YouSaid · the spoken record

Bryan Lawrence

lines on the record: 112
first: 2024-04-28
most recent: 2024-04-28
sittings or episodes: 1
sources: podcast

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“And so those six questions really, and let's say about ten of these, feels like about one every four to six weeks, call it 10 a year. We turn on the afterburners. And that process is to try to become the best informed investor. Like talk to competitors, customers, suppliers, ex-employees, read years of transcripts and public filings, do the same thing for the competitors so that you put yourself in a position ultimately you're going to talk to the CEO of the business and you're going to be able to say to him, we think we understand your business. We think the three things most on your mind are A, B, and C. What do you think? And that's really our happy place. When we get to that place, when we're having that conversation, sometimes the answer is, oh, we get to that place and the share price needs to be 20% less. So we just say, okay, that was good. We now understand that one. Let's focus on another one, wait for the share price to drop, which it might never. And out of all.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“You have no ability to match those prices. And so, you know, like Geico, you've got we're interactive brokers, you've got decades of growth ahead. If it's not that, it gets thrown to the side. But we're trying to answer six questions. Is this a business we understand? Is it a good business in the way that I just described? Is it run by a management team that thinks like shareholders, that will treat us like partners? Is it cheap, you know, demonstrably, relative to its expected cash flows? Is it trading in an attractive valuation with an attractive IRR internal rate of return owning it from here? Why is it cheap? Can we identify the reason why we are right and the market is wrong? What's the variant perception? That, you know, we spend a lot of time on that. And the final one is question number six. If we're wrong, because we can expect to be wrong at least 30% of the time, how much money will we lose, right?”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think, said the investor to the journalist, it looks a lot like journalism. A painful and badly painful pain. Well, it depends how the stock picking goes. You never know where the next idea is going to come from. And it could be you see an investor you have respect for buy something and you try to reverse engineer what they've done. It could be a disturbance in the force. You know, something's happening. The German economy is in a recession. What are the great businesses in Germany that you might want to look at? Or it could be you read about a new CEO someplace. populates like a funnel about 100 of those types of things drop into the funnel each year, let's say two a week. And pretty quickly, you know, is this one of a high quality business? Is it a natural monopoly? Does it have two players who dominate it who are being rational with each other? Does it have pricing power? Is this a low-cost operator in the incumbents, the people that it's competing with?”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“And if the business is brittle and breaks, your thesis breaks and you're not in a good place. I would much rather have, you know, after 20 years, I think a lesson is if you're in a bunch of good businesses and you hit a financial crisis, your good businesses do well. They may even get stronger. They buy back their own stock. They buy their competitors. They take market share. I think special situation investing is something that we, I mean, would we do it again if we saw something amazing? Maybe. We're really interested in the good businesses that are long holds. That's the evolution.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think the main thing that's changed is that when we started Oakcliffe, we had part of the capital invested in more special situation kind of opportunities where there'd be something an event or something in the capital structure that you could say made something cheap. But the business quality was less good than we always had good businesses. The master cards and the carmaxis and the transdimes. Some of these things, you know, we had a cruise line called Ambassadors International or we did something which is basically the only time we ever shorted anything. We owned Porsche and shorted Volkswagen in order to isolate the piece of Porsche that the Volkswagen didn't own. Those sorts of special situations, the problem with them is that if you can look statistically interesting on a piece of paper and you make a lot of money doing it, but if you go into a financial crisis, the market doesn't care what you paid for it.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Virtually all of our clients are taxable. So these decisions are made slowly, but you do make them. Do you make mistakes? Do you sell Mastercard too early? Do you not own enough TransDime the entire time you've owned it? Yes, you do, but we're going to make mistakes. But if you don't have that kind of process in place, I think you'll make more mistakes.