During their recent episode, Taylor, Carlisle, and Bogumil Baranowski discussed:
- I’m a Value Buyer but a Growth Holder
- Forgotten Money and Forgotten Stocks: The Peaceful Portfolio Concept
- Why Having No Price Target Can Make You a Better Investor
- Why the U.S. Is Still the Best Place for Capital to Grow
- The Secret to Long-Term Investing: Buy Cheap, Hold Forever
- Compounding Wisdom: The Hidden Edge of Lifelong Investors
- From Communist Poland to Wall Street: Lessons in Patience and Freedom
- Why Owning Businesses Beats Trading Stocks
- Why Central Planning Fails — and What It Teaches Investors
- Building Generational Wealth That Outlasts You
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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TRANSCRIPT
Tobias: I think we’re live. I always stare blankly at the camera for the first few minutes, just to let you know that there’s nothing going on behind the eyes. I’m reading off a prompter and I’ll read anything. I’m Tobias Carlisle. This is Value: After Hours. Joined as always by my cohost, Jake Taylor. Our special guest today is Bogumil Baranowski of Blue Infinitas Capital, host of the podcast with perhaps the greatest name ever Talking Billions. How are you, Bogumil? Welcome.
Bogumil: I’m very well. Very excited to be here.
Tobias: Just tell us a little bit about your investment philosophy, and your journey to setting up Blue Infinitas.
Bogumil: Wow. A simple, easy question to start with.
Tobias: That’s it. We’ll see you at the end.
[laughter]Bogumil: Where do I start? I manage money for families, long-term patient capital. I’ve been doing it for 20 years. I discovered investing when I was an exchange student in Brussels. I was born in Poland, went to schools around Europe. I was in Brussels at some point, and I picked up a book by Peter Lynch One Up On Wall Street, and I studied business, economics, political science at the time. But that book really opened my eyes to a whole new world.
I found investing just a fascinating intellectual puzzle, something that I could figure out. And it’s not that I thought I’m going to beat the market, outperform, and become the richest person in the world. I thought this is worth paying attention to. This is something that I want to spend time understanding.
I came to New York, I joined the firm, and I was very fortunate that that firm was focused on a certain subgroup of clientele that had money for many generations. I realized that if you want to be a long-term patient investor, you have to have clients that are on the same time horizon. I call it the Infinite time horizon. I grew to appreciate the people behind the portfolios.
Two decades later, I was trying to figure out what’s the best vehicle for me to continue to do it for the rest of my life. I feel very young, but I am 45, and I’m thinking about the folks in their 80s tell me that I’m just getting started. So, it depends on the [laughs] perspective. But I was thinking about the second half of my career, the two-thirds ahead of me.
I set up Blue Infinitas to serve a few families, and open it up to new business for other families that are on the same page, and continue to do what I love, which is investing and spending time with clients. So, here we are.
Tobias: How would you describe your investment philosophy. Are you a value guy? How would you describe it?
I’m a Value Buyer but a Growth Holder
Bogumil: I love the labels, as you can imagine. I call myself– [laughs] If you really corner me, I’m going to say I’m a value buyer, but a growth holder. I want a deal when I go in, mostly because, of course, it improves the returns if you’re right. But if I’m wrong and I paid half of what I think something is worth, there’s a lot of room for me to get out without too much damage. That’s how I look at it. I always go in thinking, what if I’m wrong? Can I afford it?
I think a lot of people get into investing, because they have this urge to be right. I think it’s a dangerous place to be. So, I want to get a deal up front. Even if you look at the largest and most successful companies out there, if you look at the last decade or two, there’s so many windows where these stocks were down 40%, 50%. And we forget it. But I was in rooms with people that were convinced that among the top Magnificent Seven, all of them, they had really convincing reasons why these companies will never grow again, whether there was a switch to mobile at some point, and new competition, all of those things. People were convinced that these things are done and they’re multi-trillion-dollar companies today.
I was in rooms when really smart people were very close to convincing me that these companies are done. So, I owned some of them and many others over the years, but I go through this realization that I met enough people that told me they bought the right thing at the right time, even at the right price, but they were not in a position to hold these holdings long enough. I think that’s where you really create value. That’s why I call myself a growth holder, because once I bought it right, it really takes me a lot to sell. So, that’s the philosophy in a nutshell.
Tobias: What begs the question a little bit, what does it take to sell?
[laughter]Why Having No Price Target Can Make You a Better Investor
Bogumil: It has to be pushed out by a better idea. I used to be much more sensitive on the valuation side, and I dropped the idea of a price target. I worked with a lot of people at different points in time that were set on a price target. I think a price target, it gives you a false sense of precision that you know that this is a $50 stock. You have a huge dilemma when you reach the $50, because what are you going to do next. Like, this could be a $100 stock, right? [chuckles] And it could be $150 stock. I think psychologically it’s very hard. So, I have no price targets. If something makes sense, I’ll keep on holding it.
I’m writing a piece now. [chuckles] I’m exploring this situation when I’ve owned something for 10 years, 12 years. And at some point, it becomes part of some short-lived euphoria, and it clearly gets inflated by the market. I have a huge dilemma here, because I could sell it. I mean, I have all the reasons to sell it, because I feel like this valuation will not hold, or this stock will take a lot of time to grow into this valuation.
But what do I do next? There are tax consequences for a lot of clients, that’s one thing that makes me slow down. And second, going back to an idea, I think it’s this untold secret or truth investing. It’s very hard for a lot of people, including me, to go back to an idea. So, I’d rather just wait it out and see a dead money period, or even a drawdown in a holding. It’s tough. It’s hard, but–
I had Chris Mayer on the show many times, and Chris talks about those 100-baggers, and we’re all fascinated with the idea. But what he really talks about, is that there’s so many periods when it’s so hard to hold onto those stocks, because they go absolutely nowhere. Even among the Magnificent Seven, a lot of them went nowhere for two years.
