Learning from Buffett and Munger: Masters in Business with Alex Morris

Barry speaks with Alex Morris, author of "Buffett and Munger Unscripted: Three Decades of Investment and Business Insights from the Berkshire Hathaway Annual Shareholder Meetings". They discuss his research into the legendary investors and the challenges in interpreting markets. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity, and credit is helping to build the backbone of the global economy. We combine deep operational expertise with disciplined long-term investing, uncovering value, and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.

• 0:33Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful, can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro Plans.

• 1:15Speaker 02

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• 1:48Speaker 03

  Bloomberg Audio Studios, podcasts, radio, news.

• 1:52Barry Ritholtz?

  This week on the podcast, another extra special guest. Alex Morris is the author of Buffett and Munger Unscripted. Fascinating story of how he put this book together by reading and watching 31 years of annual shareholder meetings, thousands and thousands of questions, hundreds and hundreds of hours of video distilled into a fairly digestible compendium. I thought the book was fascinating and the conversation was fascinating, and I think you will too.

• 2:25Barry Ritholtz?

  With no further ado, my interview of Alex Morris. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Alex Morris. He is the founder of TSOH Investment Research Service, launched in 2021 after 10 years as a buy-side equities analyst. He is the author of Buffett and Munger Unscripted: Three Decades of Investment and Business Insights from the Berkshire Hathaway Annual Shareholder Meetings.

• 3:10Barry Ritholtz?

  Amazon named it one of the best books of 2025. It's pretty beefy. I've been reading it over the past, I don't know, eight months. It's about 500 pages, and I have really, really been enjoying it. And in fact, I've been enjoying it so much that I reached out to Alex and said, let's talk about your research and the book. He has been a Berkshire Hathaway shareholder since 2011, attended multiple annual meetings, including the 2026 meeting, the first of the Greg Abel era. Alex Morris, welcome to Bloomberg.

• 3:48Speaker 05

  Thank you for having me. As I was saying to you before, Bloomberg headquarters is a

• 3:52Barry Ritholtz?

  Quite a building, right?

• 3:53Speaker 05

  I'm gonna drop my resume on the way out.

• 3:55Barry Ritholtz?

  So before we get to your resume, let's roll back to your, what led you to where you are today. Both a bachelor's and an MBA from University of Florida, was finance always the career plan?

• 4:10Speaker 05

  It was not. When I went to school, I really didn't have any idea what I was gonna do. And my dad's a plumber, so I first did a building construction and took a couple of physics classes and some other things that kind of threw me for a loop. And then I got my first internship working down in Miami, outside all day, and fairly quickly realized, let me find something a little easier. So I went to finance.

• 4:29Barry Ritholtz?

  What were you doing working outside all day in Miami over the summers?

• 4:31Speaker 05

  What were we doing? We were working on a high-rise that was being built, and I spent most of the time running from the rain that came every single day at noon or 1 o'clock.

• 4:39Barry Ritholtz?

  I spent a summer in college, working with a crew, building decks, swinging a sledge, breaking up concrete of an old pool to put in a new pool, and nothing makes you want to buckle down and study more

• 4:51Speaker 05

  Yes.

• 4:52Barry Ritholtz?

  than physical labor. It's like, oh my God, this is really hard work.

• 4:55Speaker 05

  Yes.

• 4:56Barry Ritholtz?

  I have tremendous respect for people who do that. It really forces you to see the world in a different way, doesn't it?

• 5:02Speaker 05

  Yes, it's very different work than sitting and writing a book, as you and I both know.

• 5:06Barry Ritholtz?

  So after you get your bachelor's and MBA in finance, you take the CFA exam, it's a two-part exam, you spend a decade as a buy-side equities analyst, what did you learn from those 10 years on the buy-side?

• 5:22Speaker 05

  Yeah, a lot. I kept my head down and learned as much as I could every single day. The first job I started at, I was brought in and basically told, hey, you're running all the research for equities, but also you're a secretary and you're doing the trading, you're doing everything else. So I got a lot of good experience there, but it was a role where my boss really was like, just go do what you think makes sense to do, which works really well with my kind of disposition. As time went on, I learned a lot from making a lot of mistakes. It's a really good way to learn. Ton of reading, ton of writing online and sharing stuff with people, getting good feedback. So yeah, it's just time and effort.

• 5:56Barry Ritholtz?

  That's one of the big problems with everybody. Here's what billionaires' morning routine is like. You seem to learn more, all of us learn more from our errors and mistakes than we do from our victories. Do these guys have anything to say about that?

• 6:12Speaker 05

  Oh, yeah. No, they say, learn all you can, particularly from other people's mistakes if you can, but that seems to be hard to avoid, at least for me and most of us.

• 6:20Barry Ritholtz?

  So after 10 years on the buy-side, you launch an independent research service in 2021. What made you take that leap? What was that initial couple of years like?

• 6:31Speaker 05

  Yeah, I'd been writing online going back to college, and I continued to write online under a pseudonym, Science of Hitting, or TSOH. And again, I had built a network over time. I really enjoyed the process of writing. I started making some supplemental income through writing, and I looked around and I saw people like Ben Thompson, Estrid Teckery, and other people who had built a business online, sharing their research, if you want to call it that. So when I saw Substack come around, and it went from having to understand anything on the technical side to write in Word, copy, paste, which is more my speed for tech knowledge, I decided to give it a shot. I said, I'll give myself a year, and if it doesn't work out, I'll go find another traditional job, but I want to see if I can do this. And thankfully, it's worked out.

• 7:13Barry Ritholtz?