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“It's imprecise, but you do your best. You project cash flows forward. You say, holding this. Next five years, eight years, ten years will result in a return to us. If the share price runs too much, that return drops. So if you develop conviction in something, you make in an 8% position, you think it's going to do 20% return for you over time, and the stock doubles. You no longer have an 8% position, you have a 16% position, and you no longer have a 20% IRR, the math of that in one year is you probably have a 12% IRR. So would you make a company with a 12% IRR into a 16% position or would you trim it? So that's the constant process. And the other thing that happens is new ideas are coming in all the time. And, you know, you've got something with a 10 or 12% IR and a brand new thing with a 20% IR. When we make these decisions infrequently, we do not like to pay taxes. If you sell something that's highly appreciated, we ourselves and”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“I feel really good about it, but am I still learning about it? Is there something about it that the thesis is changing? Is there some new competitor? Is it success attracting some new disruptive thing? You have to constantly be watching for that. The other thing is that back to that share price is going up and down 80%. If you've bought something that is a good business, one of these things that we like, you know, the rational duopoly, a low-cost operator, something with a lot of runway to increase cash flows to shareholders, then its intrinsic value is going to be going up and to the right. Let's say 15 or 20% a year. But at share price, if it's going, if the share price is going up and down by 80% a year and the intrinsic value is going up and down by sort of 20-ish, there will be times when the share price exceeds intrinsic value. And these things are highly, you know, it's...”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Oh, it's a great question. So if you pick a business, it's a good business. It turns out to be a good business. Your analysis is right. You buy it at the right price. It's now gone up. I guess there's two countervailing things. One is, wow, you feel great about that decision. You're happy every time you look at it in your portfolio. You tell clients about it. You tell your wife about it. That's dangerous because Just because something's done well for you doesn't mean it's going to continue to do well for you. I mean, every day. You don't sell a stock is another day you choose to buy it. So every day you keep something in your portfolio is a decision. So, you have to apply the discipline to it, which is”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“We don't get calls saying, Oh my gosh, you promised us something that isn't going to happen, right? So that's a huge advantage we have, that we have clients who understand what we do. And I have emotions like everybody else. I mean, I'm not inhuman, but we own 15 companies right now. They're trading at 14 times, trailing free cash flow. The S&P 500 is at 22 times. These are very high quality companies. just learning more about them and the dozens of companies on the watch list that we'd like. It's just the emotion drains away and you live in a world of learning more about each one continuously. And I don't know. Maybe I'm just wired in a way that that's what happens.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“An idea, it's impervious to new ideas. I really value disconfirming evidence. I welcome one of my favorite things to do is to talk to a short seller. When things start to go against us, like my intensity of desire to figure it out kicks in. And we've gone back from the beginning of Oakcliff 20 years ago. If you measure being right as the stock that we bought either we sold for more than we paid for it or it's trading now, we own it still for more than we paid for. We've been right 70% of the time and wrong 30%. Like we're definitively wrong 30% of the time. And identifying where we're wrong, that's where we work most intensely. And I just think that's how we're wired. And then we've done the things that we've done structurally choosing clients, having clients choose us for the right reasons that mean that when we're down.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“I think that I'm pretty what I want to do, like analyzing businesses, trying to understand the world, developing conviction, looking for places where the conventional wisdom is wrong. I love living in that world. And I enjoy this. And so when something starts to go against us, we bought something and it's down. I really enjoy that. That's really distinguishing between a mistake and an opportunity is where you make a lot of the money doing this. And I just really enjoy that. And I think a lot of people don't. I think that they don't like confronting their own mistakes. I'm really struck the human mind is like the human egg. Like once impregnated with...”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Is underperformed the SP 19 of those 54 years of 35% of the time. And you just imagine yourself, it's 1975 over the prior two years, Berkshire Hathaway stock has fallen by half and the market is flat. Do you sell your Berkshire Hathaway stock? If you had, that would have been a very bad decision. It's 1999. Berkshire Hathaway Stock is up slightly, but 40% points less than the S&P. Do you sell your Berkshire Hathaway stock? That would have been a very bad decision in 1999. So there seems to be something about this process that results in these periods of underperformance that means this is really not for everybody. And I don't know if that's answering your question, but that's...”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Sigma is enough lucky monkeys flipping coins will result in a warren buffet. And Buffett's response was, well, actually, there are eight other investment firms, all of whom study with Ben Graham, all of whom kind of knew each other loosely, but own different stocks. And here are their track records. All of them outperform the market. There's at least eight other lucky monkeys. And he has some beautiful math about how the probability of the lucky monkeys actually being all lucky is like you'd need like, I don't know how many alternative universes for that to be true, but a point that falls out of that, which he comments on, is that every single one of the managers underperformed about a third of the time when measured annually. And Berkshire Hathaway itself, I went back and I looked for this 19 of the last 54 years. He's been managing it 54 years with full-time Warren House. Berkshathaway Stock.