VALUE: After Hours (S04 E017): Warren Buffett and Charlie Munger’s Berkshire Hathaway Meeting in Omaha

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In their latest episode of the VALUE: After Hours Podcast, Bill Brewster, Jake Taylor, and Tobias Carlisle discuss:

  • Key Takeaways From The Berkshire Meeting
  • Charles Munger: Best Quotes From The Berkshire Meeting
  • Negotiating Munger Style
  • What Berkshire’s 10Q Revealed
  • Don’t Double Down When Your Stock Drops
  • ‘Buying The Dip’ Doesn’t Work
  • What’s Next For Netflix After Subscription Drops?
  • Buffett’s Berkshire Increases Activision Stake to 9.5%
  • Some Investing Risks Are Just Not Worth Worrying About
  • Berkshire’s Buy-Back Machine Up And Running
  • NFTs Flatlining
  • This Is Netflix. You’re Green Lit!
  • Warren Buffett On Not Timing The Market
  • Charlie & Warren Debating Oil
  • Buying The SPY
  • VALUE: After Hours Berkshire Meetup Review

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

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Full Transcript:

Bill: Real good.

Tobias: Preparing to live stream this meeting. Got it. We are live, I think. It’s 10:30 AM on the West Coast, 1:30 PM on the East Coast. It’s Value: After Hours. I’m Tobias Carlisle, joined as always by Jake Taylor and Bill Brewster. What’s up, fellas?

Jake: Back from Omaha, feeling great. Got the recharge. Life is good. How about you, boys?

Bill: I need a recharge from Omaha. It was very fun. Nice to meet many of you.

Tobias: I got to say, I’m totally energized from doing that. I loved seeing catching up with you, guys, catching up with all of the old friends of mine, meeting lots of new people. It’s great to see that there are actual real people behind the computer screen.

Jake: [crosstalk] Hide all this troll accounts.

Tobias: Yeah. [laughs]

Jake: [laughs]

Bill: That’s right.

Tobias: That was fun. We had a little meet up, a little impromptu meet up after the meeting. Jake and I set through the whole thing, set through the second half, which I haven’t done before, but it was really good. And then we tweeted out within an hour before the end to meet up. We had a great turnout. I’m an optimist. So, we had 200 people, you guys are going to give me a different bid.

Bill: I think there might be a little high, but I’ll take it. It was huge. There were thousands.

Jake: [laughs] Best.

Tobias: [laughs]

Bill: It was the best event of the weekend, best event of Berkshire ever, I would say.

Tobias: I got to live my dietary dream. I just had See’s Candies and steak, and came back, and I lost weight. So, I think that’s the secret.

Bill: Bang. There you go.

Jake: Amazing.

Bill: I drank IPAs and apparently it didn’t look as good in person as I do on camera.

Jake: [laughs] Yeah. I was shocked that that many people showed up to tell you the truth. I was pleasantly, pleasantly surprised.

Tobias: Yeah, that was cool. I was overwhelmed. I thought it was really fun. It was a great turnout. Some really great investors. It was fun.

Jake: I enjoy just getting to spend a little bit time with you guys in person, even though, we see each other all the time over this, but just-

Tobias: Ah, it’s better.

Jake: -to hang out, so nice. I love you, boys.

Tobias: Yeah, likewise.

Bill: Yeah, that’s sweet. I love you, too.

Tobias: [crosstalk] What was the highlight? Let’s do that highlights.

Bill: From the meeting or just from the weekend?

Tobias: Ah, whatever from the weekend.

Bill: No. It’s the best networking event I think in finance.

Tobias: 100%.

Bill: I’m just seeing everybody again for the first time in a long time. See the homie, Rishi. It’s been a while. I re-found myself talking to Gabelli and Bob Robotti one point in the lobby of the hotel. I was like, “If you’d told me five years ago that this would happen to me, that’d be wild.”

Tobias: I ran into William Green in the airport just before my flight took off– just before his took off.

Bill: Yeah.

Jake: Oh, good.

Tobias: That was cool. Good to see him.

Jake: Yeah, everybody is there and they’re all pretty okay with you chatting with them. So, that’s cool, huh?

Tobias: I saw Li Lu a few times. I think Li Lu is my hero, he’s my avatar. I’m a big fan of Li Lu’s. I like his [crosstalk] process.

Bill: I don’t know anything about him.

Tobias: Every time I see Li Lu something, I’ll nod until my head falls off. I think he’s very, very sensible.

Bill: Yeah, I’m certain he is smarter than me, but I don’t know much else. I haven’t read what he’s written. I don’t know, I haven’t stumbled upon much of it. If anybody wants to send me any of it, I’ll read it.

Tobias: Moving the Mountain is his book. I own it, but I haven’t read it all the way through.

Jake: I have. It’s interesting.

Tobias: I think I bought it after you gave the–

Jake: Gave a rundown.

Charles Munger: Best Quotes From The Berkshire Meeting

Tobias: Yeah, you gave the rundown. So, what were your takeaways from the meeting?

Jake: Yeah. My favorite quote from the meeting, let me pull this up, so that I don’t– I don’t know if I got this exactly correct like word for word verbatim. I haven’t gone back and re-watched yet, but Munger said towards the end, “To go a considerable distance with good company is a favorite life.” I thought, “Wow, that’s like–” Whatever, 12 words that really sum it all up.

Tobias: I have to say, not even for a 98-year-old man, but it is amazing that he is a 98-year-old man. He remains razor sharp. He’s got the best one liners. The more I heard him talk, the more I really wanted to have a beer with Charlie, honestly.

Bill: Yeah, Charlie would be awesome to cut it up with.

Tobias: My favorite line from Charlie was, when he was talking about the various jobs that they’d had as kids. Then he said and that was when Charlie realized he could only ever work for the man, who shaved him. Warren, it worked out. He can only ever work for the man who shaved him.

Jake: Yeah.

Bill: Yeah, I like that.

Jake: Had to be their own boss.

Bill: Yeah, I hope they have another one of these in them. We’ll see. But that was fun.

Jake: There were definitely points where Munger bailed Warren out a little bit. Warren was wandering, meandering a little bit in his stories, and then Charlie came in with something really pithy and punchy, and put a nice bow on it.

Tobias: and Bill: Yeah.

Bill: I liked the story about the plug at Salomon, the floating plug.

Tobias: You got to tell that story. That was pretty good for anybody who didn’t hear it.

Bill: Yeah, you should let Warren tell it, but listen, but basically, yes, it’s in the liabilities had to match and they didn’t quite know how, right?

Jake: [laughs]

Tobias: So, they created this a plug.

Bill: They created a plug.

Tobias: 12 years earlier that floated.

Bill: Yeah, nobody never figured it out how to do it.

Tobias: That was still floating.

Jake: No one knew what was in.

Tobias: It’s a hundred and something million dollars by the time they got there. Charlie was on the audit committee and had to sign off on it. What could that possibly be?

Bill: Oh, who the fuck knows?

Tobias: It’s the bezel and you get rid of that when the market falls over, you just write that off somewhere.

