Breakfast in Omaha Meeting 2024 – Session Three

In 2022, I started a new tradition, and so this year too I hosted my readers for breakfast in Omaha.

This was a wide-ranging Q&A session. We discussed

• How do you think about Charter as a business?
• What is the state of the market?
• Are we entering a sideways market? How would you update the book you wrote on the subject?
• How will AI affect the future?
• What is your view of companies with negative book value and negative share growth?
• How has writing helped you become a better investor?
• How do you balance doing what you like and what you don’t?
• What do you think of Warren Buffett’s diet?
• How do you remember what you’ve written?
• How do you manage your time?
• What advice do you give your clients on weathering future economic trends?
• What is it like living with an “outsider”?
• How would you like people to read and consume your books?
• What checks and balances do you have to ensure that your arrogance does not consume you?
• How do you not get attached to the companies you invest in?
• What feedback loop do you have to prevent bad decisions?
• How do you slow yourself down in the investment process?
• What was your worst investing decision?
• How do working-class people approach to bargain with employers without unions?
• How do you teach good money habits to young people? What skills should kids learn?
• How do you teach to understand your investor constituency?
• When do you know you have done enough research?
• How do you measure the flexivity of money?
• When do you get over not investing in a company?
• How do you decide if a country is investable?
• Why are investors reluctant to invest in technology?

Breakfast in Omaha Meeting 2024 – Session Three transcript

Thank you all so much for coming. This is very, very special for me, because I write articles, people read them, but I never get to meet them. So this is my opportunity once a year to actually meet my readers, and I absolutely love it. Next time I’ll be writing articles, I’ll be thinking of these faces. I just want to give you not a warning, but one comment. This is not a marketing event, so let’s keep the questions away from marketing.

Question 1: How do you think about Charter as a business?

Cable companies traditionally had two businesses: the TV business and the broadband business. The TV business is basically declining 5 or 7% a year. It’s a high revenue, very low margin business because most of the cost of goods sold goes to ESPN, HBO, etc. So they make very little money in this. I guess they make about 8 to 10 times more money on broadband than they make on TV. That’s number one.

The cable business, if you think about it, 99% of data travels mostly on fiber, even though the copper actually travels the last hundreds of feet. So it’s mostly a high-speed business. Now, over the last couple of years, it has a new competitor. We always had competition from fiber, and the fiber business is challenging because the economics are very, very challenging.

It’s basically that you have to bring the fiber where the cable is already, where the customer is already there, so you have to take customers away. Now, for you to be profitable, you have to capture so many new customers, which has always been challenging. Because for the most part, we as consumers are very lazy. For you to switch, it requires you to do things, et cetera, which you don’t want to do.

I would argue the fiber business is becoming more challenging because the cost of debt went up, cost of labor went up. If you, I forget the numbers now, but say it costs $5,000 to bring new fiber, while you’re competing against costs for cable companies that were a fraction of that 5, 10, 15 years ago. Because the cost of everything went up over the years. That’s point number one. So I think fiber is going to have a very limited impact. And it’s mostly the only, you know, so that’s fiber. But fiber is not the reason why the stocks are down.

The reason the stocks are down is because there’s been more competition from fixed wireless. And if you think about the fixed wireless business, what is that? Well, there are basically, if you think about frequencies, these wireless companies have to buy spectrum. And I’m going to simplify it, but there are two types of spectrum. There are short millimeter and long waves, right? Long waves, they travel very far. Because they travel very far, you don’t need as many cells in between. The downside of them is that they can’t carry as much data. And then you have short millimeter waves, they can carry a lot more data but you need a lot more towers in between, and also they become a lot more fickle because rain interferes with the quality of the signal, trees, etc.

Therefore, the quality of service, in general, is not as good as cable or fiber for wireless. Now, what fixed wireless really is, is just imagine you take your cell phone, you put it into your house, and just add a Wi-Fi router to that. That’s an oversimplification. And that’s what fixed wireless is. The reason it’s called fixed wireless is because they don’t want you to take this little box and take it to another place. They want to make sure it stays in that place.

The issue with the fixed wireless business is that the spectrum is limited. You’re competing for the same spectrum they use for fixed wireless is used for your normal cell phone. Now, a traditional fixed wireless user consumes 50 to 70 times more data than just a traditional cellphone user. So in other words, you pay as much or less, but you consume a lot more data.

When you have a lot of extra spectrum, you can do that. But you can’t really have a business. If T-Mobile tried to completely, hypothetically replace every Charter customer, they would run out of spectrum very, very quickly. So they couldn’t do this. And that’s exactly what happens in reality.

When we were doing research originally, we went to T-Mobile’s store, and my analyst could get a service, but I couldn’t because, you know, in my neighborhood it’s not available because there were already too many users. So it makes it more difficult to market it. If you say, come and get our fixed wireless, and you show up, and they say, oh, sorry, your neighbor, your friend can get it, you can’t. And so it becomes more difficult to market. T-Mobile is basically saying, yes, we want to have about 8 million customers, and they’re already at five.

So in the last couple of years, cable stocks are basically suffering from a couple of things. Number one, historically, DSL users would switch to cable, and that’s because DSL users have been more price-sensitive, and they were switching to fixed wireless instead of cable. So that’s been taking market share from them. Number one. And number two, during the pandemic, they grew too fast. So they borrowed some of the future sales.

I think there’s a company that makes luxury watches called Patek Philippe, and they have this wonderful slogan: You don’t really own the watch, you’re taking care of it for the next generation. Okay, so my argument would be for T-Mobile and Verizon, they should be looking at their customers. You don’t really own those fixed wireless customers, you’re taking care of them until they get sick of your service and until you run out of, and at some point they’ll come back to Charter and Comcast.

There is another factor going on, which I think is kind of underappreciated. The cable companies started to roll out a wireless service, and that service is priced cheaper than everybody else’s service. And they can do this basically by using something called the MVNO model, which is a mobile virtual network operator.

The way it works is basically, when you’re at home, most of your wireless service usage is offloaded to the Wi-Fi network, which is on top of Charter’s and Comcast’s infrastructure. Now, when you travel and you’re not on the Wi-Fi network, you are basically switched to Verizon’s network. The interesting part about this is that most of the bandwidth is actually consumed by users when they’re in the office or home.

So the cable companies actually have a significant cost advantage here because think about Verizon. Verizon has to maintain this huge wireless network around the whole country, whereas Charter doesn’t. Charter just buys, like whenever, like Charter just basically has to maintain the Wi-Fi at your home, right? And whenever you need to use, you know, when you step outside of that, use Verizon. And at the end of the day, Charter’s cost structure and the product is cheaper.

What makes things slightly more complicated is that cable companies decided to upgrade their network. They’re going from DOCSIS 3.1 to DOCSIS 4.0. All that means is they’re going to have more evolved, much faster, cheaper to run networks. And while they’re doing it, it costs them a lot of money. So their free cash flows right now are lower than they should be. Then I think they will be going forward. And they’ll be done by 2026 or something.