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Michael Jensen actually ended up being a professor of mine at Harvard Business School in this small world. And Jensen was arguing that markets are efficient and that Buffett's success in 1984, he'd been managing Berkshire Hathaway, I think full-time at that point for 15 years. And he had the Buffett partnership track record before that. He'd obviously wildly outperformed the market. And Jensen was saying, you're outperformance is statistically just an anomaly. You can be explained by”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“And not cash out. Yeah. Keep your money in, you know, like just have, psychologically, that's my allocation to equity. Just keep it there. Don't cash out at the bottom because you can cause real damage to yourself. Don't add frenetically as it's rising. Just have a measured annual approach. I think that's better. That's the right approach for most people. If you want to try to beat the market, which we've done for 20 years, that's a labor-intense, temperamentally challenging thing to do, which can be done, but not everyone can do it. And there's this study, or it was a debate in 1984, superinvestors of Graham and Doddsville, Warren Buffett himself debating a guy named Michael Jensen.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“That has done poorly the client's return underperform the active manager's returns by four percentage points. And so clients on average, according to Dal Bar, and they're looking at statistically significant amounts of fund flows. I think it's like dispositive. It's very, very hard to argue with their methodology or their data. The clients are underperforming their active mentorship by four percentage points is a ruinous result, ruinous. I mean, four percentage points of underperformance over 30-year investment horizon leading to someone's retirement is a nest egg that is 70%, 70% less. And so to see something so systemic and so empirically obvious indicates some sort of a thing in human psychology that is a real thing. And a conclusion from that is it really is better. For most people to be an index fund.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. Well, there's clearly something out there. There's a firm called Dalbar, which does interesting studies of mutual fund flows. And a lot of people focus on this fact that active managers tend to underperform the index. And that's an argument given for investing in index funds. And we can come back to that in a bit. That is a very logical choice for most people. Just invest in the index fund and forget it. Let the index do it. But Dal Bar has done this work which shows that the average mutual fund investor who's picked an active manager, that active manager on average underperforms the market by, let's say, 1% a year, which is almost their fees. They underperform by the amount of their fees. And then unfortunately, because the clients add money to the mutual fund that's done well right after it's done well and then take money out of the mutual fund.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“That looked like this concentrated positions that were held for a long period of time with conviction 800 billion out of 80 trillion. And of the 800 billion, 40% was Berkshire Hathaway. So it's interesting that this idea, which it can make you a lot of money, but it's not practiced by a lot of people. Why? I think one reason is that if you make mistakes, it really shows you can't just hide in the average. And two, it requires a mindset that some people may not like studying businesses as much as they like raising money, or some people may not like the volatility that they deliver for themselves. Some people may want to do it faster more differently. There are lots of ways to make money. This is the one that always just made the most sense to me. I really like studying businesses. I like trying to understand what's happening in the world. And I like placing infrequent bets investment.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Underappreciated temporary setback. And what's interesting to me is that there are not that many good ideas. And so necessarily this requires a concentrated portfolio because I don't have an idea like this every six weeks. You may see us do nothing for a year. Another thing is that this investment practice, although this is what really, if you look at the Forbes 400 and you look at who's done well picking stocks, this is basically what people do. It's practiced by so few people. I mean, the estimate that I saw at a value X conference, you and I have attended those in Switzerland. I talked about it in the talk for Jim Grant. Maybe 1% of the equity market is managed this way. At the time, I looked at the statistics. It was an $80 trillion equity market. All of the markets in the world, US, China, Europe, and $800 billion was managed in a way.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“You have a lot of confidence that when you forecast its cash flows out into the future, they'll turn out within some band of uncertainty that's not that wide. That's what you've got. And whatever disturbance is causing it to be valued more cheaply by the market, if you can turn your research attention to whether or not that is a temporary thing, are those Amazon bonds trading as though the businesses were zero because negative working capital is a bad thing or a good thing. Like that's really what that was. And so are you looking at a good business that's undergoing a temporary crisis of confidence? And there's also corporate actions. Things can get spun off and they're misunderstood because the new owner doesn't understand what he's been given. A new CEO can come in and change the strategy. There can be some new business opportunity that is.