The Guy Who Studied Buffett for 25 Years
Handwritten Notes, Infinite Games, and Value Investing - September 4, 2024 (7 months ago) • 01:18:26
Transcript:
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Shaan Puri | I have a thought experiment for you. Imagine if you could just snap your fingers and suddenly there was a second version of you—a second body, brain, your eyes, your ears, the way you think, the way you operate. But with one caveat: it would do whatever you said to do.
You know what I would tell it to do? I would tell it to go study the art of investing. Investing, like Scott Galloway says, is like having an army of capital go wage war for you. Instead of you working for money, your money works for you. I love that!
So how do you get great at something? Well, you would study the greats. And that's exactly what the person who's coming on this podcast today has done. He's gone back and for 25 years has studied everything that Warren Buffett, Charlie Munger, and all the great investors have done. He has read every single annual letter, gone and read all the reports, and studied how they grew bit by bit, block by block, step by step.
Not just learning from the books, but then going and practicing it. So I wanted to ask this guy, "What did you learn about investing, and what can I learn? How can I spend an hour or two with you and download 10 years of your brain?"
His name is Guy Speer. He's a very cool guy, and a lot of people really respect him because he is just an incredibly humble, interesting person. I think you're going to love this conversation, so enjoy this episode with Guy Speer.
I have all these notes about where to start because I'm like, "Oh, he's value investing. There's going to be good investing knowledge." But the thing I was actually curious about when I was doing my research was about this group that you had called the Posse.
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Guy Spier | Oh yeah.
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Shaan Puri | And I don't know if the posse still exists or if this was just a moment in time. But can you explain what the posse was? Who was in it, and what was it?
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Guy Spier | Well, what's happened to me is I've discovered that I love Warren Buffett, value investing, and Berkshire Hathaway. I want to be all over anything that has to do with that.
In New York City, there's this Ruane, Cunniff firm that has two friends of Warren Buffett running it. They have a mutual fund and an annual general meeting. I get invited to some event before or after, and there's a guy, Whitney Tilson, who is like a master networker.
We're introduced to each other, and we're one year apart at Harvard Business School. The next thing I know, he invites me to meet other people. He doesn't invite me to the group on my own; he invites me to meet this person over there or that person. It's sort of like, "Hey, go have a coffee with that guy."
Before I know it, I've met three or four members of this group. It was Whitney who put together a group of five or six of us who were all fascinated by Warren Buffett and wanted to become better investors. We'd meet, I think it was sometimes even once a week, in one of our member's offices. There was a member that had an office in Midtown, and we'd present ideas. Whitney's friend, Bill Ackman, was part of that group for a while. That's how I met Bill Ackman for the few times I encountered him.
I wasn't really aware of what that was or why. Well, I kind of knew we had a study group at business school, and obviously, you want to get together with friends who have common interests. But I didn't realize what a powerful tool for success it was until that dinner and lunch—the first meal with Monish Pabrai—where he talked about forums, YPO forums. He said, "You should get into one; you'd benefit." Then I got switched on.
That posse met for about, I think, two, three, or four years, and we're still part of an email chain. I mean, Whitney will send out an email, send out a happy birthday message to the group. Some have become very, very good friends of mine, and some, I'm not even sure where they are now.
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Shaan Puri | So, what was happening? You were meeting, let's say, once a week or every couple of weeks. You would go to someone's office, and you said you all had one commonality: you were all investors who were fans of the Buffett style of investing, the value investing.
What would happen at these groups? You would show up, and was there a substructure? Did someone have a stock that they were interested in, and you would start debating it? What would happen?
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Guy Spier | So, what I remember is that you needed to show up with a written stock idea.
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Shaan Puri | Everybody or one person.
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Guy Spier | Just one person would present, and then you would discuss it in-depth at that meeting. In the following meeting, another person would come with a written stock idea that you would distribute as a handout. After giving out the handout, you'd talk it through.
At the end of that, after about a half an hour to 45 minutes of discussion, various other ideas would be discussed. I remember once sitting in a car with Whitney, driving somewhere in New Jersey to visit a company called ISWI (Interactive Services Worldwide Inc.), which had gaming software for TVs, for example.
There were follow-on meetings that happened, both social and business-related. At that time, transcripts of conference calls were not available, so someone would listen to a conference call, make notes, and then pass them out by email.
There was a structured part of those meetings, but what is really fascinating is the unstructured part. For instance, somebody might mention something or say something that sparks an idea. I think many of the best ideas come from those moments.
As a result of this, I remember being at a dinner where Bill was present. He started talking about MBIA and the asymmetry of the bet on the credit default swaps related to MBIA. I could have read that in a document, but it was the way Bill talked about it that really stuck in my mind. I thought, "Wow, that is really fascinating."
So, that kind of meta-information, if you like, is what you really get out of it.
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Shaan Puri | Can you tell the Farmer Mac story? I think that was a great example of what came out of it.
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Guy Spier | The posse. So, there I am, investing. I started off investing for friends, fools, and family, as I think Howard Marks would put it. But I'm scared... I'm very, very scared because I really don't know what I'm doing.
What's a Harvard MBA? A guy who pretends to himself and the world that he knows what he's doing when he actually doesn't. You know, but I knew that I didn't know what I was doing.
One of the ways I approached that challenge was to look for people who did know what they were doing—who I thought knew what they were doing—and to try and unwind what they did. I wanted to backfill, to reverse engineer what they've done and do the same thing.
I got all sorts of investment ideas through that. I was studying Warren Buffett, and I was also studying a guy called Tom Russo. For example, Tom Russo invested in Nestlé, and I thought, "Wow, brands! That's a really powerful place to look."
Where else can I find consumer brands? At the time, Freddie Mac and Fannie Mae were these government-sponsored enterprises—kind of a duopoly/monopoly. They had highly profitable, enormous balance sheets and were super successful at making money for their investors, as well as organizing the mortgage market in a way that made sense for everybody.
So, there they are. I'm doing what I normally do, which has made sense for me: looking for similar kinds of situations.
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Shaan Puri | Because Buffett was invested in... | |
Guy Spier | Freddie and Fannie.
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Shaan Puri | Yeah, so he was invested there. You're looking at Buffett for ideas, so you're saying, "What's similar to those?"
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Guy Spier | And I actually had an investment in Freddie Mac and was making quite a bit of money. I was very, very happy with that investment. So, I started asking, "What other similar government-sponsored enterprises are there?"
I uncovered Farmer Mac. Farmer Mac is also a government-sponsored enterprise, and their goal is, in the same way that Freddie and Fannie are funding the mortgage market by buying and issuing mortgage-backed securities, these guys were doing the same thing but for farms—farm loans. They would buy up farm loans, package them, and resell them with their guarantee. The claim was that they were reducing the cost for farmers to borrow while at the same time creating valuable securities for investors to buy.
I thought, "Wow, this is incredible! This is really, really good, and it's minuscule. I just freaking love this!" I think I probably did present on Farmer Mac. I sat down with the posse and said, "Hey, you guys, check this out! This is the next Freddie Mac and Fannie Mae." Except Freddie Mac and Fannie Mae are sort of like tens of billions, if not hundreds of billions, in market cap. This thing's got a market cap of, if I'm not mistaken, maybe $1 or $2 billion, and there's plenty of room to grow.
All that jazz, maybe 2 or 3 weeks later, Whitney says to me, "You know that company you presented? Well, I think Bill Ackman's either shorting it or he's about to take a massive short position, and he wants to talk to you."
So, I'm like, "Okay." I take the call from Bill, and he says, "Look, I just feel like I need to tell you I kind of got the idea indirectly from you, but I've just taken a massive short position in Farmer Mac. I feel like I need to tell you I think that the company is borderline fraudulent."
I was like, "Okay, you've got my attention." You know, there's a saying: "Who is wise? He who learns from every man." Who is wise? A guy learns from Bill Ackman. I said, "Look, this is important to me. Can I just come down to your office?"