I was in rooms when people would ask me, “Why are you still holding it? I mean, it hasn’t moved, the whole market is up, but one of these incredible companies, they’re not moving. What do you do? And if you sell, when do you go back? When it sells off 10%, 20%, 30%, it might never sell off again,” like that. So, I’d rather err on the side of sitting on my hands and doing nothing.
Tobias: Does the period of two years waiting around follow on from the period of being very overvalued?
The Secret to Long-Term Investing: Buy Cheap, Hold Forever
Bogumil: Well, yes, yes. Short answer is yes. So, I see it as a company growing into its valuations, and we’ve all seen it, right? I think the tricky part with the market, is that there are hardly ever any periods, especially for individual stocks, where the market in a calm way absorbs all the news, good news and bad news. It doesn’t just happen. That’s how I look at it. If it’s a little bit of a bad news, the stock is down 20%. If it’s a bit of good news, it’s up 10%. Why isn’t it up a percent or two, and then three months later at percent or two? It doesn’t work that way.
Actually, there was this incredible study that I quoted in one of my Substack essays, how if you take out all the after-hours market movement? Have you seen this study? I have to look it up again. The majority of the returns for the overall stock market as such happens after hours, where the announcements are made. I think there’s so many lessons out of this study, but one of them is you’re going to miss out on a lot of movement, if you just participate during the day. It gives me a lot more peace of mind that I don’t have to watch my stocks during the day, because that’s not where the biggest value is created. [laughs] They move up and down, up and down, but then they report and they’re up 15%. Even large names, they’re up 10%, 15%.
Anyways, so, the market overreacts in both directions all the time. I wouldn’t cry about it. If you’re a disciplined long-term investor, I think it creates an incredible opportunity. If everybody’s focusing on the guidance being lowered by a percent and the stock is down 20% and it’s a large company that everybody knows, why not be a contrarian here and buy a few shares and wait it out.
Tobias: You’ve been doing this for two decades. What has changed over two decades? How have you evolved? How has the market changed?
Bogumil: I used to be much more frugal and much more focused on the cheap-
[laughter]Bogumil: -cheap end of the spectrum. I’ll tell you a story. I won’t mention the name of the company, but 10 years ago or so, we were researching as a team and I was leading at a certain stock that looks super cheap. We spent a lot of time researching it. It had a little bit too much leverage for me. But we spent a lot of time, a lot of resources, a lot of research and people were falling out of love with this company, which something I usually like. It got to the point that nobody wanted to talk to the management. The management came to visit us in New York. And yeah, we were not the–
The people wouldn’t see us as much, but they came to see us, and I thought, nobody wants to see you, guys, [laughs] so we want to see you. Anyways, after one of those meetings, one of the managers, portfolio managers at the firm where I was, he walked up to me and he said, “They have a competitor.” And I said, “I know. But the competitor is trading at a higher multiple.” He says, “Yes, but they have less leverage and they seem to get things right, the new product launch, new market. They just seem to just get it right.” They seem to get it right and the other guys always get it wrong. The cheap stock was getting it wrong. So, he said, “I don’t know enough about the competitor, but I’m just going to buy the competitor.”
And obviously, we had this tremendous, very painful holding period, and this never worked out. We sold it with a small loss. And here he was holding a stock that was so much easier to hold, because the business was doing all the right things for the right reasons. I watched this manager over the years, and I realized sometimes we might think that you might get something cheaper, but it might cost you in a non-monetary way monetarily, too, but with the lost sleep and the time invested and so on. So, I think there’s a lesson at least for me that sometimes I’m willing to pay up, I’m just willing to accept the price.
Jake: Is that kind of a return on brain damage calculation you’re doing?
Bogumil: And pain. Sometimes it’s almost physical pain.
Jake: [chuckles]
Tobias: I like that idea. But let me give you the counter example which would be-
Bogumil: Yeah, there are many. [chuckles]
Tobias: Graham called it double counting, when he went and had a look at the quality of management. So, you find a business that’s doing really well, and you impute all of these great qualities to the management of that business that’s doing very well. And then, you find a business that’s struggling and you think, “Well, these guys are bozo. They’re just not doing the obvious thing here.” Sometimes it’s just a little bit of the turn of the market. It’s the cycle that you look smart when you’ve got a great history and you look dumb when you’ve got a great future.
Forgotten Money and Forgotten Stocks: The Peaceful Portfolio Concept
Bogumil: Yeah. I think what I’m looking for, it’s a certain gap between reality and perception. I think you can find that gap between across a very wide spectrum. I think you can find it in the very cheap bucket and you can find it at the very, well, expensive end of the spectrum. I think we all have to find a place where we’re comfortable. I’ve talked to enough people to know that there’s probably a thousand ways to make money owning stocks, I have no doubt.
At the end of the day, the best portfolio is the one that you can hold or your clients can actually hold. If they feel comfortable holding certain things that move up and down a lot, or that are cheaper or more expensive, or have better margins or lower margins, whatever it is, you found a sweet spot that resonates with your audience. So, I evolved in the sense that I would rather hold slightly better-quality businesses or better-quality businesses that I could almost forget about. I take this idea to its limits. Somebody asked me, I think it was James O’Shaughnessy. He asked me, “What kind of money you want to manage?” I told him, “Forgotten money.” And he laughed.
[laughter]Bogumil: And I said, “No, I really mean it. I want to manage forgotten money.” And he said, “What do you mean?” The clients that I work with, it’s the money that they don’t immediately need, but it’s the money they can’t afford to lose. I think it’s a beautiful framework and setup for it for what I’m trying to do. If you have money on the side that you need for the house, the car, the college, for the kids, it’s not the money that you can really invest. I think we’re not as open and honest about it, that’s not really investable capital in the sense that I see investable capital. The capital that I manage, it gives people huge peace of mind that it’s there, but it’s not part of the daily equation that that’s the money they have to dip into to make this payment or that payment.