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think the first thing I'll say is it's not really waiting by the stream. It's working like heck, back to that point about Sprezatura. Like there's an enormous amount of work that's going into trying to understand these businesses. The businesses you own and then the businesses you wish you owned to be prepared because you might have to make a decision on a Tuesday and you want to have done the work. So there's a lot of work going into it. And then the second piece is mothers tell daughters it's just as easy to fall in love with a rich man. Like you want to study the businesses that are good businesses. So this is a, you know, there are different flavors of this, but our flavor is we don't want to study a business and be involved with the business unless it's just a, you know, there's like three things. We want a natural monopoly. We want a rational duopoly. We want a low-cost operator. And why do we want those things? We want those things because they have durable cash flows. If something is a good business because of one of those three characteristics,”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Opportunity because what you can do during the month or so that it's having that crisis of confidence, transdime in the middle of, which sells replacement parts for aircraft in March and April of 2020 as air travel came to an end, you could quickly do work to see that it could survive for three years with no air travel. And so the stock went from, I don't know, 600 to 200. You could buy a lot of Transdime. And now the stock is 1,100. That's what we do.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“And in a crisis, you're like, you have a pandemic or a financial crisis or an invasion of Ukraine or something. Things go up and down by 100 or 150%. So buffet by picking 80% was picking this average number. And it's extraordinary, big companies like I think in the grand stock I was talking about, Google. I mean, Google should, you know, Google in the last year has traded between the low 90s and 150. Google. Okay. How many people use Google? You know, it's more than a billion users of each one of seven of its services. How many people cover Google from an investive point of view? How many people understand Google? Basically, if you're a sentient being on Earth with a smartphone, you know what Google is. And yet the value of its stock is varied by 70%, 65%, 70% the last 52 weeks. That's like an extraordinary thing. If you've done the work to understand the business and the crisis of confidence comes in it, it becomes a very rich.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Thinking to myself, that's just insane. I get him on the first point, but on the second point, he's lost his marbles. So I went back to New York and got out an electronic version of value line and started crunching the numbers. It might have been 4,500 publicly traded companies back then. I think we're down to 3,800 now. Numbers are still the same. If you take 52-week high divided by 52-week low, subtract one for every one of the, let's say 4,000 publicly traded companies in the United States. And so it's a percentage by which the 52-week high has exceeded the 52-week low each year. And you crunch these numbers. You go back 20, 25 years, you find that in a calm year, which is basically every two or three years, I'm sorry, two or three years out of every four is a calm year. Average stock in the S&P goes up and down by 40% in the Russell 2000, the smaller companies goes up and down by 60%.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it was 04. I found myself in a room With him. And it was a meeting, I think, organized by Alice Schroeder for stock pickers with Buffett. And there were maybe 15 or 20 of us in that room. And he was telling us about what stock picking was like and the questions we were asking him kind of all boiled down to how do we become like you but faster and he said well unfortunately that's not going to happen It's a long game But two pieces of good news he said, as long as you believe in American capitalism you should expect progress, a general upturn as long as you don't do stupid things you know you should do well as the market grows in general as the economy grows in general but the real tailwind for you is that the average share price of a stock goes up and down by 80% in a year and I remember”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Of the money that it has been raised by us is locked up for three years. And we ask that every new client lock up at least a quarter of their capital for three years. You could have 6% of it back each year, sort of a thing that Buffett used to do in the mid-50s with his early partnerships. You could give him some money and take out 6% each year to live on, but put this in a place that is long-term. And what we're trying to do with that is we go through a downturn, we want to have a client base that expects it is not upset by it and possibly gives us more money in response to that downturn being an opportunity. And it's been very intentional. And I think it's a big source of advantage for us.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“And that gives us something of an edge. But our main edge is structural. And we have opened up Oakcliff to other People to clients in order to have a pool of assets that allows us to spread the costs of research across a greater pool. But what we've done is we've been very careful as we've done that to be clear this is a long-term game. And I am sure that that has diminished how much money we've raised. I mean, we've raised a total of 85 million dollars and we've distributed $82 million, the net capital raised by Oakcliffe is $3 million over its 20-year history and we're sitting on $270 million. So this is not a fundraising operation. But what we do with our clients is we say this is a long-term game. You need to put this in a place that's in your own psychology that says long term. And this should not be a huge amount of your net worth. It's a big amount of our net worth, but it's our work and we're comfortable with it. But for yourself, it shouldn't be a big piece of your net worth. And you have to, we have.