Dissecting Buffett's Forgotten Investing Method (Lost Livestream Resurrected) | Martin Shkreli
Summary
TLDRIn this insightful video script, the speaker delves into the concept of capital efficiency in investing, highlighting the importance of understanding financial statements and the iterative process of investment analysis. Using Apple and Checkpoint as examples, the discussion explores how companies generate profits relative to their assets, emphasizing the significance of capital efficiency in identifying strong investment opportunities. The script also touches on Warren Buffett's investment philosophy, the concept of 'Buffett return,' and the idea of moats in business, providing a comprehensive look at advanced investment strategies.
Takeaways
- 📚 The speaker emphasizes the complexity and iterative nature of understanding financial statements for investment analysis.
- 🧐 The importance of capital efficiency in investment is highlighted, comparing a business's assets to the profit they generate.
- 🤔 The concept of capital efficiency is defined as understanding the relationship between the assets required to generate profit and the actual profit made.
- 💡 The speaker introduces the 'Buffett return', a ratio mentioned in the book 'The Money Masters' by John Train, which is influenced by Warren Buffett's investment philosophy.
- 🔍 Apple is used as an example of a capital-efficient company, generating significant cash flow with relatively low capital expenditure on inventories and fixed assets.
- 🏭 The discussion of Apple's property, plant, and equipment (PPE) reveals the company's ability to generate high returns with minimal asset base, indicating a strong competitive advantage.
- 🚗 In contrast, the automotive industry, represented by Ford, is described as less capital efficient, requiring substantial capital to generate lower returns.
- 🛡 The concept of 'moats' or competitive barriers is introduced, explaining why some businesses can sustain high returns without attracting competition.
- 💼 Warren Buffett's investment strategies, including his focus on capital efficiency and understanding business moats, are discussed as key to his success.
- 📈 The speaker discusses the potential for arbitrage in businesses that require minimal capital investment to generate high returns, using Checkpoint as an example.
- 📘 The influence of Warren Buffett's investment philosophy, including his departure from traditional value investing and focus on private equity, is highlighted.
Q & A
What does the speaker consider the most interesting aspect of financial statements?
-The speaker finds financial statements interesting because they appear simple but are inordinately complex, offering a deep understanding of a company's financial health and operations.
What is the concept of capital efficiency as defined by the speaker?
-Capital efficiency is defined as comparing a business's assets, which are required to generate a profit, with the amount of profit being generated.
Why is capital efficiency important for investors?
-Capital efficiency is important because it helps investors understand how much capital is needed to generate returns and whether the business is making efficient use of its capital to produce profits.
What is the 'Buffett return' mentioned in the script?
-The 'Buffett return' is a ratio mentioned in the book 'The Money Masters' by John Train, which is likely a measure of return on investment that Warren Buffett is known for using or advocating.
How does the speaker describe Warren Buffett's influence on his investment philosophy?
-The speaker describes Warren Buffett as the greatest investor of all time and states that Buffett's philosophy has influenced his own investment approach more than any other.
What does the speaker find remarkable about Apple's capital efficiency?
-The speaker finds it remarkable that Apple can generate significant cash flow with relatively low capital expenditure, specifically highlighting Apple's ability to create a business valued at 600 billion dollars with only 23 billion in property, plant, and equipment.
What is the difference between the capital efficiency of Apple and Ford as per the speaker's analysis?
-Apple has a much higher capital efficiency, generating 60 billion dollars annually with 23 billion in assets, whereas Ford generates 13 billion in cash flow with 71 billion in capital, indicating a lower return on investment.
What is the significance of the 'moat' concept in the context of capital efficiency?
-A 'moat' signifies a barrier or competitive advantage that protects a company's high returns on capital from being eroded by new competitors, such as brand loyalty or unique business models.
How does the speaker view the concept of working capital in relation to capital efficiency?
-The speaker views working capital as an important aspect of capital efficiency, noting that in some businesses, positive working capital can be used as a float to invest, which can significantly impact a company's capital efficiency.