After that point, their offering is going to be 100% comparable to fiber. It’s a 10 gigabit upload and download. And it’s as fast as fiber, because fiber right now, in our mind as consumers, is a better product, because it’s bidirectional and faster. In reality, most people really don’t need the upload speeds, you know, much because we mostly watch Netflix, which is only download. And even at 500, even more than 500 megabits, none of us really need that.

But anyway, so in a few years, this is how I look at it. Fast forward to 2027, the free cash flows will be up. They’re going to have a much superior product. They’re going to have a lot more wireless customers, and they will be able to raise prices a bit more because their product is going to be a much better product. When you raise prices, I mean 3% to 5% a year. That’s how I would model it.

Question 2: What is the state of the market?

I don’t know what the latest data is. And I’m somewhat surprised how well the economy is doing, considering the way interest rates are. It’s very surprising because of how much debt we have. But I think one thing I realize is that it just takes a while for high interest rates to kind of transmit into the economy.

I think, first of all, I really don’t know the answer to this question. I mean, I’ll give you an answer, but I’m not sure I would do anything about… We always have opinions about the economy. Go ahead. Yeah, no, no, no. Let me finish.

I think there’s a more important lesson in this. You talk to anybody who’s in the stock market, you know, I would not, if I had a contrary opinion, I would still not do anything differently. In other words, I think it’s more likely we’re going to have a recession, but even if we don’t, I would not do anything differently. Because we can have hunches, but again, I think that people like me, or actually anybody, including the Federal Reserve, have a horrible ability to forecast the economy and predict recession. Because it’s incredibly, incredibly difficult.

So more importantly, when I structure my portfolio, I want to make sure that the companies we own, if we have a recession, get through this recession with flying colors. That’s all I care about. That’s kind of my non-answer to your question.

Question 3: Are we entering a sideways market? How would you update the book you wrote on the subject?

Okay, so to answer the first part of your question, yes, I think we are, and my book is probably more relevant now than before. And I think the difference is that after I wrote the book, interest rates went down to zero or close to it. Not something I expected or knew was even possible. That’s number one.

Second, this is a good question. I don’t know if, yeah, you asked me a question and I’m puzzling it. If I would do anything differently in the book? Probably not much. I mean, I think, you know, if I wrote a brand new investment book, it would be, I think I’m a better investor now than I was 10-15 years ago just because of the painful experiences I lived through. But I’m not sure the overall book would be much different. Those principles are kind of evergreen, I think. So I won’t change much.

Question 4: How will AI affect the future?

I think AI is the future, and AI is in a bubble. You can have both of those things at the same time, right? I think it’s going to transform our lives. It’s really real. And I think it’s just, it’s the timeline. The parallel I’ll be using is that it’s almost like the internet. It changed, like in 1989, we thought it was gonna change our lives, and you had a whole bunch of stars going through the moon, and it has, it just took longer. But it was even more transformational than we imagined.

So I think AI is going to be something similar. And I think what’s interesting about this is that the jobs we thought were safe, like the office jobs, right? And now we kind of start questioning how safe are those office jobs, even though they’re the white-collar jobs.

But one thing AI will do for sure is change our productivity. It’s impossible not to. Now, I am… I’m… like, as a parent, I tell my kids that they should learn how to use AI and use it all the time.

But on the other side, I wanna make sure they don’t forget how to write. Because that’s a, like I used to, like when I lived in Russia, even when I came to the United States, I was able to actually write, like with a pen. Those of you who saw me sign books, you see I can barely write. Because guess what, I type all the time and the muscle memory is gone.

So for those of you who saw me sign books, I’m very sorry about this. But that’s why. But I think the same thing happens with writing as a muscle. If you just always write using AI solely, then you’re gonna lose that muscle. So my message to my kids, these two, and I have another one at home, is to make sure you keep writing on your own.

It’s impossible for AI not to change the composition of the economy. It’s going to be disruptive. People will be losing jobs and new jobs will be created. I can’t really tell you exactly what jobs will be created, but I can tell you this: if you and I were talking about 100 years ago, think about how one third of the country was really involved in the agricultural sector. Today, only two or 3% of the country is doing it. But now we have jobs of software engineers and so many other jobs that we did not even know, like, we could not even fantasize about, even 30 years ago, 40 years ago.

So it’s going to be something similar, you know, with AI. So I just, I encourage everybody at AMA to use it as much as possible, and I tell them it should become your new best friend. Like, but it’s again, it should be supplemental for us.

Question 5: What is your view of companies with negative book value and negative share growth?

Starbucks and McDonald’s all have negative book value, means nothing. And it’s in a, in this case, negative book value means that this company has been buying back stock. Think about, actually the math is very simple.

When companies go public, the shareholder’s equity is a reflection, basically, part of it is a reflection of their stock issued at par, or whatever, a dollar per share. Then over the next 20 years, their stock appreciates a lot, but so do their earnings.

And when they buy back stock, for every share, the buyback share is at $50, which has a book value of one. So for every share, automatically, you create negative $49 in book value destruction. So it’s completely worthless.

I don’t know, like if I own Starbucks or Microsoft, etc., I would never ever ever look at book value. It’s worthless. However, because if you think about book value, what it is, it’s really just in general, it’s the difference between assets minus liabilities, right? That’s book value.

Now, the liabilities are more or less current most of the time, but the assets on the balance sheet are not, right? So the Starbucks brand is not really showing up on the Starbucks balance sheet, okay? It’s intangible.

However, the book value only is really important when you look at financial companies, because the assets and liabilities are mark-to-market all the time. So if I looked at an insurance company, if I looked at a bank, book value becomes a lot more important.

Microsoft, Starbucks, I promise you, not a single investor who has been doing it for a long time knows what Microsoft’s book value is. It’s a worthless number for these companies.

And the second thing, I think I pushed Buffett a little bit on index investing. In the 1980s, Buffett gave a speech where he basically said that if you’re a value investor and you follow value investment principles, you’ll do better than the market.

It was a Graham & Doddsville speech. And then when he talks about, when he got a much wider audience, he started talking about index investing. Why? It’s very simple.

If my wife, let’s say I’m gone, do I want my wife to be buying individual stocks? She knows nothing about this. I would say to my wife, buy index funds. Because you will not do great, but you will not get destroyed by buying. And also by getting swindled by… My industry has a lot of… less than good people. I don’t have a list of it, I’m just trying to…

So, like… If you need to invest money, you don’t have anybody you can trust, truly trust, then you have to choose your Edward Jones broker who sells insurance during the day and plays in the stock market at night, I would rather buy index funds.

So I think that’s all it is. And S&P 500 is just a wider index. It’s S&P versus Dow Jones. It’s just that you have 30 names versus 500. I’m not sure how much difference it makes, I mean, except probably S&P index is extremely, you take out the last top 10 names and the other 400 names, 495, or 90 names, whatever, made a lot less.

