability to witness Warren in his micro emotions, how he responds to that, for example, or on a trading desk even for say, I imagine Chris Hahn seeing Richard Perry’s response to a piece of negative news. It’s not about emotional or unemotional. Those are the two extremes. How are you reacting in a subtle way? What are your decisions relative to the information that’s coming in?

[00:28:55] Guy Spier: So, I think it’s very nuanced. I’ve thought a lot about this question of how emotional or unemotional the great investors are and there’s a big range. Obviously, Bill Miller said to me at one point, I think on the podcast, He said, look, I’m very emotional in certain ways.

[00:29:13] Guy Spier: He said, when I listen to music, I’ll cry and Rick Rieder said to me recently, this is the Guy who manages 2.6 trillion at BlackRock, said to me, he can’t go to this particular college day celebration when these schools that he helps to fund, the kids discover what colleges they’ve got into, because he said he’ll just weep and he embarrasses himself.

[00:29:37] Guy Spier: And yet when it comes to their investments, they’re remarkably rational in certain ways, and I think Bill Miller, for example, there is an element of him being a kind of probability machine when it comes to looking at companies and thinking, okay, well, the stock has plunged. It’s cheaper now. And so there’s something in his brain and in his wiring that allows him to make very rational, probabilistic decisions about money.

[00:30:03] Guy Spier: While also, when he got in trouble during the financial crisis and a hundred people had to be laid off from his firm because of, as he put it to me, a mistake that he made, analytically, he said he found that heartbreaking. It was deeply emotional. So I think it’s a really nuanced thing, this question of how emotional or unemotional they are.

[00:30:23] Guy Spier: And I’ll give you some nuance that I don’t think I’ve, it’s been clear in my mind until you were speaking just now that I think is true of me. So I think that I can describe. three different kinds of circumstances where my decision making apparatus works differently. So I think that my decision making, rational decision making, works the very best when I’m looking at an idea that it’s reasonably clear that nobody else is looking at.

[00:30:47] Guy Spier: They’ve kind of discarded it and if we look at these kind of investments in, we’ve talked about Alaska Milk or Weetabix, it was just there, nobody was looking at it. By contrast, if and they were cheap and not noticed. We can then vote something that is cheap but is controversial and I’ve a number of times and the name of the company is not coming into my mind right now where Bill Ackman would get involved in something that was super controversial. Hubble Life would have been one.

[00:31:17] William Green: Yeah, or Valiant.

[00:31:18] Guy Spier: Yeah, and there was one previously which sold insurance, kind of like a subscription insurance for legal fees. Prepaid legal was the company. And those some. very serious debate over whether they were accounting for these long term contracts appropriately.

[00:31:33] Guy Spier: And Bill Ackman took up one view and market took another view and I found it very hard because of the controversy and because the very strong views being represented in the media and elsewhere to have clarity in my own mind, or I think that I could have… I could not separate the emotion coming from the market and the fears over whether this was being correctly represented or not, and the analysis that seemed correct to me.

[00:32:01] Guy Spier: So you can have you know, an undiscovered idea, non-controversial, and I’m confident in the analysis. A similar idea, but because it’s controversial because there’s been an accounting misstatement or something where I don’t trust my own decision making anymore. And I would look at somebody like Bill Ackman and say, I wonder if he’s right or if he’s just being, you know, sort of like braggadocious.

[00:32:26] Guy Spier: And then you can go to a third area where I think the decision making apparatus kind of changes again. So I think that, and we were talking about it, how I’ll own a position that has gone up multiple times. And now, you know, the simple way to put it is I’ve fallen in love with the position. In a way, I’m not being rational about the likelihood that this thing is going to double and triple again from where it’s gotten to after having already gone up four or five times.

[00:32:53] Guy Spier: And so I think that it’s not just that it’s subtle, it’s like the modes by which we operate change depending on the circumstances. And I think that to be the best possible investor I can be, given my endowment of what I have, is I really need to learn to understand that internal landscape as well as possible, so I can now tell myself, And help myself in conversations with you and people in my office, remind me when this thing is, you know, remind me that, you know, I have a tendency to fall in love, perhaps a little too much and lose that amount of rationality.

[00:33:26] Guy Spier: I think I’m, I think it’s sensible for me when it’s a controversy. So give those, there are probably more than three different types, you know, as I learn more about myself, I probably maybe have five or six, but. Up to now, it becomes easier for me to say, look, it’s controversial. I think this is analysis is right.