What is the speaker's perspective on private equity as related to capital efficiency?
-The speaker sees private equity as the ultimate arbitrage, where investors like Warren Buffett acquire companies at low prices and benefit from their capital efficiency, often leading to high returns on investment.
How does the speaker emphasize the importance of understanding a company's business model when evaluating capital efficiency?
-The speaker emphasizes understanding a company's business model to identify why certain companies can achieve high returns with low capital requirements and to assess what prevents competitors from entering and reducing those returns.
Outlines
📈 Capital Efficiency and Investment Analysis
The speaker introduces the concept of capital efficiency in investment, emphasizing its complexity and importance for evaluating companies. They discuss the iterative process of financial analysis and the need for continuous learning, using Checkpoint (CHKP) as a case study. The speaker also mentions Warren Buffett's influence on their investment philosophy, highlighting the 'Buffett return' ratio and referencing John Train's book 'The Money Masters' for deeper insights into Buffett's strategies.
🏭 Understanding Capital Efficiency in Business Assets
This paragraph delves deeper into the definition of capital efficiency, comparing a business's assets to the profit they generate. The speaker uses Apple as an example to illustrate how capital efficiency can be measured, discussing the company's cash flow and asset base, including inventories and property, plant, and equipment (PPE). The importance of understanding what assets are consumed to generate profit is highlighted, along with the significance of capital efficiency in making informed investment decisions.
💡 The Significance of Capital Efficiency in Business Valuation
The speaker explores the implications of capital efficiency on business valuation, using Apple's market capitalization and PPE as a case study to demonstrate how a company's assets can be leveraged to generate substantial returns. They discuss the concept of 'moats' that protect high-return businesses from competition and the role of brand loyalty and other barriers to entry. The comparison between Apple and other businesses with lower capital efficiency, such as Ford, is used to emphasize the value of understanding capital requirements relative to profit generation.
🛡️ The Role of Brand and Moats in Capital Efficiency
The speaker discusses the role of brand loyalty and other competitive advantages (moats) in maintaining high capital efficiency. They contrast companies like Apple, which benefit from strong brand loyalty, with businesses in industries such as pharmaceuticals, where brand is less important. The speaker also touches on the concept of arbitrage and the importance of identifying and understanding the barriers that protect a company's high returns from competition.
🚀 Capital Efficiency in Software and Technology Companies
The focus shifts to software companies, particularly Checkpoint, to illustrate extreme capital efficiency. The speaker is intrigued by the high returns on minimal capital investment in such businesses and questions the sustainability of these margins. They ponder the reasons behind Checkpoint's ability to generate significant profits with minimal assets and the potential challenges of replicating such a business model in a competitive market.
🌟 Learning from Warren Buffett's Investment Strategies
The speaker reflects on Warren Buffett's investment strategies, particularly his understanding of capital efficiency and the use of working capital to invest in businesses. They discuss Buffett's shift from traditional stock investing to acquiring and holding companies, his focus on maintaining a strong reputation, and the lessons that can be learned from studying his approach. The anecdote of a young investor who had the opportunity to dine and converse with Buffett serves to illustrate the value of direct engagement with successful investors for learning and inspiration.
Mindmap
Keywords
💡Capital Efficiency
💡Financial Statements
💡Return on Assets (ROA)
💡Return on Equity (ROE)
💡Invested Capital
💡Warren Buffett
💡Buffett Return
💡Moats
💡Arbitrage
💡Private Equity
💡Working Capital
Highlights
The lesson focuses on the concept of capital efficiency in investment analysis.
Capital efficiency is defined as comparing a business's assets to the profit generated.
Financial statements are complex and require an iterative process to understand fully.
The importance of understanding concepts over memorizing formulas in finance and business.
Introduction of the 'Buffett return' ratio, a measure of capital efficiency.
Discussion on the book 'The Money Masters' by John Train, influential to the speaker's investment philosophy.