"Yeah, come on down," he says. "Prove me wrong. Prove to me that I'm wrong."
So, I go down to his office, and I also remember the black files because he had several meters worth of files where he had taken... Every time one of these government-sponsored enterprises issues a mortgage-backed security, it's kind of like an IPO. There are public filings available. You need to know they're issuing debt on one side to fund their asset purchases on the other.
So, what are their asset purchases? What are the terms of this mortgage-backed security? I have to confess, and I hate confessing this, but it's true: I hadn't downloaded one. I took them at their word.
He kind of said, "Look, when you look at the entities created by Freddie and Fannie, each one of these mortgage-backed securities has hundreds, if not even hundreds of thousands, of different individual mortgages. The individual mortgage sizes would be anywhere from $50,000 to $100,000 to half a million. They're classes of mortgages, and there's distribution across the country. These might be from the East and West Coast, North and South, different income categories."
He said, "I've downloaded... I don't know, he downloaded a number of the Farmer Mac ones. He said, 'Like, there are 3 mortgages inside.' He said, 'That doesn't create the distribution, the risk of spreading. It's just 3. It's like a bank loan. It's just 3 different things that have gone into a kind of a bank loan. This is not...'"
The mortgage sizes were far larger, and maybe 3 was an exaggeration, but 100 or 200 rather than tens of thousands.
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Shaan Puri | So much more risk.
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Guy Spier | Yeah, and he just said, "Look, this is business lending. This isn't a mortgage-backed security. There's no way you can call this a mortgage-backed security."
You know, I debated him. I said, "Look, it's got a government guarantee behind it." And he said, "Yeah, it's got a government guarantee, but what they're doing is they're engaging in business-related lending."
From his perspective, this was lending against a business, not lending against real estate, and it just didn't deserve to be there.
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Shaan Puri | So, was he right?
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Guy Spier | I think he was absolutely right. What was clear to me in that moment was that I had not done the depth of analysis that he had done.
First of all, I hadn't downloaded those documents. I could have downloaded them, or maybe they weren't available. I could have located them and found them. It wasn't as easy to find as it would have been today, but I could have found them.
I'm kind of torn between wanting to stay and learn more, and rushing back to the office to put in a sell order. Literally, I got back to the office and I put in a sell order. I knew I didn't know it well enough. I knew that the points he made were good, and I sold it. By the end of the day, lucky enough, the fund was small. I felt super relieved that I'd sold it.
Then either I, Bill, or Whitney got a meeting with the management. What happened there was absolutely astounding to me. The management came with its pre-prepared presentation and they were ready to go through it. Of course, it's very dangerous when management does that because they lead you in the direction they want you to go. They may not even do it consciously, but they're leading you in that direction.
Bill said, "Look, I know a lot about the company. I prefer if we dispense with the presentation and just go to the questions that I have for you." They were a little nonplussed by that, but they agreed to it. They didn't really have much choice.
Then Bill came with the same kinds of questions that he posed to me, which I didn't have good answers for. For example, "Why is this different from business lending? How can you call this a class when there's only a small number of loans inside, and they're all of different sizes? Whereas a mortgage-backed security will have many, many single-family homes." They didn't have any good answers at all.
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Guy Spier | The CEO said, "Well, maybe this might not be the right investment for you," which is a pretty weak statement. I don't know if that makes it into my book, but that was a pretty weak thing to say. I was kind of absolutely shocked. It's one of the three stocks that I've shorted in my life, actually.
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Shaan Puri | When presented with a counterargument, instead of simply explaining, "They should know their business better," they just took their ball and said, "Okay, maybe don't play with us."
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Guy Spier | Yeah, exactly. Bill was a way better analyst than I was. I had all sorts of other things that I needed to be doing just to keep my little business afloat.
So, there were all sorts of good reasons for why I was unable to dive that deep. But it showed how, from time to time, if you don't do the analysis all the way—especially when you're going to a place where other people haven't been—you’re going to get it wrong.
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Shaan Puri | There's an example that comes to mind when you say that, in my life, in the entrepreneurial sense. I have a friend who is a good buddy of mine and a bit of a mentor to me. We made a deal with one of my businesses for him to help me out.
He said, "Okay, great! I'll help you out." I asked, "Hey, can we meet on Friday?" Friday comes around, and I'm expecting... I just thought this is how business works. I thought we were going to meet on Friday. So, Friday at noon, that's when the video call would start, and then we would start to talk and discuss some ideas. After we discuss, there would be some actions.
Basically, in the 72 hours before, he went to our site. We have an e-commerce site, and he went to our site and immediately opened up a Google Doc. He started writing a bunch of hyper-tactical observations of things that were messed up in our own product.
There's this weird thing that happens with your own product where you spend so much time at the back of your business that you never use it as a customer. Whereas he just went and used it as a customer. He went into our ad account and laid out this Google Doc that was like two pages of bullet points.
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Shaan Puri | No fluff words in between. It was just, "Try adding this, remove this, this is missing. Hey, you wrote this here, but that doesn't... this link doesn't work in your ads. Try this segmentation strategy. Try this, try this, try this."
He had laid out this two-page document. By the time we showed up at the meeting, I was like, "Oh, well, I guess we don't really need to discuss. You already did an audit basically and dove so deep—deeper than I'm doing in my own business, which is embarrassing for me at the moment."
But it was so useful, and it became a real eye-opener of like, "Oh, this is how the best people operate." When they're going to do something, they just drill right into the source of the issue. If we're trying to grow, the answer to how we grow is going to be in the actual product mechanism.
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Guy Spier | Right.
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Shaan Puri | And he went right there. He found a bunch of opportunities, and it was like, "There's nothing to discuss. Make these changes, and then let's see. Let's talk after that."
You know, why would we talk before? It was a real eye-opener for me in how the best people operate. They go straight to the tactical stuff of like, "What could we just simply be doing better in the funnel?"
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Guy Spier | What strikes me about that is what an extraordinary act of generosity. He was giving you, sort of like, the best part of his brain. He was giving it to you just out of the desire to give.
It feels to me—obviously, I wasn't there—that he's giving it without any agenda. Maybe he loves to do it, or because he really cares about you, or because he knows a lot about the topic. That seems really special, especially because there are people who know a lot but just don't have the time. They either don't want to have the time or generally don't have the time to talk to you about your stuff.
So, that's pretty special, especially if he wasn't an investor yet or he wasn't an employee yet.
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Shaan Puri | Yeah, I think we're both Tony Robbins, you know, fans or...
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Guy Spier | Yeah, I noticed that.
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Shaan Puri | And he is afraid. You know, the secret to living is giving. He talks about, you know, almost like in the hierarchy of needs, eventually you get past yourself.
Can you tell a couple of the lessons that you got from Tony, or maybe what shaped you out of that? Because you, like me, are a self-improvement kind of infinite learner mindset person. I think a lot of the audience, because that's what I like to talk about, is also wired that way.
I would love to hear maybe some stories or some big takeaways for you.
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Guy Spier | So, I think that in total, I've done sort of like 8 or 9 Tony Robbins seminars in my life, including a big one in Hawaii. I'm just curious, what number are you on? I want to know if you're more of an expert than me or vice versa.
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Shaan Puri | I've been to two or three events. They were all the UPW, at least the Power Within. I didn't do his deeper stuff, but then I just kind of devoured a lot of his old material. Specifically, if you go on YouTube, there's really great stuff of him when he... | |
Guy Spier | Was very. | |
Shaan Puri | Young, right? Talking... and you know, not all of it is the stuff he talks about today, but he has some really good material that is actually useful for business people. It's about public speaking, sales, marketing, and persuasion.
Yeah, he doesn't do a lot of that material now, but that was some of my favorite stuff that he did back then. So, that's where I'm at.