[00:33:44] Guy Spier: But I just don’t like being involved in controversial situations. It’s not my area. It’s not something that I do well with emotionally. It’s kind of like an intelligent thing to do. Of course, I can’t do that when something’s gone up five or six times. So it’s, I guess to bring this idea to a close, the navigating the emotions in between emotional and unemotional is a complex landscape and just bring it back to Bill Miller.

[00:34:08] Guy Spier: When my sense of him is that when it’s pure financial analysis, He’s fine. And the markets, you know, you’re issuing buying and sell orders, which are kind of, impersonal as well, but the minute it impacts people that he has a personal relationship with, that’s extraordinarily hard. Understandably so.

[00:34:27] William Green: I feel like one of the things that, that you’ve done to manage your own particular wiring and emotional landscape is that you tend just to make fewer decisions. And so there’ll be an entire year where I come to edit your annual report and I say, so did you buy anything last year? And you’re like, no, did you sell anything last year? No. And that’s happened so many times, like in a way, your default almost partly because you understand the importance of compounding and not meddling.

[00:34:55] William Green: And partly because you’re suspicious of your own emotions. I think you tend. You tend just to leave things in place. Is that fair to say?

[00:35:05] Guy Spier: Yeah, but I just, you know, I want you to know, I think you do know and I’m is that it’s, that’s not with a self-confidence this is the right thing to do.

[00:35:13] Guy Spier: I’m questioning myself all the time. Are you just being, are you being sensible by not moving the portfolio around too much, or are you hiding behind that idea because you’re afraid of making a decision or because you’re lazy, you know, and trying to understand, am I being lazy or am I being smart by being inactive?

[00:35:32] Guy Spier: And of course that depends on where the portfolio goes. So I’ve experienced. All the range of something going up multiple times, and being glad that I left it alone, selling half a position, and then it going up multiple times after that, and being angry at myself, something going up multiple times, not doing anything, so all of those things happen, so I’m questioning the whole time.

[00:35:52] Guy Spier: But in my case, the evidence shows that the more you meddle, the less your returns are. So I think that I’m right, even though I continue to question it, that the clarity that I ought to have before I make a move on the portfolio ought to be enormous. It should be, you know, you shouldn’t make a decision because it’s 51, 49. You need to wait till it gets to 80 20, if you like. but you know, I’m questioning myself as I do it because I think I actually would say, William, so, I would say that in my case, so, so there’s all sorts of ways in the environment which the environment changes. And so we talked a lot about this move to Zürich and I’ve kind of figured out, yes, the city in which you live and the particular circumstances, the office and how you get to work.

[00:36:37] Guy Spier: That’s really important but actually, even more profound, the relationships within which that office sits. So in my case, I had no choice, but my work environment went through a profound transition from being unregulated to regulated and the simple thing that happens when you get regulated is you have a lot more eyes on you as they should be. One of the responses to the financial crisis was we did not, we were not looking closely enough at what all sorts of different actors were doing. And so therefore we don’t care that Mr. Guy Spier doesn’t short, doesn’t leverage.

[00:37:10] Guy Spier: We want to have eyes on him and everybody else who has more than a certain amount of assets and so, and what I realize more clearly now talking to you is that, you know, the work of getting regulated is not just, you know, getting the appropriate mechanisms in place. It’s structuring those mechanisms such that they interface into the investment decision making process.

[00:37:31] Guy Spier: And that is an ongoing thing that we have discussions with on a daily basis, which is kind of. Making sure that the regulatory oversight that we’re required to have fits with the investing style, and I think that there’s been an adjustment for me, and I think that ultimately what it did was it put quite a lot of friction in front of any particular portfolio move, probably a little too much friction.

[00:37:54] Guy Spier: So that friction from the regulatory side, plus my natural desire to do nothing, probably reduced the portfolio movement more than it should have, and it’s an adjustment, and I’m making that adjustment.

[00:38:05] William Green: Just to clarify for our listeners, an example of this would be that now, because Guy is regulated by the Swiss authorities, if he makes a trade in the portfolio, he has to actually basically justify the trade, more or less in writing, I think, with a colleague of his.