Bill: I flip it to the Fed.

Tobias: [laughs] [laughter]

Tobias: Actuary tables say Munger should live for another 4 years. I honestly think that Munger– I’d be a little bit more worried about Warren than I am about Munger. Munger is razor sharp.

Bill: Yeah, I listened on 2x. I didn’t think Warren was as rambling as I did in person. But I also– [crosstalk]

Tobias: Listening on 2x. [laughs]

Jake: Yeah. 2x is still tight. [laughs]

Bill: I also didn’t quite hear much in the meeting. I don’t know. I said to you, guys, part of why I moved is I’m taking care of my grandma. What I’ve seen is the mental slip, at least for her. This summer, we had one, and then we’ve just recently had another big one, and it happened slow than fast. So, I hope that both of them get to go before they get to that point, because it’s not– Guys with those brains, I don’t think deserve that kind of punishment.

Tobias: Warren, he was slow, slower to make the point, lots of “ums” and “ahs.” And then, I found that he took a lot of detours, and then down the third [unintelligible [00:08:10] with Warren, and then he’s got a slide for it. I was like, “What’s this got–?” The optical vision– [crosstalk]

Bill: I love when he was like, “I have a slide for this. I wanted the question to come up. I’m just going to ask it myself.” I was like, “All right, cool.” Come in with an agenda and get it done.

Tobias: I couldn’t understand sometimes what he was saying. He had sort of run the words down a little bit. But the optical illusion, one was, I’ve said to a few people, he’s some optical illusion. I found these on the internet. Wasn’t that cool?

Jake: [laughs] Yeah, that was pretty funny.

Bill: Yeah.

Jake: Next up is, what color is his dress? Is it blue or gold?

[laughter]

Bill: I think the optical illusion thing, though, is a nice metaphor for a lot of situations. I think cable’s one right now, where– [crosstalk]

Jake: You are always going to drag it back to cable, don’t you? [laughs]

Bill: Well, it’s gotten crushed. It depends what you want to see and I think different people– I think it’s important to try to make your brain see both sides of the illusion before you come up with a conclusion.

Tobias: Very true.

Jake: That is true.

Buffett’s Berkshire Increases Activision Stake to 9.5%

Tobias: The other thing that I found a little bit hard to– I wasn’t aware that there was some controversy around the Activision. What has happened in Activision is one of the–? Or, it looks like from the outside is Berkshire has bought a position in it, and then Microsoft has announced the takeover, and then Berkshire has massively increased its position in Activision.

Evidently, there’s some suggestion that they may have had some inside information, because they had that initial position before the bid got announced. Warren gave a defense of that, but I wasn’t aware of any of that context before we get that offense. So, he was just saying that there had been this acquisition and then he had massively increased the stake as a merger arbitrage.

Jake: Yeah. Well, [crosstalk]

Tobias: Yeah. It makes a lot of sense, because I think the bids at 95 was trading at 75. I don’t know when it closes, but presumably, before the end of the year. It’s like a 30% return with IRR that’s even higher than that again. And he was just saying there was no inside information. That was the point of it.

Bill: It’s an interesting buy for them. I realize everybody thinks for themselves, but I think that was a fragile situation with a whole lot of misconduct alleged.

Tobias: Were you aware of that context before he gave the defense of it?

Bill: What?

Tobias: That there was a suggestion that they’d had some inside information.

Bill: Oh, yeah. But I don’t give a shit. That’s not how Berkshire operates.

Tobias: Not, of course. Not but–

Bill: To be fair, he definitely has better information than us. I don’t know what the line of inside is, but I didn’t think they had inside there. I thought Activision was pretty clear. Dislocated high-quality company in the parlance of– [crosstalk]

Tobias: 100%.

Bill: But he also had a bunch of cultural issues there that–

Tobias: Right.

Bill: I’m surprised. I guess, what they would say is, it’s not they’re taking it over and owning it and they made a distinction in the past between securities and companies they own, so it has made no difference.

Tobias: The thing is, though, clearly, it was way too cheap. The cultural issues are resolvable without too much effort, you just have [crosstalk] run.

Bill: I don’t know, man.

Tobias: Those are resolvable.

Bill: Peter Kaufman at one point said that it could unravel the whole company.

Tobias: It’s comparable to Salomon, which similar situation where– [crosstalk]

Bill: Allegations of sexual misconduct from the top that were covered up? I don’t know, I don’t know, I don’t know.

Tobias: But do people who bought video games care about that? Probably, not.

Bill: No. But if your developers all leave. I don’t know. I didn’t buy it. I don’t know enough of that.

Tobias: I’m not saying that it’s not bad. I just think that you can resolve it. You’re not going to lose the whole company. It’s not Arthur Andersen type thing, where it goes directly to the trust that people place in you to do the business, where that has to be broken up, or dissolved, or whatever they did to Arthur Andersen.

Bill: Yeah.

Jake: That’s true.

Bill: Yeah. If nothing else, there’s franchise value, they can bail you out there.

Tobias: There’s going to be recurring income from those. There’s a trail on those games for a long time.

Bill: Yeah, I just think the issue is, if your developers leave and then you can’t bring other people in, what do you have. But I agree with you.

Tobias: It’s discounted, too. It’s de-risked a little bit. It’s discounted as much as it was. But in any case, it’s been taken over by Microsoft. So, Microsoft doesn’t have any of those allegations at the top.

Bill: Bill Gates, Jeffrey Epstein?

Tobias: [laughs]

Jake: Oh, there we go. We just got demonetized.

Tobias: [laughs]

Bill: I don’t know what I’m talking about. I get all my news on Twitter.

Jake: [laughs]

Tobias: This is just– [crosstalk]

Bill: You know, it’s facts.

Jake: Yeah.

YouTube: Don’t Mention The War!

Tobias: I got a note from YouTube saying, “You’re not allowed to talk about Ukraine and Russia, and you’re not allowed to victim blame.” That’s the words that they used. So, don’t do that.

Jake: YouTube said that?

Tobias: Yeah, I got an email saying, “if you do that, you’ll be demonetized.”

Bill: What is victim blaming?

Tobias: Suggesting that they had invited the attack.

Bill: Yeah, so that we get demonetized?

Tobias: But have you ever heard that in relation to a country? Like a country victim blaming?

Jake: No.

Bill: No, I haven’t. [crosstalk]

Tobias: I thought it was funny that they use those terms particularly. This is probably demonetized as a result of talking about– [crosstalk]

Jake: Just even bring it up here, we’re done.

Tobias: But I thought it was such a strange thing.

Bill: Well, it is strange, especially, given some of the other stuff that YouTube allows and I would not be one that would victim blame anyway. But the suggestion that you’re not allowed to is somewhat upsetting.

Tobias: Strange.

Jake: Speaking of that, am I the only one, I don’t know if it’s my feed or what, but if you get served an ad during our show, some of those are the jankiest bucket shopee type of ads that I’m just like, sometimes, I’m shocked. I’m like, “God, I can’t skip them fast enough.”

Bill: Yeah. Look, Putin is a piece of shit. No doubt.