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Guy Spier | And I think that what comes up for me as you say it is, you know, there's this moment where, in a way, my destiny is on a knife edge with this meeting with Monesh Pabrai. Because I took the decision to approach him without an agenda, I got a very different Monesh than the person I would have gotten if I'd approached him with an agenda.
The first meeting is always very important. So, the decision to go to my first Anthony Robbins seminar was a bit like that. I had this really good friend in New York City who said to me, "Oh, you're in San Francisco. There's an Anthony Robbins seminar there. You should go; it might change your life."
I remember at the time, because I had this weekend planned with friends, it was like, you know, I'm going to go somewhere. Perhaps my deepest, wisest part of me knew that just hanging out with friends would be something like the same old, same old, whereas going to the seminar might give me something new.
So, I showed up at the seminar. Anthony Robbins is like 6 feet tall, and he's getting us to jump up and down. There's a huge amount of energy. As you've heard a thousand times, anybody who's done Anthony Robbins knows that "emotion has got motion in it." If you want to feel good about yourself, you need to look at your physiology and how you're moving, and change the way you're moving in order to change your emotions.
I was this kind of snarky Brit at the back, you know, just thinking, "So, what is this?" I was looking at my watch and thinking, "Why did I waste the money? Maybe I can still go out and hang out with my friends." But I did the firewalk, and once I'd done the firewalk, I was in a different place.
For those who don't know, he kind of whips those who want to be whipped up into a state in which you feel very confident to walk across a bed of hot coals. You walk across them, and you don't get burned. There are all sorts of spiritual or non-physical reasons for this. I think that the main thing is the state of mind that you're in and the firmness with which you walk.
Anyway, it was like, it really did resonate with me. That metaphor of how, if you have the right psychology and the right physiology, there are extraordinary things that you can do as a human really struck me. I ended up staying the rest of the weekend.
In my case, I was a guy who had my head up my rear end. I had achieved some early academic success in life, but I was getting quite bitter because I wanted success. The things that I'd learned, the routines that I'd learned to get success, were not working for me.
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Guy Spier | I'm aged 27, 28, 29. They weren't working for me, and I'm sad that I see other people who are in kind of similar circumstances. I think the younger you are when failure hits you or when difficulty hits you, the better it is. You're more likely to develop strategies, adjust, and try different things.
But I was at a point where I was kind of starting to get stuck in my ways. I really needed a very powerful kick in order to change. It wasn't enough that I knew things weren't working, and Anthony Robbins did that for me.
After that firework moment, I was really quite enthusiastic about everything that came out after that. I couldn't stop talking about Anthony Robbins when I got back to New York. I started reading NLP (Neuro-Linguistic Programming) and really diving into the self-help bookshelf to find more material that would help me in that way.
I think that in my case, I was so badly programmed for the earlier part of my life that I needed... you probably did fine with one or two Anthony Robbins UPWs (Unleash the Power Within). I needed every single one, and I'm super grateful to him for giving me that. I mean, you know, there was a...
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Guy Spier | On that first night, he kind of said, and I bought it. There was the fire walk, and he said, "Look, you think I'm here to make money out of you." He kind of said, "Look, I'm definitely here because it's a business, and you guys have paid money to be here. Yes, I definitely make money out of this, but it's not the true motivation. I really want to help you. I really, really want to help you guys in this stadium get a different result from your life."
That actually resonated with me. One of the books that Monesh gave me to read when I first met him was *Power vs. Force* by David Hawkins. I went strong at that. He didn't strike me as just selling me a yarn. I was like, "Okay, I'm willing to open myself to this." He actually wants to help me. I don't know if he can help me, but at least that's the intention he's expressed, and I believe him.
What I knew was that I had an enormous amount of rewiring of myself that I had to do. So, I started doing that rewiring. It was that process of rewiring myself and taking actions that I'd learned to do because I'd started doing Anthony Robbins that got me in front of Monesh Pabrai.
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Shaan Puri | What would be an example of a rewiring? So, like, before my brain thought this way or worked this way, and after?
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Guy Spier | So, I had this awful attitude that I was smarter than most people I met. First of all, I was way less smart than I thought I was. It's not important how smart you are; it's how smart you are relative to how smart you think you are. I had this arrogant attitude that once I categorized somebody as not worth my time, I didn't really need to pay attention to them.
There's a moment, either in a seminar or one of the cassettes, and at the time, I was listening to cassettes of Anthony Robbins. By the way, I had a collection of those cassettes. There's a story that Anthony Robbins tells about walking up to maybe Norman Vincent Peale or another one of these self-help people. Anthony Robbins says, "Look, I've read your book and nothing's changed." The guy responds, "How many times have you read my book?" Anthony Robbins says, "Well, once." The guy replies, "Go read it five more times and then come back to me."
One of the books I picked up was Dale Carnegie's *How to Win Friends and Influence People*. This came well before I discovered that Warren Buffett really learned a lot from Dale Carnegie. Dale Carnegie states that the most important sound in anybody's mind is their own name. What a concept! I was too busy studying law and economics and what have you, and I was not connected to that.
So, this was just the awareness: Oh my God, I don't bother to remember people's names. I don't bother to address people by their name. Is it a surprise that I'm not getting the results I want? I then made an effort, especially as someone who grew up in the UK. In the US, people will often meet you and say, "Oh, how do I pronounce your name?" They make sure it's pronounced correctly and then use your name a lot. It struck me as being a little disingenuous, but I started doing it. I made myself do it. I said, "You know, wire this into yourself."
Around that time, and this is not from Anthony Robbins, I read *The Psychology of Influence*. I thought, "Reciprocation, I need to do reciprocation." I would buy bags of sweets and hand them out to the doorman, the taxi driver, to whoever it was. I had all these big theories of how the world worked from great professors and writers of textbooks. I could spend hours writing essays about how the world worked, but I had never really spent time understanding how one-on-one interactions work and how to get people to feel positively oriented towards you on a micro level in real life.
It's shocking. I think in my case, there are a few things going on. I think that module is not very well developed in me. I take my wife, for example. We'll go to some social event, and she says, "Do you realize the guy you were standing too close to?" or "Do you realize they wanted to go five minutes before you actually allowed them to go?" I'm like, "No, please help me." I think I've made some progress, but it's just not something I'm very good at. Yes, we should specialize in the things we're really good at, but we need to bring a few things up to the bare minimum basics. There were a few things with me that I was missing that were just not the bare minimum basics.
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Shaan Puri | It's funny, in your book you talk about how when you were young, you were like this Gordon Gekko wannabe. I wrote that down here: I was a young Gordon Gekko wannabe. I wanted to be rich, I wanted to be powerful, and I wanted to run Wall Street.
You joined DH Blair, which was basically modeled after, I think, Stratton... the firm that's featured in "The Wolf of Wall Street," like the penny stock firm. Then DH Blair goes down a few years after you leave.
You're at this point where you've gone to Harvard Business School, you got the job on Wall Street, and you wanted to have the slicked-back hair, all the money, the cars, and the power. Then you have this kind of turning point, which is the Tony Robbins event. This event starts to get you to think about other things.
You go on to study NLP, you study the Cialdini book about persuasion, and you know, "How to Win Friends and Influence People." You start working on other things. There's a great Tony Robbins line where he says, "School is great, but learning is more important."
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Shaan Puri | Is that it doesn't matter what happens when you're in school. The goal is to learn. Sometimes that learning happens in school, and sometimes it happens out of school. But the learning is the thing, not the schooling.
Yeah, and so it's funny to me that it seems like you actually got your master's after you left Harvard Business School. Then you started to pick up all these other traits that were important to you.
Can you tell the story of the handwritten notes? Because I found this... you know, initially when I read this, and I've heard this before, I kind of wrote it off as this sort of simpleton, cheesy idea. And it's now come into my life three or four times.
