The Exchanges

Q Because he was like, what if somebody saw me?

A I know. And it is an area where my dad and grandfather were so different. And again, both admirable, but in very, very different ways. But yeah, my grandfather always sort of had this sense of, You know, he was a great man, and it was important that he, and, you know, Ben Franklin did the same with a wheelbarrow in the streets of Philadelphia. In his autobiography, which is, you know, 80 pages, there's a section about borrowing money. And he says, you know, when you borrow money, uh, there, it's very important that you do certain things. And one is that you need to reassure your creditors that you're trustworthy. And so he always advised to paying them interest a day early. Uh, but another thing is he said is he would load up these, you know, big printing blocks and type things and he'd have a wheelbarrow and he, he would be seen pushing this wheelbarrow. And he said, it's important that they know I'm industrious. And so, in the book, he says there were times he didn't need to do it. He just, you know, he was managing his, his brand, you know, and, but in a way that he felt it was important. Well, my grandfather had, had that. He felt, you know, interestingly, Charlie always talked about dressing conventionally, you know, wearing, he said he's so eccentric in other ways that by wearing a suit and tie, people assume that he's more conventional than he is, and that serves him. So…

AI assessment note: “I know. And it is an area where my dad and grandfather were so different.”

Q One of my favorite anecdotes, uh, I'm gonna fast forward a little bit here to you going through sort of exploring the veterinary option, theology, You start out in banking, you end up working for your grandfather, and he has you writing the insurance letters. You ask, why bother when nobody's reading them? And he had a really interesting response to that.

A Yeah, which is, is you write it for yourself. And Shane, it's so amazing that you say that. On the, on the walk in, uh, you know, I was, I've been, um, uh, uh, uh, A fabulous book on AI is called The Coming Wave. Um, it's written by one of the co-founders of DeepMind, and, and I was listening to it this morning, and it was talking about, you know, uh, obviously the ability of the AI models already to do very good writing. And so, that exact anecdote was on my mind as I was walking over here, uh, because I was thinking about how strongly he said, you know, the writing is not about the product for the client. It's about what you learn by writing for yourself. Um, it is. And so it didn't matter that we sent out this insurance letter. I don't know. We probably sent out a couple, two, 300 copies a week. You know, by the time I was working for him, he was probably already in his seventies. So a lot of his peers had long retired and, you know, I wasn't sure anybody was reading this and, and I mentioned that to him and he said, well, we, we write it for ourselves. You know, the discipline of every week. Going through, you know, reporting on any company that had reported earnings. What was happening with inflation? What was happening with investment returns? Was there any specific company news? Uh, what had been the performance of the indices, which we would calculate by hand? There was…

AI assessment note: “Yeah, which is, is you write it for yourself.”

Q Was this driven by your father saying, go get a job, or was this all self-driven?

A Well, I, I give my parents enormous credit. There was a rule from about the time we were 13, which was, you know, you were allowed in the house, you know, three weeks without a job, so that sort of got you through. You know, Christmas break or spring break, but the, the, the assumption was you were going to work in the summer, and, and that was sort of the assumption all the way through. But to their credit, uh, they felt like, you know, if it was an internship at the Bronx Zoo or whatever, or working at the Humane Society, that was fine, you know, and they would pay you for that, uh, if the job didn't pay you. Everybody had Summer jobs. And, and it would never have occurred not to. I think I was a little bit more obsessed, uh, with the idea of, you know, I don't, I don't want to make it sound like, you know, I came out of the womb an entrepreneur or something, but, but I loved the freedom of being, you know, of having money. And, and so, you know, I started a dog walking service when I was probably in third grade, uh, or second grade. My parents rule was I couldn't cross streets with dogs, but I could go around the block many times. And so, you know, I, and it was a way of getting a pet without having a pet. Uh, and you know, when the mayor passed the pooper scooper law, I mean, again, going back to New York in the seventies, you just can't imagine the amount of dog crap that …

AI assessment note: “I give my parents enormous credit. There was a rule from about the time we were 13”

Q That's a great segue into the Question we always end with, which is what is success for you?