But within that forgotten money framework, I’d like to have forgotten stocks. I’d like to have stocks that I could just forget about. If I forget about them and not check on them for six months or a year or maybe five, will they be more or less okay? That’s how I look at it. It’s a huge test. I’ve owned stocks that I had to watch. Like, really, really watch quarter to quarter. How much worse is this getting? [laughs] I’m not going to get that [laughs] time, effort, attention back. I don’t think I was compensated proportionately in terms of the investment return for what I was trying to do.
Tobias: Yeah, that’s certainly been true for cyclicals for a very extended period of time that sort of buy and sell. Necessary for cyclicals, it’s definitely a buy and hold, never sell type market for the things that have won, which is the Mag 7 and so on. You talk about compounding wisdom as much as compounding capital. What do you mean by that, and how do you go about doing it?
Compounding Wisdom: The Hidden Edge of Lifelong Investors
Bogumil: It’s the idea of always learning. I think I stayed in investing because of the people that I get to work with. That’s for sure. But also, because it’s a never-ending learning opportunity. Even hosting the podcast, now sitting down with people and talking to them for an hour about something they dedicated decades of their life to, and they’re so passionate about it. They know everything about that aspect of money, wealth, investing, whatever it is I take away from it. People ask me, “What’s your return on investment with the podcast?” And I said, “There’s no number. It’s an inspiration, it’s a lesson. It’s an eye-opening experience. It’s the ability to learn from other people’s mistakes. It’s all those things.”
So, the more you learn, the more questions you have, the better your questions become. It’s an open-ended pursuit, just as investing is to me. I know that I open the laptop the next day, there’s something new to think about. A lot of the things that’s on people’s minds today, like AI, this wasn’t part of the conversation even three, four, five years ago, really to that extent. So, there are always new things to look at question.
I remember a senior partner at one of the firms where I was years ago. He told me that he likes investing, because he feels that he’s always plugged in to the world. I might look at a pharmaceutical, but I’m not a pharmacist and I’m not a doctor, but I can understand how this helps, how it’s sold, how it’s paid for. I have this head on my head that allows me to analyze all kinds of businesses industries that I’m no expert. I have no idea how to produce this medication, but I can understand how this medication can help and work in the world.
So, it’s this ability to have a lens and an eye on some of the most fascinating things that are happening around us, and have an opinion about it. And if you want to act on that opinion, do that and own a few shares of companies that maybe will benefit from it.
Jake: Yeah. It’s nice to have that kind of a monetary spur for your curiosity.
Bogumil: Yeah. I thought about it a lot that I know investors that are very financially comfortable. Like, they’re not doing it for the money. I think it’s a bigger picture idea that what I find fascinating is when you have a founder of a business that’s worth tens of billions of dollars, I think we all know that they’re not doing it for the money. They really don’t need the extra $10 billion. But they’re on a mission. They’re doing something, they’re building something, and they’re staying and working harder than they probably need to or should for decades to come.
When you have an investor that’s just showing up every day– I met people in their 90s who were investing still, and opening up the newspaper, and reading things, and asking things. They were asking about Facebook back in the day. They had no idea what Facebook was, and I had to explain what. They would call it Bookface, by the way. [Jake laughs] They would say, “Tell me about that Bookface.” [Jake laughs] I thought it’s so endearing and fascinating that at 90, they felt they don’t know it all, they won’t understand. “So, is this like a newspaper? Is it like a radio? What is that Bookface?” I would sit down with them, and as much as I could explain, I tried to explain.
Tobias: What are the most common mental traps you see investors falling into?
Bogumil: I think we overcomplicate what investing is about. I think we’re trying to make it way, way too complicated. To me, the idea is very simple. I’m not saying it’s easy to do, but some of us are in a position to be investors. We have some capital that became available to us, either we– And what’s one of the traps? I think for value investors, that we are frugal, so there is some capital that’s saved on the side and that capital has to be deployed. At some point, we realize that a money market account or a certificate of deposit is just not enough, so it has to be invested in some way.
Obviously, with the families I work with, there’s a family inheritance or a business that was sold, so that money is, it needs to be deployed and it’s a serious challenge and an opportunity. And now, a question is, how do you do it? I have an overly simplistic answer, but you have to own businesses. If you are not going to start those businesses on your own, which I think is really hard to do, to start a business on your own, then you have a choice with the stock market, an opportunity to own small pieces of businesses. That’s what Peter Lynch told me in his book 25 years ago, and I thought it was fascinating.
I don’t have to be a billionaire. My age, my gender, my education, my experience, nothing matters. I can own a few shares of some of the most incredible businesses out there, and be treated the same way as the founder. I know there are different classes of shares. You can challenge this statement, but the principle is the same, like, I get to own the same a slice of a business with the same rights more or less as the founder without– [crosstalk]
From Communist Poland to Wall Street: Lessons in Patience and Freedom
Jake: How did growing up in Poland influence that appreciation for that ability to own business? Yeah.
Bogumil: Hugely. [laughs]
Jake: Maybe you could share some of the background of that that’s always interesting.
Bogumil: It’s a terrific question. I think we all grow up in certain circumstances, like even the three of us grew up in different places, and we assume that everybody else has the same experience. There are books about inherited wealth, how people have inherited wealth. They assume that everybody grew up with inherited wealth and they realized, no, it’s actually an exception to the rule that somebody grew up with inherited wealth.
Anyways, I grew up in Cold War Poland. So, I got to see the last decade of a failed economic political system. I saw empty stores, I had to line up with my parents and grandparents in front of empty stores, so you would get a paycheck. But even with the paycheck, you had to go to the government owned, state-owned store that was empty. Huge shortages, poorly managed economy, and a large, healthy gray market on the side where you could buy things.
But anyways, the principle was that private property is not allowed. Private property is not something that’s a good idea in that system, because it means that you accumulate wealth, you’re greedy and all those things that you know about socialism, communism, one and the same thing at the end of the day. So, anyways, owning things was not an option and owning a business was not an option. Even sometimes owning an apartment was not really possible, because it was just a lease from the government.