So what did you read in that book, and then how did that lead to, ultimately, I think you meeting Monesh was from a handwritten note also? Can you tell that little story? I think there's something I need to learn there because I've heard this three or four times and never implemented it. Maybe this is the time.
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Guy Spier | So, in the Cialdini book, there is a story about the person who was the most successful car salesperson for the longest time. If I remember correctly, Cialdini writes that he just wrote a thousand cards a year saying, "I like you." I don't know if he actually said "I like you," but if you go into an Anthony Robbins seminar, you'll learn about matching and mirroring.
This idea is very interesting. The word "like" relates to liking someone and being alike. We tend to like people who are similar to us. The idea is that if you just match and mirror what they're doing—speak at the same speed, wear the same clothes, have the same hand gestures—they will respond positively.
I sort of said to myself, because I'm feeling raw and angry in a way, that I want success and I'm not getting it. I'm willing to try things that I haven't tried before, and that's kind of key. Having gone to DH Blair, I've burned my bridges. I can't go back into all sorts of career choices where, if I hadn't gone to DH Blair, they would have had me. So, in a way, I'm kind of desperate as well.
With this idea of writing a thousand notes a year, that's more or less three notes a day. I'm not going to leave the office until I've written three notes that basically say, "I like you." I realized that saying "I like you" feels a little weird, but "thank you" feels a lot better. I think I can do that. If I leave the office without having done that, it means that I actually don't want success that badly.
Somehow, if I write those three notes, I could forgive myself for not achieving success. If I did that, I think that was me showing up. As an aside, I often see friends' children who are not showing up for themselves and not even trying. I think the worst thing is to fail an exam or some test that life gives you without having shown up. If you're going to fail, fail fully and honorably by showing up and doing the best you can. Then the failure means something.
That was my way of saying I desperately want success. I'm even willing to spend the extra time at the office to write these notes. If that's what it takes to succeed, then I'll do it. If I find something better to do, I'll do that. But for now, leaving the office, that's what I can do.
Actually, funnily enough, I remember a conversation with Whitney Tilson. He was like, "Guy, you know all of my friends are telling me you're writing notes. Do you really think that's going to get you anywhere in life?" It was kind of ridiculous. For some reason, I said to myself, "I don't mind looking like a fool." I think many people inhibit themselves because they're afraid of looking foolish. I really didn't mind looking foolish at the time, so it didn't stop me from doing it.
I just wrote endless thank-you notes to people. Even better, or often better, is to send them something that you know will interest them. Now, you can end up spending a lot of money if you're sending each an expensive book, for example. But it might have been a printout of a transcript. I realized that often, whatever I'm sending them, I really didn't care genuinely about the people I was writing to. I was doing it because I was going through the motions, in a way. I was faking it.
Then, you know, I'm writing a note to XYZ person, and I actually take the time to think about them a little bit. I realized that the act of writing the note changed my insides and made me care about them a little more. I was actually becoming more caring through the act of writing the note. This idea that sometimes you don't have to feel it to do it—do it, and you'll feel it later—and that's absolutely fine. | |
Shaan Puri | And that's huge. Right there, I just want to add one thing, almost going back to the Tony Robbins thing. He tells the story when you're at the event. He's like, "Okay, we're going to play a game. Look around the room, find everything red. Find as many red things as you can. The winner is whoever finds the most red things."
Look around, look for red, look for red, look for red. All of a sudden, you're looking around and you see that the fire alarm is red, you see that the chair is red, you see that the screen has a little red thing on it. You see red everywhere.
He says, "Alright, close your eyes and tell me about something blue." And everybody laughs. It turns out we didn't see anything blue; we were so fixated on red.
Yeah, and he said there's a part of your brain... He said there's a couple of things there. Number one, when I told you to look for red, you suddenly saw so much red. When I told you to look for blue, when I asked you what was blue, you saw none because you were only looking for red.
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Guy Spier | Yeah. | |
Shaan Puri | And he says there's a part of your brain called the **reticular activating system**. It's your heat-seeking missile. It's the part of your brain that actually says, "Ignore everything. There's too much stimulus; only pay attention to what matters." But what matters is you get to program that.
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Guy Spier | Yes.
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Shaan Puri | And so, when you're searching for a car and thinking, "Maybe I'll buy a BMW," suddenly on the road, you see that BMW. "Oh, that's the one with the different wheels. That's the one with the trunk space."
You start to see BMWs everywhere. It's not that the BMWs suddenly appeared; they were always there. But your brain had called them "white noise" before. Now you've told your brain, "BMWs matter, pay attention."
So, how do you use this part of your brain to your advantage? What you're doing with the notes, where you said, "Doing it will cause the feeling later," is significant. If I'm going to write the thank-you notes, that means I need to thank them for something. I need to pay attention to something that I appreciate about them or what they're interested in to give them this note.
You become suddenly a more caring, interested person because of that. Gratitude works the same way. I know I had this practice where every night, my wife and I would say, "Alright, let's give me three things—three things you're grateful for today."
These are moments of the day you were grateful for, not just abstract concepts like, "I'm grateful for my family's health." At first, it's really hard, and you realize, "Man, I'm such a jerk. I don't even pay attention to my life."
How could it be that I just went through the motions today and had nothing? You do that for two or three days, and suddenly during the day, you start stashing moments. You say, "Oh, that'll be one of my three things for the night."
You train your brain to look for things to be grateful for, which makes you a more grateful person. That was such a huge unlock for me. What you're describing is essentially a similar phenomenon, a similar pattern, where the act of writing the notes caused you to be more interested in other people and genuinely care about them.
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Guy Spier | And you know what's interesting for me is there was a certain point at which I would get interns to do just that. I would say, "Your job as an intern is just to get a list together of people that you care about and write notes to them."
I don't think that there's even one case that comes to my mind right now where somebody really implemented it, and it kind of frustrates me because it's not a zero-sum game. It's not like if you do it and somebody else we know does it, it diminishes us. It actually enhances all of our lives.
It's not clear to me exactly why some people end up doing it and some people don't. What just blows me away is that, you know, Warren Buffett gets this. Warren Buffett is giving gifts to me; he's writing the equivalent of thank-you notes to me. I'm a nothing in his life, and he's not doing it every day. He's not necessarily doing it every year, but every two or three years, he sends me something or does something via his assistant. Like, Warren Buffett is doing that, you know?
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Shaan Puri | Wait, really? So Warren Buffett sends you something like a thank you note or something like this?
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Guy Spier | I mean, it's like a holiday card. But here's the thing: I don't know if we're doing video. I could have one that I...
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Shaan Puri | It's a video. | |
Guy Spier | Pull out... So, do you let me step away for a second and pull it out and demonstrate it? Bear with me because, of course, I have it up on my wall. Hang on a sec.
So, Warren, this is—I don't know how many years after I've met him, not right away, that's for sure. I get a holiday card from Warren in the post, and I'm just going to put it up for a second, and then we can talk about it because it is so clever.
So, let's see... You can see that, and there we go.
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Shaan Puri | Yep, Warren... Santa. I can't read the text, but I see Warren Buffett with Santa, so of course.
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Guy Spier | I framed it, but the key there is that it's a card. I mean, I'm gonna look at it now because I need to remember. So it's 2011, and he's crossed out Geico, Burlington Northern Santa Fe, and McLean. Then it's the right companies that he maybe would want to buy. He's got ExxonMobil, Wells Fargo, Google, and you know, there's Warren next to Father Christmas.
But here's the key: he says, "Either I finish this list by Christmas or I occupy the North Pole." Probably it was around the time of Occupy Wall Street. But then what he's done is he's written, he scrolled on it, and I don't know how many of these he does every year.
"Happy holidays! I enjoyed your 2010 report, Warren."
So, you know, the key there is that the other side's got nothing on it because who cares? Maybe guys are gonna frame it; you don't want to put anything on that side. What makes it special is he's personalized it to me, and he's understood that that is an enormous gift to the people who receive it.