[00:38:25] William Green: And so it acts as a kind of circuit breaker. So when Guy was thinking recently of you know, should I sell some of my smaller positions to free up cash to make a new investment? He had to actually go through this process of justifying what he was going to do. And it provides this circuit breaker that made you, I think this was in the case of Alibaba, right? Tell us what happened once you actually started to look at it and say, well, do I really want to sell it?

[00:38:48] Guy Spier: So the basic principle, regulatory principle is we want a record of why you made these decisions. And it’s a very, it’s almost like, I think that the benefit of doing that is that it’s like, you know, many investors talk about keeping a diary, personal diary or a personal journal.

[00:39:04] Guy Spier: And this is kind of like an official journal, if you like, of what happened. and why did you do it? And we see that this move was made in the portfolio, made this decision. Is there any kind of like backup for this? So in my case I wrote my pre trade check for actually we’ve modified it. I don’t have to write it.

[00:39:22] Guy Spier: I just have to record it and then we can use, you know, alter or similar to transcribe it and gets edited lightly. And we have a written record and there’s a mark on a piece of paper that shows that. So I’d done the pre trade check for the thing that I wanted to buy. And I kind of said, look, we’re going to make this like three or 4 percent position.

[00:39:39] Guy Spier: And we’re going to sell these things to do it, these smaller positions. And the CFO came back to me and he said, look. The buy side is fine, but we need a little bit more. So then I said, okay, fine. I’ll write it up. And I looked more closely at these smaller positions and I said, wait a second, I don’t want to sell this cheap, it’s like there’s no, I’m, so we went back instead of buying a 4 percent position, we bought, I believe a 2 percent position and the balance is still to be bought.

[00:40:07] Guy Spier: So yes, it acts as a kind of a check for mindless decisions, if you like. Now, there is an argument for saying that if it’s such a small proportion of the portfolio, just clear it out. But at least then, I would have to make that case. Yes, they’re cheap, but there is a cost to us to monitoring these positions, and there’s a mental energy that we’re in, we’re investing that we no longer want to invest in them.

[00:40:29] Guy Spier: But he stopped me and I believe that was the right thing to do at that, or in a sense, he wasn’t stopping me. He was saying, that’s fine, but I need to know why. So, and of course it’s delicate because somebody can say, damn it, I just want to do it. Or isn’t it obvious why? And on the other side you know, if somebody, I mean, William and I think I’ve figured out mainly through therapy sessions with Laurie, my wife, that if you’re getting agitated, then the first thing we do when we get agitated is we want to think it’s somebody else doing something to us.

[00:41:03] Guy Spier: And they probably are doing something to us, but that’s not the point. The point is what we’re doing to ourselves. And so if I would have gotten agitated at that response, that in itself would have been something to pay attention to. I didn’t get agitated. I was like, yeah, he’s got a good point. And oh my God, check that out.

[00:41:18] Guy Spier: No, I don’t want to do that right now. So he’s just saying, give me your reasons and make sure that the reasons are on paper. It also, for what it’s worth, from a governance standpoint, means that there are multiple eyes on these pre trade checks or this investment, official investment journal.

[00:41:34] Guy Spier: that also allows, for example, other staff in the office to say, yeah, this is going the way it ought to be going, or, my gosh, there’s something really weird going on here, I need to put some phone calls in to our directors to say, this, you know, he’s lost his marbles, so to speak, so. It’s a new world for me, I’ve been learning to live in that world, and it’s been interesting for me to learn what I needed to become but also the people around me have come to trust me, it took about it’s a slow process.

[00:42:01] William Green: There’s a beautiful line that I often, it sounds really pretentious, I often quoted it to my kids, Henry and Madeline, from Nietzsche, where he talked about how the genius dances within chains. I always talked about it in, in terms of literature, that it’s kind of helpful to have certain rules and constraints, whether it’s a poet with certain types of meter or whatever, you think of Shakespeare having to write with iambic pentameters, where it’s like di dum, di dum, di dum, di dum, and yet somehow you can write amazing things within that rhyme scheme.

[00:42:31] William Green: And there’s something about being regulated by the Swiss. that it’s chains, right? I mean, and yet somehow you can make it work for you by saying, well, actually it’s kind of helpful to have a circuit breaker that forces me in writing or in a dictation to explain why I would sell this position.

[00:42:55] Guy Spier: Yeah. There’s so… I’m not… I don’t consider myself a creative guy, but it seems to me the case that actually, funnily enough, William, with Cece, that you introduced me to, every time, I have so much fun doing these holiday cards.

