Warren Buffett

“Warren Buffett has the absolutely wonderful benefit that he has permanent capital, and it completely changes what he can do because he has permanent capital than any other investor can do who does not have permanent capital.”

“He has bought companies on a contract on a single sheet of paper. And yet this kind of handshake charitable wager ultimately was like a 25 page legal contract.”

“If the fund to fund fees had been zero, you still would have lost.”

“At the time, the S&P 500 was trading near its historical high on a Shiller P.E. Basis, P.E. Basis, whatever you want. Simple metrics, but the S&P was expensive.”

“I would make the bet again, over and over and over again, enough times so that the odds played out.”

“If you can make the case credibly that you don't have to sell someone's business, you become a more favorable buyer. So if someone has bought, I'm sorry, built their own company over the years, and they're nearing retirement age, and they want to sell their ba…”

“In the subsequent few years, he always put the results up, which he still does, right before lunch. And he would say, well, as you see, as you can see, I'm losing, so let's go to lunch.”

“In 2008, the market, the S&P was down 37%. The hedge funds after Lehman, it was a big difference before and after, but after Lehman had a tough time, but were down, I don't remember the number, maybe it was 24%. This was the group of fund-to-funds.”

“I thought Warren was the patsy at the poker table, because he threw out the S&P as the index. I thought that was the wrong index to be picking, and it was something that was going to be an easy hurdle to overcome.”

“And there's one closing point I'd make that's an undercurrent of the bet, which is we all talk about and focus about how great the S&P five hundred's been. But what we actually did with the money, the collateral of the bet, outperformed the S&P 500 by a mile. …”

“For all intents and purposes, it is, because it'd be very difficult for, unless there's a market crash, for the hedge funds to come back”

“And the first time I went after the bet, it was much more of a cartoon show. And I think in the last couple of years, it circled back to kind of a balance between really fun entertainment and substance about the company.”

“So I wrote him a letter, like, you know, figure, write an old fashioned guy, an old fashioned letter. I'd never met him before. I made the letter, I think, cutesy enough that I thought he would respond. And I had heard that he was just legendary in how he resp…”

“I think if you gave him a million bucks today, in 15 or 20 years, he'd be a billionaire again. But he probably wouldn't do it in the stock market.”

“For myself, for my wife, for my sons and for my grandchildren, it's all indexed with one exception and the one exception, which you and I both know is Warren Buffett. I lucked into understanding Berkshire Hathaway way back in the seventies, and I'm not about t…”

“He goes, a young, charismatic, putatively smart guy like you should be able to get into railroads. You'll be CEO of Burlington Northern within 15 years and watch Warren Buffett will buy it.”

“Cause it's not enough to find a 50 cent dollar bill, Warren realized, if the dollar value didn't grow. Because to recognize that discount, you'd had to somehow close it, and your internal rate of return depended entirely on how quickly that happened. And so if…”

“That whole notion of price increasing for a brand that had, in the perception of the consumer, no adequate substitute, which delivered price inelastic demand, allowing Warren to raise prices each year to show growth in operating income, and hence the growth in…”

“He doesn't feel That he has as strong a way of quickly assessing the caliber of the management in foreign markets as he does in the U.S.”

“You know, if I could have one thing to do over, I would have realized that I should have hedged the currencies in Asia when current accounts went above five percent.”

“And I've always thought that Warren Buffett is not a great investor. He's a, he's an above average good investor. He's good on the asset side. He's the world record holder. He's the absolute best borrower in the world. And had sort of a unique model, and that'…”

“He put like a third of the endowment into TV stations. And he did it on a highly levered basis, so they put in, like, five million dollars of equity to make a seventy million dollar investment, and it was like a ten-bagger.”

“The smartest of the smart guys say that volatility is not risk. And I strongly, strongly disagree. Because if you're, what you're really trying to do is achieve your goals in life, and the more volatile an investment is, Makes it more likely that you're going …”

“So as a defensive move, we bought some Berkshire Hathaway. And candidly, it's worked out beautifully. But what I wish has gone up 300 times from where we bought it. What I wish, obviously, is we bought more. That's probably the biggest mistake I've ever made.”