  And The Science of Hitting was a book by Ted Williams that Buffett loves to cite for the whole strike zone analogy. If you Google image search this, there's a strike zone, and Ted Williams literally figured out every position a ball can be thrown, just picture 12 by, I don't know, 20, however many it is, and figured out the percentage hitting average of where, when a ball hit that spot, where he was likely to hit it. Buffett loves that analogy. Why did you name your research service after it?

• 7:49Speaker 05

  I'd say partly luck. I don't know if at the time I knew it was such an analogy that I liked so much, and that would be a good name to keep for the next, you know, coming up on 15 years now. But it really spoke to the way I think about investing in terms of being patient, and then also making big swings when you get the chance to.

• 8:06Barry Ritholtz?

  Waiting for your pitch, and when it finally comes, don't be afraid. So I'm gonna assume you're not averse to a concentrated portfolio.

• 8:14Speaker 05

  I am not.

• 8:15Barry Ritholtz?

  How many holdings do you typically have at any given time?

• 8:18Speaker 05

  In the range of 10 to 15.

• 8:19Barry Ritholtz?

  Oh, really?

• 8:20Speaker 05

  Yeah.

• 8:21Barry Ritholtz?

  That's very concentrated. So big swing after waiting for your pitch.

• 8:25Speaker 05

  Yeah. I mean, and there's names, like you said, I've owned Berkshire since 2011, I've owned Microsoft since 2011. There's, most of the positions have been in there for a period of years. So, you know, it tends to be things that I've come to know quite well and have gotten familiar and comfortable with.

• 8:38Barry Ritholtz?

  So this raises the obvious question, when did you first become enamored of Buffett and Munger? If you've been a shareholder since 2011, when did they first show up on your radar?

• 8:49Speaker 05

  Yeah, late 2000s, when I was in school, and I stumbled across the letters. And actually, a buddy and I both became obsessed with it, and we were at the University of Florida, and we actually drove to one of the annual meetings, which is

• 9:00Barry Ritholtz?

  In Omaha?

• 9:01Speaker 05

  In Omaha.

• 9:02Barry Ritholtz?

  So it's like a 10-hour drive?

• 9:03Speaker 05

  No, it's like 20 or 25.

• 9:05Barry Ritholtz?

  Oh, really?

• 9:06Speaker 05

  It's a long way.

• 9:07Barry Ritholtz?

  Wow.

• 9:08Speaker 05

  And we were college kids with no money, so we slept in the car, I think, one or two nights.

• 9:11Barry Ritholtz?

  Wow.

• 9:12Speaker 05

  So, yeah, we were very interested in it.

• 9:14Barry Ritholtz?

  Wait, you're college kids, you have no money, but you, and you didn't own Berkshire A or B back then?

• 9:20Speaker 05

  I think I bought one share, a B share, to be clear.

• 9:22Barry Ritholtz?

  Just to be able to go in.

• 9:24Speaker 05

  For the sake of getting in, yeah.

• 9:25Barry Ritholtz?

  Right. It's open to anybody who's a shareholder. What was that first trip as college kids to the Woodstock of capitalism in Omaha?

• 9:35Speaker 05

  I mean, it's tough to remember now. I don't know how productive the trip was, but it was more just in awe of seeing everything and, you know, really starting to learn about investing. And I didn't do much. Now, when I go, I go to a bunch of events and other things and network with people. At that time, it was walking around the convention center, eating deli bars, something like that.

• 9:53Barry Ritholtz?

  So you have sort of the opposite version, the inverse version of how the sell-side or typical newsletters operate. You disclose your buys or sells before you make the trade. You tell your subscribers, this is one I'm planning on doing. Why run it that way? It's the inverse of the typical way.

• 10:16Speaker 05

  Yeah, I think one part of one part of finance that I that I didn't love was what I considered a lot of talking about things that weren't really particularly meaningful and a lot of discussions about things like we like Google stock, for example, but then not a discussion around position sizing or when you like Google, what are you going to sell to fund Google? Those kind of more detailed discussions around portfolio management and decision making. So when I launched T S O H, I thought one way to differentiate this is to just take everything, take everything away and be completely transparent about all my decisions, my returns, et cetera. And I thought there'd be a group of people, maybe not the largest group, but a group of people who would connect with that and, you know, could build a sustainable business as a result.

• 10:56Barry Ritholtz?

  I recall way back when watching some, some talking heads on TV and when they say, we like Google or whatever stock it happened to be, the immediate question was, what does that mean?

• 11:08Speaker 05

  Right.

• 11:09Barry Ritholtz?

  Does that mean you own it? Does that mean you're holding it?

• 11:11Speaker 05

  Right.

• 11:12Barry Ritholtz?

  Like liking a stock is very different than I have allocated 6% of my portfolio to this position.

• 11:18Speaker 05

  Correct.

• 11:19Barry Ritholtz?

  And, and post analyst scandal, they used to put the disclosures on screen. We seem to have moved away from that.

• 11:26Speaker 05

  Yeah. I mean, it's, it's, it's tricky. It's, it's tough to get on there and kind of explain these things. And it's a lot of it's not black or white. It's in the gray, a lot of these decisions. And there's a lot of mental accounting and decision making. And I think it's just a reality of being an individual and being an investor and figuring out what are you comfortable with and what game are you trying to play? And, you know, I think talking about that, it resonates with some people who are kind of honest with themselves about what this game actually is.

• 11:50Barry Ritholtz?

  So I like the 100% transparency and the disclosure prior to trading, but it raises one question. When you are this public, does it make it more difficult to change your mind or say, hey, we got this wrong and we're now selling this?