Tobias: [laughs] We are back on.

Jake: Remonetized.

[laughter]

Tobias: We’ve got a bonus.

Jake: [laughs]

Bill: I’m not sure that you need to from a companywide standpoint silence one view. That’s insanity to me.

Tobias: I just don’t know anything about it at all. I don’t know why people would get strong opinions one way or the other.

Bill: Well, I know why people don’t like Putin. But I don’t know why Google thinks that they are the one that should be–

Jake: Arbiter of discussion.

Bill: -who can monetize what and who can’t and what can be discussed. I think that’s a dangerous place to go. Especially, since some of the early COVID conspiracies that probably would have gotten us demonetized are actually looking not [crosstalk] territorial to know.

Tobias: True.

Bill: Yeah.

Tobias: Kevin Jameson says, “Do you get demonetized for victim-blaming value investors?” Only on this show?

Jake: Yeah. Where were they when we needed help?

Tobias: You actually can victim-blame if I invest. That’s right, that’s right.

Jake: [laughs]

Tobias: Yeah, that was a funny tweet from Eddy Elfenbein yesterday.

Jake: I want to say I didn’t see it.

Tobias: I just said 2020 value investing is dead. Anybody looks at P/E ratio doesn’t know what they’re doing. 2022, actually…

Jake: Oh.

What’s Next For Netflix After Subscription Drops?

Bill: I think this is a really interesting period, where I’m really interested to see what happens three years out from all these multiples imploding. Because I actually think it’s highly rational for a company to spend as much as humanly possible, when they’re being rewarded like they were. And if there’s a land grab and now, multiples have compressed, there’s less of an incentive to come in and compete, and now, you can get rational. But I’ve always wondered whether or not they’re going to be able to get rational. So, I think, it’s going to be interesting.

Tobias: When the market is treating you that way, you’re incentivized to do it in the short term to meet the market. So, therefore, it is rational in that moment. Whether it is rational long term for your business, I think it’s a different question, but– [crosstalk]

Bill: Well, look at what Netflix did. Now, they’ve got a $30 billion recurring revenue base that’s not ad supported that they can go out and fight with. Do they need to pivot some stuff? Yeah, they need to pivot some stuff. But I don’t know. Financial analysts that are like, “This is a terrible business model.” Okay, go do what they did, then you can talk. I’m not trying to be an ass, but I think– [crosstalk]

Well, I would much rather have the problem of having $30 billion and figuring out how to generate profit off of that, then try to be like, “Well, I really need to make sure that my ROI is right here.” It was a once in a lifetime opportunity to get the asset position that they got, now they got it. Now, let’s see if they can flex it. I would have done the exact same thing, especially, if the debt markets funded it.

Tobias: I agree.

This Is Netflix. You’re Green Lit!

Jake: Also, it reminded of– I forget where this was, what show it was, but they’re making fun of Netflix and saying that, you call Netflix up and they say, “Hello, this is Netflix. You’ve been green lit. Who am I talking to?”

Tobias: [laughs] That was South Park.

Jake: South Park. That’s right.

Tobias: Netflix. You’ve been green lit. Who am I speaking to?

[laughter]

Bill: Yeah, that’s right. Then the question becomes like, “Okay, well, can that culture maybe change a little bit.” That seems like an easier thing to change than trying to figure out how to grow and do it.

Tobias: What interesting bit of rumor that you pick up at the meeting that you’re allowed to talk about?

Jake: Toby and I were making the joke that, if they were going to do a big announcement, it would have been funny if they had said that, Charlie, since he stepped down from Daily Journal as the Chairman has a little bit more time in his schedule. So, he can now become the Chairman of Berkshire, and then that way CalPERS will be happy with separating the CEO and Chairman roles.

Tobias: Yeah, that would have been interesting. CalPERS had this fight on to split the Chairman-CEO role from Buffett like ignoring the fact that he’s still a major shareholder and probably, has a lot of support from the other shareholders too. It’s highly unlikely anybody’s going to vote against him.

Jake: You think?

Tobias: Yeah.

Jake: [laughs]

Tobias: So, that was a nonstarter. I don’t know why like a little protest, but if you want to get famous, write a short report or go activist on Berkshire, and then get up, and have your little two cents. But they’ve changed the way that the meetings run now these days. You remember they used to open it up, do whatever it was absolutely mandatorily required, and then they’d say, any further business, and there was none I’d close it, and the meeting was over in 30 seconds, and then they’d take questions. Now, they take the questions and they leave the business of the meeting until after the second session. So, you have to come back to hear whatever the protest votes are.

Bill: Mm. Yeah.

Tobias: I don’t even know if they televise it.

Bill: Yeah.

Jake: You almost don’t need to, because all the votes are in hand. So, there’re zero surprises.

Tobias: It’s like the Oscars. Academy Award for best sound engineering or something like that, they don’t run in that primetime.

Jake: Yeah.

Tobias: Best foreign film.

Bill: Yeah, this doesn’t qualify as a rumor, but I got an update. A guy that I know from Chicago, Adam Patinkin. I think that’s how I say his last name. He runs David Capital. He just had a big activist win. I think he said he got everything he wanted and that’s exciting for him, because that dude has worked very, very hard for a number of years.

Tobias: In what business?

Bill: It’s in UK. I don’t know exactly. I’m not informed enough to talk about it, but he was excited. He’s a dude that’s worked really hard. So, it’s nice to see him get a win and I hope that his success continues.

Jake: Fair play to you, lad.

Tobias: [laughs]

Bill: Yeah. European activism could be fertile ground.

Jake: Hmm. Not as good to Japan, though, right?

Bill: Yeah, I don’t know. Anything about what I’m talking about right now, it’s just word salad.

Tobias: [laughs]

What Berkshire’s 10Q Revealed

Jake: Let’s go back to Berkshire a little bit. I thought it might be interesting. This is as close as we’re going to get to veggies today just because this is– we were all traveling and busy this last week. I just went through the 10Q of Berkshire and looked at some– It’s always interesting to see what were the sources of cash, how’d money come into the door, and then what were the uses of cash? It really just untangles what Warren has been working on. The sources of cash were, they used $50 billion basically out of the piggy bank, took that off the balance sheet, and put it to use. Yet, another $5 billion added in debt. This is just Q1, by the way. And then $7 billion came in the door and very, very rough numbers. We’re just sketching it out. $7 billion came in from cashflow from operations. Total that all up and you get to $62 billion.

And then, so, what did they use for that? $40 billion into equities, $12 billion into US Treasuries very short term, $5 billion into fixed income, $3 billion of CapEx, which is a little bit more than depreciation and amortization, and then $3 billion in buybacks. So, add that all up and you get it to the roughly that $62, $63 billion rounding. Mostly took cash out of the till and bought equities really in Q1, which is maybe potentially surprising.

Tobias: I heard somebody say this and I haven’t verified it. But they said, it was the most money that Berkshire had ever spent on equities in a quarter. It must be the most money. That makes sense. It wouldn’t– [crosstalk]

Jake: Not as a percentage.