Apple is used as an example of a highly capital-efficient company.
Apple's property, plant, and equipment are worth $23 billion, a small fraction of its market cap.
The concept that high returns on capital should eventually be eroded by competition unless there's a barrier to entry.
Warren Buffett's influence on the speaker's investment approach.
Buffett's understanding of capital efficiency and its role in business valuation.
The idea that some businesses can use their working capital to invest and grow.
Private equity as the ultimate arbitrage according to Buffett.
Buffett's focus on image and reputation in investing.
A personal anecdote about meeting Warren Buffett and the insights gained.
The importance of reading and understanding the works and philosophies of successful investors.
Transcripts
uh so I think today's uh quote-unquote
lesson or review or whatever you want to
call these things uh is probably the the
most I think interesting one I've put
together yet it's probably the most
advanced one so it may not make sense to
everyone
uh from the perspective that um you know
it requires that you you watch the other
ones at least and probably have even
more knowledge beyond that but I thought
I'd sort of start to evolve what we've
been doing
um and we always have to look at
companies and investment opportunities
with the
um perspective that we're trying to make
good Investments and we started off just
sort of understanding what financial
statements a company provides and then
um seeing what we can Define from that
and what's interesting is it's a very
iterative process and a lot of the young
investors I need after I teach them the
very first elements of the process they
they sort of decide that they're the
greatest investors who ever lived and
don't need any more um understanding but
the reality is that financial statements
are probably like many things they look
very simple but they're inordinately
complex what you can Define from them is
um more complicated than uh you can even
imagine we're going to go a little bit
further into that with respect to
something called Capital efficiency a
little later and like most lessons again
we have a company that we're going to
use as a we're using a more as a muse uh
or Conversation Piece than we are as um
a serious examination into the company
um
but of course we're going to try to
examine it as best as we can in a few
hours uh and that company is called
checkpoint
um ticker is chkp it's a software
company
and uh we're gonna look at that and
we're going to talk also about Warren
Buffett you know I like to uh talk about
great investors
uh and Warren Buffett is arguably the
greatest of all time
um
and uh I'm a Avid buffetologist I'd say
he's influenced
me and my investing more than anyone
else and uh we'll talk about Buffett um
quite a bit so where do we get started
well uh maybe we can talk about what
what capital efficiency is because it's
going to dive into
um it's going to be related to kind of
what we're talking about you've probably
seen at some point some of these ratios
like return on assets return on Equity
return on book tangible book uh invested
Capital Etc and uh which you probably
haven't seen is something called the
Buffett return
um and I actually have this book
um let me run and get it real quick
because it's pretty important and it'll
tell you something important about how I
do what I do the money Masters it's by
John train I think it's out of print so
you gotta find a used copy
um I had a first edition copy and I gave
it away to somebody which was foolish so
I had to go buy this on Amazon for three
dollars which is a very good investment
but the entire thing's marked up pretty
bad anyway it's uh if you're familiar
with Jack schwager's books which I also
recommend uh John trading wrote the
first Jack schwager book before
um probably schwager was even born
what's interesting about this book is
that uh
it's sort of similar to the schwager
books that it goes through
um investor by each each chapter is an
investor
and um
the uh the first chapters by Warren
Buffett and it's got some things in here
that nobody knows about Warren Buffett
which is pretty cool because you think
someone who's the most successful
investor ever the richest man in the
world that's somebody that has been
studied and and sort of um you know
everybody knows everything about Warren
Buffett but the reality is you know
there's things in here that are really
not uh
um understood
um about Warren Buffett and one of those
is the so-called Buffett return which is
a ratio which we'll talk about in a
second but what is capital efficiency
and like all of these I I sort of put
the new things that I am writing in red
and I put the whole things in Black so
each lesson you can see what I added uh
to our little PowerPoint our PowerPoints
now like 70
let's see 74 75 73 slides
so it's almost a not quite a book but
it'll be a book sooner or later
um so what is capital efficiency well I
Define it as capital efficiency as a
concept and I think that's really