So that’s all there is. Why not make it QQQ? It’s a lot faster. I mean, it’s just a different, like when you buy S&P 500, you’re buying a broad index. When you buy QQQs, you’re buying a very, very more narrow index. That’s all it is. So it’s, again, do you want to have a broader index or more narrow index?

Well, I guess when you make a recommendation for your wife and say you already have a lot of money, your goal is not to lose it or not to be swindled. But I wrote a book, would I be buying the index today? Absolutely not.

But would I rather buy an index than have my money managed by an Edward Jones broker?

I’m sorry, I don’t mean to pick on Edward Jones brokers, but I just, you know.

Question 6: How has writing helped you become a better investor?

I’m so thankful for this question, also because my kids are here. And I want them to hear this answer twice a day. I think for anybody to be a thoughtful, mindful human being, everybody should write daily, five minutes, 15 minutes, because throughout the day, we really don’t have the time to think, right? Because between Facebook and TikTok, we’re busy. So when you sit down to write, all it is is just focused thinking. That’s all it is, right?

So I would not have… None of you would be here if I didn’t write. And I’m not talking about just because I… I understand that a lot of you would talk about the African Central, but I would be so uninterested. Not that I am interested, but I would be a lot less interested if I didn’t write. Just because I wouldn’t have the time to think about all these different topics. I would not have time to think about how to answer this question.

So I think to, like I was asked about charter investment, right? I cannot tell you how much time I spent sitting in front of a computer and writing about this and thinking through this and finding logical gaps in my thinking, okay? And going back and rethinking it. I think everybody should attempt to write.

And I’m a morning person. I write in the morning. But what Isaacson writes at night, who cares? Just find the time when you can do it every day, almost every day, and just start journaling. I think my son is journaling every day, almost.

Question 7: How do you balance doing what you like and what you don’t?

There are always gonna be things in your life, even when you love what you do, that you don’t like doing. They’re always going to be like this. If you paint, hypothetically, you may not like to wash your palette after you’re done painting. But you still have to do this. That’s part of the journey.

Now, I think when I was talking about my father, I was a little bit more nuanced than that. My father was very dedicated to his art, and for him, it was very important that he was very, he wanted to make sure that he painted for the love of art, but he did not, like this, I’ll give you an example.

Let’s say he started to paint Colorado mountains. And people love Colorado mountains, and that’s all they want to buy. Well, but he’s not interested in painting the Colorado mountains all the time, right? So he wanted to paint things he liked, and he knew that if he decided to paint roses, people don’t buy roses, he will still paint them, because for him, being a true artist was more important to him than just selling a lot of art.

Now, my father had a very interesting relationship with money. He treated money, after some level of income, he basically treated money like the way you treat air or water. In other words, you have it. If you have enough air and water, you don’t need more. And he knew what enough was. And after this, he just stopped thinking about it.

So he had enough money to have a modest life, and he made sure to keep his expenses low so my stepmom wouldn’t go out. But they traveled twice a year, and they kept their expenses very low, and that allowed him to focus on things he loved, and money was just basically, he thought the same way about money as you and I think about water or air. He had enough, and after that, it didn’t matter.

So now we live in a very materialistic society, and that’s something we have to cultivate in ourselves. It’s not easy, and especially when you have neighbors that always have nicer and better cars, et cetera, and then it’s up to you not to get infected by that. I’m not sure I’m answering the question, but that’s my answer, I guess.

Question 8: What do you think about Buffett’s purported diet?

It’s hard to argue with him, right? It’s been working for him well so far, right? So who am I to argue with Buffett? Well, Charlie Buffett has different genetics than most of us, so if all of us went on the Buffett diet, probably we’d have different results for most of us, right?

Last year, I adopted a new lifestyle. I don’t call it a diet, but I call it a lifestyle, because diet is something short-term, and something you kind of force yourself to do and you don’t want to do. If you call it lifestyle, then it just becomes something you do every day, you don’t think about it.

And I just realized last year that we eat too much. I mean, you think I’m joking, well, you don’t think I’m joking, but the portion size, what used to be adult-sized, now is a kid-sized burger. The portion size went up a lot. And we eat a lot of, and it’s not even like I might be talking about chips and everything, but if you look at most of the stuff you buy inside the store, it’s basically processed food.

So my diet has been very simple. I just eat whole foods. I eat a lot of vegetables, and I consume as little sugar as possible when I’m in Denver. And I eat, you know, clean protein. And I made my life, so I’ll give you one example, because I think you need to create a system for you to maintain this lifestyle, you need to have systems.

And our system is this, here’s my colleague Cyrus, who’s a beneficiary of this. I just probably saved 20 years of his life. But we have a colleague, Dominique, every morning before she comes to work, she goes to Whole Foods and she gets fresh fruits, vegetables, and some good protein for the whole week. And we basically eat salads at IMA. And I make my own salad, and it’s been very good for my cholesterol, etc.

Anyway, so that’s what I think of Buffett’s diet. Not everything Buffett does we have to copy.

Question 9: How do you remember what you’ve written?

Oh, my god. First of all, thank you. Thank you. You know what, I once learned how to type. So I went to high school in the United States for about a year, and the only important class I ever took there was typing. And I learned how to type. To me, that’s probably the most important class because I learned how to type. I’m going to k-type for like maybe 35, 40 words per minute, which is plenty for this kind of writing.

I think my son is actually a much better writer than I am, like with a pen, right? You write with a pen a lot more than I do. Over time, I just lost that muscle memory. And now for me to write, you should have seen me signing books. Honestly, it’s unbearable. Every time I sign books, I feel embarrassed for that.

But I think you’re right. When you write as much as you and I do, you do forget. And I wrote about this last week. I literally was doing an interview. It was a podcast. And they were going to ask me about some stoic philosophy. And I just wanted to kind of brush up on examples I wrote in the Soul in the Game.

And so I started working on Soul in the Game in 2020. And I really finished it, I think, in 2021. And then it took a year for the book to get published. So when I listen on Audible to the stoic chapters, I’m like, oh, I wrote it! I was listening to it as a reader, not as a writer. Because it was almost like new content for me to some degree. So you do forget.

I’m not sure I have a great system, except we have a… everything I write, it goes on our website, so sometimes I do search. I know I wrote about McKesson, I just don’t remember every single article, so I guess having a website helps. I’m not sure I have a great, I think one way I do is that if I answer, if I wrote about something, the subject is probably less interesting to me, so I write a lot less about it. That’s the only thing I can think about, but I’m not sure I have a great system for that.

Question 10: How do you manage your time?

When I travel, things get slightly more complicated because traveling can interrupt everything. And I have a slightly different day in the summertime versus wintertime. And the difference is this. So, okay, so I get up about 4:30, 5 o’clock in the morning.