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Yes, so it's very important to understand what your edge is. Like if you don't know what your edge is, you don't have an edge. And so what are our potential sources of edge at Oak Cliff? Like, you know, I think there are three, there's analytical, kind of informational and structural, right? Analytical, are we better at analyzing? Are we smarter at analyzing companies than other investors? I think we're smart. I mean, I think there are smarter investors. There's lots of smart people out there trying to do what we do. So I don't think we have very much of an analytical edge. Informational, we own 15 stocks. That's a lot fewer than a mutual fund guy who owns 150 stocks. So we are, and we know this from our conversations with CEOs, when we sit with a CEO having done three months of work on his company and really focused on it, and we ask him questions, we are better informed than most other investors. Our objective is to be the most informed.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“To ask him these questions, I would have loved if I had the ability, I would want to talk to him about what that felt like. I like to be the guy when everything is coming down who has an unlevered balance sheet, who has cash to deploy, who's bought put options. I like to build resilience like that. Shelby enjoyed. Enjoyed levering his life in a way which I don't think I would be comfortable to it.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“There's one lesson about Shelby that I was not eager to emulate. And you can see it in this book, Davis Dynasty, which it talks about Shelby and then his son, who is also named Shelby Davis, and then Chris and his siblings. Shelby Sr. really liked margin. So he was 50% levered the whole time. And so the normal volatility that concentrated stock investing brings to you, which we can talk about later. We might get to that subject, was accentuated by the margin. And so his returns, that 4,000 to 1 unlevered would have been less. But the swings were just unbelievable. I think there was one point in 73-74. He might have been down 80%. And that, for me, the psychology of that is fascinating. I met Shelby when I was young. I was too young.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Powerful example. And to the end of her life, if there were a window that was rotting out in her house, she'd be complaining about paying $800 for this window, but she had this amazing stock portfolio. So the Shelby example, the example of my grandmother, the power of investing with a systematic, disciplined, thoughtful way really spoke to me.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“didn't have an edge as the insurance inspector what they had was common sense and the common sense was like this find products you understand Kellogg cereal Hershey's chocolate you know AT&T the phone company so you understand what the product is get the annual report you don't really understand what's in the back because you haven't trained as a banker gone to business school or anything fancy like that but in the front there's a letter from the CEO does the letter from the CEO make sense does this guy speak in jargon or is he speaking clearly a and b are they paying a dividend that always goes up because whatever the company is doing, if it's always sending you more money each year, it can't be that bad, and then just continuously reinvest the dividends. And so when my grandmother died in 1995, I think, she had like $5 million worth of stock. And the cost basis on most of the shares was less than the current dividend payment for the shares, right? That's a very...”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Bought and sold securities. I think he had a seat on the New York Stock Exchange. So that provided a little bit of income for him. But the $200,000, he never took other people's money. And he just invested it in a concentrated set of ideas, largely from his understanding of the insurance business. And that $200,000 by the time of his death, 48 years later, was $800 million, which is a $4,000 to one return, about 19% compounded. And that example really spoke to me. There was a related example. My grandmother, my father's mother, and her mother, my great-grandmother, they grew up in the depression. My great-grandfather died, you know, mother and her three daughters, one of whom was my grandmother, were left kind of in a sort of a tough financial position. So they got jobs, real estate brokers, whatever, but they also picked stocks. And with just their own money, they...”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Shelby very smart man, academically PhD, ended up somehow an insurance inspector for New York State in the 1940s and spending time studying the various reports that insurance companies would file with New York State and other jurisdictions, insurance companies to this day are regulated by the states. So they file financial statements with the SEC, but they file regulatory reports with the states in which they provide insurance. And by looking closely at the state regulatory reports, he had an edge understanding insurance companies, very smart. He found different things to invest in his whole life, but the early edge and a persistent edge was insurance companies. And with $200,000 of his wife's family's money in 1947, he started investing. And he had a brokerage firm, shall we call him Davis& Co., which”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“I don't have an idea every six weeks. I'm just not going to have an idea like that. And there's some back and forth. And I have a lot of respect for Lazard. It's an amazing place. But the frequency of an idea that good and a client willing to do it is too infrequent. And so the idea of setting up Oakcliffe as a place to do infrequent ideas, it's a different application of a similar skill set, different mentality. Don't talk to clients just to talk to clients. Talk to clients when you have something to say. And in this case, the clients now are people who've trusted us with money and, you know, my own money and my family's money.