• 12:06Speaker 05

  Yeah. And that's probably fair. It's, it's never fun to be wrong, of course. It's less, it's less fun to be wrong when you're telling people that you were wrong and you're, you're dealing with the pain of that. You know, the way I write my research, there's a lot of, I kind of view it as an ongoing discussion for a given name. So there's a lot of opportunities to, to link back to prior work and go, hey, this call is looking good for X, Y, Z reasons or looking bad for X, Y, Z reasons. It allows for a continuity of thought and a level of honesty and transparency that I think kind of makes it easier to deal with that issue.

• 12:37Barry Ritholtz?

  The, the reason I asked this quote, this question was due to a quote right from the book, which is Charlie Munger's, show me the incentive and I will show you the outcome. So first of all, I think that could be the most quoted line of his of all time. But how do you contextualize that? Is the whole transparency an attempt to stay honest within the Munger framework?

• 13:05Speaker 05

  Absolutely. And it's, yeah, it's, it's, it's part of, and it goes back to writing when I was much younger and didn't know nearly as much as I hopefully do today. It's, it's part of this just being a continual learning process. And it's, it's with the subscriber and it's also me on my own. And I think collectively moving to a place where we can become better investors or at least more thoughtful investors.

• 13:24Barry Ritholtz?

  So I, I like that concept of becoming a better investor. I don't remember if it was this, the, the problem with the book is, was that a Buffett quote? Was that a Munger quote? They all kind of blur together. The compounding of knowledge that you're referring to, I think that's a Munger observation.

• 13:43Speaker 05

  I forget as well.

• 13:45Barry Ritholtz?

  Um, but one thing that he definitely said was Warren Buffett got better after 65. We're birth, both learning machines and we spend most of the day reading. Explain, these guys are running hundreds of billions of dollars, or at least they were. They spend their day reading.

• 14:05Speaker 05

  Yeah. I think it's all about trying to expand your circle of competence and learning as much as you can. As we said, you're learning from the mistakes and the mistakes of others. And it's a game where, you know, I'm thinking as I'm getting a little bit older and go running some time, my knee hurts more and more. Well, investing, I'm still quite young because in theory I could be doing this for another 40, 50 years. So, and all I need to do is be able to sit into a chair, which isn't that difficult. So, yeah, as long as you put the time and the effort in and remain open minded, which is a huge thing that I, I think especially traditional value investors, Buffett and Munger fans, the last 15 years have been a good lesson in that in terms of being flexible and willing to learn. And the world's obviously changed very significantly. Just turning your, turning your mind off from trying to learn about tech as an example. I just don't, you can't really do that anymore

• 14:49Speaker 05

  in today's world. You have to be able to at least try to learn about some of these things.

• 14:53Barry Ritholtz?

  So I know at T S O H, you cover a number of individual names, things like Netflix, Microsoft, 10 to 15 names is pretty tight. Tell us about some of your other names and you're sitting tight with all of these?

• 15:07Speaker 05

  Yeah. So I've owned, as I said before, I've owned Microsoft and Berkshire for a long time. I've owned Disney for a while, which has not worked out, but thankfully it taught me things about the business that then led to a decent Netflix investment back in 22.

• 15:20Barry Ritholtz?

  So what is that? I was curious, why you think it didn't work out? Was it, was it Netflix as a threat or was it something else?

• 15:28Speaker 05

  They, they saw, they saw where the world was going too late and their ability to truly pivot and make the investments they needed to make were, they were behind. I think they've done better than a lot of their peers, at least among the legacy media companies. But they were slow to the party. And I think especially with ESPN, they've struggled with what really is our strategy going forward. They, they have their strategy in the entertainment programming side, but in live programming and sports, it's still really a challenge from how do we, how do we get from A to B over time? And obviously sports are expensive. So it's been, it's been an issue for them.

• 15:59Barry Ritholtz?

  And yet, go back a few decades, they were very aggressive. They bought Star Wars, they bought Pixar.

• 16:05Speaker 05

  Yeah.

• 16:05Barry Ritholtz?

  Those seem like, wow, that's $4 billion. That seems crazy. Meanwhile, it's been a giant moneymaker for them.

• 16:12Speaker 05

  Yeah.

• 16:12Barry Ritholtz?

  Um, was it just a change of leadership at Disney? What, what led to this, um, failing to recognize the changing world?

• 16:21Speaker 05

  Yeah. I think the media companies got lulled into a place where they thought Netflix or these other channels were, were incremental as opposed to replacing what they were doing. And when they then figured that out, you know, you got through a period where Netflix had, had been investing very aggressively and was going global and getting scale in a way that nobody else has basically been able to catch up to. And it, it changed a lot of their, you know, their negotiating position amongst each other or, and also their ability, how they, how they had to price their products and the reach and engagement of those products. It's just they're in a really tough place or have become in a really tough place relative to Netflix's rise.

• 16:55Barry Ritholtz?

  Give us one more holding that, that is intriguing.

• 16:59Speaker 05

  Yeah. One that I, at one point would have probably thought I'd never own. It speaks to what I said before of, of reading about a company and writing a company up and following it for a couple of years is Peloton. Um, they brought on, when they brought Barry McCarthy on as CEO, who used to be at Spotify, that's where my interest came from. Um, the company went through a transition process that still continues to this day. He has since left. Um, but the stock got to a point where, well, it appeared to be very cheap and I think-

• 17:26Barry Ritholtz?

  Post pandemic.

• 17:27Speaker 05

  Post pandemic. Yeah.