I write the first thing in the morning, unless it’s summer. Summer messes things up because I have a very low tolerance for heat, and if it’s very hot in Denver, I go for a walk in the park every single day. And it’s very important to me. So if I go in the afternoon, it gets very hot, so I have to go in the morning, and that screws up my writing a little bit. So if I have to get up earlier, or I write less, instead of two hours, I write.

Then, if it’s summer, I go for a walk. If it’s winter, I drive my kids to school, and then I go for a walk during the day. So I call it my European day. And the reason I call it my European day, because when I go to Europe, I see all these lazy Europeans, sitting in the cafes, drinking espressos. And I’m like, I want to have a life like that.

And so I just said, you know what? I’m going to, you know, I mean, I’m not critical of Europeans. I’m actually admiring their ability to sit in a coffee shop, just drink espresso and enjoy being present with the time. So on Wednesday, my calendar is always blocked, so you can’t have an appointment with me or anything. It’s my day. It’s a day that’s mine because I can go to see a movie, I can go do whatever I want.

I don’t do client calls until 2 o’clock. I don’t talk to clients much, but in general, I don’t do podcasts, I don’t do any interviews until 1:30. So, like, I say no a lot to meetings. And unfortunately, if you guys are coming from Denver, you’re going to email me and say, Vitaly, I’m in Denver, I love your books and everything, I’m in Denver, I would love to see you. Most likely you’re going to hear no, and don’t take it personally, but I just… There’s only so much time in a day, and I just… Either I spend time with you, or I spend time with my kids. And I know them longer, sorry.

So you have to say no. As much as I hate this because the last thing I want to do in my life is sound like I’m better than somebody else. I’m not. It’s just there’s only so much time.

Somebody told me that Warren Buffett, somebody asked him, you know, what was the question about the car? Oh, somebody asked him a question about, you know, that the car, the quality of cars have improved. Why is he driving this car, not this car? And he said, listen, I would buy a new car, I just don’t want to take the time to go buy a car. Okay, but I want you to think about this. He’s basically thinking his time is more important than spending an hour on buying a car. So his daughter went and bought him a car.

And I think this is something we should learn from Buffett in the sense that if you only have so many minutes on this earth, so this is why I try to be very protective of my time. I don’t do, you know, somebody calls me, let’s go get coffee, I don’t do those things either. So I know that I have the most energy until 1 o’clock. And after that, my energy level declines. And this is when I do less important things. I’m not sure if there’s anything else. I think that basically sums up my day. Try to have as few appointments as possible.

Question 11: What advice do you give your clients on weathering future economic trends?

You’re absolutely right, the last 15 years we’ve basically been in an environment of multiple expansions, right? And you would think when interest rates go up, the multiple expansions would, no, multiples would decline, but it hasn’t happened yet. Exactly. Multiples will decline, but it hasn’t happened yet. Exactly.

So, I’m not sure I really can tell my clients what number to expect because I really don’t know, but it’s probably less than in the past. But at the same time, I think the, I’m somewhat optimistic on value investing because I think it should work better in the semi-normal environment with interest rates, where interest rates are normal.

And it’s kind of funny, the way people think about interest rates, a lot of people look at 7-8% mortgages and say, yeah, they’re going back to 5 again. I’m like, do they have to? I remember when they went from 8 to 5 and people were celebrating how great five was, right? And it doesn’t, and they don’t have to be at five because we have a lot more debt now and we run huge budget deficits.

Again, everything I’ll tell you, like all the rational things I’ll tell you, are probably going to be worthless because every time I gave you my rational opinion, it was worthless. So, but I would think we’re probably going to, one thing I learned is that historically, inflation rarely just came, showed up for a little bit, and went. It’s actually persisted for a long period of time. It’s just kind of once you start the inflation machine, it’s very difficult to stop.

So, and I don’t know what inflation is, what the inflation is gonna be years from now, but I think it’s a, there’s a good chance it may stay… inflation may stay higher for longer or you know, just it’s a function, just it’s very, I mean the math is actually incredibly simple. We have 30 something trillion dollars of debt. Interest rates go from, say, if you paid 2% on the interest, now they go to 5%, 3% change, that’s 900 billion dollars of interest payments the US government pays. That’s our defense spending, and I promise you one thing, I’m actually not promising anything, but it’s very likely that defense spending is not going to go down because Russia is not going away, China is not going away, Iran is not going away, and North Korea is not going anywhere.

So our defense spending is likely not going down. So our government will be spending money. And as we keep spending money, we’re just gonna be creating more money, therefore we’re gonna have more inflation. So I think just, I tell my clients, just be very patient, let me do what I do.

If you know what’s going to happen, and smart people don’t, you’re fooling yourself. So I think one of my superpowers is that I’m absolutely comfortable with saying, I don’t know, and then investing as if I didn’t know.

In Canada, I’m not going to mention names, you’ll see why, there was this investor that I really respected a lot, and he was a billionaire. He became a billionaire, self-made investor, and unfortunately, he passed away a few years ago. But I remember I wrote this article, this is maybe 7-10 years ago, where I basically said I don’t know if we’re going to have inflation or deflation. And he wrote to me and he said this is such a chicken… I’m not going to use that word. It’s a very… my position was very non-committal. And he says, don’t you know we’re gonna have inflation?

And the interesting part was this, he positioned his portfolio as if he knew there was gonna be inflation, and it didn’t happen, and the costs had been so high that some of his companies went bankrupt. So, when you position yourself for an “I don’t know” scenario, you’re not gonna make as much money if, like if inflation showed up, he would’ve made a killing. But because it didn’t show up, he lost his shirt.

And my objective is to survive. So I try to position a portfolio for an “I don’t know” scenario. So if inflation’s gonna be high, we should be fine. If inflation’s gonna be low, we’ll be fine. So that’s kind of, I’ve learned the hard way that I have to plan for both scenarios and make sure that it doesn’t include a scenario that’s fatal.

Actually, Silicon Valley Bank is a great example. Let me give you one example, and this is gonna be very visceral and it’s gonna make a lot of sense. You are the chief investment officer at Silicon Valley Bank. And you basically say, listen, interest rates haven’t gone up for a long time. They’re not going up. They haven’t gone up for a long time, they’re not going up, so we’re going to buy 30-year mortgages. Listen, there’s very little credit risk. And for year after year after year, you’re right, until you go bankrupt overnight. That’s basically what I want to avoid. Okay, that’s kind of, that’s probably the best example I can think of because it’s so visceral in our minds.

Question 12: What is it like living with an “outsider”?

Jonah: That’s a good question. So it’s a fancy way to ask, is he weird? I think that the way that he thinks is founded in being like a contrarian and thinking differently and seeing things differently.