So, coming to discovering, Poland changed in a huge way, when I was a teenager. The stock market reopened, supermarkets came in. It was a massive, massive change, hyperinflation as well. But anyways, discovering Peter Lynch who tells me, “Listen, there’s a stock market, and it’s not necessarily a casino. It could be if you want it to be, but it’s also a place where you can go and buy shares of companies.” It just blew my mind. “What do you mean? I have $100, and I can have two shares of this, one share of that and become a shareholder? How come?” It just blew my mind.
Jake: I can own Coke or Nike. [chuckles]
Tobias: Poland has become one of the world’s great success stories over the last– Well, since it opened up and then it’s often used to contrast with other countries that have gone the other way. What’s that experience knowing some of the people presumably who’ve lived through it, and what is that like?
Bogumil: Well, I left Poland 20 some years ago, but I go visit and I saw a massive change in the first decades of the 1990s, when the country opened up. It was such a big shock. I think that we’re trying to label things, and Poland was labeled an emerging market for a period of time. I think the idea, is that the country was absolutely frozen. It’s not that it was not capable of growing or delivering value. It was just stuck, because if you don’t allow people to start businesses, if you have only the government as the only buyer of your skills and talents, if you have the government as the only seller of everything that you need in your life, you can imagine what a huge inefficiency it creates, right? If you want to work the extra hour, it doesn’t really matter. If you want to work a little bit better and compound wisdom that we talked about, nobody cares.
[laughter]Bogumil: So, the system levels everybody. There are some people that say, “Well, I didn’t feel like working anyway.” But there are quite a few people that think that “I could make a better loaf of bread, I could make better shoes or I could make whatever better, I could teach kids better at school,” and on and on. If you take that away, it’s a huge deprivation.
Anyways, this was released in the 1990s. In Poland, I saw statistics, and I hope it’s correct that the purchasing power of the average citizen is catching up with Japan, which is unbelievable to me. Because Japan in the 1980s, it was supposed to take over the world. Japanese businesses were buying US assets. I remember this moment, and you’re telling me that Poland is catching up at least on purchasing power level to Japan in my lifetime. It’s hard to process. It’s a huge leap. But to me, it’s a proof that if you let people operate in a free-market economy and sell their skills and services to the highest bidder, the outcomes can be really impressive.
Tobias: What about lessons as an investor? Does it teach you something about patience, or about incentives, or what do you take from your childhood, which was in a totally different system to the one that you’re in now?
Bogumil: I think there’s so many layers to it that I still uncover them as I go. It was one revelation. I have a very calm and collected attitude to money as such, as a phenomenon. Because in the first decade of my life, even if you had a paycheck, you couldn’t really spend it. So, to me, shopping is not really a fun activity. I grew to accept it, and I spend money.
Tobias: Yeah, that might just be because you’re a man.
[laughter]Bogumil: There you go. But money, it was very abstract as a concept. I knew that my parents are getting paid, and I got that. But then, we had the cash, and we couldn’t buy things anyway, because the stores were empty and you had to line up and wait for things to show up, even the basic goods like flour and sugar, which is– And even meat. Poland ran out of pork. Poland was invaded by European powers for hundreds of years because of pork and grain. We ran out of pork and flour grain, because it was all shipped to– [crosstalk]
Jake: You really got to screw up to do that, huh?
Bogumil: And whatever was produced was shipped to the Soviet Union. But anyways, that’s– [laughs] So, I remain to have a very calm and collected attitude to money. Money comes and goes. I saw hyperinflation, which is a very confusing phenomenon to adults, but it’s equally confusing to a kid that goes to a store and a bottle of Coke, I remember, was 10,000, then it was 20,000, then it was 30,000, and then it was 40,000, and then we took four zeros away, so it became four. And it happened within four years or three years when you’re growing up. So, what is money? Is it the 10,000 or is it the 4?
And then, the more fun thing, was that my grandparents continued to speak in the old money, so they would talk about hundreds of thousands and millions, and we no longer had those zeros. So, as a kid, I had to translate in my head between the old money and the new money.
Dollar was gold. So, that was something that was ingrained in my head that dollar is not something that you go spend, like the same way you would treat a gold bar today. You don’t really run around with a gold bar and pay for food. So, to me, dollar was something that you store it, you respect it, it doesn’t lose value. I know that people have different thoughts about the dollar these days, but that’s how I grew up.
Jake: You were living Gresham’s law then at that point, huh?
Bogumil: [laughs] So, these are the things that I think allowed me to look at the money and wealth phenomenon from outside. I think I continue to see it as something very helpful, that the numbers are just numbers and they have a meaning in a certain context.
I also grew to appreciate the impact that money has on people. I don’t think there’s any amount in the world that exists in a vacuum. It has a charge. I work with people that inherit wealth. The way that the money was given to them and the way they receive that money has a huge importance. It doesn’t really matter how much it is. It doesn’t have to have a lot of zeros, but the emotional charge around it.
I think in the investment profession, we’re granted this huge responsibility for a very intimate experience. I don’t think we’re fully equipped to take on the role we have to take. We focus on the numbers, focus on the returns, but you’re taking on the responsibility for somebody’s livelihood, and I think we forget that sometimes.
Tobias: I think it’s a great point, but we’ve come to the top of the hour, [chuckles] so, JT, we need to do some veggies, and then we’re going to come back and talk about a few other things.
Jake: Sure. So, as you can tell, Bogie’s got a very calm energy and patience to him. So, I always try to match segments up with the guests. So, today, we’re going to start with a paradox, which is every organism wants to live forever. Every company does, too. Every founder dreams of building something that outlives them 100 plus year companies. But in biology, the only cells that live forever are cancer. And so, what is the secret to endurance in life, business, leadership? Is it learning when to occasionally go a little slower?