• 17:28Barry Ritholtz?

  I mean, it had a crazy run up when everyone was stuck at home and couldn't get to the gym.

• 17:32Speaker 05

  Yeah.

• 17:32Barry Ritholtz?

  Obviously, as did others in that space, but they were the poster child, right?

• 17:36Speaker 05

  Yeah. I mean, I think it was a $150 stock at one point and recently it traded below $4. So that's quite a drawdown.

• 17:43Barry Ritholtz?

  96, 97% drop. That's amazing.

• 17:45Speaker 05

  Yeah. It's pretty good. Um, I think there's this question of, of what are they dealing with that's cyclical versus structural? And I think people have a certain view on it that is kind of informed by their anecdotal experience. But you looked at, there's other industries like mattresses, for example, where volumes are still meaningfully below what they were during the pandemic. I think most people would argue that's probably not structural. People still need mattresses, but this supply demand got out of whack. And in Peloton's case, they went from 500,000 paid customers to 3 million in 36 months. Now they've bled off-

• 18:14Barry Ritholtz?

  Paying a monthly subscription fee on top of it. So it's a little bit of a razor blade model as well.

• 18:19Speaker 05

  Now they've bled off half a million. So they're at two and a half. But, you know, if you step back in the fullness of time and went, hey, you guys are going to go from 519 to 2.5, 2.5 in 26, everybody'd say, that's great. Their strategy got out of line, their cost structure got out of line. Um, I think they're rectifying that now. And, and again, you got a stock that, that in my mind was incredibly cheap. So it went from something that I, again, probably didn't think I would have ever owned a couple of years ago to, to it has been my largest position lately.

• 18:47Barry Ritholtz?

  Oh, interesting. Give us one more.

• 18:50Speaker 05

  Um, another one that I bought recently or relatively recently is Dollar Tree. I think it's a really interesting retail concept that is is kind of on its own in the retail landscape. I mean, everybody competes with everybody in retail, but their their position and who they serve and what they sell to them is unique.

• 19:05Barry Ritholtz?

  No threat from the internet at Dollar Tree.

• 19:07Speaker 05

  No, no, there's not.

• 19:10Barry Ritholtz?

  What about from Amazon or or places like that?

• 19:13Speaker 05

  No.

• 19:13Barry Ritholtz?

  Or Target where, you know, I can't remember the last time I stepped into a Target, but I get Target deliveries every couple of months on on a regular. It's so delightful not to have to spend a couple of hours doing that.

• 19:27Speaker 05

  Yeah, Dollar Tree sells products at a price point, obviously, that's very low. The average ticket's really small. The immediacy of the purchase is a tight window. The ability to cost effectively do it with delivery is it's challenging, to say the least. They owned Family Dollar for a long time, which is a Dollar General competitor. They tried to turn it around. It didn't work. So I was watching from the sidelines for a long time as they got that resolved. Then they changed their strategy to to basically replicate what a company called Dollarama has already done in Canada. And if you look at that stock's been a great performer and the business has done particularly well. And there's a lot of sense, the strategic evolution that they're making and and the stock got pretty cheap. I think I bought in second half of 24.

• 20:09Speaker 05

  So, yeah, it's a business that I think is retail, again, obviously, is intensely competitive, but there's little niches that people play in that I think can be attractive. And Dollar Tree is one of those one of those niches.

• 20:19Barry Ritholtz?

  Really interesting. Coming up, we continue our conversation with Alex Mars, author of Buffett and Munger Unscripted, discussing how he plowed through hundreds of hours and 31 years worth of material to write this book. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

• 20:40Speaker 00

  At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity and credit is helping to build the backbone of the global economy. We combine deep operational expertise with disciplined, long-term investing, uncovering value and partnering alongside clients to shape tomorrow's economy today. Learn how you can own what's next at Brookfield.com/own. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.

• 21:13Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro Plans.

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• 22:56Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Alec Mars. He is the author of Buffett and Munger Unscripted, Three Decades of Investment and Business Insight from the Berkshire Hathaway Annual Shareholders Meetings. So I found the book fascinating, but before we delve into the content, I have to discuss your process. So back in 2018, Berkshire releases the full archive of every Berkshire Hathaway annual meeting from 1994 forward. And that's 31 years worth of stuff.

• 23:39Barry Ritholtz?

  And you watch all of it, hundreds of hours, maybe even thousands of hours, 1,700 questions. What the hell? How do you start? Where do you begin with an archive that immense?

• 23:56Speaker 05

  Yeah, slowly and somewhat unwillingly at first.

• 23:59Barry Ritholtz?

  Did you just go back to 94 and start plowing through? Was there a a method to the madness?

• 24:05Speaker 05

  Originally, I, well, first of all, when I was in when I was in college and got interested in investing, one of the books that really resonated with me was the Essays of Warren Buffett, which

• 24:13Barry Ritholtz?

  Lawrence Cunningham.

• 24:14Speaker 05

  Which, yeah, Larry Cunningham.

• 24:15Barry Ritholtz?

  I went to grad school with him.

• 24:17Speaker 05

  He had the decades of of shareholder letters, which you could just sit and plow through if you want, or he compiled it in a way where you could look at what about capital returns to shareholders and and look by topic.

• 24:26Barry Ritholtz?

  He had a much easier task because the letters are a couple of pages, 10, 20 pages each, and they're already in print format. You had to fight your way through hundreds and hundreds of hours of of video. How did you organize that material?