Bill: Yeah.

Tobias: Yeah.

Jake: But maybe total just because they are so big.

Warren Buffett On Not Timing The Market

Tobias: Buffett had a great story, where he was talking about– I think somebody asked the question about, even though, they say that they don’t time, how do they get the timing? How is Buffett such a good timer? He said and he gave 2007 as the example or, maybe it was 2000– I wasn’t exactly sure about the time period. But he said, “We invested $15 billion, which was a much higher percentage, which is a lot more to Berkshire then that it is now trying to buy, spin it on a whole lot of equities between Goldman Sachs and something else.”

Jake: GE.

Tobias: GE. So, what time period was that?

Jake: This is middle of 2008 before things really–

Tobias: Before the big failover.

Jake: Yeah. And then, we’ll keep going. But he wrote the op-ed in–

Tobias: Right. By American I am.

Jake: Right. So, he just bought a bunch of stuff, he writes this op-ed, and we still had another probably, what, six months or something to go before it really bottomed?

Tobias: Yeah, there were two big like 15% down quarters at an index level. Q4 in 2018 and Q1 in 2009 were 15% down and 15% to 20% down each.

Jake: All of which is to say, he thinks his market timing is not that good.

Tobias: If you don’t know what’s coming, you wouldn’t have done it. Then, you’d have waited six months. Yeah.

Charlie & Warren Debating Oil

Bill: Any concern about him buying oil, and Charlie and him debating who’s more incompetent with oil?

Tobias: [laughs]

Jake: Yeah, but come on these guys– When they say, they’re incompetent, that means they’re just only in the top 98th percentile of understanding.

Bill: Yeah, I don’t know. I haven’t looked at his historical record in oil. I think it leaves a little to be desired, but I don’t know that that matters.

Jake: Yeah, that’s fair. It’s been some hits and misses.

Tobias: Well, China National was a good one?

Bill: Yeah.

Jake: Very good.

Tobias: [crosstalk] 6 baggers?

Jake: Yeah, four, five, six.

Tobias: I think it was six when I looked at it, because I didn’t follow him in. But I saw him buy it.

Jake: Yeah.

Tobias: I ain’t follow him into the bad stuff.

Jake: Yeah.

Bill: I like it. Smart.

Tobias: [laughs]

Jake: He bought some– [crosstalk]

Bill: I know what I’m going to do to myself, I’m going to Constanza myself.

Tobias: [unintelligible [00:25:36] self.

Jake: Just go full invert.

Bill: Yeah.

Jake: [laughs]

Bill: It would be my last gasp before I’d become an indexer. You’d be like, “Holy shit, am I outperforming?”

Tobias: You get two portfolios right and you got to keep on rebalancing, so that equal weight. And one is, what you think and the other one is the inverse of what you think. How do you think that performs? You’ve got this Shannon’s demon thing going on where you’re taking away from the one that’s working and putting into the one that’s not. I wonder which one outperforms.

Jake: And I want to know that answer.

Tobias: Is it inevitable that one has to outperform? Does one of them have to beat them up?

Bill: No, I probably lose on both.

Tobias: [laughs]

Jake: Both under performance, somehow?

Bill: Yeah.

Tobias: Yeah, I don’t know.

Buying The SPY

Bill: Something came up about my indexing comments. Here’s the problem I have and this is a very good problem. But–

Jake: [crosstalk].

Bill: No. I have this massive position in Microsoft. The cost base of buck 37. It’s all taxable. Even if I’m good at what I want to do, am I going to leave my kids the same problem, whereas the index, if you truly have– When I say an index, an ETF structure. A tax advantaged structure that can continue to roll in and out of stuff, you don’t have to continue to make decisions and you can leave that to somebody who also doesn’t have to make decisions. That’s fairly powerful.

Tobias: The index, the SPY, I think is reasonably well constructed these days. Historically that hasn’t always been the case. It’s well known that the biggest name in the index almost inevitably underperforms and that’s been true. But you can look back at what it’s historically been like Exxon or something like that.

Jake: Yeah.

Bill: Yeah. Well, that’s not you could do an equal way. That’s why I’m saying. I’m not saying like indexing. I don’t know a value ETF. Whatever it is, the strategy, but you know–

Tobias: I was just going to say that, that would be a reasonably good bet these days. I’ve said this a few times. If someone came to you with, just take the top 30 names out of the S&P 500 and then readjust the weighting. Each one is a proportion of the 30 names. You would look at their portfolio and say, “Oh, he’s weighted into Google, and Microsoft, and Netflix, and this guy knows what he’s doing. This is a real quality, a reasonable price portfolio.”

Buffett Buying More AAPL

Bill: Yeah. Be interesting to see– I found it interesting that Buffett was buying more Apple.

Tobias: Yeah, tell that story.

Bill: He’s buying more Apple. That’s all I know.

Tobias: [laughs] We see– [crosstalk]

Jake: What was the total amount?

Tobias: $600 million, right?

Jake: Is that what it was? I think $5 billion increase in consumer, whatever that is, I think Apple’s inside of that. So, I don’t know exactly how its peanut buttered around.

Tobias: Is HPQ countless part of them?

Jake: Probably.

Tobias: Because they’re comparable kind of quality businesses.

Bill: Pretty much. Not much difference.

Jake: World class brand. Yep. That makes sense. Luxury printing.

Bill: Checks out.

Jake: [laughs]

Bill: Definitely, checks out.

Tobias: Everybody knows. I own HPQ and I have since 2019. So, that’s the one that everybody, every conversation I have is– People who don’t know that often start with– I get all the stuff. He bought except for HPQ. I can’t understand it. Yeah, it’s deep value.

Bill: Well, I’ve heard people say share loser in a shrinking industry and I guess that maybe part of the idea–

Tobias: Accountable.

Bill: Yeah, part of the ideas in a shrinking industry, you’re not going to have entrance. So, potentially, profitability goes up and they can reduce the share count.

NFTs Flatlining

Tobias: Remember, when 3D printing was going to be a thing?

Bill: I still think it will be.

Tobias: When it was probably– [crosstalk]

Bill: I think NFT’s will be one day, too.

Tobias: When it was right of the top of the Gartner Hype cycle.

Bill: Yeah.

Tobias: Now, it’s in the trough of despair.

Jake: Yeah.

Bill: Yeah, probably, the time to buy it.

Jake: I saw something. NFT’s like the amount of volume or whatever is just way like 90% off.

Tobias: The Google search is down to 24, which is, that’s the lowest it’s been since it’s topped out November 2021. So, it’s real relative to the 100 on the index, it’s 24.

Jake: Yeah. How’s your NFT game looking these days?

Bill: I stayed away from the NFT game. I’m telling you, though, 20, 35, I bet it’s a big thing.

Tobias: You can probably get one of these Bored Apes, though.

Bill: I tend to believe that all these bubbles have enough truth in them that there’s a reason they bubble up. Look, I think it was speculative access. [crosstalk] Well, actually, I’ve heard that the tulip bubble was very misunderstood, but I don’t–

Jake: Care to elaborate?