You know, I literally—this is a Monash expression—you needed to peel me off the floor when I received that. I mean, I was sort of... but what am I to him? Really, of all the people that he knows, what am I to him? He's had dinner parties with Catherine Graham in Washington, where he's met heads of state and the head of the Commerce Department and the head of the Federal Reserve.
And now he's sending that to me. He's doing reciprocation; he's giving out the equivalent of sweets. He's given out the equivalent of a thank you note. He's showing this individual that he, in some way, just cares about me as an individual.
He's doing it in a pretty efficient way for him and in a way that allows me to get all excited and tell Sean Puri all about it in a podcast. I mean, he understands this stuff. He freaking understands this stuff.
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Shaan Puri | Well, I think that's amazing! I did not know that he does that, so that's very cool. We had a guy, Jesse Itzler, come on the podcast, and he does this as well. I think he handwrites thousands of cards every year, and he talks about the value in this.
But, you know, I need to hear ideas four or five times before I actually go implement them. I'll tell you another similar story. We met a guy who knew Kobe Bryant. He trained Kobe's daughter before she passed away in that tragic accident. I was like, "Tell me some Kobe stories."
If you read on the internet, all Kobe stories are like Nike Kobe or Black Mamba Kobe, which is basically about this ruthless competitor, hard work, and kind of an asshole on the court, but for the right reasons. That was the brand there. But this guy who actually knew Kobe told me a different side. He said, "Kobe would call my mom on her birthday."
I asked, "Who am I to him?" It's unbelievable that he would FaceTime my mom on her birthday. I don't know how he even knew her birthday, but from that day forth, my mom was the biggest Kobe Bryant fan in the world.
Another guy mentioned the same thing. He told us a story, and I'll give you the short version. He goes to this pickup game and plays with Kobe. The guy plays terrible, and Kobe's like, "Come on, man! Are you going to make a shot? What's going on?" He's joking with him.
The guy says, "Hey man, I'm a volume shooter. I need to take lots of shots. It's not about making a high percentage; I'm a volume shooter." So, Kobe laughed. A month later, the guy comes into the gym where Kobe's playing.
Kobe's playing in his game, and this guy's helping out on the side. Eventually, as the guy's leaving, Kobe says, "Hey man, Volume! You're just going to leave without saying bye?" The guy's like, "Oh, I didn't even want to bother Kobe; that's why I didn't say bye."
He couldn't believe that this guy, A, stopped him to say bye, and B, remembered that thing about him. The trainer asked Kobe, "Kobe, you have an amazing ability with people's names or remembering one thing about them. Why is that?"
He said, "Well, you know, it feels good in the moment, right? But beyond that, look, this will be the only five seconds I maybe will ever interact with this person. But for the rest of their lives, they're going to tell everybody they know. They might tell 3,000 people over the rest of their life about Kobe Bryant."
He said, "So it's so simple. If it's so lightweight for me, it's nothing for me. It costs me almost nothing, and yet for them, it could be a huge payoff. They will go and tell the world about this amazing interaction they had."
So, it's only five seconds for me, but it might last years down the road. Yeah, and it's the same thing. Kobe got it. He understood that. | |
Guy Spier | Well, I think that what's fun about these things is that you want to make it yours. So, you don't want to necessarily follow the guy's beer formula.
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Shaan Puri | Well, I also want to ask you about investing because, you know, that's what you're known for. I want to start with a quote from you that I found interesting. I don't fully get it, so I want you to explain it to me. You said, "Investing is like being a drunk stumbling around in a bar trying to find a drink." Yeah?
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Guy Spier | and | |
Shaan Puri | I think you were contrasting it to the idea of investing. You're like a fighter pilot; you just scan, lock your target, and then you just, you know, laser beam it. What do you mean by that? I guess I don't fully understand.
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Guy Spier | Yeah, so another... I'm not going to get the terminology wrong because I'm not a big bowler. But if you go bowling, the last time I went, every single ball I bowled went into one of those side channels. It was very upsetting to me. I mean, I was really bad.
But then, if you're a child especially, you can get them to put up curtains so that it doesn't go into the side channel. You know, it's this idea that you get on... When I've been bowling, I want to hit the kingpin or the pin at the front and knock them all over. What a satisfying feeling!
That's what you're trying to do, but actually, you're just trying to keep it off the edges. Anything that you can do to stop yourself from having it fall into those edges, where you kind of lose everything, is a good thing.
So, spend less time aiming for the skittle at the very front. Instead, spend more time thinking just to keep it on the runway rather than in the sides. Set myself up such that when I miss really, really badly, I'm still going to be okay. That is more important than actually hitting the targets.
It's going to be more important for me, or for many investors. It's not the question of whether you select that winner; it's going to be about how you run your portfolio in such a way that you don't have massive, massive losses.
You know, we spend a lot of time being impressed with success—impressed with people who seem to have succeeded, whether it's companies like Google or individuals like Jeff Bezos and a large enough number of others. This is the "fooled by randomness" idea of Nassim Taleb's. Many of those people are lottery winners; they were in the right place at the right time.
Yes, they were working hard, and yes, they had all the attributes, but also, they were lottery winners. We need to be really, really careful when we study success. Don't study lottery winners.
There's a well-known phenomenon that even the lottery winner subjectively thinks that they had some input into their success. The famous example is that you get a room full of any number of people, and you have them all flip coins. You keep them flipping coins, and after a certain number of flips, there will be somebody who managed to flip 9 heads in a row or 20 heads in a row, depending on how many people there are and how lucky you are.
In interviews, I wish I could actually cite the study, they asked the person who flipped the 9 heads, and they're convinced they had something to do with it.
So, this is just a really, really important phenomenon to be aware of and stay away from. How do I set my life up in such a way that, given the enormous randomness, I succeed well enough no matter what? That is a far more laudable goal than trying to ape the success of somebody who won a lottery ticket. | |
Shaan Puri | You know, you said something in your book that I liked. You mentioned, "I don't know what it is about me, but when an idea captures me, I throw my all into it, for better or for worse."
Like, if somebody... you know, it's the handwritten note thing, right? Like, "Yeah, okay, that's the thing. Then I'm gonna do it all. I'm all in on doing that."
It sounded like when you got interested in Buffett, you didn't just read about him or study his high-level philosophies. It seemed like you went and ordered the annual reports of the companies that he bought in the years before he bought them.
You tried to sit down as if you were Buffett and read them through his eyes. Can you describe this? I thought that was pretty fascinating. I'd never heard someone talk about something like that. There was something in there that felt like a valuable practice or an impressive version of really throwing your all into something, versus just tiptoeing around or doing a surface-level investigation of an idea.
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Guy Spier | Unlike what I did with Farmer Mac, for example, just to get back to any part of the conversation where I did not do that. That's what I should've done but didn't.
There have been, I think, three times—maybe four times—in my life where I've lost sleep over something. I've stayed up saying, "I kind of want to do it now. I want to get my hands on anything related to it." That happened to me with Warren Buffett and Berkshire Hathaway, sitting at this Stratham Oakmont-type place, DH Blair, and saying, "I want a life that looks more like that, guys." I hate what my life is and then doing whatever the hell I can do to get closer to it, in a sense of desperation.
So, the idea of this masterful person who orders up the annual reports and goes through them carefully? No, it's a sense of desperation. I'm so desperate I'll do anything, even order his annual reports because that's the only thing I got.
My father kind of says to me, "So, I'm talking to him about this. Why don't you go and apply to him for a job? Why don't you go visit him in Omaha?" I'm like, "Father, he was a guy who was smiling and dialing, pounding the pavement looking for deals for DH Blair. He wasn't going to be interested in Mr. Guy Spier showing up." So, I felt like that was a dead end.