• 24:43Speaker 05

  Well, and originally it was only on CNBC's website with a web player where you couldn't speed up the time. And and and one of those, when you try to fast forward 20 seconds and it goes 15 minutes and you can't get back to your original spot. So that would that made it a little bit tough. When they eventually got on YouTube, that helped a ton. I originally went through it for the sake of learning and using it for writing material for for TSOH. And as time went on, well, first I thought somebody else would do this, so I wouldn't have to do it. And then I didn't see anybody doing it. At one point, Harriman House reached out to me about writing a book. And I actually was working on something. Basically, the concept was for people like my parents or my grandparents who had asked me questions about working with a financial advisor or managing their own finances.

• 25:25Speaker 05

  I was trying to write a book about how do you navigate that relationship with a financial advisor and talking about active and passive and asset allocation. And then I started writing it. And as I got into it, I thought, well, one, I'm not hugely interested in this. And two, I don't have the depth of knowledge on things like trusts or estates or a lot of financial planning stuff that's a really important part of that discussion. I just don't really have the depth of knowledge there to I shouldn't be the person writing this. So when Harriman House reached out, I first said, you know, I have this book, but I think I'm going to kind of drop it and I don't really have anything else. And then a week or two later, I wrote back to them and said, I think, actually, I might have something with the Berkshire meetings

• 26:02Speaker 05

  that I could explore a little more, but I can't do it unless I reach out to Berkshire and at least not approval, but not disapproval from them.

• 26:10Barry Ritholtz?

  You don't want them fighting you every step of the way.

• 26:12Speaker 05

  So, uh, so I put together a sample chapter and and sent it to to Warren's assistant, Debbie, or at the time, and asked, can I please do this? I I promise that I'm a massive fan of Warren and Charlie, and I'll I'll do a good job and I'll give away half the proceeds to Glide, which is a charity that Warren supported through the the lunch auctions. So I got a response a couple of days later saying, as long as you're saying he didn't approve this, you're okay to go with it. So at that point, I was like, okay, now I now I have to actually do this. And the process at first was not particularly well thought out. I remember I got through two or three or four meetings and I I realized I wasn't I wasn't getting into a I wasn't getting to a place where I wasn't going to have to repeat that process again.

• 26:56Speaker 05

  So I went back to the start, created an Excel file where I time stamped everything, had like primary topic and secondary topic, and then very simple, green, yellow, red. Is this going to be in or maybe be in? As time went on, I had a lot of overlapping things. I had to figure out which which answer is better, which one should I keep? But as I got through 10 or 15 years, it became, I knew what I was doing at that point, so.

• 27:18Barry Ritholtz?

  Did it reveal itself to you as you were working? By the way, full disclosure, Harriman House is my publisher. But one of the things I found fascinating about the writing process is when you happen onto a good framework, it's sort of.

• 27:35Barry Ritholtz?

  Opens itself up to you, it reveals itself and like, oh, I see how to, what this should look like. Did you have a, I would imagine you might have had a similar experience year after year. They, the same themes, the same ideas, although they must evolve over time somewhat.

• 27:52Speaker 05

  Somewhat. And I, I got to a point where, well, one, yes, the meetings definitely have their place in time is kind of, I mean, especially think of like the late 90s or you get to the financial crisis. The discussions that are had there, the part of it that I've found so useful that I thought would resonate with people was, you know, the letters are, are edited and Warren's very specific about what he says and when someone-

• 28:13Barry Ritholtz?

  Unscripted is very different.

• 28:15Speaker 05

  Unscripted. When they're off the cuff and Charlie a lot of time pushes Warren in directions that he may not want to go, the answers would be really revealing. And again, like a period like the late 90s when people were really pressing you on why aren't you investing in tech companies, you know, there's a level of, of, um, as they're pushing them, they get a little bit more honest and say things in a slightly different way than if they had written them. So anyways, as I worked through it, it just got to a point where I can imagine myself, the college kid, reading this book and getting a lot of value out of it. But I also could see myself, the person today who has a lot more experience reading it and still getting value. So I thought this is going to be, this is going to be a worthwhile book for a wide range of people. So hopefully it can be a good project.

• 28:54Barry Ritholtz?

  So, so recurring theme of all of the meetings and therefore of the book, investing success is a temperament problem, not an IQ problem, emotional stability, patience, and independence from crowd opinion do the compounding. Again, I don't remember who I'm, which of them I'm taking the quote from, but we've heard that over and over again.

• 29:18Speaker 05

  Yes.

• 29:19Barry Ritholtz?

  What, give us, give us a little color on temperament versus IQ.

• 29:24Speaker 05

  Yeah. I mean, I think your, your book title sums it up well. How not to invest is, what mistakes are you looking to avoid is a great place for starting to figure out where you're trying to go. And I think that's, that's what they've done their entire career. And it's funny how that then, that mindset of don't be stupid can still be connected to really big swings at points in time because that seems like an aggressive act and kind of a risky thing. But I think when you actually pair them together, uh, it can, they can work well.

• 29:52Barry Ritholtz?

  So, so the flip side of the Munger quote, be less stupid is a Buffett quote, if you have an IQ of 160, well, you can sell 30 points. They're not needed in investing. I, I love that. That goes, flies against everything we've ever heard about, you know, the genius hedge fund manager, the Quants, the, the math whizzes. Um, how, and clearly both Charlie and Warren, not dumb guys.

• 30:21Speaker 05

  Right.

• 30:21Barry Ritholtz?

  They, they were more than less stupid, but how sincere is that, hey, you don't need 160 and it's probably going to get in your way anyway?