Tobias: Everybody has really got a history– [crosstalk]

Bill: Well, I don’t know enough. But I’ve heard a lot of people get their facts from, what is it, it’s not Edwin Lefevre or Lefevre, is it? I think it is that Manias, Panics, and whatever. I don’t know. I’ve heard that his– [crosstalk]

Jake: Mackie.

Bill: Yeah, well, whoever. I’ve heard that the– Oh, was I thinking of Reminiscences of a Stock Operator.

Tobias: Yeah. That’s Lefevre.

Bill: Yeah. I don’t know. I just heard that his account of history is not actually, historically correct. Check with Jamie Catherwood. He’s smarter than me.

Jake: Okay.

Bill: And he actually knows what he’s talking about. I don’t even know that I heard this from him. I just figured [crosstalk] history question. Send it to him. That’s his brand.

Jake: That is his brand.

Jake: Anyway, I don’t know. I do believe in the Metaverse one day. I don’t know what that will all mean, but I do believe that NFT’s will be a real thing. I just think we were 13 to 15 years early.

Tobias: Well, when do those Bored Apes– Have you got your-

Bill: My buddy’s still in it.

Tobias: -Bored Ape in the screen? Did you bid [crosstalk] on the Bored Ape–

Bill: I didn’t even watch Bored Apes.

Jake: Or, did you just right click, save as?

Bill: I would love have an Ape, though. No, I wouldn’t do that. That’s not right.

Jake: Okay.

Bill: I respect the code.

Tobias: Devil take the hindmost.

Bill: Yeah, there you go.

Jake: That was one. No, you are thinking of–

Tobias: That’s [crosstalk]

Jake: No. But Bill’s thinking of the [crosstalk]

Bill: Manias, Panics, and Crashes, I think. Yeah. I’d be knowing. I just don’t know who wrote it.

Jake: [laughs] Yeah.

Tobias: I’m not going to make that joke anymore.

Jake: I’m not going to make that joke–

Bill: I’m not going to think of the right name.

Tobias: What else stands out from the comments?

Bill: I don’t know. I’m still working through it, even though it’s on 2x speed.

Berkshire’s Buy-Back Machine Up And Running

Jake: It was interesting– Also looking at the 10Q, the buyback schedule that they did. January, the average price paid was $299, February $312, March $322, April, they didn’t do any buybacks according to Buffett, and then, right now today it’s back at $322, which would imply that maybe the buyback machine is back up and running, I would guess. There’s my hot tip.

Tobias: That’s interesting. Charles Kindleberger. Thanks to Chase Jones.

Jake: Kindleberger, Charles. Dang it. Had Charles, right? Didn’t have–

Tobias: Yes. Buy when Buffett’s buying Berkshire. That’s probably pretty good–

Bill: Now, what does that guy know?

Jake: Worst strategy.

Bill: What does that guy know?

Jake: Yeah. Does he have a pretty good hunch of what that particular security is worth?

Bill: Nah.

Jake: No?

Bill: Nah.

Is Berkshire Headed To $1 Trillion?

Tobias: Will Berkshire make a trillion? I’m guessing this is a trillion-market cap before Buffett hits 100. Also, Munger hits 100 or Buffett hits 100. I think it was $480 billion last time I looked. You know where it is now?

Jake: I’m sure now it’s seven– [crosstalk]

Bill: I think it’s quite a bit higher than that now.

Tobias: I said, last time I looked. [laughs]

Jake: That was 2014. [laughs]

Bill: I don’t know.

Jake: Book value is $500 billion alone right now. So, what’s the machine say, Mr. Brewster?

Bill: The Google machine says $712.

Jake: Okay.

Bill: 50% return-ish.

Tobias: Yeah, could get there. It could get there before Charlie, it’s a 100.

Bill: Yeah, two years?

Tobias: It’s possible.

Bill: Yeah. Just need a real run.

Jake: Nominal.

Bill: I’ll tell you what if it does, I’m probably going to sell some. No offense to the Buff Dawg.

Don’t Double Down When Your Stock Drops

Tobias: “Charter down big– Did Bill finally buy, since he mentioned he missed it in 2020 drop?”

Bill: I didn’t miss shit in the 2020 drop. I just didn’t buy more. I was buying travel.

Jake: [laughs] Buy shit.

Bill: I own Charter. I’ve owned it since 2018. I continue to own it. However, the younger me– [crosstalk]

Jake: Is it back to 2017 prices?

Bill: It may be. Yeah. The younger me would have bought into this. The older me is not mostly, because if I’m right they’re probably going to retire 10% to 12% of the company this year and I’ll let them buy for me.

Jake: You don’t want to buy more if they’re going to in this case?

Bill: I have a reasonable exposure to Charter right now. I don’t think I need to make it some hero trade.

Jake: Zero call?

Bill: Yeah.

Jake: Okay.

Bill: I value survival much more than heroicism.

Jake: Hmm. I think that’ll serve you well.

Bill: Yeah. It’s going to work out. If I’m right, I’m going to be fine. And if I’m wrong, I don’t need more additional exposure on it.

Jake: It does seem there’s some heroic concentration that’s out there these days.

Bill: Yeah. I think that’s right. I think some of that’s because I had heard through 2018 and getting more and more that some of the allocators were pushing more and more concentration upon people.

Tobias: That’s because they’ve got distribution across, they get their diversification across so that you take– [crosstalk]

Bill: I know. It’s fucked up, right? It’s like, you take harder risk. Yeah, that’s right. So, that I cannot say that I’m hiring a diversified manager, so, I can keep my job. So, you can take all the risk.

Jake: Yeah. We need you to put 50% in your best idea, so that I can check this box.

Bill: Yeah. We really like conviction and deep work and concentration. Meanwhile, they’re allocated to hundred different managers.

Jake: My fund blew up. Now what?

Tobias: That’s what they want.

Bill: Yeah.

Jake: [laughs]

Bill: Well, listen to what I say not what I do.

Jake: You’re right. That is gross principles problem.

Bill: It’s an agency cause. Yeah, it’s a massive agency cause.

Jake: People won’t talk about that enough.

Bill: If you want to play the game, you got to do it. Then the other thing that people don’t think about I don’t think is then you look at 13Fs and you’re like, “Oh, wow, they’re mad concentrated in this.” Yeah, maybe that’s their best idea or maybe they were pushed into it for other reasons.

Tobias: It might be my bias towards invincibility and survival. But I think that that’s the theme that they often hit. But I think that Munger said at the start, “It’s not that we’ve done anything particularly brilliant over the years. We’ve just tried to avoid all the particularly dumb things.” I think that that’s much easier to do than trying to do brilliant things.

Bill: Yeah.

Tobias: You know the list of things that will blow you up.

Bill: Hempton’s, when to sell is the greatest–

Tobias: Went to sell, went to double down?

Bill: I think it’s when to sell, it is. Yeah, I think that’s what he wrote. But I just think, in general, anytime that I listened to Hempton talk about risk management, I’m like, “This dude has really thought about it and he’s really, really smart in this.” I think he’s smart. But when it comes to risk management, I have mad respect for how he looks at the world.