A Well, I mean, it, it, for me, that is one where Charlie shaped that from the beginning. It's just living your funeral backwards and thinking, thinking about, you know, well, I, I'll give you an image that, that was true image. I, you know, talked about this recently, but this, this idea of, you know, I came up to this, uh, house after being out for a dinner and, and all my kids were there and, and, I, you know, it was glowing on the inside. It was like Courier and Eve's, you know, it was so beautiful. And, and I saw all my kids at the dining room table with their significant others and laughing and, And it was this moment where I felt like I didn't even need to go in. And so that, you know, in that dimension of life, just this, just the intense love and admiration I have for, for them and my curiosity at how it's going to play out. And, uh, the fact, I mean, one of the things I love is that my, my daughters are friends, even though they're Very unlikely friendship. You know, one is that Princeton kid running a big residential real estate operation and like, you know, and the other one is invented a, uh, you know, the founder and CEO of a, what is a, can only be called a sex toy company. You know, and I, I just, but she is just, she is just a crazy exuberant kid living in a totally different world than one that I can grasp, but, you know, um, so there's a lot there. And then, of…

AI assessment note: “It's just living your funeral backwards and thinking, thinking about”

Q Are there any particular stories that stand out about moral lessons or businesses that still stick with you today that you try to pass along?

A I mean, the, the, the list of business lessons is sort of endless. I mean, in other words, that, that was just sort of constant. I mean, just going, I'm not sure how much it was stream of consciousness for him versus here's my lesson plan of trying to shape my kids. And of course, it's six kids and everybody got different things out of it. It, it, you know, there were Ways in which the business stories really resonated. I, I don't know if I've ever thought of that. Question in, in that way. I, I, I would say one story that really struck me, uh, in that I was remembering the other day was, uh, about a man who, as he described it, one of his inventions, he was a brilliant polymath businessman inventor, and he invented the yellow tennis ball. Uh, I remember him telling that. And, uh, He was telling us this story because the man had been bitten by a bat and had nothing, done nothing about it and had died of rabies. This enormously successful person. And I remember it, it being so out of left field, you know, the idea of somebody dying and, you know, and he, he said, you know, the point is this guy that was so brilliant, you know, it just, but it never occurred to him that, that, Uh, you know, he could die of rabies. So I, I, I don't know how much my father intended that lesson to be a lesson about hubris, or about domain knowledge, uh, or, you know, about the, the closeness of trag…

AI assessment note: “one story that really struck me... was about a man who... invented the yellow tennis ball”

Q Did your father or mother give you an allowance growing up?

A They did. It was a little unreliable. My father, my, my parents were divorced, and, and so, of course, that allows kids to, you know, I don't, I don't know if you ever fish, but, you know, in, in, in fishing, there's this thing about fishing the seam, you know, where you find two bodies of water moving at different rates, and in that seam between those two bodies of water, there's often a lot of, uh, of marine life, and, uh, and so I think children of divorce are very good at fishing the seam, and, uh, So, you know, my father would put up some policy about doing chores and collecting kindling and, you know, he had moved out to the, uh, uh, the country and commuted and, uh, and, but, you know, we were there every other week. And, uh, and so, you know, yes, we, we had an allowance. It was sort of, as I say, regularly sort of, uh, not uniformly enforced, which I think probably reinforced the idea of liking having my own funds. Uh, uh, from, and of course, interest rates were very high then. And so, you know, I remember my brother and I both being struck that we had put for a few years money we had gotten at Christmas or our birthdays into the local, uh, savings bank. Uh, and you know, the idea that all of a sudden, I mean, I remember going to, to get the money out and being given a 50 dollar bill Plus a two dollar bill and then some change because what seemed like I had put in onl…

AI assessment note: “They did. It was a little unreliable.”

Q How would you define risk? What is risk?