• 30:28Speaker 05

  I, I definitely think the latter part is true. It's, it's, it's very easy to get overconfident in your abilities and to make mistakes that can be, particularly when you start doing things with options or leverage, you can make mistakes that are, that are truly devastating. And if you just avoid those things, it's much easier to, at a minimum, stay in the game. And to get to a decent place is also, I don't think overly difficult as a starting point.

• 30:51Barry Ritholtz?

  So over the three decades that the book covers, uh, there have been wildly different environments where there was those examples of people who should have been less stupid. So you had long-term capital management blow up in, what was that, 98, um, the dot com implosion, the financial crisis, the zero interest rate policy of the 2010s, then COVID. Um, how do the same principles that are espoused by Buffett and Munger apply to all these wildly different environments?

• 31:28Speaker 05

  Yeah. I think it's, it's being consistently level-headed and not letting things, uh, get away from you and having a long-term view and staying within your circle, which I think is one of the biggest lessons I've had as an investor is, is learning what game you're playing and, and why you're playing that game. And your answer may be different from mine. And I think a funny example is someone asked in one of the meetings about Peter Lynch and Warren Buffett was talking about and say, his approach works well for him and mine works well for me. And I think if he tried to adopt my approach, it would not work as well and, and vice versa. And there's, there's more than one way to get to heaven in this game. And as long as you understand that, I think you're in a, at least a good starting point.

• 32:05Barry Ritholtz?

  Uh, another quote that I can't remember which of them said, volatility is the friend of the investor who knows values and the enemy of the one who doesn't. Explain that.

• 32:16Speaker 05

  Yeah. Well, sometimes in real life, it feels, it feels a little different than that when you're seeing a lot of volatility in your portfolio. But I, but I think the idea is, is a sensible one, which is you, you don't want your decisions to be led by the market. You want to be making decisions that are somewhat independent of what the market's telling you. Um, there's a fine line there between just being stubborn and overconfident that I, I think, especially when you're younger, a lot of quote like that, you know, this is, this is true of a lot of quotes from Warren and Charlie. A little bit of experience helps you understand what they're actually saying versus maybe a more novice interpretation, uh, that can get you in trouble. So I think to, to completely disregard what the market's saying is something that you should do cautiously, but, uh, the idea of acting based on what the, what the facts tell you as opposed to, you know, short-term weighing machine is, is the right mindset to have in investing.

• 33:00Barry Ritholtz?

  So there are so many quotes of theirs that are just become so famous and repeated over and over again. What sort of buried gems did you find in there that people don't really talk about? What, what stands out is, how is this not a more famous line?

• 33:15Speaker 05

  I mean, I think some of the discussions on, again, things like stock option accounting in the late 90s where they're really, I mean, I think they say in the book, uh, there was 500 companies and two of them had adopted quote unquote, the right stock option accounting rules. Everybody else is playing this kind of game and, and they talk about things like that so clearly in a way that's, that anybody can understand that it's just so, so useful to hear those things. Um, trying to think of other examples throughout the book that, that stand out. One, one example they give in terms of like their business is National Indemnity Insurance Company. They talk about this idea of, there was a period of time where the volumes in that insurance business went up, I believe 5X, then over a period of 15 years contracted 85%.

• 34:00Barry Ritholtz?

  Wow.

• 34:00Speaker 05

  And then-

• 34:01Barry Ritholtz?

  That's back, back below the original, uh,

• 34:03Speaker 05

  Yeah.

• 34:03Barry Ritholtz?

  Starting line.

• 34:04Speaker 05

  And you could imagine running a business and how painful that is. And they use it to teach a lesson in terms of, uh, it applies differently in different businesses, but how in the insurance business, the only thing that matters is writing good business. And you have to, you have to get to a place where all the stakeholders, particularly employees, realize that writing bad businesses is not the decision to make. And you have to help them appreciate that they can keep their job too, as you go through this. So it's just an example of them laying out something that, when they explain it is so sensible and logical, but you have to have that long-term mindset. And again, when you compare something like that to how a lot of public companies act, you start to notice things that you may want to avoid.

• 34:42Barry Ritholtz?

  That, that's very much a science of hitting, uh, philosophy. You're better off not writing bad business, not writing any business-

• 34:50Speaker 05

  Yeah.

• 34:50Barry Ritholtz?

  Than writing bad business. Uh, I think the modern Berkshire is underappreciated for the importance of the various insurance. So there's GEICO, there's Berkshire, there's, there's a few insurance companies-

• 35:05Speaker 05

  Yeah.

• 35:05Barry Ritholtz?

  Which essentially gave Warren a giant pool of capital-

• 35:10Speaker 05

  Yeah.

• 35:10Barry Ritholtz?

  And patient capital to work with. Talk about the significance of insurance to the success of, of Berkshire Hathaway.

• 35:18Speaker 05

  Yeah. It's been, I mean, it's been hugely important. That float has, I don't know what the number is now, but it's grown very significantly over a long period of time. And it has allowed them to, to make the investments that have, you know, got Berkshire to where it is today. Um, I, one example that I come back to a lot from one of those investments is Coca-Cola, which everybody knows that Berkshire owns Coca-Cola. I think the part that people sometimes don't know is that Warren started buying in, I believe it was 88 or 89. He bought his last share in 94 and he hasn't bought or sold a single share since then, which is, at a point, at a point in time, it was more than 30% of Berkshire's equity portfolio. It's not like it was, you know, 2% of their portfolio that they're not touching. It was a hugely important position and he hasn't touched it for more than 30 years, which is, you know, when someone's really good at investing like they are and

• 36:03Speaker 05

  they do something like that and you look around, you see, well, nobody else is really acting in this way. It's just, it's something that stands out and I think is noteworthy.