important is that we are always taught
in in probably it comes from school
where we're taught to memorize things
and not think about the concepts behind
them and in business investing and
finance it's way more important it's
important in chemistry it's important in
math but in business and finance I'd say
it's the most crucial where you actually
have to understand
Concepts and not formulas and so the
concept of capital efficiency is that
we're comparing a business's assets the
assets that that business requires to
generate a profit with the amount of
profit being generated so so that's a a
simple concept but it actually is
extremely tricky to sort of understand
for instance what assets are required to
generate a profit and that's the maybe
the hardest part of this and and so is
it desirable or undesirable obviously if
you think about it from a plain
perspective you'd rather much rather
let's say um you needed a a million
dollars of capital to make a dollar that
that would not be a capital efficient
business if you needed one dollar to
make a million dollars that would be an
extremely Capital efficient business and
why is capital uh efficiency important
obviously as return goes to zero you
could you could have alternative returns
right you could decide not to make that
capital investment uh and instead take
your capital and put it in something
returning higher the other concept is
that there's volatility around this
quote-unquote capital and what what is
the capital we're talking about well
we're actually talking about the balance
sheet so we're talking about things like
uh inventories and and uh property plan
equipment mostly so uh and this this
becomes a very very interesting
conversation let's look at some examples
um apple is one of the most Capital
efficient companies that exist so let's
pull up
in apple um income or out the financial
statements we'll say and so let's see
last quarter Apple generated
well let's just say for the last four
quarters Apple generated about 50 60 and
70 billion in cash flow for the trailing
12 months for the last
uh four quarters going backwards
um three times so on average they're
making about 60 billion on a full
annualized rate uh rate so the the book
is called the money Masters and it's by
John train
um I'm sure it'll go out of print
uh it's been out of print I'm sure it'll
go more out of print tonight but
actually talks about some wonderful
investors and you've never heard of
um one that's really uh fascinating is
actually a guy who just died is Robert
Wilson
um who's a New York uh Trader who is a
who was extremely successful that again
again almost nobody's ever heard of so
these old books can sometimes be
um rather nice I like how they say the
go go hedge fund days of the 60s which
is pretty humorous to anyone who's been
in the hedge fund industry recently so
anyway let's get back to Apple
so Apple's made UH 60 billion dollars on
an annualized basis so on on a four
quarter trailing basis and so the
question is what did it take for them to
make 60 billion dollars we all want
businesses that make cash flow at least
I do uh and um I know others don't but
uh I certainly want to make as much cash
flow as possible for my businesses and
the question is every business needs
assets to create those cash flows and on
a balance sheet it's supposed to be a
complete comprehensive description of a
company's entire asset base and there's
Concepts like off-balance sheet assets
and we don't have to get into those but
in general by law the balancing has to
contain every asset the company has and
the assets of apple look pretty simple
you have
um 230 billion in cash
and 305 billion in total assets so
really if you exclude the cash you're
left with 72 billion of quote-unquote
real assets but you can actually take
that a little further Buffett defines in
this book the uh the money Masters
um again something I don't think he's
ever talked about publicly other than in
this book which almost nobody's read
that he looks at the asset base as the
firm assets which is maybe an old name
for property plan equipment and
inventories and why why are those assets
of that are consumed capital
and so basically the way you look at it
is inventory is you have to spend money
to make your inventory right and you
hold that inventory and you hope to sell
it for for a higher price because that's
what a business is you make something
and then you sell it for a higher price
uh how much higher that's up to the
market but that inventory is capital
that's being consumed you have to hold
that Capital
um you have to Apple for instance here
has about 2.2 billion dollars of
inventories presumably those go into any
accounting student knows this goes into
raw materials work in progress and
finished goods so raw materials would be
you know I don't know glass I don't know
what Apple keeps holds in their stores
in their inventories but uh something
like that finished goods is probably the
bulk of it where they have finished
iPods and iPads that they're uh and
iPhones most especially where they're