A I mean, if I define risk as an investor, I'll always start with the client work backwards. You know, when, when I speak to a client, I think, you know, for them, the risk for them is, is ultimately, it's ultimately becoming beholden on somebody, right? They don't want to be beholden on the government. They don't want to be beholden on their relatives or their kids. You know, uh, uh, they want that sort of financial independence. So you think very much, you know, You have this sort of responsibility where, you know, I sometimes joke, you know, risk is having to being forced to change your lifestyle. Uh, there's a lot to that. You know, I think a lot of people, particularly people that are savings and investing, right? It's, you know, you have to recognize that there's a huge amount of people living hand to mouth and paycheck to paycheck. So I'm, I'm, I'm going to define risk in terms of the investing Public. And I would say in terms of the investing public, you know, everybody who invests is making a choice not to consume now in order to be able to consume in the future when they aren't producing. And so, you know, obviously for them, risk is about that somehow that decision having been mistaken, right? In other words, they should have consumed now because they ended up with less. And so, you know, I do think that, you know, I joke that risk is, is about, you know, a lifestyle c…

AI assessment note: “risk is about that somehow that decision having been mistaken”

Q that comes to mind when I think of Who's well positioned no matter what the future sort of what happens in the future, whether it's positive, negative, stays the same, a hundred and sixty billion dollars on balance sheet, like they're going to exist. They're passively stable almost. How, how do you think about that in terms of positioning and in terms of the risk management, uh, from the company?

A Well, you know, it, there was a beautiful, uh, last, uh, interview with Charlie, uh, that Becky Quick did, and I, I give her enormous credit. Uh, now, of course, she was recording that for his 100th birthday in January. Uh, it's amazing that it was like two weeks before he died, and it was, I, I, it gave me so much pleasure to watch that. I mean, because he was just so lucid and engaged. Um, I, if I'm remembering right in that interview, but if not in that one, and over the years, it's something that he goes to over and over is this idea as Berkshire is run with the idea that some, that, that from the very beginning that, uh, the people that were invested in Berkshire had a hundred percent of their net worth in Berkshire. And that really does shape the culture there. So it is, it's not that it's afraid of risk. But it will not, the, the sort of risks it takes are risks that are manageable on the income statement. You know, the idea of Berkshire really, really being built to last, that is profoundly true. And, and I think that, um, you know, I, I was saying to somebody that You know, being on the inside versus the outside of Berkshire. I mean, you know, I'm going to Berkshire annual meetings since 1989 or something and, and read everything that they've ever written and all the back to the partnership letters. And so it's not like there's a big surprise, uh, uh, on the inside ver…

AI assessment note: “the sort of risks it takes are risks that are manageable on the income statement”

Q How do you avoid that lifestyle creep from sort of like setting in?

A Well, it's gonna be whatever. I mean, of course, one of the great things about making money is you can sort of have what you want. And I think the question is, how do you try to do a good job deciding what you want? Um, you know, obviously, I mean, and you know him, I mean, one of the great gifts to humanity has been, uh, Morgan Housel. And, uh, uh, you know, the psychology of money is like the perfect reminder. That what we really want, you know, what kids crave is time with their parents. And, you know, you end up in the Hamptons on the cocktail circuit and, you know, biking in your Lycra with all your private equity buddies. I mean, can you tell I got a chip on my shoulder about that? Um, but, uh, you know, and all your business school buddies. So I just think, you know, I've had a, I'll, I'll give a good example. Uh, We grew up loving skiing and, uh, and my dad is a fabulous skier and some of my grandparents were good skiers. Um, but they were so worried about spoiling us so that I grew up skiing in upstate New York in a town called, uh, well, by the snow, the mountain was called Snow Ridge. It's in Boonville, New York or near Boonville, New York, which is, you know, it's just a farm hill. Uh, but, you know, as we were doing better, my dad wanted us to ski in nicer places and so on. And, uh, and we went to all different places, but we always stayed in a pretty modest way. W…

AI assessment note: “we went to all different places, but we always stayed in a pretty modest way”

Q You mentioned Munger a few times. How did you guys meet?