[00:43:08] William Green: C is a wonderful art director, who was a great art director at the time, who I worked with for years, and has been doing lots of design stuff for Guy, including the cover of the Educational Value Investor.

[00:43:18] Guy Spier: Yeah, exactly, and sorry for not explaining.

[00:43:22] Guy Spier: And with the holiday cards, every time what makes the holiday card, and I have so much fun with her, is that we have some powerful constraint. So that prevents us from doing what we’d originally thought. And then it’s in the work of going around that constraint that a really fun card comes out.

[00:43:38] Guy Spier: So this idea of, and iambic Pentameter, how strange that actually having those constraints forces you to become the best version of yourself perhaps. And yeah, so that I guess that’s true. of the regulatory work, what I wanted to say is that, you know, there, look, what is it? It’s one, a few times, many times, this last few days, William, you’ve used the phrase, it’s one damned relatedness after another, and the world is complicated.

[00:44:07] Guy Spier: So, I used to love sort of like the distributed office. So, you know, we had a member of our staff in New York. We had a member of our staff in the BVI, but in responding to the new constraints, for example, from regulatory constraints, working out new systems. Far better to be in one office because you want to have intense and regular conversations about how to make it work.

[00:44:29] Guy Spier: And if you’re in a different time zone and you’re doing it over the phone, your kind of don’t have enough opportunity to figure out that system. And so, I think the regulatory constraints, those constraints provide the opportunity for outperformance or excelling in a certain way. Once you’ve kind of grasped them, you’ve engaged with them, and you’re developing a rational response to them.

[00:44:50] Guy Spier: At the same time, I feel like in the past, developing that response was made more difficult by the fact that we didn’t have a full office day with all of the staff who were, and what I came to, it’s just coming to something very practical, which was that needs to be worked out in one office, not in a distributed team.

[00:45:08] Guy Spier: And I’ve become very leery eyed of people who say that they can work effectively in a distributed team across sort of multiple time zones and large geographies. I think there’s an enormous benefit to being in one place and when you’re all in one place, your structures can evolve to changing circumstances, and when you’re all distributed, they kind of become ossified.

[00:45:30] Guy Spier: Especially people not at the center don’t realize that the environment is changing, and the way the team works needs to adapt, so. I know that’s not a question that you posed to me, but I came up for me and it was important for me to say it. And now you get to, William’s looking at me in such a way, you’re looking at me in such a way that goes, okay, now creeping it, but you’ve traveled off the reservation.

[00:45:50] William Green: What’s funny is Guy and I are both so unlinear that I, you know, I started this interview with about six or seven pages of questions and I immediately veered entirely into a totally different direction. [Crossover]

[00:46:02] Guy Spier: Oh, so you did it. So that’s fine.

[00:46:04] William Green: There’s something wonderfully characteristic of Guy and my conversations where we’ll literally talk for two days without having covered the thing that we meant to cover and then we’ll feel guilty and we’ll come back to the main theme. So I did want to ask you about a very important topic that has been a really central part of our conversations over the last week, which is…

[00:46:23] Guy Spier: This, by the way, is William bringing us back on track, and I just want you to know that I had various ways in which I could have taken it off track. I’m resisting mightily because they’re so interesting but go ahead.

[00:46:32] William Green: So far, you’re resisting. So a topic that’s very central and important, I think to a lot of our listeners and viewers is this whole game of long term compounding. In Aquamarine, your fund, is a really interesting embodiment and illustration of this issue. So you set it up in September 1997. So this is a little over 26 years ago.

[00:46:56] William Green: Over that period, you’ve averaged almost exactly 9 percent a year. This is through the end of 2023, exactly 9 percent a year. The S&P I think was, let me check. It was 8.3 percent annualized. The MSCI was 7.1%. So cumulatively, the fund has returned 874%, so it’s about 157 percentage points ahead of the S&P, 371 percentage points ahead of the MSCI.

[00:47:24] William Green: So in some ways, it’s a beautiful illustration of the power of long term compounding. Like, we were calculating this the other day and we figured out that a million dollars invested at the start of that journey 26 years ago is now 9.4 million, right? So in some ways, it’s an incredible example of the power of long term compounding.