going to be reselling those to uh
retailers for instance so inventories
are capital that you have to put up that
money right so before you sell a product
you actually have to spend the money and
make that product and that's capital
that's capital that you have to put into
the business and if you're a retailer
and we'll see those in a second the
capital you have to put into your
business is enormous because the margins
you're making on on your on your resale
are very limited whereas the amount of
money you have to put in your inventory
relative to the amount of money you're
making that's what capital efficiency is
all about property plant and equipment
is the most interesting part about all
this property plan equipment of course
is any expenditure that that
its expected life is greater than one
year right so uh that includes things
like buildings and plants and all those
types of things and so
basically what's what's really
remarkable and this kind of dawned on me
uh as a young investor maybe 10 years
ago or seven years ago inventory is
usually valued at Cost
um to answer that question
um what's really remarkable and this
should blow your mind for a second apple
is worth 600 billion dollars they're
making 60 billion dollars a year that's
10 times earnings but what's amazing is
if you look at this property plan
equipment think for a second about this
23 billion dollars of property plant
equipment what does that mean
does anyone have an idea
take it take a guess Apple has 23
billion dollars of property plan
equipment
how do you interpret that think about
that for a minute
it really is a
an interesting way to think about it
well we know what PP e is I'm not asking
you to Define PP e everybody knows what
PP e is it's again machines real estate
things like that and no one's really
getting it which is great because I feel
so proud of myself or understanding this
as a young investor the theory the
reason this is fascinating Apple's
entire property plant and equipment is
worth 23 billion dollars
why is that so interesting the market
cap is 600 billion okay
but the entire you could create recreate
the entire Apple business
if you had 23 billion dollars and there
are people with 23 billion dollars
you could actually replicate think about
you know trying to copy something
photocopy something you can actually
replicate all of Apple
for 23 billion dollars
right that's all it would cost you the
current value of all of their assets
imagine making a apple in a you know a
copycat app we'll call it uh uh crapple
and uh this crapple company
you could actually recreate every
machine every desk every office every
everything in the whole company with 23
billion dollars but why is the company
worth 600 billion dollars
that's the interesting part
there are businesses where
where you can generate a high return so
if we add this up we get that they're
making 63 billion dollars off of 23
billion dollars every year
so it's a 250 return there's no hedge
fund on the planet that has that kind of
return
um and so they're they're arguably the
best investors ever
so obviously if you recreated this
company Apple with your new brand name
it would not have the same brand loyalty
and brand value and and you wouldn't
have the same revenue and earnings but
there are businesses that you've never
heard of
that don't have that kind of brand
loyalty they're they're much different
they're business to business companies
and they're you know good examples
Pharmaceuticals doctors don't care what
company makes a drug they don't say oh
well I don't I don't trust this diabetes
drug because it's not made by Merck no
they prescribe the drug if it's safe and
effective and they don't really care if
Merck made it or or your you start a
pharmaceutical company made it
um you know there are businesses where
it totally doesn't matter what your
brand is
and there are companies where you could
recreate completely recreate a business
like this and generate High returns and
and that's sort of the essence of
Arbitrage
um and it's there's other sort of
reasons why these moats exist and Warren
Buffett was one of the First Investors
to sort of understand that
something there's something about
looking at return on
Capital whether you define a capitalist
assets or Book value or whatever you
want to find as Warren Buffett's
inventory plus firm Capital at some
point what you're what you're realizing
is that the higher that return the more
likely there is to be some kind of moat
or some kind of barrier that is stopping
new competitors from coming in and it's
often just brand right
it's often just you know customers love
Coca-Cola they've never heard of Martin
Cola and they're not going to drink
Martin Cola anytime soon
um but again in Pharmaceuticals that's
not the case
that's not the case in in medical
devices that's not the case there's
often something else that's stopping
these companies from coming in and
competing away that fat March everybody
would love to you know spend 20 million
to make 60 million a year to take
Apple's numbers divide them by a
thousand