I remember, I mean, I have so many different examples, but I remember when I was a little kid, I went to Chipotle with my dad, and I got a water cup. They never let me drink sodas, my parents, no sodas, no lemonade, so I was always watering. And when they weren’t looking, I filled up my water cup with lemonade, and I come back to the table. My dad made me go up to the cashier and take my allowance out of my wallet, which was 100% of my net worth, and pay for the drink. I remember the cashier didn’t want to accept it, so he made me put it in the tip jar. So it’s like, he’s like, it’s not about whether they accept it, it’s about whether you pay for things on your own and you understand the value of honesty.

And I think a lot of these lessons actually stem from my grandpa, where he kind of passed on just being an honest person. But also, a lot of our conversations are not normal, I’d say. When we go on vacation or we see an interesting business, we go to a restaurant, we sit down and break down how do they make money, what is their, what are they doing well, what are they not doing well, what’s our estimate on the revenues they’re bringing in every year. And I don’t think most people do that. Maybe in this room, a lot of people do.

But yeah, that’s sort of a long way to answer the question, what is weird? I don’t know how to say it in a funny story. I think compared to most people, my dad is a very interesting person because when he cares a lot about something, he’ll put 100% of himself into it, but if he doesn’t care… For example, when my dad hears a lot about his investments, a lot? You guys don’t know? You really opened a can of worms.

So, when I think this was in high school, I come home and my dad is throwing all his clothes in the trash. Like, I was like, what’s going on? And he’s like, think about it, I only need two pairs of pants, three pairs of shorts, and a pair of T-shirts. I don’t need all this other crap, I’m throwing it all away.

Hannah: I’m going to let you guys know this, my dad does like ValueX every year in Vail. And he makes, how many shirts do you make? 50 or 60, and then he makes a lot extra, and every year he gets about 10 shirts for himself. He made himself the same ValueX shirt, and he wears them every single day. There are different shirts, they’re not the same shirts. Like, it looks like he’s wearing the same shirt every day, but they are different. You can wash them, don’t worry. But that was the first time I’d ever had this.

It’s definitely a trait people think of him. And because of that, my sister was excited having him look what he’s wearing. Which is really, like, I find that really inspiring. Because we just went to Mexico where people were, like, the price points were very high, I thought it was high rollers, but they were wearing things, and social signals, and just trying to show off what they have. And my dad was just like, it just made me realize that not everybody gets as lucky.

Vitaliy: So let me just clarify something. I usually don’t wear this. But no, but he went to Mexico for two weeks, and he came back. And he landed at 8 at night, and at 8 in the morning, we came here. So I ran out of my normal clothes. So this is not my normal clothes. But anyway, thank you.

Question 13: How would you like people to read and consume your books?

For Soul in the Game, I think probably the best way to do it is just read a chapter a day and just think about it. Just read a chapter, maybe two, it depends on the chapter, and just think about it. And I think, I am a big believer in rereading books in general, not talking about Soul in the Game, but in general.

And if you find a good book, reread it because when you read something five years from now, you’re a different person. Also, when you read the first time, a lot of times what happens when you read, there’s something new. We usually probably read a little bit faster than we should because there is curiosity about what’s going to be next. And when you read the second time, you already know how the story plays out. You already know the message. So I think you may be reading slower and more thoughtfully.

So my suggestion in general is just read good books many times. And I’m working on this new series of essays that’s going to come out in the next month or two, I don’t know when.

I will call them Reflections. And let me tell you what I’m doing, because I think there’s a lesson to this for everybody. I literally, so when I read, I don’t read physical books, I read on Kindle. There was a reason for that, which is kind of very weird and Russian reason for this. When I was growing up in Soviet Russia, books were rare, so we were told never to write in them.

So this has been drummed into my mind, so I can’t highlight in normal books. It’s just physically impossible for me to do. So when I read on Kindle, I underline. But the beauty of that is when you underline, you can export those underlines, you can export this as notes. So what I started doing, and I started this with a book on mindfulness because I wanted to explore the subject again. So I took three books by Ellen Langer on mindfulness, explored my highlights, and I would just take a highlight and write below it, like write my thoughts about it. And I did write like 13, 15 pages already.

And what I’m gonna do, and I think so, what I decided to do, I cannot tell you how much I enjoy doing this because I go back and relearn it again and think about it. And when you read a book, it’s better than listening because you still get to pause and think about it. But for me, it’s even better when I read the highlight and sit down and write about it. And I cannot tell you how much I learned over the last couple of weeks doing it.

So, what’s gonna happen over the next, I don’t know when, but I’m gonna start a new series that’s gonna come out on Tuesday. It’s gonna be called Reflections. In addition to everything else, it’s just gonna be like a quote from the book and my thoughts on this, and it’s gonna come out on Tuesday. I don’t know how it’s going to be, either a limited series or whatever, how long it’s going to be, I have no idea. But I think this is something we should all do. In addition to reading the book, just go through the highlights and just pontificate, write about them, think through them. So that’s what I do and I think it’s incredibly useful.

Question 14: What checks and balances do you have to ensure that your arrogance does not consume you?

He’s a brilliant guy, but then he does stuff like a gambler in a Las Vegas casino kind of stuff. And a year ago or so, he came out and said, the past success went to my head. I’m paraphrasing. It went to my head and I just became too arrogant. Which I respect him for doing that, actually.

So I think to be an investor you need to have some arrogance. But I would argue you need to have not just kind of, I am, therefore, I’m better than everybody else, therefore I’m arrogant, but you need to have what I call thoughtful arrogance. Thoughtful arrogance is the arrogance you deserve. And you deserve, you earn it. And you earn it through a process.

We talked about Charter. I earned that arrogance through doing a lot of research. And that, I assume I end up being wrong, but if I do this enough, I’ll be more right than wrong. We do the research, we come to a conclusion that is different from the market. It’s not because, I’m not buying, the worst thing you can do, if I convince myself I’m right because in the past I was right all the time without doing research, that is just arrogance. That’s how you get in trouble. If I come to the conclusion after doing very thorough research, that’s a different type of arrogance. And the reason you need to be arrogant as an investor in the sense that because every time you’re making a decision, you’re basically saying, I’m right, they’re wrong.

That’s exactly what I’m doing with cable stocks. You can go back and read my articles about Uber or McKesson, and I was saying, here’s why I think I’m right, this is why I’m wrong. But you can also go back and read my articles about Apple, where I was right for a while, I was right at some point in time, and I was wrong at other points in time. And that’s okay too, but you get to that arrogance through research, and that’s very, very important.

That’s the earned arrogance, okay? Maybe just, maybe arrogance is not the right word, maybe confidence, earned confidence, you know? So that’s probably, because arrogance has a negative connotation, right? But earned confidence, okay?

Question 15: How do you not get attached to the companies you invest in?

So they basically sell for three reasons. You bought a stock, things worked out, it got to a fair value. That’s one way. The second way is that you bought a stock, you made certain assumptions, things did not go your way, and you basically said, you think it used to be worth $80, because of the change in your new assumptions, it’s worth $60, and now it’s $62, or whatever. So it’s fairly valued yourself.