[00:47:45] William Green: And yet there’s also something deeply disappointing to you about it because you look back and you think, you know, when I started my career 26 years ago and was influenced by Buffett, I thought I was going to make 15 percent a year, 20 percent a year. And here you are at 9 percent a year. And in some ways, It’s a morality tale about disappointment, and in some ways it’s a morality tale about the incredible power of long term compounding.

[00:48:11] William Green: Can you talk about how you’ve been thinking about this whole issue of the power of compounding, the power of good enough returns? There’s so much to discuss here. What does this bring up for you?

[00:48:22] Guy Spier: So, the first thing that I can say is that I think that the world that I used as I was making notes for before you came, William, is bittersweet.

[00:48:31] Guy Spier: So it’s sweet because it’s compounding and it’s bitter because it’s not the number that I set out to achieve and it doesn’t feed my ego in a great way. And I would say that the same way that we were talking about the financial crisis chapter. I probably approached it in a defensive way anyway, because that’s the nature of the human ego, but I trusted, trust William enough to kind of bring that to you, and in a certain way, I’d say that this conversation, being willing to share it, Is an act of tell the truth, because you’ll have a great adventure in life, something like that.

[00:49:05] Guy Spier: If you want to live a meaningful life, certainly tell the truth. And I’m brought back to a question that was asked to me by a very smart Google engineer at the talk that I gave at the invitation of Saurabh Madan. where he said something along the lines of, and he probably kind of interrupted, he put his hand up in the first five minutes and he kind of said something like, how do you know you’re so good?

[00:49:27] Guy Spier: You seem to have beaten the market up to now, but maybe that’s just luck. And again, I had to be honest and say, well, we don’t know. And I don’t know. And so there’s all sorts of questions that I have about that. One possibility is that I’m an average investor who was lucky enough in the first few years to outperform the market, or I may be below average investor who was lucky enough to outperform the market for a while, has underperformed the market for a while, and actually if we could look into the Eyes of the Almighty, he will reveal that over the course of the fullness of time, I wasn’t a great investor, or was a great investor.

[00:50:04] Guy Spier: I don’t know what the reality is. I wish I did. And so I have to operate within that uncertainty. And over above that, within that uncertainty, I have to structure my own decisions and the decisions of the fund in such a way that given that I don’t know what I really am like as an investor and over above that, I don’t know how reality will unfold.

[00:50:28] Guy Spier: I want to position myself in this kind of a personal decision such that no matter which one of those things is true, I will come out in a good way on the other side. And so, you know, we could do a sort of matrix of many different possibilities in one I’m actually, so there’s also, referring back to a book of our friend Ken Schubenstein’s, I believe you edited, you can have a good decision making process in a specific, say, investment idea and get a bad result.

[00:51:01] Guy Spier: Because the world unfolded in a different way. And that doesn’t mean that your process was wrong. That just means that you’ve got a bad result. By contrast, you can have a terrible decision making process in a particular investment, make the decisions for all the wrong reasons and end up with a spectacular result.

[00:51:17] Guy Spier: And the idea that we have is somebody running with a match through a bomb factory. You might get through on the other side, but it might’ve exploded. So I need to structure my decision making in such a way. That given that huge, so, so I could be a good investor and the environment was not good for me. I could be a bad investor and the environment was not good for me as multiple different options.

[00:51:40] Guy Spier: I need to take all of those into account and all of the uncertainty about how the world unfolds. And make decisions such that on the other side, there’s a good life and a happy life. And, you know, we were talking, I was talking yesterday to this Guy who’s here at ValueX, who I think has got a wonderful book, Luca Dellanna, on Ergodicity, and we can ask the question, if you have the ambitions as a young person to be a movie star, you know, so you’re focused on, I don’t know, Natalie Portman or some other, Gwyneth Paltrow has had this super successful career, but you don’t see all the people who started off, who didn’t have that super successful career, who were equally good actors and actresses, equally hardworking, equally talented, equally faced for cinema, Because the world is an extraordinarily random place.

[00:52:34] Guy Spier: So the question becomes, if you’re a person starting off in life, do you want to take the lottery ticket, the one in 10, 000 or one in a million that you become Gwyneth Paltrow, whoever else it is, are you also willing to live with all of the other outcomes that you might have? And I think that, you know, as long as you’re happy, if you don’t get that starring role and have that lucky thing that you get that career that you’re dreaming of, you’re also okay if it works out in a pretty boring way.