Tobias: What’s his Wendy sell? What’s he say?

Bill: I think it’s when not to double down would be the most accurate. It goes back to Altice. I saw that guy’s body language and my perception of the story changed and a younger me would have been like, “I understand this asset base, I’m going to buy more.” I ended up selling at 19 and here it is at nine. If I had doubled down, then I’m looking at it like, “Well, now what do I do? Do I double down again?” No. That’s how you get blown up.

Jake: And that one, especially, when the take under is lurking and you have to almost keep lowering your cost basis all along just to minimize the damage from a take under.

Bill: Yeah.

Jake: You get pot committed to that situation without really wanting– I just want to put a little bit of money in here. And now, I’m all in on this and that was not how I– This wasn’t the hand I wanted to go all in on.

Bill: Yeah, that’s right.

Tobias: They hate us cos they hate us.

Bill: Now, on top of that, there’s probably a fair amount of opportunity cost. Let’s say, you do get taken under in the market actually– Forget about the market, but some of these companies that I think are trading in pretty reasonable valuations, like, start to take off on you. Now, you got a taxable event, then you got to buy higher like, I just don’t know.

Tobias: Yeah.

Bill: If my people are buying it. I’m not going to double down into it. I think it’s crazy. And I feel somewhat similar with Charter, although, I think it’s a very different situation.

Some Investing Risks Are Just Not Worth Worrying About

Tobias: Buffett and Munger made it clear the biggest risk is nuclear war. I wonder what insurance underwriting they’ve done for nukes.

Bill: It doesn’t matter. We’re all fucking dead.

Tobias: Hold on. They had Ajit Jain up on stage talking about that. And he talked about– That was an interesting thing discussion there. Because he said, “We exclude nuclear from all of our policies.”

Bill: Yeah, but they’re going to make us pay.

Tobias: But we do underwrite for fire. I studied insurance contracts when I was in law school, which is a long time ago, now, but that was one of the– You’re insured for water damage, but not flood often or the other way around. Flood, not water damage and it’s a little bit of a– How do you have one without the other? I don’t know that there is an answer that you don’t need– I do remember that discussion, whoever was just drafting the email to me right now. But the fire one is interesting, because what he was saying was not that their contracts won’t stand up. But what he was saying that there might just be a policy decision about legislative level where they say or even in courts where they say, “Too bad, you got to eat those losses.”

Bill: Yeah.

Jake: I don’t think that there’s much to worry about here with that, because in my opinion, we insure those kinds of things from a societal level. We’ll pay for that. I don’t think it’ll come down to– Why trash all of your insurance companies completely and zero them out from these kinds of claims?

Tobias: I think you are assuming rational actors at a political level, which– [crosstalk]

Bill: I don’t know. Moral hazard, man. They should carry enough cash to undergo nuclear attack at all times.

Jake: Oh, come on.

Bill: Why did we bail out the airlines when we stop the economy? They should have had more cash on the balance sheet.

Jake: Well, that argument that we not going to– [crosstalk]

Bill: This is [crosstalk] doesn’t make the facts different.

Jake: That’s an argument for what I’m saying is that we will all pony up and take the tab for that thing. It’s not going to fall on any one entity.

Bill: No, I think you’re right. I think those are the times the bailouts are actually–

Jake: If you’re worrying about Berkshire’s or any insurance company’s survival in a nuclear holocaust, I think you’re a little too plugged into the markets and need to be a little bit more plugged into humanity.

Tobias: [laughs]

Bill: Yeah. The markets are going down no matter what. Mitigate that with your– [crosstalk]

Tobias: It depends on the market at the time like 2021.

Jake: FAANGs got to rip on that, I think.

Tobias: [laughs] Zoom will be up along.

Bill: I think even FAANGs earnings are heard on that.

Jake: Intangibles, bro. You can’t nuke intangibles.

Bill: Yeah. You can win a lot of the values through advertising.

Tobias: But it’s one of those. It’s like the John Maynard Keynes argument where–

Jake: What? Eyeballs? [laughs]

Bill: That’s right.

Tobias: I like the way that John Maynard Keynes thinks about some things when one of those is–

Jake: [crosstalk] those think about it?

Tobias: Well, thought. I always feel I’m having a conversation when I read. I think the general theory, it sounds it’s this really complicated work, but it’s all free online. You can have a look at it. I think it’s quite readable. I find the general theory, I’m not trying to make it sound like I’m super genius or anything like that. I just find it easy to read. There’s a lot of stuff out there that I find impenetrable. That’s just not one of them. It’s a reasonable easy read. But he makes the point in there or in some of his letters, I forget now, exactly where it’s sort of, but that there are some risks that they’re just not worth worrying about. You just have to ignore them. You can’t control them. So, if it happens that there’s a nuclear war, then it’s probably not going to be gold’s going to save. You’re going to need shotgun shells and shotgun barbwire around the house.

Bill: I mean T bills would probably catch a bid, right?

Tobias: [laughs]

Jake: Which ones?

Tobias: Briefly.

Bill: Treasury bills.

Tobias: VIX is going to go bananas.

Bill: Yeah.

Tobias: VIX calls, that’s where you want to be.

Jake: Yeah, VIX calls, Black Swan insurance.

Bill: But I do think that’s an asset allocation question. I don’t think you can look at one individual equity and be like, “Well, which equity is going to be safe in a nuclear attack? None of them.

Tobias: What does the– [crosstalk]

Bill: They all are shorts. Yeah.

Tobias: Do you think they’ll be setting the interest rate that then–

Bill: All go down to zero.

Tobias: Jay Powell still be out 2% inflation. We’re still targeting 2%.

Bill: Jay Powell, it’s going to be interesting to see. Not so much the nuclear thing. We’re ready to go. I have no interest in seeing the nuclear thing.

Jake: I don’t either, but I’m finally getting around to reading Red Notice, Bill Browder. Incredible story, by the way. I love the high jinks that he’s getting in the investment context, like, looking for these arbitrage situations that no one’s looking at. I think it’s such heroic investment work that he was doing at that time. But I’m not done with it, yet.

Maybe my opinion will change on how this all works out. But I’ll probably end up doing a veggie segment at some points that there’s some interesting stuff in there. But just the idea of going after some of these opportunities that were just such market inefficiencies. The information is just nowhere to be found, unless you’re actually boots on the ground doing the due diligence. That’s a real investment stuff. Not us, me debating like, “Oh, should you buy Google or not?” It feels childish in comparison, sometimes.

‘Buying The Dip’ Doesn’t Work

Bill: Wow, the 5, 10s inverted.

Tobias: What’s that mean?

Bill: I don’t know. It looks like the 10-year gives you 294 and the five-year gives you 298.

Tobias: On the recession risk, the recession typically follows– Well, as we’ve discussed in the past. It’s the 10-year 3 month is the research that was originally done by Cam Harvey and that hasn’t inverted this time around. But the 10-2 seems to be for whatever reason. Folks [crosstalk] don’t do that.

Bill: [crosstalk] 275 today.