“You know, as Warren always says, the goal is to know what's important and knowable, and by channeling the conversation to what's most important and what's most knowable, I think the strikeout ratio at Berkshire is way lower than any other company because they'…”

“And if you compound from that moment till today, I think the compound is about eight percent. Embedded, you can check that number. What year and what year was that? Between 99 to today, and then if you go back to 65, I think that's when he first starts to repo…”

“Warren insisted over the years that companies had to compete for the business, that the internal crutch of a natural demand to Clayton homes for the Acme bricks threatened over time to lead to less than market tested outcomes because each of them knew that the…”

“And then on specific risks, he consults with Warren, the best risk adjuster in the world. And together, you have this ability not to swing for endless pitches, endless countless pitches they don't swing. But when they do swing, it's the big fat one. And so it'…”

“I think there's already still a departure discount, so I think the markets already carries with it the secret that Warren is 88 years old.”

“They had an interesting phantom stock arrangement. They created a phantom share. Called a share of my tech within the company. And Warren referred at one point an annual report that had gone up a thousand times.”

“American Express is part of the portfolio, and Borsheim's had, and Nebraska Furniture Market had MasterCard, and Visa, no American Express, because obviously each of them said, the premium's just not worth it for us, and Warren never insisted that they migrate…”

“It was family controlled, and so the ability to invest for the very longest term, and in their case, they sort of let the ball drop, and of course, that's the risk with moving from Warren's early comments about making sure you have a Interested agent managing …”

“If you get a sense That there's a wholesale rejiggering of the lines of reporting, or that people have to fire 10% of all their staff, or any kind of change that impinges upon that promise, it'll vastly diminish the value of Berkshire going forward.”

“Anybody who reinvests on your behalf is your agent, and it's really hard to succeed in business if your agent is self-interested rather than has your interest at heart. And so that was a really important insight is that you need something that can grow, and th…”

“The government only gives you one advantage As an investor, and that's the non-taxation of unrealized gains, and so you better do something about that”

“They don't have any reporting responsibilities outside of Warren, in some ways. They don't meet with committees. They don't have to describe why it is that they like Amazon to people who may not have the capacity to even understand the essential value that the…”

“The first time I think I was there for five hours, you know, went to his office.”

“He sits in a seat where he has a big pile of cash, and he's looking to find attractive businesses to buy, so he has, for decades now, reiterated a message of the types of businesses he wants to buy for people, so that He can get sort of inbound inquiries. And …”

“Warren is not going to come on the show. I, I've asked him twice. And the second time it was, he really walked me through the why, which was very, very interesting. So he's getting a little on in his years. He's very focused on this time. And what he said was …”

“You think about guys like Warren Buffett, you know, one of the advantages is he's constantly has flowed. He always has money coming in the door and That really helps for you to be able to behave in a way that counters this pro cyclicality.”

“Buffett tends to like what I call the unnatural monopolies, right? So he's an owner of Moody's. That only exists because it was an act of Congress which created the NRSRO designation, and it's easier to raise an armed militia in the U.S. Than it is to start a …”

“So he didn't have a robust thesis. He was just plying it, you know, to hope to make the point that fees, you know, in hedge fund world are expensive.”

“I assumed that no matter what, the bet and having lost the bet to Warren would be sort of part of my public legacy, and I wasn't gonna be able to do anything about that. I was not expecting that doing a podcast would Broaden, you know, people's at least knowle…”

“I think that it's probably fifty-fifty if you had a good hedge fund portfolio versus the market for the next 10 years, but I would never make what I thought was a fifty-fifty bet in public with Warren Buffett.”

“So I came out of it saying, you know, I actually still don't think it was a bad bet at the time. There was one outcome. It ended up being a bad outcome.”

“When we started the bet, My partners and I had said we thought we had, I don't remember what the number was, an 80 or 85% chance of winning, and you said you had a 60% chance of winning.”

“I have always thought that index funds are a terrific tool for most investors. And I say most because most investors do not know why they might be beating the market. And you have this wonderful opportunity to just join the market. And pay next to nothing for …”

“Buffett mentioned years ago at a Berkshire Hathaway meeting that he has owned 500 stocks over the course of his investing career. And in percentage terms, he has made most of his money on 10 of them.”

“95% of that came after his 65th birthday. I think he's 89 years old right now. 95% of that amount came after his 65th birthday. 98% of his wealth came after his 50th birthday.”