Okay, so, in the 1960s, there was a scientist named Leonard Hayflick, H-A-Y-F-L-I-C-K. And he was studying human cells in a petri dish. He expected them to keep dividing indefinitely. Like, after all, that’s what life does, multiply, expand, reproduce. But after about 50 to 60 divisions, depending on the cell, something strange happened. The cells just stopped dividing. They didn’t die, they didn’t fail, they just stopped. They entered a state that’s called senescence. It’s kind of a permanent rest. This is not a random glitch in biology. It’s a design choice. It was written into the genetic code of life itself. Each time a cell divides, the ends of the chromosomes, which are called telomeres, they get a little bit shorter.
You know the famous analogy, is that the telomeres are like the plastic tips that are on the end of the shoelace, which are called aglets, by the way, in case you want to win at Jeopardy at some point.
Tobias: Legal binders.
Jake: Yeah. [chuckles] So, these telomeres protect the chromosome from fraying, basically. But after enough divisions, the tips of it wear down, and the cell then senses that danger and another replication might potentially damage the DNA. So, it decides, “Okay, that’s enough. Like, stop.” It stops dividing to protect the integrity of the whole organism.
So, Hayflick discovered this biological truth, and that life really has speed boundaries to it, and for a good reason. And that’s now called The Hayflick Limit. So, cells that ignore that, they find a way to override it, they become immortal, but in the worst way possible, they become cancerous.
So, now, let’s take that lesson out of the petri dish and into the boardroom. Organizations are living systems, too. They replicate through new hires, new products, new offices. They divide just like cells. They clone their processes and values. They imprint on each other. And just like in biology, that replication can introduce risk. So, the faster a company grows, the more that it’s copying itself, the more likely it might be to introduce mutation.
And in this context, mutation means like cultural drift, ethical drift, strategic drift. And that slow erosion of what made the company coherent in the first place can then start to take place. So, when companies scale too fast without repairing themselves, without repairing their DNA, their culture, values, judgments, it can start to degrade. So, in other words, they’re basically overclocking their Hayflick Limit. Every company has a genome, this set of organizing principles, and how decisions are made, tradeoffs are judged, how information is shared and sorted and dissipated throughout the system.
And in healthy organisms, that DNA replication comes with a proofreading enzyme that catches mistakes before they become mutations. And in healthy companies, that proofreading comes in the form of values that are codified, and enforced, and lived on a day-to-day basis.
I’m going to skip this part, because it’s already running long. So, what’s The Hayflick Limit in business? It’s probably varies depending upon the industry or the age of the business. But if we look at Mauboussin’s white paper work on base rates, he documents the historical distributions of revenue growth, profit margins, and returns on capital across a bunch of industries at different sizes. And the data show that mid-single digit to maybe low double-digit growth is the norm for established firms. But growth that gets above 20% per year, and you’re starting to sit on the outer edges of this distribution curve. It’s rare and it’s usually temporary.
So, my guess is that Hayflick Limit is probably somewhere around 20% before you really start risking, like introducing cultural cancer into your firm. The healthiest systems, whether in nature of business they grow, they pause, repair, renew, and they respect that limit. And nature shows us that we have to pause by design or by disaster. Those are like your two choices. So, either way you’re going to end up pausing.
Just to make this a little more personal, I was fortunate enough. My family got to spend time a month with Bogie and his wife Megan in the Dominican Republic during COVID. He really had an incredible amount of patience and ease with the whole COVID situation and really everything in life in general. And so, I thought it might be fun, Bogie, for you to share or like think about that analogy a little bit about you moving from New York City to the Dominican Republic, and what that meant for your own personal pausing and repairing.
Bogumil: Wow. I mean, I love the story. It got me thinking about many different things. I was thinking about an individual, a business, and family fortune. Somehow, I was thinking about it. And obviously, I ask people about immortality. It’s funny that you brought it up, because I have this book in mind which maybe will happen at some point. I want to compare time to money, because people say money is time, time is money. We can imagine having enough wealth that’s almost impossible to spend in a lifetime, but we can’t imagine having enough time that exceeds a lifetime, because it’s just not possible and being able to enjoy this time.
Anyways, I think it’s fascinating to consider immortality. I think we’re all longing for it in some way. I think through art, and writing, and also running a portfolio. When you think about it, we imagine that this will outlast us, and somebody will take it over and continue to grow it. So, I think it’s a human thing of what can I do touch immortality. I think that’s been with us for a long time.
But changing the setting has had a huge impact on me during COVID. And at different points in time, you might remember that we left New York for a small cabin in the woods two hours away from New York. We were probably one of the last people to do so among our friends, because a lot of our friends bounced right away and we thought, we’ll just wait it out. [laughs] New York was not fun, and there were moments we were walking along the river, and there was a police car that drove over the curb and told us to disperse. And we said like, “It’s just two of us. Disperse? in what way disperse? Like, there’s nowhere to go.” [laughs] So we went home.
New York was not a fun place to be. It was just really tough. So, we thought, we’ll leave for a week or two and became a much longer experience. We went to the woods, and I felt that I could hear my thoughts again. New York is an incredible city. Don’t get me wrong. I came to America for New York. That’s obvious to me. But it’s also in that city, it’s very hard to hear your own thoughts. You can be pulled into so many events.
I’m very, very grateful. I’ve been to lunches and meetings with incredible people over many years in New York. But there’s a moment when you sit down and you realize which thoughts and ideas are my ideas and which ones I just overheard and are not really mine. But I heard them so many times from very convincing people that they may as well be mine, but they don’t really feel mine. Going to the woods and hearing absolute silence, like deafening silence, something happens to you and there are books about it, right, about going to the forest. I think was a hugely eye-opening experience.