But I was doing what I thought were not dead ends. To understand everything I could about him was not a dead end, and it was absolutely instructive. I remember the feeling of getting the annual reports. You had to call up the company and say, "I'd like to receive some copies of your annual report." Then they'd take your mailing address and mail it to you by snail mail.
Now, the annual reports arrive, and I'd never seen a company like this. After two years of business school, I hadn't seen the accounts of companies like these. It's funny because it's a well-worn saying: "You want to buy companies that just drown in cash." I hadn't seen the Coca-Cola Company drowning in cash—just enormous amounts of money being generated, way more than on the income statement. It's kind of like an embarrassment of riches.
To somebody who looks at the average of all American corporations, if you spend your time with most American corporations, you're not going to see the outliers like a company like Coca-Cola that really is this extraordinary outlier. It was an eye-opener to me. My jaw didn't actually drop, but I was like, "Wow, that's what this guy looks for. That's insane! I didn't realize. I wonder what other companies like this exist."
So, this is 1995, and Warren already understood so much because he was just sitting on Coca-Cola. The story of Coca-Cola, as I understand it, is that he'd bought See's Candy, and See's Candy opened his mind up to these businesses with pricing power—a powerful brand that people don't want to switch away from.
So, obviously, I was going down a steeper learning curve than Warren Buffett had been down, if you like.
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Shaan Puri | And so, you order these reports, you're reading them, and you're trying to understand what he looks for.
Was there anything else that was formative at that time for you to develop the mindset of a value investor? Just to sort of immerse yourself and speed run this education to try to really level up?
So, one formative thing sounds like ordinary reports. Sitting down, I think you even described it like sitting down like Buffett.
Like, "Yeah, yeah." Walking like him, talking like him, drinking the drink that he sits down with, the Diet Pepsi or whatever he drinks, and really trying to, you know, sit in their shoes for a minute.
Was there anything else that was very formative in your development there?
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Guy Spier | Just two things there. One is that obviously drinking diet cokes is not necessary, and eating steaks or whatever is not essential either. However, reading the annual reports is for sure important. So, when in doubt, do it all, and then maybe over time you'll figure out what's meaningful and what isn't. But drinking diet cokes really isn't that important.
Also, I think that... I just get excited to think about this. Doing that goes to the very, very core of our humanity as a species. That's what we do; we learn from generation to generation by modeling. I mean, this matching and modeling, matching and mirroring—in Anthony Robbins' case, cloning, as Monish Pabrai calls it—is a very, very human thing to do. That's how daughters learn from their mothers, and hunters learn from their elders.
So, I was doing something that was kind of natural—very, very natural. In a way, it's very unnatural for us to send people to university to have to model professors who don't know anything about business if their plan is to go out and be business people.
There are two insights that I had that I subsequently realized were good insights about what to do. The first was, you know, I can't get Warren Buffett as a mentor for me, much as I would like him as a mentor. But if he were my mentor, what would he say? This beautiful idea that we often... all the time, maybe we don't actually need the real person. We need to know enough about them to understand what they would say if they were present.
So, this idea of me also saying, "What if Warren Buffett was here right now? If he were in my shoes, what would he do?" I think it's funny because I don't want to live a life like Jeff Bezos lived, actually, at the end of the day. So, I've never asked myself the question, "If I were Jeff Bezos, what would Jeff Bezos do in my shoes?" But I think it's just an unbelievably powerful question, and it helped me get going.
This is the technology of success that I think Tony Robbins would call it—the technology of success. In a sense, I wish that we could teach it at school. Because, in a way, it's success by numbers. It's not that hard. Imagine that the person you admire is in your shoes. What would they do? Now, try doing that and see if it works for you. It might well work for you. | |
Shaan Puri | Can you give the... I think there's a Monash thing. I don't know, or maybe he got it from somebody else. The two gas stations across the street, I thought this was a great metaphor.
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Guy Spier | So, yeah, it comes from *Good to Great*. It's a beautiful idea that I haven't thought about for an enormously long time.
The idea is, and this is a story I think is in his book, there are two gas stations on opposite sides of the road. The guy in one gas station, you know, when he gets a customer, he makes some money. He paints the wall of the gas station, puts out some flowers, and makes his gas slightly cheaper.
These are all actions that the guy on the other side of the road could do. Not only could he do it, but he's seeing the other guy do it right in front of him. The fact of the matter is that in so many cases in life, the guy on the other side of the road, who has all the opportunity to do exactly the same thing as the winning gas station, just doesn't do it.
You come to this situation, and you're down the road, and it's very hard to understand why one is so successful and the other isn't.
The way I think I tell the story in my book is, you know, I'm sort of sitting with Monash, and he's told this story a few times now. I'm like, "Yeah, yeah, what a dumb guy on the other side of the road. He isn't copying any of the things that the one with the successful business is doing."
And I don't know exactly what happens when I realize, actually, you're the guy on the other side of the road. Because here's Mr. Monash Babri doing all these things, and you're not doing any of those things. Why the hell not? Don't be such a freaking idiot.
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Shaan Puri | What was something Monish was doing that you should have been simply copying?
Oh, that guy! You know, he comes out and washes the windshields of people getting gas, and they love it. That's why, you know, that little action is leading to success.
What was something that was a little action you could have copied?
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Guy Spier | You know, getting around the right people... It's taking a while for this to kind of seep into me, and now I feel like I own this phrase or I'm fully familiar with it.
Monash will talk about a sales engine or a marketing engine. For those of you who don't know, in a sense, Sean, I've never built a big business. I just have a little investment shop with five people. I'm like the little watchmaker, you know? I have a few people helping me make watches.
The realization that I need to do is break down the actions that I see need to be taken into repeatable steps and then build an engine around them. This means enabling people around me, not just me, to do those things and then to scale them up and do them in larger volumes.
There’s a limit, say, to how many thank you notes you can write. But if you decide that you're going to generate goodwill in a certain way, how could you scale that up? In what ways can you do it? This Value X event that I do every year, or this Value X BRK, is a way of scaling up goodwill and building an engine for creating the kind of good feelings that you want to create inside of people.
So, that idea of building an engine... What engines do you have? What engines are firing up inside your business? This is certainly straight from Monash's fiber.
Another huge thing for me was the realization that I was investing enormous amounts of time talking to prospects. In a certain way, that was an enormous waste of my time. It blew me away when I discovered that Monash didn't waste any time talking to prospects. Basically, if you weren't ready to invest with Monash, he didn't want to spend time with you. He had an engine for how people were going to find out about him.
The first time I implemented that, when I declined a meeting, I said, "Well, if you're not invested with me, I'm not going to meet with you." It was huge, actually.
So, I was in my office reading the Coca-Cola annual reports, asking myself, "What would Warren Buffett do in my shoes?" Then there's the idea of getting around the right people. Just find a way to get around the right people, no matter how spurious you think that connection is.
For me, it was a great distinction. I was so desperate for success and so frustrated. I said, "Well, if I'm going to travel to the Berkshire Hathaway meeting every year and that's going to get me a little closer to Warren Buffett, I'm going to do that."
I actually think that my annual pilgrimage—it's correct wording to call it a pilgrimage—going to the Berkshire Hathaway meeting every year has exerted a really powerful positive gravitational pull for me in the right direction.
I get super excited about that because these are not genius moves. They're not like I had to be so capable or so smart. It's something that anybody can do. You know, "Oh, I want to live a life that's more like the life of Warren Buffett. I'm going to start going to his annual meetings because that's going to rub off on me in some way."
What's interesting is I could have, at that time around 1995, said, "Oh, but I don't ever want to live in Omaha. I hate the coffee in Omaha." There are many things about Warren Buffett that I'm actually not a big fan of. There are all sorts of things that I love doing that Warren Buffett has no interest in doing.
I see that stop people. The fact that I'm going out to Omaha doesn't mean I'm about to turn into Warren Buffett. It doesn't mean I'm about to live his life. It's still going to be my life. I'm still going to do the things that I like to do, but I'm going to have that rub off on me.