A Oh God. It's such a great story. My grandfather built this fortune. I mean, it was amazing. He started borrowed a 100,000 dollars. When he died, it was eight hundred million. It was held in a trust as long as my grandmother, his wife was alive. And when she died, it was two billion. But a hundred percent of that money, a hundred percent was marked for charity. They, that was, uh, his belief. He told us all from the beginning, my father's done the same thing. Um, uh, unfortunately, uh, and, um, You know, and so they've really sort of followed what I'd call the Carnegie Buffett school versus the Munger school, where I think Charlie said on that same podcast that half of his net worth had already been transferred to his kids, and he has fabulous kids. My, I was working for my grandfather, and it was clear that the capital of his firm was all gonna go to, to charity, and so the, it couldn't function as an operating business anymore. And he had this business that was called a stock loan business. I don't know how familiar you are with securities lending or in, in its simplest form, it would be if you were a short seller and want to sell shares, uh, shares short in, you know, company XYZ, the person who buys company XYZ from you is not interested in the idea that you're short. You need to deliver them Some shares. So, what you do is you go find an owner of X, Y, Z, and you say, hey, …

AI assessment note: “It's such a great story. My grandfather built this fortune.”

Q Take me behind the scenes of no particular company in general, but a board meeting, and what makes For a really good board meeting versus a really bad board meeting?

A Well, the board meetings, I mean, I've been, I think that a lot of average companies' board meetings are basically the lights go down, the PowerPoint comes on, there is a focus on pageantry process, um, uh, and, you know, sort of checking the boxes. And I'd rather shoot myself in the face. I just, I mean, going back to the ADD, you know, and, um, but the first board I ever came, and I do think that's the way a lot of corporate boards work, and I think it's gotten even more so because I think investors are discouraged from going on boards by the regulations. I think the SEC is makes it, I think it's a terrible mistake. To discourage money managers, uh, especially longterm investors, uh, from getting involved in the governance of the companies that they, they manage. And it's, it's the compliance issues are real because you've got to be very careful about disadvantaging your clients or if you're burdened with inside information. And, but I think the importance of having owners of the businesses represented on the boards versus academics and lawyers and politicians, you know, you want, People that have real skin in the game and are advocating and representing their investors, their clients. So it's a very, but it, it ain't easy. I mean, we're in a world where often regulation is for its own sake. And so, um, I was very lucky that the gateway drug, it was like starting, you know, a…

AI assessment note: “average companies' board meetings are basically the lights go down, the PowerPoint comes on”

Q how do you raise kids in, in a world where, I mean, you're the third generation of this in a, in a way, your grandfather is very successful. Your father was very successful. You're very successful. And, but you live in a different era where I know a lot of my friends are sort of struggling with like, How do we raise kids in an environment where we have affluence?

A Well, I like what, you know, Charlie said that, that money doesn't ruin kids, you know, parents do, and I would add genetics can too. I mean, it, you know, there, you can look at siblings from the same family that make totally different choices. They've had roughly the same home life, roughly the same genetics, and something is, is different. Maybe it's peers, maybe it's, you know, just some nuance in the, One or the other. But I feel like, for me, the, that was an area that You know, I, I, I could, I get pretty emotional about it because it's, there are a lot of people that I know who are very successful investors, and their basic view was, thank God I married somebody that could, you know, raise my kids right. That was not me. I actually married a woman that had a four and five-year-old when I was only 28, and then we had a child together. We actually, uh, uh, you know, functionally adopted a boy in there as well. That to me was, you know, maybe the greatest source of joy in my life. I mean, I love, I talked to almost all my kids almost every day. Uh, I don't think I was ever a helicopter parent. In fact, their line was, I somehow managed to turn every activity into a helmet sport. Uh, and there's some truth to that. Uh, and, um, But I just loved raising kids, and I've actually got three grandchildren now, uh, and, uh, and it just, you know, COVID, I had all of my children ca…

AI assessment note: “money doesn't ruin kids, you know, parents do, and I would add genetics can too”