Tobias: The 10-2 did invert and typically the recession for six months after the 10-two inversion. The 10-2 has inverted and then uninverted, but that doesn’t matter the six months runs from the 10-2 version so.

Jake: So, how long do we have left in that, like, four months or something?

Tobias: Something like that. Yeah, four or five months.

Jake: Till the world collapses?

Tobias: Wouldn’t it be funny if it was just as simple as that, it was just clockwork, you just knew it was going to happen? It does feel we’re going through some– Who really knows this mark as we’ve discussed thousands of times. It could be up or down 30% from here. But as we’ve discussed lots of other times, so, this is what the bear markets look like where–

Bill: Yeah, this is an actual bear market.

Tobias: It rallies and then it falls to a lower low. Every time you buy something, it kills both the dip buyers and the– [crosstalk]

Bill: I’m not buying, man. Guy at the gym, when he stops buying, that’s when I’ll think about it.

Jake: [laughs]

Bill: I don’t mean it in a rude way. If you listen, I got mad love for you, but I am using you as a– [crosstalk]

Tobias: It’s the Shushan boy.

Bill: Yeah, he’s an intelligent dude, though.

Tobias: Sounds bad,

Bill: But I don’t know. There’s still a lot to buy the dip.

Jake: Well, it’s been Pavlovian condition to be the winning strategy for 12 years now or something, right?

Bill: Yeah. I’ll tell you what’s interesting is building permit data is strong as hell despite the rates.

Jake: Oh, yeah? Does that measure starts then? Is that the idea?

Bill: I think that it lead starts.

Tobias: To be fair, the rate move is very, very recent. It might take a little bit longer.

Bill: Yeah. It should take a couple months to get through, but– [crosstalk]

Jake: What if he can’t finish the houses, though? That’s the other question because you can’t– [crosstalk]

Bill: That’s the problem. Completions are garbage right now.

Tobias: “Anyone noticed the inefficient market in the lines to get in before the meeting? In the much shorter one you could use mobile app *or* the vaccine card. Long line was physical card only?” Yeah, JT and I-

[laughter]

Tobias: -discovered that, too.

Jake: Yeah.

Tobias: We were in the app line.

Bill: Ah.

Tobias: because I’m a hyperbolic discounter I hadn’t actually downloaded my app until I got this, which could have been in the other one.

Jake: Turns out it didn’t really matter.

Tobias: Yeah, it turns out didn’t matter.

Jake: It did feel like a smoother, I think there’s some supply chain analogy here of being feedstock coming in at a smoother pace and then therefore, you don’t get as many snarls, but the loading up of the auditorium or the arena seemed to be smoother than in years past when it was you needed sharp elbows to get to the seat that you want. [laughs]

Tobias: Yeah.

Bill: Yeah. There also are a lot fewer people, I think.

Jake: Yeah, that’s true.

Tobias: Did we get an official count? Did they give us the– Did anybody see that?

Bill: No.

Jake: I never heard one.

Bill: Guys, I got to take a break. I’m going to wet my pants. I’m sorry. I’ll be right back.

Jake: [laughs]

Tobias: What do you think the numbers were down?

Jake: I have to imagine it was the China contingent, maybe not being able to travel due to COVID zero type of stuff. That’s my only– And now, that it’s live stream. You don’t have quite as much of an– You’re not going to miss anything really other than the social aspects.

Tobias: I saw there were a lot of people in their KN95s and rubber gloves. I was just going completely commando.

Jake: Just making out with every stranger you could go. [laughs]

Tobias: That was a good test of the immune system. We’re going to find out, I guess, in a few days. What’s the incubation period? Four days?

Jake: I don’t know. She’s considering whether– [crosstalk]

Tobias: She said, “Go into another room.”

Jake: Yeah. She’s considering whether to let me into the house or not.

Tobias: [crosstalk]

Jake: Few more days.

Tobias: Let you hose off.

Jake: Yeah, exactly. I had to drink a bunch of bleach before she gave me a kiss when I go home.

Tobias: [laughs] Yeah, I wonder. We are going to find out. I’ve got little kids. So, I figure I’ve got a bulletproof immune system at this point.

Jake: Yeah, they’re just feeding me microbes all the time.

Tobias: Stick their little hands straight in my mouth.

Jake: [laughs]

Tobias: Go and stick their hands into each other’s mouths at school and can stick it into mine when they get home.

Jake: Oh, cesspool. So, gross.

Tobias: But as a result, I can’t get sick from anything anymore.

Jake: No, you’re like Invincibles. You’re running your immune system– [crosstalk]

Tobias: It’s true. I tried to become one test it out.

Jake: Yeah [laughs].

Key Takeaways From The Berkshire Meeting

Tobias: That’s what they say, right? Test it out. Check it all the time. What was your like big ticket item? The thing that you took away like, the thing that you just hammer into the nut. You got to remember this for the rest of time.

Jake: Yeah, I would say, it’s not your rate of return. It’s the exponent on that calculation. How many years can you do it? If you can stay alive to get that exponent to be as big a number as possible, then that’s the real name of this game. It’s not putting up 25% or 30% returns for a couple of years. Can you do it for a lot of years and you that’s how you win.

Tobias: Yeah, that was mine, too.

Jake: Sorry, I got that one already. You have to come up with something else.

Tobias: Oh, mine was that Charlie said, “It’s not doing the brilliant things. It’s not doing the dumb things. But that’s basically how you achieve what you’re talking about.” That’s what I’m trying to get to. I just want to survive to the ripe old age of 98. I’ll get my– [crosstalk]

Jake: I think that applies to the businesses too, where those returns on capital that aren’t 50%, then go to zero in three years, because everyone wants to get in on your honeypot. I think the flying under the radar at that-

Tobias: Yeah, 13% return.

Jake: -low teens is the–

Tobias: Well, the S&P 500 averages 13.3%. Maybe you want to be at-

Jake: 14.

Tobias: -13.4%.

Jake: [laughs] No one’s looking there.

Tobias: And like just under the market multiple. Just surging on the wave.

Jake: Sustainable.

Tobias: What’s your big takeaway, Bill from your single idea that you want to remember, that you want to carve in the beams of your office?

Bill: I don’t have any from that. Those guys are the men. I just have a lot of respect for them. I think that the world would be better if more people listen to what they said and I just am really grateful that I found them.

Tobias: Yeah, likewise. I had to quite appreciate what a lad Charlie is here. Charlie’s one liners in that second half were hysterical.

Bill: Ah, he’s the man.

Tobias: Yeah. He’s real– [crosstalk]

Bill: [crosstalk]

Jake: There was a little bit of complaining in the beginning, because Buffett was meandering a bit, and they only got through seven questions in the first half, something like that. So, it’s like, “Oh, come on. This is feeling a little draggy.” Unless you’re at 2x, what Bill was able to do.

Bill: Still little meandering.

Tobias: But here’s a picture of a duck that looks like a-

Jake: It looks like a rabbit.

Tobias: -rabbit, if you switch it around. Isn’t that cool? Just found them on the internet.