In my view, that's what a real pilgrimage is all about. It's about regularly getting together and getting around people who are the kind of tribe that you want to become more like. That's just destiny in there, you know?
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Shaan Puri | Right, you bumped into Buffett, right at the...
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Guy Spier | The you're a close reader of my book. It's a true story, and it's just hilarious.
So, this was the meeting where they were voting on the B shares. There hadn't been B shares up to this date, and I don't remember the name of the location. It certainly wasn't where it is now, the big stadium or the big convention center downtown.
I'm in the stalls, going to the toilet, and out comes Warren Buffett. He turns to me and says, "I always get a little nervous before these things," before he goes off.
Again, this was one of those moments where I just dropped to the floor. I couldn't believe it—my hero was just standing there! And I thought, "Why did he talk to me?" He was not in the streets, although I've heard stories of him showing up at people's parties in Omaha. I mean, he was well-known around town, at least when he was younger.
He was talking to me because he felt like he was amongst family. He was with the Berkshire shareholders, and therefore, I was family to him.
But there I was, dressed in a suit, Mr. New York investment banker, with an MBA. I still had all of that wiring going on inside of me. But that was kind of like a—what would Anthony Robbins call it? It broke my pattern.
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Shaan Puri | Right, right. Well, I have a question. So, you have your fund, and I think you own a bunch of Berkshire in your fund, right? It's like 20% of your fund.
And Buffett doesn't take any management fee or any carry, right? You're just buying a piece of Berkshire Hathaway if you do that.
Now, this is kind of a silly question, a stupid question, but like, if all the fund managers sort of idolize Buffett—and I think most would say, "I might not be better than him or as good as him, but I will try to learn from him as much as I can"—why would anybody buy anything besides Berkshire if you wanted to do value investing?
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Guy Spier | You know, people say, "Well, should I invest in Berkshire Hathaway or should I invest in the index?" They say, "Look, I think that Warren Buffett's getting older. Berkshire Hathaway just hit a trillion in valuation, and I think the index might be better."
One of the things that I want to say to them is, look, realize that the index is impersonal. You might get spooked out of the index. I think that many people, if they buy Berkshire shares and they attend the Berkshire meeting, and they really kind of become closely connected to the company, they're more likely to be in for the long haul and be in for the ride.
So, it's not just the choice of whether to buy Berkshire or to buy the index, for example. It's about how I impact my own behavior through my investment actions. The realization that when we invest—if we buy Berkshire, or we buy the index, or we buy something else—we're also making our own bed. We're also creating the environment in which we'll be in, and we're in a kind of relationship with these things.
What I discovered when I shorted Farmer Mac, just to go back to one of those original stories, was that I became all twisted inside. I kind of didn't like my internal wiring when I was doing that. Berkshire Hathaway strengthens my internal wiring in the right way.
I think it's a really important question to ask: If I become a shareholder of this thing, or if I buy this asset, what does that do to me as a person? How does it improve or deteriorate my thinking? That's the reason to own Berkshire. And I actually tell people that's a reason not to own the index because the index is unbelievably impersonal. You'll get manipulated into all sorts of things.
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Shaan Puri | Well, the other thing I want to ask about is just performance. So, I asked my guy who helps me with research, "Okay, what's the performance, let's say, of your fund over the long haul?"
It looks like you basically beat the S&P 500 by some amount. I don't know the exact numbers, but...
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Guy Spier | Sliver | |
Shaan Puri | By 9.5% versus 8.5% or something along those lines.
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Guy Spier | Those lines. | |
Shaan Puri | Is that right? Like, since you started?
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Guy Spier | It's about 80 basis points at this.
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Shaan Puri | Great. And is that, by the way, is that net?
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Guy Spier | It's certainly net... it's net of everything.
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Shaan Puri | Net of everything cool. So, good job! That's something that's obviously very hard to do: to beat the index over a year. | |
Guy Spier | 25 years or more.
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Shaan Puri | We have more than a 25-year timeline, so that's super impressive. At the same time, in the last 10 years, I don't think you've beaten the S&P 500 in most of those years. But that's a long time.
I'm thinking, putting myself in your shoes, man, the psychology... I don't know what I would do. I would just be running around with my head cut off, basically, if I, over a 10-year period, wasn't doing the main thing I wanted to be doing.
And I felt this, by the way, in my twenties. I wanted to be a successful entrepreneur, and for eight straight years, I failed. I remember what that felt like at the time; it was crushing, soul-crushing for me to be doing that.
I wonder, how do you manage your psychology in a period of time where your performance is not as good as you want? Because you seem like a really well-balanced, emotionally regulated guy. But at the same time, this is the game you're playing. How do you manage your psychology during a window of time like that?
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Guy Spier | So, yeah, it's absolutely a spectacular question. It's funny because I did a sort of dry run through. I'm going to be talking about the fund to our investors in a day or two's time.
I think it's like 7 or 8 years that I've underperformed the S&P index in this case. I don't know why it always comes up for me when I think of this, but the question that was asked to me just after I'd published my book was during a talk I gave at Google. The performance was looking better at that time than it is right now. A very smart engineer asked the question, "How do you know that the outperformance you've gotten to date is not luck?"
My answer then, as it would have to be now, is: "We don't know." Well, I'm just one data point among thousands of data points. You'd argue that 25 years is a long time, but 8 years of underperformance in that 25 years is also a long time.
This was already a year or two ago when I said, in the face of underperformance, "What am I going to do? Am I going to say this sucks, this isn't working, I need to change my strategy and risk everything that's dear to me potentially? Or am I going to say, 'Look, I understand what I'm doing. Somehow the market's not rewarding it the way I would like it to be rewarded, but I know that what I'm doing will, even in the worst possible cases, lead to a really, really good life even if I am underperforming.'"
If I take, for starters, my first investors—friends and family—who had never invested in equities before, even if they're underperforming the S&P, they vastly outperformed what they would have gotten in fixed income and all the cash instruments. They have won many, many, many times over.
I actually got to have what I like to call courage, where I kind of realized that the key is to compound and to make moves that I know will enable me to compound. If I can end up beating an index, then that would be great, but I cannot jeopardize compounding for the sake of beating the index. I have to focus on compounding.
If you step back, I think that this idea of playing the infinite game is important. So many people think they're playing a finite game, but they're actually playing an infinite game.
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Shaan Puri | **Explain the difference between finite and infinite games.**
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Guy Spier | Yeah, yeah, sorry. So, finite... so, there's a clear distinction between finite and infinite games.
A **finite game** is one that has a clear set of rules and a defined space in which it's played out, both in terms of time and physical location. An example would be chess. There's a set of rules, it's played across the board, and there's a winner and a loser according to the time controls. Another example is a game of American football. It's played on an American football pitch, there are players on each side, the game starts and ends, and there's a winner and a loser declared according to the rules.
But the most important things in life are **infinite games**. What is an infinite game? An infinite game has no clearly defined rules, no clearly defined game space, and no clearly defined time when it begins and ends.
One of my favorite examples of an infinite game is the **Cold War**. The Cold War was fought across many battlefronts, whether it was in Southeast Asia, the building of nuclear missiles, or the rivalry between the superpowers in various ways. It wasn't really clear exactly when it started.
Here's the thing: it played itself out across multiple rules and multiple places. In an infinite game, you don't really win or lose. Usually, one or more of the players just decides to drop out. In the case of Russia, Russia kind of, in a way, imploded and dropped out of it.
What's the most important...
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Guy Spier | The key mistake that we make so often in life is that we think we're playing a finite game when we're actually playing an infinite game. Life is an infinite game; investing is an infinite game.
So, how many people, I would tell you, out of I don't know how many funds that were around at the time that I started, how many are around today? It's like less than 2%. Now, some of the people left that game of investing because they were utterly superb, made enormous amounts of money, and decided to go and do something else. A famous example of that is Nick Sleep; he's in William Green's book.