And then another one is when your expected return, you have better opportunities somewhere else. So you have a company that has a 7% expected rate of return over the years, and now you see Stargate has a 20% rate of return. I have the little book of sideways markets and I talk about the sell process there, so that may help you. Just getting more in-depth about it.

Question 16: What feedback loop do you have to prevent bad decisions?

Pain is a very good feedback loop. Okay? When you make mistakes, you usually remember your painful moments a lot more than your joyful moments, and I think behavioral psychology kind of confirms that. So, you know, like, the pain, painful moments get seared in your head, and your muscles, and I constantly, when I make decisions, I’m thinking, am I doing the same thing I did before?

I discuss my ideas with other investors I respect and try to see if I’m right or wrong about this. I mean, I just, you know, I’ve been on 25, 30 stocks, I constantly think about them, I constantly try to figure out, am I right or wrong? So let’s see, I’m not sure I have anything more sophisticated than that, it’s just, I’m constantly on, for good or bad. So I guess that’s my answer.

Question 17: How do you slow yourself down in the investment process?

It’s kind of interesting. So in the little book, I talk about how you should not fall in love with anything. You should be dating your stocks, not fall in love with them kind of thing. And I tell you, it’s easy to put it on pages.

It’s more difficult to live this, because you really get excited about things. You like the management. You like the business. You like certain characteristics and stuff. So you do fall in love with that.

So to make sure, so remember how I talked about how my goal is to, I need to be able to survive, okay? So therefore, we have a position sizing process that’s very mechanical. Our position sizing can be determined by a company’s quality and undervaluation. And it’s almost like an external factor. It overrides my love. And that basically helps me to not hurt myself.

Question 18: What was your worst investing decision?

I’ll give you multiple answers. So a couple of things. Number one, I think when you think of worst investment decisions, you think about the ones that decline the most, right? I have a pushback for that, because you can only lose 100%. But my worst investment decisions were when I actually lost 300% to 100% when I sold things too soon. And I sold them for the wrong reasons. So those are actually, I would argue, the ones that have been costing my clients the most money.

But in general, I think my worst investment decisions when I lost money were when I bought lower quality companies because they were so cheap. And that’s, in the Soul in the Game I talk about this. There’s a chapter called Pain, Opera, and Investing.

And this was in 2015, it was a very, very painful investing year. And the thing is, it was a painful year, but it’s not, it was a culmination of decisions I made in previous years. And what I learned from that was to not compromise on quality. And so that became a very important part of what we do.

I was thinking about it, actually. When companies, sorry this is kind of interesting, when companies usually have a corporate slogan, they have like multiple things. We do this, we do this, we do this, and this. I was thinking, well the problem is it’s kind of too many things, okay? And I was thinking what would be the word that would describe IMA? And I realized, it’s so simple, one word. Quality. If we have quality in everything we do, then we’ll be fine.

So it’s quality now, how we, you know. And Cyrus runs our operations, so he makes sure that our clients are treated well, the trading is done well, all these different things. And I think this is kind of what we are obsessed with, you know, I wanna own high quality businesses, like as an investor, but we want to provide high quality service to clients. So this is kind of quality is kind of at the back of our mind.

So this is kind of just one word that should really define us. This is a new thought. I’m looking at him because this is a new thought. So whenever I compromise the quality, I usually pay the price for that. I think, actually, no usually, every single time. I can’t think of a single exception. So from now on, I don’t compromise on quality anymore.

Question 19: How do working-class people approach bargaining with employers without unions?

I think that’s a very fair question. I think it’s a great question. For those who haven’t read it, maybe less than that, maybe I forget. Yeah, let’s say 10%. Somehow 90% of our economy functions without unions, and we’re doing fine. I think to… I think the way you bargain with your employer is to create more value. I’m serious, by the way, this is advice to my kids. Be more valuable than your cost. That’s really it. If you are producing $100,000 of value and you want $150,000, then you probably don’t have good bargaining power.

It’s kind of interesting. Let me give you an example. Amazon is very hated. I was having a dinner with my niece, who is a musician who lives in London, and I love her dearly, but she is a professional musician. She never took an economics class in her life because she studied eight hours a day in music, and she hates Amazon. Like, she thinks Jeff Bezos is worse than Putin. I might be over-dramatizing a little bit. Okay, but it’s like, it’s, her anger is that kind of anger to us.

And it’s kind of interesting, like you look at Amazon and you say, well, they make these people work, like people who work at warehouses, they’re working miles and miles a day. And it’s horrible working conditions because these people have to work. And then the opposite side of this, well, Amazon says, fine, you don’t have to walk, but we’re just going to have to automate everything.

So how do you work at Amazon? When they automate the warehouse and 10,000 jobs, whatever, that’s 1,000 jobs lost, Amazon loses again because it’s evil Jeff Bezos just laid off 1,000 people, right? So I think the key is to have skills. Unfortunately, that’s the answer. We live in a world where, guess what, just having hands and being able to do things is not good enough anymore.

You need to have unique skills, you need to be better than others. If you have capable hands, then well guess what, your bargaining power is probably not very high. And the reason for that is because either they pay you or they pay a robot. And that’s what’s going to happen, so much more automation. And you’ll be looking at factories, and they look like sci-fi movies.

And so I think this is why I want my kids to have a very good education, to be very thoughtful, to always think about how they can create value for their employer. Because nobody, I don’t think anybody owes us anything. Honestly, in this society, my issue is the younger generation, there is this kind of entitlement. Like people owe us things. And that’s not how I look at the world. And I guess this is maybe an immigrant mentality. When I came to this country, nobody owed me anything, and I had to achieve everything on my own. So anyway, I’m not sure I’m answering your question, but this is where I’m coming from.

Question 20: How do you teach good money habits to young people? What skills should kids learn?

I’m a big believer in scarcity, of constraints. So my kids, which made them so scarce, because of the love. I’m going to have to go to the kitchen. I can tell you all the stories without them. And they’ll never watch this recording anyway, so it doesn’t matter.

So my kids get limited allowances, and they always get less than they think they need. And that’s because my daughter wanted, my daughter loves going out to eat, and she gets, between you and me and the camera, $20 a week. Exactly. And she’s 18 years old. Which is just enough to buy half a Starbucks coffee or something.

So she got a job at the coffee shop, and that’s how she… And then she works at AMA and supplements her very limited allowance. And when Jonah was a senior in high school, I paid him for his grades, but it was a very interesting system. I forget the numbers, but I gave him a weekly allowance where basically he got a very, like I’m gonna make up numbers because I just don’t remember, this was a while ago, but I think he got nothing for C’s, he got negative $20 for D’s and F’s, whatever. He got maybe $5 for B’s, and maybe $20… I forget what it was. So the point was, if he gets okay grades, he gets nothing. If he gets great grades, he gets a lot. He had a 3.9 GPA in high school. He had a 1.3 GPA in 11th grade. So he went from 1.3 to 3.9. So I think money was not just the only motivator, but it was helpful.