Building Generational Wealth That Outlasts You
I’m thinking about family wealth, and I’ll bring up a couple of things we talked about throughout this conversation. Poland that I grew up in left limited chances for anybody to preserve wealth over generations in the century before I was born and into my lifetime. So, whether it was World War I, World War II, Poland didn’t have independence before World War I. Divided among three empires that are long gone. And then, half a century of communism, game over. We won’t let you keep anything. If it wasn’t stolen or burned down or damaged, it was confiscated.
So, coming to New York and working with a firm where I was introduced to families, that some of them had the initial seedling of their wealth planted 200 years ago when Beethoven was writing his symphonies. It really opened my eyes, and I thought, there is a setting, there is a place, and there’s a framework that would allow multiple generations of a family to build on what was built already. Just compound. And not compound over a lifetime, which is already very impressive, but compound over a generation after generation after generation.
A lot of challenges on the way. Don’t get me wrong. It wasn’t a straight line for any of those families, but there was a certain framework that allowed them to continue. It was as much financial in terms of investing and participating in the success of the businesses as it was family communication, keeping peace, cooperating, collaborating, and being a family unit, which is as hard as investing itself. But it opened my eyes.
So, in terms of immortality, I think when people think about their legacy, I think it’s an attempt to touch that kind of immortal experience. Can what I created in this lifetime be that shadow under the tree for the generations to come?
Tobias: Let me go around the horn, and then have some more questions on durability for you. Tomball, Texas. Tampa. Winter Park, Florida. Lausanne, Switzerland. Tallahassee. Boysee, what’s up? Thanks for spelling it out. Hamburg, Germany. Mumbai. Toronto. Bellevue. Oregon City. Jupiter, Florida. You won. La Ràpita, Catalonia. Portugal. Sydney. Dubai. Jackson Hole. Östermalm, Sweden. Thanks, team. That’s a good spread.
Listening to the story about Poland, you just made me– I don’t know many people who’ve lived through a revolution and then gone from a communist, socialist world to a capitalist world. I can’t imagine what it does to your mind or the way that you think, but it’s an interesting question to– What does it teach you about durability and patience, and what is your view on these things? If you know that prior to Poland being liberated, it was part of other empires and then a communist country, and now you’re thinking about generations. What’s the thought process? Yeah, I’m intrigued by– [crosstalk]
Jake: How do you avoid confiscation?
Why the U.S. Is Still the Best Place for Capital to Grow
Bogumil: [laughs] I’ll give away a secret that might not be a secret. But the choice of location is the most important part of it all. And I’ll explain why. I wrote a book, Money, Life, Family, where I dedicated a third of it to explaining why the US has worked, and I hope continues to do so. It’s never that obvious, because I think we’re earning our future as we go. It’s not given, and it doesn’t apply just to the US. But a setting where you had a country where it was okay to own things, it was okay to be successful, it was even praised and accepted that you could get richer than your neighbor, you could definitely get rich, as rich as the king, which is still not the case in some countries on earth.
I visited some places where you can’t speak up about the king in a certain way. It’s still very real. It’s happening as we speak. But it’s a country when we haven’t had a king, and we are allowed to get rich, and we can keep it. Of course, there are taxes and consequences and all kinds of frameworks, but nobody’s out there to take it away from you outright. And not having a conflict within the borders, obviously, except for the Civil War, which is tough time and a lot of lost life, and I’m sure wealth as well, but nothing like what Europe endured in many other places.
So, this is like the protection of the downside. But then, the upside, it’s a country that has a huge economy, lots of talent, people that are willing to work hard. I’ve lived in many places. Americans work hard. And even us, immigrants, coming and working hard, it pushes the country forward. And having a stock market where the best businesses choose to be listed allow you to participate, so you have layers and layers that allow this place to be a great setup and give you a chance. Not a guarantee, but a chance to grow wealth. People use the word perpetuate. I think it’s an aspiration to perpetuate wealth over many generations to me.
It’s heartbreaking to see that every generation has to start from zero. We talked about wisdom. Can you imagine all of us burning all the books with every generation? And every kid has to start with nothing again? We don’t do that. But so many people start with absolute zero, financially speaking. And some students these days start with a negative net worth. It’s a very uncomfortable place to be making any life decisions. So, to think of the next generations being able to start with something, I think it’s the beginning of the aspiration that we’re building here. What can we do, so that the next generation has an easier head start, I think that’s something we could aspire to have.
Jake: Bogie, are you thinking about the New York City mayoral race?
Bogumil: Right. Right. [laughs] You know people ask me– I actually spoke with somebody yesterday who’s from Hungary and might be listening to this. He’s about my age. He said, “You know, it’s interesting that you talk about your experience in Poland.” Because he lived for something similar in Hungary. And he says, “It’s interesting you choose to talk about it.” And I told him, “I think I almost feel obligated to talk about it, because as a civilization, we just forget the lessons of the past again and again.”
I find it very disturbing that some of the ideas that we already tried and they failed. We try to apply them again across a wide spectrum of ideas, not picking on anybody in particular. [chuckles] But we’ve tried it. We’ve tried it already. I think it would be very useful to– If you don’t want to read a book, have somebody in the room that has lived through an experience that you tried to invite again, and tell them what it’s really like. And if you still want to do that, and then, sure. But just sharing the story and the idea and the experience, I think gives us a chance not to make the same mistakes again.
Communism as the one that was practiced in Poland came at a huge expense to a nation and to a whole block of nations within Europe. A lot of people died with songs that were never heard. You know, they had talents and gifts. I don’t think we would like to live through it again anywhere else, including New York City.
Tobias: I saw a good program the other day that talked about the geographic advantages that the US has relative to the rest of the world. I mean, there are many, like just having two oceans, so not having competitors nearby. All of the rivers on the inside, the amount of arable land that the states has like oil and gas and minerals and so on. So, it just goes on and on, which suggests that the US is set up pretty well, probably better than any other country in the world for at least the next century or so beyond that, which is a huge positive for the states.