So, there are those people. But I did a study of this about 10 years ago, and there was a Lipper database where I could look up all the funds around at the time. They don't really give their reasons for dropping out, but in many cases, it was because they had an implosion of one kind or another.
So, you don't want to be the guy who implodes. | |
Shaan Puri | Well, I mean, I enjoy listening because I think what's cool about your mindset is that it's very different from the environment I live in. I've lived in Silicon Valley for the last 12 or 13 years.
Everybody here wants to be Zuckerberg. Everybody here wants to be Elon. In your case, it would be Buffett, right? The venture capital game is one where you win and get all the glory, or most likely, you fizzle out and lose.
My life really improved when I asked myself, "What game do I even want to be playing?" I moved basically an hour outside of Silicon Valley, which helps just to not be right in the center of it.
It seems like what you're trying to do is not be the next Warren Buffett. Although, if your performance actually happened to be the way it is, you would be annoyed by it. But your goal is to compound well and live well.
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Guy Spier | Yes. | |
Shaan Puri | And I think that that is a much more achievable goal that you've been able to achieve versus putting your happiness or self-worth tied to some moonshot type of outcome.
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Guy Spier | And I | |
Shaan Puri | I really respect that about you because I think it's not going to get movies made. It's not going to get articles written about you. You're not going to be on the cover of Forbes with that attitude.
But those are the people who... you know, the guy swimming in the lake happily with his kids, who's living well and gets to do what they enjoy every day: reading, writing, and talking. To me, that is a life well lived.
I had to almost deprogram myself from the media I was consuming, which was kind of shaping me to want something that I didn't really want, especially once I knew the odds of success in that game. So, you know, it really helped me to shift my thinking that way. So you... you know, you're a...
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Guy Spier | Good example of that for me is if I do the same contemplated action given the same set of circumstances throughout the rest of my life, how's it going to turn out?
So there's this sort of like, "Just this once, just this once." Do this, just this once. Get blind drunk just this once. Drop out of an airplane without a parachute because it'll be fun.
And just to ask the question, for me, for example, just take this meeting, just help this person, just give this person an internship. I think that something that is helping me to say no more often to those things is to say, "Well, if every time I'm faced with these circumstances, I say yes to this, how will my life look?"
And if every time I'm faced with these circumstances, I say no, how will my life look? It makes it far easier to come to a quick no and an understandable no, where I can say to the other person, "Look, I'm sure you can understand I can't say yes to this."
And I'm sure you can understand because if I did, here would be the consequences.
I think that that's a huge part of Warren Buffett's wisdom: never ever fall for the "just this once."
Another one of those is, "If everybody in the world did this contemplated thing that I'm contemplating doing, what would the world look like?"
I think that a world in which everybody is trying to be Zuck is utterly miserable—really, really miserable.
By contrast, a world where everybody is writing their own story, a world in which everybody is trying to discover some new scientific discovery, that is a really, really beautiful world.
And it's possible. It's really possible.
You know, so I'm doing a sort of part-time history degree for fun, and I've been thinking quite a bit about empires. I think the way that we feel today across the planet is that empires ought to be a thing of the past.
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Guy Spier | When empires were built, we don't want to build empires like the Roman Empire or the Persian Empire, or many different empires that were around, do we?
You know, we could imagine a world where every man, every working person, is doing the equivalent of being a watchmaker or a novelist. Why does it have to be on a grand scale?
So long as the work that you're doing is satisfying and you're creating something that is of beauty or has worth, it has its worth in itself. Isn't that a more beautiful world, actually?
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Shaan Puri | Yeah, that's an interesting point. Because also, the other side is true too, which is if nobody was Zuckerberg, if nobody was Elon, then we would also have a problem.
I think the answer isn't to be one way or the other, but like you just said, what is the satisfying version of life for you? If you could figure out that answer for yourself and then just act in accordance with that, that's really powerful.
I think for somebody like Elon, this is the satisfying version of life for him. I don't think he would be satisfied doing what I'm doing or what you're doing. We need that sort of diversity in the ecosystem for it to work.
You just said something great. It's almost like this action in the limit. You know, if every time I was in this circumstance, I did this thing. If every time I was craving chips, I ate chips, where does that lead me?
If everybody did this action, if everybody just took from the cookie jar, what happens? There's nothing left, right? So I think that is a very powerful question that simplifies things.
I'm a big fan of single decisions or frameworks that simplify thousands of future decisions, and that seems like one of them.
We should wrap up with this. Can you just leave me with... I am a newbie on what I'll call the Buffett-Munger school of thought, which is around partially investing and partially how to conduct oneself, how to avoid the trappings. What is the Munger talk like? The 24 common... | |
Guy Spier | The cause of human misjudgment, yeah.
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Shaan Puri | Yeah, causes of human misjudgment. So, things like that. What are the best essays that I should go read? If I was going to read three things, what would you recommend? The kind of the pinnacle, you know? Either essays, letters, blog posts, or it could be books, but I'm looking for the shorter versions if you have them.
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Guy Spier | I'll give the answer that I think most people want to hear, and then I'll provide a non-answer, which I think is more valuable.
So, I'll start with the actual answer. You gotta go to the source. You need to check out the Buffett letters, the transcripts, and the recordings of the annual meetings, which are phenomenal. And obviously, as you brought up, I think that "Poor Charlie's Almanack" really is an incredible collection of material. It's not too much, and some of it can just be listened to online. It's an amazing start.
So, there's the straightforward answer. But what I want to give is a non-answer, which I think is far more important. I can't tell you or anyone else what to read because you're a different person in a different space. Your brain is different.
People often ask, "What can I read to learn about...?" The answer is: pick up 20 books that you think might lead you in a good direction. Go through them quickly and ask yourself the question, once you've flicked through and read a few pages, "Is this getting me somewhere or not?" If it's getting you somewhere, keep reading it. If it's not, put it down. Maybe tomorrow will be a good day to read that book.
I really do believe that life is too short and our reading time is too limited to force ourselves to read things that aren't giving us win after win after win. So, if you go to the Buffett letters and it's not speaking to you, put it down quickly. Don't waste your time. Don't have that sense of obligation that you're supposed to be reading. Use your valuable brain energy on something that really works for you.
So, what I really want to say is: start with any reading list, but start iterating quickly, basically.
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Shaan Puri | Yeah, I like that. That is the answer I needed, not the answer I wanted, which is good. You have a good quote, by the way, that stuck with me. You said, "I treat my library like a cocktail party." You know, you're gonna mix and mingle and hop from one conversation to the other. If it gets boring, you go grab a drink.
I love that metaphor because I also am a promiscuous reader, and I just didn't have the right mental model or metaphor for how to treat this stack of books that's here in my room. But I think a cocktail party is a good one.
Guy, thanks for doing this, man. This is a really fun conversation that I was looking forward to. I gotta say one thing about you that's really cool.
Probably I'll leave you just with a compliment. I texted a few people before this that you were coming on and I said, "Give me what's a good story about Doug." I was disappointed at first because they didn't give me a specific, "Oh, you gotta ask him about this," which is what I'm looking for. It's a shortcut for me in my research.
But the way people talk about you is incredible. You're like a mensch, right? People just have such a high regard for your character and who you are as a person to them.
Like, what's a brand? It's what people say about you when you're not in the room. What's a reputation? It's what people say about you when you're not in the room. Your brand, your reputation is very, very strong amongst people I respect. The way they think about you is that you are sort of, you know, just such a value giver.
So, congrats to you on that. That showed me something that I can strive for. Like, oh, how would people talk about me if somebody asked them in this way? Would they do this today? I don't think, honestly, no. The answer is no, they would not talk about me the same way. But that became a bit of an aspiration.
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Guy Spier | Well, I'm delighted, and that's extraordinarily kind of them. Whoever the hell said that, thank you so much.
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