• 36:10Barry Ritholtz?

  So I love the concept of, imagine you only get 20 investment decisions for a lifetime. Uh, and when you look at Berkshire's returns, it's a handful of decisions and decades of sitting still that have been driving it. What is that thesis, hey, you're only going to make 20 meaningful investment decisions. What does that do to selectivity?

• 36:34Speaker 05

  Yeah. It raises your bar a lot.

• 36:36Barry Ritholtz?

  A lot.

• 36:37Speaker 05

  The things that you're willing to compromise are on will, you know, if you need to find a hundred things to own, you gotta make a lot of compromises. If you can own 10 things, you can make less compromises. And if you can own one thing, you can get even more selective. So I think that idea of knowing what you're looking for, being patient, and then these two are connected. If you're gonna, if you're gonna act in that way, you have to swing big to some extent.

• 36:58Barry Ritholtz?

  So they repeat a lot of the same principles over and over, over the, the years. I'm, I'm curious, uh, not only how things evolved, but did, what are some examples of them reaching a conclusion, hey, maybe we haven't really thought this through and we want to pivot or tack away from a previous belief? What, what, where did they really change their minds?

• 37:20Speaker 05

  Yeah, two really prominent examples are one in an owned business in GEICO. They they basically missed the move in telematics, which is like the data measurement in the car. And progressive was really early there and and Warren publicly at the meetings kind of said, we don't think this is going to be important to the to the rate making decision. And they were wrong and and they were years.

• 37:40Barry Ritholtz?

  Explain what telematics does for an insurer.

• 37:42Speaker 05

  Yeah, basically, it gives you actual data from how someone drives, which is it turns out is very important for determining how they drive and setting their rate and the riskiness, etc. So GEICO was or the way Warren talked about it, they were convinced.

• 37:55Barry Ritholtz?

  Is that built into the car? He asked concerned or is it something that you have to give permission to?

• 38:02Speaker 05

  You you have to you have to get it. You had to get a device at one point, I believe you can do it with your phone now. But they would.

• 38:08Barry Ritholtz?

  And you get a discount.

• 38:09Speaker 05

  You can get a discount for using it. And they've changed over time what they're willing to do with your rates. But early on, you could just get a discount from it. You wouldn't get a rate increase. So, yeah, Berkshire or GEICO kind of missed that early. And they've kind of been playing catch up since then. And progressive went from millions of policyholders less than GEICO to now being quite a bit larger than GEICO.

• 38:30Barry Ritholtz?

  They're one of the bigger. This is a huge, huge growth story and change for them over the years. Is the telematics strategy what drove them?

• 38:41Speaker 05

  Yeah, it's a huge part of it.

• 38:42Barry Ritholtz?

  And then and then the other issue that comes up is Buffett has been notoriously tech averse and then becomes one of the biggest shareholders of Apple.

• 38:52Speaker 05

  Yeah.

• 38:52Barry Ritholtz?

  How did he explain that? How did he wrap his head around that? That major pivot?

• 38:59Speaker 05

  That's the other example I was going to say that they you go through a period of, I believe it's 2011, 2012, 2013, some select quotes are that when they owned IBM, they basically said, we'll never have the confidence in the the person asking the question specifically asked about Apple and Google, which in hindsight is kind of funny because those are the two companies that they've now invested in. They basically said, we'll never have the confidence on those two companies that we have in IBM, which was not a good investment. And then I think late at the next meeting, Charlie even more forcefully said, basically, Apple's too hard for us, we'll never own it. Fast forward a few years and it was a, I think at one point it was almost a $200 billion position and it's one of the greatest investments of all time. And I think it just speaks to a willingness to continue learning.

• 39:43Speaker 05

  And, you know, Warren specifically talked about on CNBC when they bought, he he spoke about how, you know, the Nebraska French market, which is a retailer that they own, people come in and buy a TV and they they're looking at the number of pixels or the quality of the screen, they're comparing the prices, etc. And then when it comes to an iPhone versus an Android, doesn't matter if an Android phone is 60% cheaper, some people were just absolutely going to buy the iPhone no matter what. So he noticed that in terms of, you know, that differentiation between a technology question versus a consumer brand kind of question. I think he also recognized early the the value of the screen and the services strategy that Apple in the mid 2010s really got underway. And also the valuation was attractive and then they had capital returns policy.

• 40:25Speaker 05

  That's one of the things that really jumps out in terms of his investment approach is how much he, particularly in publicly traded companies, how much he valued the combination of the valuation and very clear capital return strategy. You see that at Apple, you see that at Petro China in the early 2000s. It's a very prominent part of what he what he seemed to be looking for.

• 40:46Barry Ritholtz?

  So I see how their ideas have changed over time. I'm curious, the process of going through the whole book and all of the various meetings and videos you ended up watching. Anything changed the way you invest personally? Any ideas you're still wrestling with trying to put into practice?

• 41:08Speaker 05

  Yeah, I think this idea of, again, I think I mentioned this before, kind of traditional value investors, this idea of of change being a bad thing and trying to avoid it.

• 41:18Speaker 05

  It's just, I mean, it's it's borderline impossible in today. I mean, if you could give me a list of five companies that haven't meaningfully changed in the last 10 or 15 years, it kind of be tough to do. Every industry is changing and you have to be, I just, you can't just avoid it, I don't think you have to, doesn't mean to run into it, but you have to be really thoughtful about how every business is changing. And you think the prominent examples that they gave over time of, you know, the greatest businesses are newspapers and other things that are either greatly changed or gone. So you have to and retailers as an example.