In life, no matter how much money you make, you always can spend more. And therefore, you always have to have trade-offs. And my kids, you know, so Hannah has a trade-off. She goes to the movies or she goes to a restaurant for an extra time. So she has to make this trade-off. So that’s how I deal with the money issue.

I think one thing you can do in this new world of automation is to have skills that are kind of multilateral. Like Hannah is thinking about studying psychology and business. There are a lot of people who study business, a lot of people who study psychology, but a much smaller number of people study psychology and business. And suddenly you’re competing against a small number of people.

I think it’s kind of interesting, I think today almost you don’t have to go to school in a traditional way. And I think there are some people who don’t have to spend a penny and don’t have to go to university. You can basically go online and take Ivy League classes for free online. And you can build your own curriculum. I don’t think it’s for everyone. I don’t think it would be for me because I needed external structure imposed by school.

But if you can sit on your butt, and you can study on your own, and watch online classes, maybe there is absolutely no reason to go to school. But again, you have to have this special, it has to fit your personality. And here’s the interesting part.

Let’s say two people apply for a job at the IMA, one person actually has created their own, his own or her own curriculum, but you know, like, says, listen, I didn’t go to university, but I took this class from Yale, this one from Harvard, this one from Community College of Denver, and this, whatever, and this is what I learned, and I actually probably would look at the, versus somebody who went to Ivy League school, I probably would have a higher, the first person probably to me is more interesting because it shows original thinking. It shows actually being a value investor as well, but you know, because, save the $400,000 as well.

So, but that’s, you know, I have a friend who applied for a job at Goldman Sachs. And he was rejected. This is long, long time ago. So what he did, he went home and he read 150 books. And then for every single book, he created an outline and what he learned from every book. He reapplied the next year and said, this is, I’ve been gone a year, but here’s what I learned. He got the job at Goldman Sachs.

I think it requires this kind of thinking. It requires… Just because I see these kids today, they go on LinkedIn and they just click and apply on every single job. And then they say, well, somehow I didn’t get the job. Because there are 250 other kids who are doing the same clicking. It requires you to be creative. I think that’s what I encourage my kids to do.

Question 21: How do you teach to understand your investor constituency?

I talked about Value Investing Congress in Pasadena. And here’s the story from that event. The true story, because I love that you bring this up.

So I was speaking at that Congress. And the day before we spoke, all the speakers went out to dinner. And to the right of me, sitting Monish Pabrai, and I’m talking to Monish, and I’m like, Monish, how can you handle a portfolio of 10 stocks? Like, doesn’t volatility, this whole thing, drive you crazy?

He’s like, Vitaly, don’t look at me, look at this guy to your left, and I’m gonna call him Bill, that guy to the left. He said, look, this guy has three stocks. Now, it gets more interesting. The next day, the guy, Bill, goes out and does presentations on Kelly Criterion. Do you remember that? Okay, and Kelly Criterion is basically, I’m not sure I can explain it that well today, but it’s a concept taken from gambling. And it’s basically, if you look at your hand and you see probability of winning has so much greater than probability of losing, and the magnitude of it, you place disproportionately large bets. So it’s kind of position sizing.

And he basically said, if you calculate Kelly criterion for this stock, it should be a very large portion of my portfolio. And he said it was 60%. Okay? And so three-stack portfolio, there was nothing wrong with that.

But the problem is, Kelly criteria, it’s based on gambling, where you have very discrete outcomes. You know if you have 52 cards in the deck, so you know the probability that the next one is gonna be an ace or whatever. Establishing these probabilities in investing is a lot more difficult.

To conclude this story, this guy does a presentation on Kelly Criterion, and then he pitches the company, which was a natural gas stock. And at the time, if you don’t remember, the natural gas price was $13, maybe six months before that, and then declined to, I forget, to $8. And he said, listen, this is one of the cheapest companies I’ve ever seen because natural gas prices cannot go below seven.

Well, they declined to $1.50. And this guy basically completely blew up. Previous five years, he had returns of 25% a year. And then he had a negative 90. And I think your question, your point is so paramount because, number one, surviving is incredibly important. Like, to me, my job is, Warren Buffett has a saying, probably it’s not even his saying, but to finish first, first you have to finish. That’s point number one.

Point number two, you’re absolutely right that you need to have the right constituency. In other words, you, like, I don’t want to talk about IMA too much, but people come to us and usually give me most of their wealth. And therefore, and they are in their 50s or 60s, some of them are older, so that’s money that they can’t replace. So therefore, I have to invest as if it was the only money they were ever going to have.

Therefore, I think it would be irresponsible for me to have a three-stack portfolio. Even probably a ten-stack portfolio would be irresponsible to have. So we have, our portfolio has 20 to 30 stacks, let’s say 25 on average, and I think that’s, and they are diversified. And I’m not, this is probably diversification as well, because sometimes people like saying, I own this, and this is very different from this, I’m gonna buy this. Well, it also has to, the other asset you’re buying also has to have very good returns as well. So just because they’re negatively correlated, one has good returns, the other one doesn’t. You shouldn’t be buying the second asset.

So… We are very lucky at IMA that there was a kind of reverse stock selection. In other words, I tell people, here’s what we do, here’s how we’re going to do this. If you want to be part of this, join us. If you don’t, that’s okay too. Some people want to own exchange-traded funds. You won’t find them in our portfolios. And I’m not going to change for them. So I’m just going to do what we do.

So you need to, what I call, an empathy gap. And what I mean by this is when an investor comes in and you tell him, and he says, I’m a long-term investor, I’m not great, and he says, I do look at volatility as just a nuisance, you know, the risk is a permanent loss of capital, I’m great, and he’s like, I wish the stock declined 20%, it would be so awesome, and then three months later the stock declined 5% and he’s like, oh my god, what’s happening to me?

So it’s a, and this is not because people are lying to me, because they were lying to themselves. That’s why it’s called an empathy gap. So all I can do is try to educate them as much as possible up front, and then hope that we understood each other. But anyway, so I hope I kind of answered your question.

Question 22: When do you know you have done enough research?

Okay, so I’ll give you a couple of answers because I’m not sure I have a great answer, in all honesty, so you pick and choose the one you like the most.

I think number one is that when you’re analyzing companies, it’s like building a world. Like if you read sci-fi books, like I’ll give an example. If you read a book about Elon Musk versus you read a book by Ian Banks, it’s much easier for you to understand a book about Elon Musk because he is a contemporary, you know a lot more about this world. If you read books about sci-fi books, now you’re reading about a planet that has two moons and the people are flying, not walking, so suddenly there are a lot more things you have to learn to understand the dynamics in that world, right?

And in investing, it’s kind of the same thing, right? You look at a new industry, you need to understand all these different dynamics in that industry, right? The relationship between buyers and suppliers, customers, what are the metrics important, this kind of things. So if I’m looking at, if I owned the company before and I sold it a few years ago and I’m buying it again, it may take me literally 30 minutes just to update if anything has changed. So it’s going to change from company to company on how familiar things are to me.