um that's the a crazy return because not
only you're getting you only have to
spend that 20 million once that's the
crazy thing about Apple they spend the
20 billion one time and they make 60
billion every year you think about how
insane that is
uh why isn't that just disappear well
one reason is their phone's working
they'll blow up like Samsungs so they
have a lot of uh you know brand loyalty
people love their phones
um but one of the things about high
extremely high rates of return is that
eventually they should be chipped Away
by competition
and it really depends on the mode there
there are different moats in in Industry
one is sometimes you have entrenched an
entrenched customer that's that's emote
not because of brand loyalty but they're
remote because they're forced to be a
mode you see that a lot in software
where you can't change your Software
System every year you got to kind of
make your choice same thing works with
drugs once you start taking drugs most
people take it for for many many years
so uh it's interesting to sort of think
about and look at return on Capital
and try to sort of back into
um what is going on at the root of the
business why aren't there competitors
coming in and taking this return
sometimes the return is low give you an
example this is probably the highest
Capital uh efficient company there is if
I look at Ford we got numbers down to 15
19 returns
um and these are these are good years
for Ford right I'm just looking at it
last couple of quarters that we're in an
economic recovery this is a type this is
the sort of time when Ford does well
there's periods before we lose money and
uh Ford is a successful company
um but uh in that book that I mentioned
by John train Buffett talks about how
inefficient Capital inefficient
companies like Ford and gmr and they are
and uh these are the kinds of businesses
that you would not want to replicate for
instance the the cash flow of Ford is uh
trailing 12-month basis 13 uh billion
and to replicate their business you'd
have to put up 71 billion of capital
that's a very different deal from Apple
right where 20 billion makes you 60
billion here uh 71 billion makes you 13
billion
so it really is like it's backwards and
that's sort of the point here is that um
Brands matter with cars they matter a
lot less and margins are low customers
are very price sensitive
um and so forth so when I looked at
checkpoint software it was the company
we're going to focus on in a minute I I
found this astounding uh return where
they have virtually no capital
in fact they don't hold inventories
their software company they can't hold
inventories right so their actual
um only asset is their fixed assets
which are 54 million dollars which are
probably a couple of offices and things
like that and they make 200 million
dollars a quarter
and if you think about that you know if
someone said can you scrounge together
50 million dollars well I could a couple
of friends maybe you could
um and then after that you would make
200 million dollars a quarter that's
almost a billion dollars a year of 50
million in capital
I would love to just completely copy
whatever checkpoint's doing maybe hire
their team and go ahead and just copy
everything and if I can make half that
money a tenth of that money I'd be happy
um and that's what's fascinating about
these kinds of companies obviously the
what's important to understand is that
from a stock market perspective you
don't get that same deal
right the company got that deal you have
to pay whatever the market price is
which will be very high for a company
like this
um but the question really is if it's
that easy for maybe a new company to
come in and say you know what I want to
start a software security company and
all I have to put up is 50 million
dollars I could be just like checkpoint
and make 800 million dollars a year
I'd make 13 times my money in my first
year now obviously checkpoint's been
around 13 years and you're not going to
do that well that quickly but it does
tell you a little bit about the kind of
business you're in and most importantly
what you have to pay attention to when
you're forecasting because I think
that's the question
um you have to sort of forecast the
future and we haven't done that yet for
checkpoint but the point is that no pun
intended is that one has to sort of
carefully think about well
why is this business why does this
business exist which is a very sort of
existential question but
what are its customers really after what
is the company after why are they
getting the margins they're getting
about 50 operating margins which is you
know insane
um and almost no Capital how how do they
do this and what's to stop
um what's to keep their margins this
High what's to keep their returns this
High it doesn't seem like it's possible
that they could could be this high it's
sort of the old saying Easy Come Easy Go
and so one has to sort of think about
that pretty carefully
um so anyway
um let's go back to Buffett a little bit
we'll probably talk about Buffett for a
very very long time