Jake: Then second half, though, picked up the pace, got through more questions. And then my absolute favorite is, when the two of them talk back and forth as if we’re not there.

Tobias: Yeah.

Jake: They ask each other questions and “Oh, do you tell them this story? Remember this.” I could do that all day long and not have any questions from the audience.

Tobias: Oh, 100%.

Bill: Yeah. Just a podcast between the Buff Dawg and the Mung.

Jake: So good.

Tobias: That’s what it is. That’s what it is. They have been doing a podcast now for 50 something years.

Jake: It’s so good when they get into that mode.

Tobias: They had some interesting stories. I like the fact that Charlie couldn’t remember one of the stories that he had told Buffett, Buffett had to start him off.

Bill: Yeah. [crosstalk]

Tobias: I can’t remember what the story was, though.

Jake: That was the one on chiseling down the–

Tobias: Oh, that was good. Yeah. The Fairness Opinions.

Jake: Yeah, Fairness Opinions.

Tobias: The story was, when they were doing some of those related party transactions with Berkshire, it was tidying up blue chips, and diversified, and a few other things. They had to get a Fairness Opinion, because Buffett was the biggest shareholder on both sides and Munger had a shareholding on both sides. They have to recuse themselves and get a Fairness Opinion. And Fairness Opinions are– The bank is putting its reputation on the line.

Jake: Do you ever have to do any of those? Did you write those up before?

Tobias: I have sought them. I actually had to ever do them. As a lawyer, you’re not doing Fairness Opinions. You’re doing an opinion on, is the company properly formed? Does it hold the assets that it says it does? That’s what he’s saying?

Jake: Gotcha. Yeah.

Tobias: But it’s the same idea. But basically, you’re writing it insurance contract. You are writing a put for them.

Jake: Yeah.

Negotiating Munger Style

Tobias: They charge a lot of money for them. It’s not because it takes a lot of time to do it or it’s hard to do is, because it’s risk. They want a million dollars and naturally those two guys don’t want to pay a million dollars for that thing. Buffett said, “What do I do to Charlie? Charlie said, “What you do is you take a list of the 10 investment banks that you want to do it and you contact the first one, how you want them to do it, and you say, “I’m offering $50,000 to do this. It’s against your economic interests. Take this, but I’m just telling you that I’m offering $50,000. If you say no, I’m going to go to two through 10 and offer them the same deal. If everybody says, “No, I’m coming back at $60,000 and then we’re going to go through it again.”

Jake: It’s basically auctioning it off to them.

Tobias: Reverse Dutch auction.

Jake: Yeah.

Tobias: Oh, that’s not Dutch, but reverse auction. The first two accepted.

Jake: [laughs] Yeah, they had to get two and then yeah, the first two, I don’t think they had to make any more calls than the two calls at the front. It saved a ton of time.

Tobias: Buffett said, Charlie had given him four pieces of advice. That was one of them.

Jake: Yeah, it was very definitive. There was like, “I have four things that he taught me that moved the needle and that was one of them.”

Tobias: What was the other one? It was a good one, though.

Bill: Didn’t he say, he didn’t want to share some of them, because he might want to use them still?

Tobias: He did. He only gave two.

Bill: Yeah.

Tobias: I wish I could remember what the other one was.

Bill: Well, people should do their homework. They can watch it.

Tobias: Somebody let us know, if you can remember what the other one is. Did Robinhood respond to Charlie’s criticism? Someone says, they did.

Jake: I don’t know. Did Bitcoin respond– [crosstalk]

Bill: Well, I’m sure that’s [crosstalk] a newsworthy response that everyone should read.

Tobias: [laughs]

Bill: [crosstalk] enjoyed it.

Jake: Apparently, Bitcoin’s only worth $25 for the entirety of it according to Buffett.

Tobias: [laughs] He said he wouldn’t give you 25 bucks for–

Jake: Oh, $24. Sorry. [laughs]

Tobias: then he might be chiseling them.

Bill: Robinhood has argued against Charlie every time he’s talked about it. And so far, Charlie looks really, really right. So, it’s just another press release.

Tobias: “Where will value folks gather in 20 years? Who is the younger Buffet and Charlie?” That’s a good question. I don’t think we’ve got a– Well, there are meetings like such probably Markel or Fairfax, something like that, right?

Bill: Yeah.

Tobias: We’ll have to get together and work that out.

Bill: Yeah. We just need to throw a really good event.

Jake: Markel has done a really good job of cobranding into the Berkshire meeting, and having Berkshire like principles, and doing– Their brunch they put out on Sunday morning in Omaha has long been a great event to attend.

Bill: Bagels.

Jake: Yeah, theirs is bagels.

Bill: Yeah. Shoutout to Tom. Thanks, man.

Jake: Yeah, sausage and egg bagel breakfast-

Bill: Delicious.

Jake: -to get you over that a couple of IPAs the night before. [laughs]

Bill: That’s right. He started at the right time. I was like, “Oh, is this going to be at nine? Nope, 10?” So, right time. Give people time to sleep in or run at 5k or whatever.

Jake: Run a 5k.

Bill: Yeah.

Tobias: Yeah. What was it? Was it 10:00, 10:30 something like that? I agree.

Bill: I think it was 10.

Jake: You get there 10, I don’t think they start talking till a little bit after that but yeah.

Tobias: We’ll start from– [crosstalk]

Bill: I was there at 9:15.

Tobias: [crosstalk] where a dozen people around to my house for a cup of tea and some bikis. That’s a cookie.

Jake: 10 people.

Tobias: Cup of tea and some cookies, plus, you guys. That’ll be 12 of us all together.

Jake: 13, I think is last time.

VALUE: After Hours Berkshire Meetup Review

Tobias: It was good seeing some of the people behind the Twitter accounts that we always interact with.

Bill: Yeah.

Tobias: You can’t tell how gigantic someone is from that Twitter account. It turns out some big blokes walking around there.

Jake: Including you, Toby. You’re always taller in person. Unfortunately, I’m always shorter in person than people are expecting.

Bill: I’m apparently, fatter.

[laughter]

Tobias: Always there for that one.

Jake: We all have our crosses to bear.

Tobias: I was impressed, I know who that was to just told you flat out to your face.

Bill: Yeah, I was like, “Jeez.”

Tobias: Clearly believes you are not a violent man.

Jake: Yeah, he’s lucky. Get rassled to the ground.

Bill: I’m not wrestling rassling anybody at Berkshire. I just looked at him like that’s a bold thing to say.

Jake: Florida man rassles. [laughs]

Bill: Yeah.

Tobias: Fellas, we’ve made it. That’s time.

Jake: Oh, we did it.

Tobias: This was a fun one. It was good seeing you guys and good seeing you live.

Bill: Yeah, it was fun.

Tobias: And good seeing everybody else, too.

Jake: Yeah, thanks for coming and saying hi to everybody.

Tobias: I truly am energized after that. Not even the meeting, really just seeing everybody, seeing all the faces behind the names.

Bill: I’m going to be better looking next year.

Tobias: [laughs] Thanks, amigos.

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