[00:53:03] Guy Spier: You end up being a waitress your whole life or whatever else it is, then that’s fine. But when I look at running Aquamarine Fund and looking at the financial affairs of myself, my family, our investors, an outcome where in some cases of the world, it’s spectacular, but in other cases of the world, I blow up meaning, you know, and the kind of person, and there are stories like this, of somebody that I know from the beginning of my career, who put all of his investors assets into one stock, the stock was called MCF, and levered, with the expectation that the price of gas would go from 2, from 4 to 8 to 12, except it went from 4 to 2, and he’s no longer running a fund.

[00:53:47] Guy Spier: That’s not an acceptable outcome for me. All of that, because you feel like, and I’m going to bring this back to your original question, I believe, is to say that I don’t, you know, so, so you don’t want in the investing world, I believe to say, I’m going to act in my portfolio in such a way that I can get my 18 percent annualized over the next 20 years and be super successful when in reality, some proportion of the realities that may unfold that turns into a great big zero, a la putting all of your investments in one stock and leveraging it.

[00:54:23] Guy Spier: And so the strategies that get all of the potential outcomes to a decent result mean that you’re far more likely, say, to get 9 percent rather than 12, 15, 20%. And so the sweet part of the bitterness is that. Survival is everything. Survival of the principle of compounding is everything. That is the most important thing, not the actual annualized rate of return.

[00:54:47] Guy Spier: And yeah, if all other things being equal, I can double the rate of return or increase it by two or three percent, then that’s fine, but they’re not equal. And so I’m constantly saying to myself, and sometimes I look at it and it’s not a clear picture. So I can go back and I’ll hand the mic back to you in a second.

[00:55:06] Guy Spier: I can go back into, so I had a bankruptcy embarrassingly enough in my portfolio in 2015. That was me acting with a certain proportion of the portfolio, about 10 percent of it in a way that was not very smart. It was a bit like running with the lighted match through a bomb factory and it didn’t work out for me.

[00:55:24] Guy Spier: And that’s not the vast majority of the portfolio in my case, but every now and then I look at some positions that may be that they’re great businesses, but they’re very highly valued. And I asked myself, am I actually doing a little bit of, you know, constructing the portfolio in such a way that it only works out great in certain versions of the world?

[00:55:42] Guy Spier: And we want it to work out at least okay in all versions of the world. I think I’m kind of mincing my words a little bit, but I think I’ve made the point probably too much.

[00:55:52] William Green: No, we’re getting at something that’s really profoundly important and I’ve been struggling to digest and synthesize this myself over the last few days because I think it’s vastly important.

[00:56:02] William Green: This idea, you know, so many people set up the horse race of investing where it’s about, okay, I’m going to get these great returns and I’m going to beat the market. And for most of us, That’s not really that important. Really what we want is to get to a position where we’re financially secure, financially independent.

[00:56:21] William Green: It doesn’t truly matter whether you beat the market by 150 points over the last 26 years. or 300 percentage points or 20 percentage points, or if you trail, so long as it’s like a really positive result that’s getting us toward the finish line. And so I feel like what you’ve been working towards is this much greater clarity about the importance of compounding without catastrophe long term companion without catastrophe. And I think one of the reasons you’re so clear about this as a goal is that from the very start, a huge portion of the money in the funds, and it was a tiny fund at the beginning, it was like a 20 million fund, right? With 14 million from your dad, so it was his 14 million started with, right.

[00:57:05] William Green: And so it was like your dad’s. All of the money that your dad had made in his entire career as an entrepreneur, basically, plus a few friends of his who were lawyers and stuff in Switzerland, who might not have been invested in the market at all. Friends, family and fools. Yeah, and I was one of the first investors, like a little bit after that, probably a couple of years after that, in around 1999.

[00:57:27] William Green: And so having done no due diligence except had a few meals with you over the years, so this priority of simply surviving, of getting to a good end point and compounding and staying in the market was hugely important to you and I don’t think this is something that most people think about. And it strikes me that just avoiding catastrophe and staying in the market, staying in the game, continuing to compound at a decent rate, a good enough rate, it’s underestimated.

[00:57:57] William Green: But then at the same time, there’s a danger that it’s underestimated. Money managers end up changing the game that they’re playing, saying that’s the game they were playing just because they failed at the game without performing.