But the problem for the states seems to me to be that that huge wealth inequality where you have students who are coming out of school. We’ve got giant student debts that really– You got to swallow that before you then go, and try and buy a house, and move on with your life beyond that. It frustrates me a little bit, because I think that a lot of the problem is that interest rates were set too low for too long, and that’s a Federal Reserve problem, which I think is one of the problems with central planning. It frustrates me that our solution to central planning is more central planning in New York. [Bogumil laughs] So, that’s the end of my editorializing, but that’s the way I feel about it.
Bogumil: Yeah. Can I chime in?
Tobias: Yeah. Please, I was going to throw it to you.
Bogumil: [laughs] So, Jake knows very well how I feel about central planning. I remember the office building in Warsaw, a gray communist Soviet style building, where people– [crosstalk]
Jake: Beautiful, right?
Why Central Planning Fails — and What It Teaches Investors
Bogumil: Beautiful. Where people would go in and decide– You’re going to laugh at it, but I’ll say it, because people forgot it set the prices of everything from a nail to a shoe to a car to a television set. They would go in there and look at it and say, “You know, there are that many Jake’s in the world. There are many Toby’s. I think the TV should be $500.”But nobody asked how much does it cost to make a TV. “Well, who cares?” [chuckles] There was only like one or two models available on a license. One was the Soviet style TV. Anyways, very limited options, so don’t imagine a Costco style aisle of TVs or anything like that.
I remember and I’ll bring it up, I don’t know how much time we have, but I was in Brussels in that bookstore where I found Peter Lynch’s book. And there was a book about the Chairman of the Fed, Alan Greenspan. I picked up that book, and on the floor on the carpet, I started reading it. He said how he is counting the train cars, and trying to guess what the interest rates should be. I’m reading this book [laughs] thinking, wow, this sounds really familiar, because I remember a building in Warsaw where guys go in and decide how many shoes Jake’s of the world need and how many TVs Toby’s of the world will buy and then we’ll set the price. How different is that than some group of people gets together and decide that the cost of money is this or that.
How come they know if you and I, I think we can agree, I have no idea how much a pair of Nike’s should sell for. I have no idea. We’re trying to figure it out how much people will pay, how much it costs. There might be tariffs or no tariffs. It’s a moving target. There’s no official that can say a Nike shoe should cost this much. How come we think that we have some God given power to set the interest rates? I know it’s very hard to give up. It’s an immense framework and power over the markets, and it can be used–
Allegedly it’s not a political force. In most of the countries that have a central bank, people can read about the history of central banks and people can be reminded there were times when we had no central banks and the economies worked somehow. I don’t think central banks belong in the future. I actually wrote a chapter in Money, Life, Family, the Elephant in the Room about what you just brought up, Toby, about low interest rates. I personally don’t think that we will have central banks the way we have today in a couple of decades. I think the model is just not– It doesn’t belong.
Tobias: Do you think we rouse around it with crypto, or do you think we wake up to the problem? Because I don’t think the second thing’s going to happen. I think it’s too abstract for the average person. The average person has no idea what the Federal Reserve is or what it does.
Bogumil: No. I think most of us don’t really know. I’m still trying to understand how this– It’s a much more complicated system than we all think, the Federal Reserve and how money is created and fractional reserve banking. A lot of things that I’m throwing out here that are each and every one should be a lecture of hours and hours of explaining how the system actually works. There’s too much going on.
The point is you can turn it up and turn it down depending on how you think the economy should be operating, that’s basically in a simple. If you feel like the economy is slowing down, you cut the rates. If the economy is overheating, you cut them in very, very basic terms. I think at the end of the day, we will be making things and providing services and goods. I don’t know in which currency we will exchange those things.
I’ve seen Poland, where I grew up, switch between currencies. And I’ve seen multiple currencies functioning at the same time. So, you would buy tomatoes and cucumbers with the local currency, but you would buy a car with dollars. There are countries in the world today where some things are priced in dollars. You can buy a lot of goods, everyday goods, with local currency. But if you want to sell an apartment, it’s going to be in euros or dollars. So, it exists still today.
I don’t know if the currencies we have today are the final ones, I doubt it. As a civilization, we ruined so many currencies in the last few thousand years.
Tobias: Only everyone we’ve ever created so far.
Jake: Yeah. Just unrepeated record so for. [laughs]
Bogumil: I was visiting a house– [crosstalk]
Jake: But we have dot plots now. Bogie, you’re forgetting about dot plots, so that’s surely [crosstalk] out by now.
Tobias: The committee’s making a decision.
Jake: [laughs]
Bogumil: I visited a museum in Madrid. And it’s a house. I think it was a publisher, and he has a room full of currencies. It’s a beautiful wall. And all the money he was collecting was some sort of metal. All the paper money is gone. It was silver and gold coins from around the world that he was collecting. I think that room reminded me yet again that we say paper money, but that paper money means something different these days, because most of it’s an electronic ledger.
Jake: Digital.
Bogumil: Yeah, it’s digital. But the paper money, that’s not backed by anything. It’s built in a way that allows us to inflate our way out of a problem again and again. The Greeks have done it, Romans have done it, and everybody in between. The Chinese have done it centuries ago, many times. And we’re doing it again.
The moment that we end up on the other side of it is very disruptive. It’s like an unfair disruption, because it’s going to be really random, the same way hyperinflation in Poland. The outcome was very random. It’s not like you had people that were so prepared for it, nobody was really prepared for it. You might end up on the right or the wrong side of it.
Again, going back to what I talked about, what can I do to be the least wrong? My conviction is that if I own a collection of businesses that are doing something that people want, they can price it at a level that allows them to make money, and they continue to grow and improve. It’s not a set in stone portfolio of companies. They will change. That’s the best place that I can imagine for a family fortune to survive any of systemic shocks of that kind.
Tobias: What does that mean international as well outside the US?