um he is the the greatest of all time
the goat investor and I like to think of
uh people like Buffett um in the in the
vein of uh Albert Einstein who uh had
his honest mirabilis uh which is
translates in Latin to miracle year and
uh the point is that when when people
achieve these uh achievements that are
um you know otherworldly uh almost
Supernatural you know I think it's a
good term to use Buffett uh introduced
Concepts that um
uh people never anticipated in business
um and and like like Einstein
um
in some ways they were probably floating
around but he sort of put together put
them together and applied them uh and
what's most interesting about Buffett is
he learned the grand Dodd School of
investing and then sort of totally threw
it away
um
Ben Graham and uh
is this professor at Columbia and so uh
the flow generative businesses we'll
talk about at some point but Buffett
realized that this on this Capital
efficiency stuff what's amazing is that
you could have positive working capital
so much so that you could use that
working capital to invest once a moment
here
for instance um I define capital a
little bit differently from Buffett I
like to include accounts receivable and
accounts payable because there are
businesses where your customers
literally give you money to hold for
them
and sometimes you can actually use that
money
um to invest and there are some
businesses where your customers expect
you to um give them credit
uh and there's the same applies with
bills there's some businesses where
customers expect you to pay up front
when you go to a restaurant and you say
I'll pay you in 30 days well that would
be actually a great result for for a
Fortune 500 company but it's a terrible
result for uh for a restaurant
um so restaurants expect you to pay up
front
um but law firms and other firms like
that you know you could be paying over
60 days or 90 days so every business is
different I think that working capital
in general is is something that is
important to pay attention to and when
you think about Capital efficiency but
Buffett took it to the next level when
he realized that you could get flow
generating businesses and use their
float to do things
um he also realized I think some someone
early in his career that private Equity
is the ultimate Arbitrage
um
and this is something where he's
basically straight away from Trading
stocks and investing in stocks when that
was sort of his his beginnings and
almost all the money he's made in the
last decade I would say comes from
private Equity from actually acquiring
companies at low prices and keeping them
um
uh forever
um and then he sort of understood the
mode concept that I talked about and all
ties in the capital efficiency to some
extent but that there are companies
where their discount rates on when you
analyze and calculate their value their
discount rates are often very close to
zero
um which is really remarkable a couple
other things about Buffett that that are
important to understand are the His
Image and reputation
um
um he focused on that maybe more than
any investor I've ever seen and
um some of it is sort of manufactured
some of it is authentic
um one of the things I'll say about
Buffett you know you're you know you
might say well what can I learn from
Warren Buffett that somebody else has
you'd be surprised again I I wager that
most investors have never read this book
which is really remarkable because it
has an interview with Warren Buffett
that is is old and reflects uh his
thinking and anytime you can get
something like that it's great but I'll
tell you a story I have a friend
um who lives overseas and he manages a
very small hedge fund it's somewhat
insignificant you would argue he's great
investor
like me he's a big fan of Warren Buffett
and what he's done is he's actually made
a friendship with Warren Buffett he's
only 27 or something and he just
basically follows buffing around
um whenever he comes to America he tries
to sort of look up what Buffett's doing
sometimes Buffett will be giving a
speech at a school or something like
that and he'll go to the speech and
he'll just follow him around and and
eventually you know Warren Buffett's a
very nice man that that evening he said
oh you guys came from such a long way
I'm having dinner tonight at this
restaurant why don't you join me and he
got to talk to Buffett for two hours
just him uh and a couple other guys his
friends and you know to be able to pick
the greatest investors of all time his
brain
um for two hours I answered every
question there was not one question we
said you know I'm not comfortable
answering that
um
and uh
and this was last year you know or two
years ago I forgot but it wasn't you
know 30 years ago so even people like
Buffett are you're able to sort of meet
them and and if you're that interested
in in it all it is possible I'm not
saying it's easy
um
but you know if you can't do that
reading books and reading everything you
can about the person will probably be a
pretty good replacement
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