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“A conflict because if one of the clients, prospective clients you've talked to about this, comes back and says that they want to do it, it'll be a conflict. He said, in what world is doing what I'm advising a client to possibly do, a conflict, A, and B, the lizard that Andre Meyer built in the 50s and 60s would be buying a ton of the bonds because that's what we used to do. Anyway, they wouldn't let me buy them. Like a year later, the bonds have gone to par. The stock has started its march from 6 to 3,000. And I learned that the buyers of the bonds at 40 cents were Warren Buffett and Bill Miller. And then the firm Lazard is taken over by a guy named Bruce Wasserstein. Very talented banker. And he comes in and he sees that I've had this interaction with Barry Diller. And he says, go call on Barry Diller once every six weeks with a new idea and get another assignment from it. And I say to Bruce Wasserstein.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Is not a sign of weakness And so I took this idea to Barry Diller, right? And Barry Diller thought this was the best idea he'd been brought in like five years. And he hired us to buy a controlling position in Amazon's bonds, a third of Amazon's bonds. And it was like one of the most exciting moments of my young investment banking career. And it was going to be an enormous fee, you know, very high profile transaction. And then he called up and he said, I've reconsidered it. I can't do it because I'm the I operate a public company. It'll be publicly disclosed. It'll be too complicated for what I'm trying to do. He was right. But anyway, I tried to get Walmart to do it. I tried to get Francois Pinot to do it. No one would do it. And so I went to the General Council of Lazard and I said, could I please buy these bonds personally? Because I've done all this work. I just want to take a big chunk of my net worth and buy these bonds. And the general counsel of Lazard said, under no circumstances can you buy the bonds?”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Ever survived Christmas with negative operating profit, negative working capital. The suppliers would pull their support, things would collapse after Christmas. Okay, why did it have negative operating margin? It had a US book music video business that was profitable and it had a European business that was unprofitable. You could shut the European business and be left with a profitable U.S. business. It was obvious. You could just read it in the financial statements. Why was there negative working capital? They were turning their inventories 18 times. If Jeff Bezos wanted to sell a copy of Warren Peace, he needed like one copy a day and Len Reggio running Barnes& Noble needed one in every one of his 750 stores. And when you bought your book at Amazon, the credit card company paid you that day, paid Amazon that day. So there was no accounts receivable and very high accounts payable because you didn't pay your book suppliers for a long time. Negative working capital for a company that's growing.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Billion worth of bonds that Jeff Bezos had sold to finance expansion into Europe, and they were trading at 40 cents on a dollar. So the bonds were saying that the company was worth $800 million. But there was $800 million in cash on the balance sheet. So what the bonds were saying was that the value of Amazon's business of November 2001 was zero. And I think the firm had been, Amazon had been around for really had been founded in maybe 1994, 1995. So Amazon's, you know, people know what Amazon.com is and the bonds are saying it's worth zero. That was interesting. So why are the bonds worth zero? So, you know, trained, I've done a bunch of financial analysis. Bonds are worth zero because credit analysts led by a guy named Ravi Suria, who was a guy at Lehman Brothers. Very, very smart, had properly pointed out that if you're a retailer with a negative operating margin, a negative working capital facing Christmas, you're going to go bankrupt. Like the never in the history of retailing had a retailer.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Yes, there were a lot of things about investment banking that are not useful to being a stockbicker, but there are some things about that particular type of investment banking, which was the merger and acquisition business that were. And I think maybe a story will kind of illustrate the difference. I was made a partner in January of 2001. And Michel Davive, the senior partner at the time, said it was the worst day of the rest of my life because all of my partners would now consider me to be a competitor. And I had to generate my own business. That was a fun first day. And so I was thinking about, you know, how I could come up with ideas that would be relevant to people to maybe hire me to do merger and acquisition business. And in November of 2001, reading 10K, you know, reading different financial information, 10Ks and 10Qs and other things for Amazon.com, I noticed that the stock was down, I think, at like $6. And the bonds, there were two.