Bogumil: Well, yes and no. I think it’s a whole separate topic. Because in the US, we have an incredible, large liquid market with incredible protections, incredible disclosure. I haven’t seen other markets, except for very small that match what the US offers. And the other side to it is a lot of the companies I have in mind, they have a lot of the business outside of the US. They have more than half of the profits outside of the US. So, even if I limit myself, so to speak, just to well established US companies, just to make it super simple, half of your profits are not from the US anyway.
I actually was going to write a piece that I put aside. What is an American company? What would you call an American company? Because I think we’re all a little bit lost with the terminology these days.
Tobias: I would say the head office is domiciled here, that’s about all.
Bogumil: [chuckles] But then, you have companies that were started outside of the US and they’re as American as any American company, because they moved their headquarters to the US. They got listed in the US, and they have most of their customers in the US, and then you say, no, it’s actually a European or it’s actually an Asian company, whatever. I think it’s not that. If you are operating under the protection, and the level of disclosure, and the level of liquidity that the US market offers, I think it’s a good place to be.
I spent half of my life in Europe, so I looked at a lot of European companies. I visited many countries visiting companies, too. It’s very, very hard. The hurdle for me is very, very high if I want to invest globally. So, that’s, yeah, a separate topic. To be honest with you, I wish I could say that it’s very easy to build a portfolio of international stocks that match the US level of shareholder friendliness and on and on and on. It’s not as easy, at least to me, but I’d be happy if somebody wants to prove me wrong.
Tobias: My concern with someone like Mamdani winning the New York mayoral election is not so much that– I think he probably wins, and I think that nothing ever changes, really. New York’s had Bill de Blasio and other guys who are equivalent kind of– Maybe the rhetoric isn’t as obvious or as strident, but they’re comparable plans to govern. Likely nothing happens, really. There’s small changes, but it’ll continue on as it’s always continued on. But it does make it a little bit more acceptable for it to roll out across the rest of the US which is one of the concerns that I have.
At some point, it’s conceivable that you don’t want to have all of your allocation in the States. But then, the question becomes, where do you then allocate? Markets are looking pretty capitalistic these days. I think there’s some real bare-knuckle capitalism going on in their stock market. I don’t know about the political situation, but you’re not just out of an abundance of caution considering distributing the domiciles.
Bogumil: That’s a good question. So, what allows me to sleep well at night, is that the stocks that I own half of the profits are overseas, but they’re from the US perspective, the US shareholder friendly mindset. If I look outside, I have a hard time getting comfortable with the location. I think I would rather have, and I’ve seen it happen even with my stocks. A company have a write off, because they picked the wrong location for a part of their business. I remember and let’s call out a name. Colgate, I remember a billion dollar write off for their Venezuelan operations. It’s public. Everybody knows about it. You can look it up. No recommendation of any kind. But I remember it, and it was eye opening.
Well, if you have a minute, I’ll tell you but I was traveling around South America before that happened. I was in Brazil, and Brazilian companies were buying up assets in Venezuela and they were telling me how they understand the continent. They’re not as exposed to whatever happens in Venezuela, because they understand Venezuelans. Well, I guess, they were wrong, because [chuckles] Venezuela went really far with what they wanted to do. I know a lot of Venezuelans that left Venezuela since and are in Florida, and Dominican Republic, and many other places. I’m sure they’re in California, too. They’re smart, bright people and they realize this is not the place.
Anyways, long story short, if you can find other places on earth where you feel like you will get to keep what you own and it can flourish also, so the downside and the upside, then more power to you. [chuckles]
Jake: What if it’s Poland after all these-
[laughter]Tobias: Politically, it’s right.
Jake: -full circle.
Bogumil: Yeah, sensitive topic. Well, we’re sitting here in late 2025, and there is an ongoing multi-year conflict right across the border. I’ll add to you, and I’m not here for your benefit. Some of the drones that fell in Poland, they fell in villages where I know those villages. They’re not far from some members of my family that live there.
We talked about location, you talked about the US having this huge advantage. Poland has a terrible location. There’s nothing that can really change that. It’s a terrible location. There are mountains in the south, but the neighbors in the south are very friendly. But there are no mountains and no big rivers on both sides. It’s very easy to roll the tanks, and it’s been done. If not the horses, then the tanks.
Anyways, I hope the conflict dissipates, goes away, and we’re all at peace. But there’s always the fear that the location is still not great. Poland had an incredible run, and I certainly hope that we’re done redoing the past. [Tobias laughs] But you bring up New York, I feel like somehow humanity is just bound to make the same mistakes.
Tobias: Yeah.
Bogumil: I really hope that Poland is done taking the beating here in the region, because it’s been an incredible run and probably the longest peaceful growth period for Poland in recorded history. There were different 20-year or 30-year periods that I remember from history books, but this is a remarkable. I’m not saying it to test the luck here of anything. It’s just something to admire, and I hope that a permanent solution is found for peace in the region, because we’re not done yet.
Tobias: Well, I guess you can always change your leaders, but it’s hard to change your demographics or your geography.
Bogumil: Yes. Yes.
Tobias: Bogumil, we’re coming up on time. If folks want to follow along with what you’re doing or get in contact with you, what’s the best way of doing that?
Bogumil: Find me on Substack. Just my first name, last name, Bogumil Baranowski. Everything I post, it’s there these days. So, find me there. And write to me. I answer all emails. I have fun reading people’s emails. People share incredible stories with me. I’m always moved by what’s on people’s mind after reading or listening to whatever they come across. So, thank you for writing, and please keep writing.
Tobias: The podcast is Talking Billions. The firm is Blue Infinitas. Bogumil Baronowski, thanks very much. JT, any final words?
Jake: No. It’s just fun to see my buddy Bogie. [Bogumil chuckles] I’m not sure why we took so long to have him on the show, but we won’t let that much time go by again before you come back.
Tobias: Yeah, we’ll do that.
Bogumil: Thank you– [crosstalk]
Tobias: Thanks, Bogumil. It was awesome. Thanks, everybody. We’ll be back next week, same bat times, same–
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