“We know with just the simple arithmetic, he's done what he's been able to do because he's been investing for 75 years. That's it. That's 99% of the explanation. So the only book describing Buffett's success, if you want to emulate that success, is the title of…”

“Let's say that Buffett, instead of starting to invest when he was 11, let's say he started investing when he was 25, like a normal person. You graduate college, you get some money. He started when he was 25. And then let's say he retired when he was 65, like a…”

“Pretty quickly we realized that being involved in good businesses expands your margin of safety because you might buy in with some margin of safety, but the value of the business keeps going up. It expands your margin of safety. The value of the business is go…”

“What Buffett was able to do, and this is me imposing my own narrative now looking backwards, but he was able to use capital to accelerate his worldview. And a lot of his worldview was around American exceptionalism and American GDP and the belief in the Americ…”

“So he says, okay, there's five big records out there, homerun records. Willie Mays, and he goes one by one. Hank Aaron, Barry Bonds, Babe Ruth. So if you hit all those five, And you get a six million dollar bonus in each one of them. They will be happy. I said…”

“The last three or four years was almost impossible to insure because there wasn't a lot of comps. So we had no problem the first five to seven years, but Tom Hicks was having a hard time with the last three years. I guess he put word out in the market and Warr…”

“Like this could be a game changing technology but the destruction of capital because of so much money flowing in, we could all be changing how we trade, how we clear, how we transact, how we communicate, but it's not clear any of us will have made money on tha…”

“If Warren Buffett was 30 years old, he'd just be buying software businesses, because they have every aspect of a great business that he talks about. They've got massive moats. You can raise price every year. Customers are happy. It's this beautiful flywheel of…”

“Jay was incredibly successful investor. Certainly the Warren Buffett of his time.”

“So I would say he won with the decision process that was questionable. We lost with a decision process that looked pretty good.”

“I would make that bet at the same time. Again, I think the odds were highly favorable of winning. It just didn't play out that way.”

“You go about a year and a half into the bet. And I think the hedge funds were up at one point about 50%.”

“I do think there's a, you know, the high level lesson that Warren wanted to impart was basically right, which is, it's just really, really hard to beat the market.”

“Well, first they went to Omaha, Nebraska and talked to Warren Buffett. Would he be interested in lending some money? And then they explained to him through their banker that they had the ability to raise money by passing it back to the funds anytime they wante…”

“One of the key things about Warren Buffett success is that he had a very flexible capital structure, very flexible source of capital, and within that The same team, if you think about it, was making buyout decisions, was buying equity in the secondary market, …”

“So I had a structure which was zero percent management fees and 25% performance fee above six percent.”

“Buffett also in that article makes the observation that value investing is something not everybody is comfortable with. But that it's like an inoculation. When you get introduced to the approach, either it makes sense and you get it or you don't.”

“The hardest thing about value investing without catalysts is you can own something that's out of favor for an incredibly long time and over five or 10 or longer year period. Looking, being early and being wrong look exactly the same, and you can start to get c…”

“If you look to the market for feedback, the market might regularly say, you're an idiot, you bought it, now it's down, you don't know what you're doing, but the reality is that you've got to see that a little bit differently. You've got to see that as the mark…”

“So he picked the Vanguard S&P, 500 index fund. We picked five fund of funds for 10 years for a million dollars for charity. The bet started in January one of 2008.”

“An underappreciated contributor to his success is that for his entire life, he's been such an effective communicator. I don't know if I'd say storyteller, but a very effective communicator. In the hedge fund partnership days, that gave him, I think, a more sta…”

“It's like Buffett and Munger talk about your margin of safety when you buy a stock. It was the intrinsic value of the stock higher than the price of the stock. My business is the opposite. My business is margin of asymmetric upside if it works.”

“What you learned over the years is that it actually has a utility that goes way beyond its obvious help in meeting unexpected redemptions. Psychologically, it frees you up, and Buffett, more than any other actor in my lifetime, has proven the value because you…”

“Yes, there's more bureaucracy, but without Warren Buffett in the sole fiduciary chair for a hundred years, it probably makes sense to go away from it.”

“Warren Buffett's famous statement is the price you pay determines your return. I would modify that and say the price you pay determines your return for a given business outcome.”

“Fees, I think what's the biggest problem in hedge funds? They charge too much. There's only so much juice in the game. These are efficient markets. It's not like seventies. Buffett can do whatever sitting, reading Moody's manual and pick up stock two times ear…”

“That phrase from Buffett has probably done more harm than good over time to a lot of investors in not interrogating the quality of management or underweighting signals that maybe capital allocation is poor, that management's incentives aren't aligned because t…”