[00:58:08] Guy Spier: They wanted to play. I mean, what comes up for me and is an analogy that was so helpful for me and it’s funny because we happen to be at a ski resort and this is straight from Luca Dellana’s book.

[00:58:20] Guy Spier: So he asked, so, you know, the name of the game, we’re in the business of skiing and being the most successful skier for the season. And obviously there are good skiers and we’re now going to take the perspective of an individual skier who wants to win the season. And there are 10 races, and you know, as the skier, he can ski, this is a downhill race, he can ski as fast as he possibly can, and there’s a higher risk of crashing and injuring himself, and he can ski slower than his top speed, and he takes a higher risk of not winning that individual race, but he reduces the risk that he gets injured and get taken out of the race, and I’m not going to go through the probabilities, but I think that we can all see in the rush and the excitement of the day and the pressures that the skier feels, there’s a tendency to want to push the speed so you can win the race.

[00:59:16] Guy Spier: And the skier may, doing that, win races one, two, three, four, and five, but he’s taking a cumulative risk there of injury. And as Luca puts it in the book, the skier that wins the race is not the fastest skier. It’s the fastest skier that doesn’t get injured, but the individual, and you’ve got an audience, and there it’s super exciting to see the Guy skiing super-fast, and it’s even more exciting in a way if you get a massive accident, but from the perspective of the skier, if he can just step back and say, my goal is to survive 10 races then he may ski differently, and so I think that this beautifully illustrates what we’re trying to do as investors, and The pressure to try and win the individual race is just enormous.

[01:00:02] Guy Spier: And this, by the way is kind of like a rule for life in all sorts of things where what is short term expedient, what feels like optimal in the day, is not optimal for the week, the year, and many years. So, and just to take it to an investing example, there I am at the Waldorf Astoria and White Mountains Insurance is giving a presentation, and Jack Byrne is the CEO, and Berkshire Hathaway has funded White Mountains Insurance to buy a distressed insurance company, which is probably at half or less of book value.

[01:00:39] Guy Spier: And now while the whole thing is still trading at less than half of book value, White Mountains Insurance is doing an equity issuance and Jack Byrne, who’s redossed and domiciled this company to Bermuda, is standing there in Bermuda shorts and I’m there as a young whippersnapper after the presentation for the issuance and wants to ask him a question.

[01:00:59] Guy Spier: I say, but Jack, it’s trading at such a discount. This share issuance is dilutive. We will make so much more money if you don’t do this share issuance. Why are you doing it? And he basically, he looked at me with these kind eyes and, you know, I mean, I’m just a nothing to him and just like total focus on me.

[01:01:18] Guy Spier: And he says, this, yes, if the world works out perfectly, we would have left money on the table, but if the world works out really badly, doing this equity issuance ensures that the company will survive and do just fine. And I want you to know, Guy, that this issuance has the blessing of our friend in Omaha, Warren Buffett.

[01:01:39] Guy Spier: And it’s just an example of, you know, Warren saying, don’t race as fast as you can, the name of the game is to finish the season, don’t take the risk by not issuing equity that you might not finish the season, let’s issue the equity, yes, we’re going to be going a bit slower, but we will definitely finish the season, no matter how the world unfolds.

[01:02:01] Guy Spier: So that’s an example of that. And I would just tell you that as I say it, I think of the decision that I made to stick around in Horsehead, which ended up as a bankruptcy. And in that case, the equivalent analogy in White Mountains is that I didn’t do the equity issuance because I wanted to make as much money as I possibly can.

[01:02:21] Guy Spier: And so that the desire to do that, even with a part of the portfolio, is very high, and what I learned from that moment, and from reading Luca Dallanna, and, you know, understanding his skiing analogy, and seeing the decision that Warren Buffett made, is that almost in all circumstances, don’t do that, you know, and it came up at the most recent Berkshire Hathaway meeting, I don’t know who I was talking to, but somebody who’s pretty close to the decision making in Kiewit Plaza, And they said you cannot imagine how much of Warren, how much time Warren spends just thinking about the downside.

[01:02:56] William Green: This came up in my conversation with Chris Davis who had, who’s now on the board of Berkshire, and if you want to check this, there’s a fascinating part of the recent podcast that I did with Chris. where I asked him what it was like to be in a board meeting with Buffett and Munger and he was saying you wouldn’t believe how much time Buffett spends talking about the most extreme circumstances that he’s guarding the portfolio against, making sure that the company would be okay in the event of you know, nuclear attacks, financial crises you know, Dirty Bombs whatever it might be.