It’s usually the, I wish I could tell you what is that moment when I say, okay, yes, it’s just, it’s a kind of, when I feel I understand the business and I feel like it’s a, I get comfortable, and I don’t know how to define the comfortable, what does it mean comfortable, but I just do, it’s a feeling. I mean, it has to meet all the criteria, and then I just feel like, okay, I get it.

Question 23: How do you measure the flexibility of money?

I mean, the whole concept of negative interest rates is antithetical to, it breaks my brain, literally. So if I save money, you’re gonna pay me less? Like, it’s just me. It’s, I tried to explain it to my kids, and I just, I gave up. Because it makes no sense to me. That’s the issue with that.

Listen, I think there’s optionality in cash, right? And optionality, like if I can put, when we look at stocks, we’re usually looking for it, now internal models for at least 15% or more. So if I can find enough stocks that meet my criteria for that, and I can do a diversified portfolio. That’s another key, right? It can’t be just cold stocks, right? It cannot be just a portfolio of cold stocks, right? Or whatever.

So it has to be a diversified portfolio of stocks. That if I can build a portfolio, then I will be fully invested. Now, if I can’t, it means that the market probably doesn’t have a lot of opportunities, and therefore, we’re going to have a lot more cash. And historically, if you were constantly looking for ideas and you had cash, then there will be times, it’s just a matter of when, when the market gives you the opportunity to put things to work.

And the beauty of it is, obviously, if I only invested in Switzerland, hypothetically, it would be difficult, right? Because it’s a tiny country with so many companies, right? So opportunities there probably don’t come as often. Nestle only declines every five years, I don’t know. Now I happen to be looking all over the world, including Switzerland, so it’s a matter of – my thinking is it’s a matter of time before I can put this money to work. I’m not trying to hold cash to hold cash. I’m not trying to time the market. I just want to put it to good use. So that’s how I’m thinking about it.

But obviously when you have negative, I’m not even sure what you do when you have negative interest rates. It is crazy. And it’s not Switzerland’s fault. It happens to be the most pristine, beautiful shirt in the world with a lot of dirty laundry. And so that’s why the capital of lightning applies to Switzerland, to Swiss banks.

Question 24: When do you get over not investing in a company?

Poorly, poorly. I mean, you see, it’s not, you see, I think Buffett complained that he missed Walmart by a few dollars or something at some point, and then, you know, it’s very, very difficult. I usually maybe buy a little bit, and just not as much, and most of the time I pay a price for that. But it’s, that’s kind of, you get anchored to a price.

I mean, but let me tell you what I should be doing, may not be always doing. You should basically say, what is the company worth and move back and work backwards. And that’s basically the right thing to do. I’m human and I get anchored, but I mean that’s kind of that’s what I should be doing basically. That’s the right answer.

Question 25: How do you decide if a country is investable?

Oh, that’s the easiest question ever. If I write an article critical of the country’s leader, and I’m not afraid to travel to this country, after I wrote this article, then it’s investable. If I write an article and I’m afraid to travel, then it’s uninvestable. Very simple.

In 2008, I wrote an article about Putin and about this whole saga they had with Yukos, which when the government basically stole a company from its public shareholders because Putin wanted to put down its biggest opposition, which is Michael Khodorkovsky. And I wrote the article, and I never published it. The reason I didn’t publish it is because I went to Russia once since I left Russia in 1991, that was 2008, and I was afraid that when I go there nobody’s gonna know that I wrote this article, I’m not important. But let’s say I’m crossing the street and the policeman arrests me and I have an American passport, and they take me to the police department, and then they just Google me. And then they find this article, suddenly things become very different.

Same thing about China, same about other countries. So this is kind of, this has been my rule. If I can’t write a critical article about the country’s leader, then I should not be investing in this country because it’s usually an indication of a bigger issue.

So, Turkey is a good example. We don’t invest in Turkey for this reason. Like I don’t, you know, I… Argentina is a different story. Argentina is actually… I wish the new president, Milei, huge success. I hope he’s so successful because if he is, it’s gonna be a world-changing event. Okay, I hope so. But Turkey, yes, I mean, the guy who runs it is a dictator, basically.

So there’s this great book called Spin Dictators by Sergey… I forget the guy’s name, sorry. Anyway, spin dictators. And it talks about how the new dictators are basically… they don’t wear the kind of uniform, they wear Armani suits and they go into Davos. Think about Putin, you know, he’s not wearing uniform, he’s, you know… and think about… sorry guys who came here from Singapore, but the guy who runs, the family who runs Singapore are kind of dictators as well. They’re just kind of more malignant, you know, more benign dictators.

But so I don’t wanna own, you know, I mean, I feel fine owning a company, you know, in Stuxnet, Singapore, but not in Turkey, not in China, not in Russia. Yeah, probably not even in Hungary either, so.

Question 26: Why are investors reluctant to invest in technology?

Thank you for this wonderful, wonderful question, because I actually have an answer, so this is good. So the cause is the guy who lives in Omaha, okay? And this guy is 94 years old. He grew up when the people were still riding carriages, you know, okay? I think there is absolutely no excuse for anybody who is less than 94 years old to not own technology stocks.

Okay, no, there’s absolutely… Let me take it a step further. That fellow, Mr. Buffett, studied this for a long period of time and then he bought Apple. So, guess what? People say, well, here’s what happened. To me it’s insane. So there’s this concept that I absolutely love called cargo cult. I don’t know if anybody here heard of this concept, cargo cult. Look it up. It’s a Google. It’s a fascinating story about these islands in the Pacific or something, where this kind of original population, the native population, never saw people. And then after World War II or the 1950s or something, there was some kind of war, I forget which war it was, suddenly Americans land on the island. And these guys had never seen human beings before, I mean, never seen modern, and they looked at them as gods.

And then Americans came, you know, kind of landed, spent there a few months, whatever, and left. And then these people started to build planes and radios out of sand. Because this is what Americans used to communicate. So they had sand radios, right? So they copied how things looked without understanding the content.

So why am I telling you this? Because when Buffett says, I don’t buy technology companies, what a rational human being should learn from this is Buffett thinks they are outside of his core competence. And he has an excuse because he is 94 years old.

When you’re 25 years old, you don’t have that excuse. What you should be learning from Buffett is that you should not invest outside of your core competence. But you should also learn from Buffett that you should always try to grow the circumference of your core competence.

So I own plenty of technology companies. So, and I think there is absolutely, but I tell you this, I don’t only buy technology companies because I always failed biology and I don’t understand this and therefore I would not be able to tell you if the company with one molecule has a better molecule than the other and that’s okay. So if I say this doesn’t mean that if you are having PhD in biology you should not be owning those companies. Did I answer your question?

That was a lot of fun and I hope to see you next year. Keep reading my articles, tell other people about them, and thank you.