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Or a pandemic or whatever else is coming to us, it actually gets stronger in the crisis. So that's another thing that's another munger lesson.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“The story has kind of grown in the telling, but he was probably six percent of Lazar's profits. What he was, he owned 6% of Lazard's partnership, but he was probably 30% of the revenues. And so Andre Mayer, who was running the firm, said to him, you can't take two years off from the firm to go fix New York City. He said, well, I think I can actually. The math says I can. And then, of course, it was not like saving New York City was bad for business when he came back, right? So that's a very interesting thing. But Charlie, it's also the best way to be successful is to not take undue risk. Don't do stupid things. You know, conduct your business so that wait, wait, wait until the opportunity is obvious. Drain the risk out of the opportunity. So that's really informed how Oakcliffe has been run. We're going to do well, but we are going to, you know, how do you make Oakcliffe into the kind of place where when the financial crisis comes, as it does all the time, whether there's a financial crisis.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Whether or not when you say you're going to do something, you get it done is within your control. Reliability is entirely within your control. Whether or not you save a lot of money is within your control. And it is actually a piece of advice I got from Felix Road. And during my time at Lazard, this feels like something Charlie should have said. Like, always be saving money because a couple things will happen. First one is you'll save a lot of money, right? The second thing is if you're saving as much of your income as you can, then by definition you're not doing what you're doing for the money because you're not doing it for the fancy house or the big vacation. You actually intrinsically enjoy what you do. So test, do you enjoy what you do? You're not in it for the money. You're saving the money that you're making. And then the third thing is as the money piles up, you develop autonomy and autonomy allows you to be.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“I think Charlie is fascinating and an inspiration to so many because a lot of us are looking for meaning. It's a world where some of the old meaning that people might have found in religion is gone or weaker. And Charlie really is a bit like a modern day philosopher. How do you live a good life? And of course, everyone focuses on it because of the commercial success that he had. But really what's at the heart of what he's saying is simple is clearly stated, cutting through the complexity of life. And there are some simple ideas about how to conduct business. Like be the kind of person who is trusted, like your trust and your reputation are within your control, right? You know, your innate talent is not, your height is not where you were born is not.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“That book It's an amazing one, too. And what I remember from that book is how to suffer successfully. That's a very interesting concept as well. So there's a bunch of very beautiful book called Difficult Conversations about how to have a difficult conversation with someone. I just, I don't know. There's a list. I can send it to you after the podcast.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Influence other people to make it happen. I think that's an amazing book. I think Ork Charlie's Almanac is a compilation of Munger's writings and speeches is amazing. There's a book by a guy named Alanda Bataan called The Consolations of Philosophy, which I think is a terrific philosophy can be very inaccessible. It's a terrific introduction to how I think it's six philosophers he goes through and he tells you how that philosopher is relative to your life. I just think that's an amazing thing just to drill down on that. That's an amazing thing. This is why philosophy can be useful to you.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think it's in the spirit of what Chris did for me, this idea that you can very quickly come up the curve in a discipline. There's huts by there, but I think there's also truth. I believe with a good book and maybe some reflection, maybe some other books in the subject, you can get yourself to maybe 70 or 80 percent domain knowledge in, let's say, biology or psychology or physics or the history of India. I mean, that last 20 or 30 percent might take you 10 years of a PhD to achieve, but how do you equip your children with these different models? So, you know, there's a book called Influence by a guy named Robert Childini, which I think is a masterclass in how marketing is used by people to try to influence people. And you need to read that in order to understand how you are being influenced and you need to read that in order to understand how maybe for something that you love and is worth making happen.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“There you go There you go. You should have given the $150 to a friend, had them keep $50 and give $100. I don't even forget the money. Just suggest it to a friend and have them suggest it.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT
“Children to read, and our children don't necessarily read them because, of course, it's their father's suggesting them. So we've tried various things. We've tried bribery. Read this book, and I will pay you for a book report. But maybe the best thing to do is to get a friend to suggest the book that a friend is more impactful than a father is an interesting idea.”
2024-04-28 · We Study Billionaires · RWH044: How To Beat The Market w/ Bryan Lawrence · IDENTIFIED FROM THE TRANSCRIPT