[01:03:31] William Green: I thought that was a really interesting insight that, that, that focus on resilience. But what’s interesting is Buffett has this ability, both to set things up to be incredibly resilient, and then to make these incredibly bold, racy bets on things like American Express, where he put a huge, so he’s one of those rare creatures who can kind of do both.

[01:03:53] William Green: But I don’t think I don’t think almost anyone else can, right, take that sort of intense, Joe Greenblatt did the same thing.

[01:04:01] Guy Spier: It’s true. I think also Warren did it at a different point in his life. I don’t think he’d do that now, even if he could, he probably can’t now anyway, because it’s just fascinating because in Warren’s case, 40 percent of his portfolio in American Express and you know, salad oil scandal and in a way of controversial situation, I talked about that sort of controversial, I don’t like, there was controversy around it.

[01:04:22] Guy Spier: I mean, in a way American Express’s name was dirt and the ability to say actually yes in financial circuits or circles perhaps, but as a consumer brand, it’s absolutely fine and it will succeed and survive. And he actually, what he told. I’m going to get the details wrong, but he kind of said to American Express, look, it doesn’t really matter who’s at fault here.

[01:04:42] Guy Spier: Just pay them out, get this behind you and you’ll do fine. Even if you weren’t at fault at all here, you just want to get this behind you because your business will be great and you can afford to do the payout. Yeah, I mean, I’m not that smart. I’m not that able to do that kind of thing. It seems to me.

[01:04:58] Guy Spier: I also don’t know to what extent, I mean, just rewinding slightly the way in which one gets started. So in my case, if I could have, I’m very grateful to be doing what I’m doing. I’m extraordinarily grateful to my father. I’m grateful that he made the decisions that he did. If I wanted to be, if I could like have my past again, I think that I would have liked to have seen how things would have unfolded if my father had, instead of dumping the whole of his liquid net worth into me, had said, look, I’m going to dribble it out X amount at a time, that my liquid net worth, the vast majority of it is extremely safe, and you can have oversight over that, and you’re going to work on growing a small chunk of it at a high rate, and I will add over time as we get more confident in it.

[01:05:45] Guy Spier: So I would have, I think I would have been more willing to take bigger bets at the time. And what happened with me is, I mean, I was given, it was 14 million from these three different investor accounts that came in. And like, like 50 percent of it was in bonds for like five years. So I was so super scared.

[01:06:03] Guy Spier: And when I went and bought my first stock for the portfolio, Duff Feltz, Even my father was disappointed by how little I put into it, but out of 14 million, actually, I put about two quarter of a million into Duff Phelps and made seven times my money, you know, instead of putting, say, a million in and making seven times my money, which is, by the way, all in the track record, it’s like, I’ve not varnished that in any way, shape or form.

[01:06:26] Guy Spier: There’s nothing that’s been taken out. Some people might have said, oh, but let’s remove the cash and just see the performance of the equities. I didn’t do any of that.

[01:06:34] William Green: All right, folks. Thanks so much for listening to part one of my conversation with Guy Spier. If you enjoyed it, then please do check out part two, which is available now wherever you listen to the podcast.

[01:06:45] William Green: In part two, Guy explains what kind of misguided, self-defeating behavior can prevent you from compounding wealth over the long run. And he specifically explains what common mistakes he consciously avoids and what kind of companies he avoids too. We also talk about building strong relationships with family and friends as a key to success in investing in life.

[01:07:06] William Green: We chat about how to engage with people whose beliefs and perspectives conflict with our own. And we talk about why it’s helpful to shine a light on our own weaknesses, instead of hiding them. We also talk about the role that money does or doesn’t play in constructing a truly rich and abundant life.

[01:07:22] William Green: And we chat about some great books that have hopefully helped to make us a little bit wiser. If you’d like to learn more from Guy, check out the show notes for this episode and for part two, which include an array of helpful resources, including links to several previous conversations that we’ve had both on my podcast and on Guy’s podcast.

[01:07:42] William Green: In the meantime, please feel free to follow me on Twitter, or X, @WilliamGreen72, and as always, please do let me know how you’re enjoying the podcast. I’m always really delighted to hear from you. For now, take good care, and stay well, and don’t forget to listen to Part 2. Cheers!

[01:08:00] 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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