• 41:49Barry Ritholtz?

  Adapt or die.

• 41:49Speaker 05

  Yes, adapt or die. And I think that's a reality of being a business manager, it's a reality of being an investor and and you have to, you have to be willing to, you know, lean into that.

• 41:59Barry Ritholtz?

  Really, really interesting. Coming up, we continue our conversation with Alex Morris, author of Buffett and Munger Unscripted, discussing Berkshire Hathaway after Warren Buffett. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

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• 44:30Barry Ritholtz?

  I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio. Alex Morris is my extra special guest this week. He is the author of Buffett and Munger Unscripted, Three Decades of Investment and Business Insights from the Berkshire Hathaway Annual Shareholder Meeting. He is also the founder of TSOH Research. So so let's talk a little bit about their relationship before we get to the post Buffett and we're already in the post Munger era. What did Munger contribute to Buffett's thinking that Buffett probably wouldn't have developed on his own? They they really had kind of a unique partnership.

• 45:13Speaker 05

  Yeah, they did. And they'll, Charlie will say it didn't have as much of an impact as Warren says he did. So I guess you got to, you got to pick which one you want to agree with or believe. You know, I think Warren's strategy that he ran up into the point in time where where they became, you know, friends with each other and decades after. It was a cigar butt strategy and a traditional value investing strategy. The main constraint it was going to run into over time was size. And that's a problem they have now, even as they've adjusted the strategy. And I think Charlie changed his mindset a little bit towards buying businesses that they're going to own as opposed to things that are going to be liquidated or sold, whatever it may be.

• 45:47Barry Ritholtz?

  When you say buying businesses completely like a full takeover, not just, we don't want 10% of GEICO, we want all GEICO.

• 45:56Speaker 05

  Yeah, I think one of the prominent early ones was Seize Candies where they, you know, they were getting a little bit. They're getting a little touchy on the price and I think they had someone who worked with them who said, "If you guys don't buy this because the price is 10% higher than what you wanted, you're idiots," basically.

• 46:09Barry Ritholtz?

  Really?

• 46:10Speaker 05

  Yeah.

• 46:10Barry Ritholtz?

  Who says that to Warren Buffett? I'm just curious.

• 46:13Speaker 05

  I think it was Charlie Munger's part, I want to say Ira Marshall for some reason, but I could be incorrect. But anyways, they told him, "If you don't buy this business because it's 10% higher than what you want to pay, you're not being very intelligent because this is a really good brand and it's going to be a really good business over time." And thankfully, they listened.

• 46:29Barry Ritholtz?

  You know, I have a buddy, Jonathan Miller, who's not only a data junkie with the backend of real estate and an appraiser, but he was saying, "If you're buying a house that you're going to live in for 25 years, this is the house, if you pay 10% or 15% over, who cares?"

• 46:47Speaker 05

  Yeah.

• 46:48Barry Ritholtz?

  Just look at it from houses sold 25 years ago. What would have happened if you paid 10% more for that? It's meaningless. And Marc Andreessen said the same thing about Facebook.

• 47:01Speaker 05

  Yeah.

• 47:01Barry Ritholtz?

  All right, it was a 40x or a 50x. Imagine if we paid 25% over, it wouldn't have made any difference. And yet, this is coming from people with a value background. How do you reconcile that?

• 47:14Speaker 05

  Yeah, personally, my personal experience taught me to, or in some ways, taught me to, just to get past that way of thinking. And again, I said before, I bought Microsoft in 2011. It was a very traditional value investment. Ex-cash, it was trading at high, single-digit PE and, again, very traditional value investment. You get forward to 2015 or 2016 in that period, and now the PE, as opposed to being in the high single digits, is, you know, call it mid-teens. And I can remember that point in time, a lot of the, again, more traditional value investors, they were at a point where they go, "Okay, we've had our run here, it's time to sell." And it's a situation where I looked and saw, I saw with Sachin Adella, who was recently named the CEO at that time, the strategy they had in the cloud business, and not that

• 47:56Speaker 05

  I have any great technical knowledge on this, but the way they explained where they were going and what the opportunity was, just seemed clear to me that to sell it simply because the PE was a couple turns higher than, you know, what the quote-unquote "fair" price was for it, just didn't make a ton of sense. If you found a business that has a really long runway with a person running it that you think is the right person for that job, to let that go easily is a mistake. And, you know, it's funny to look back now, I didn't know this because I was updating on Microsoft the other day, over the last decade, the stocks compounded at a mid-20s annualized return.

• 48:29Barry Ritholtz?

  Amazing.

• 48:29Speaker 05

  This happens all the time with companies like this, where people, if they become too focused on the valuation, they go, "This can't, you know, this isn't going to generate more than 12% a year over the next decade," or whatever.

• 48:39Barry Ritholtz?

  What's the line? Price is what you pay, value is what you get?

• 48:42Speaker 05

  Exactly.

• 48:43Barry Ritholtz?

  So clearly, even at an elevated price, Microsoft turned out to be a good value.

• 48:48Speaker 05

  You have to consider both at all times. If you become overly focused on price as the driver of your decision-making, I think that's, I think that's kind of a flawed way to do things. And the same goes for, you know, theoretically, you have, let's say, have a portfolio and theoretically, you could re-rank it every single day on expected five-year returns, whatever it may be, and the answer's going to change based on what those positions did the day before, obviously. I think that mindset, while it makes sense theoretically, it guarantees you're never going to own anything, particularly in size. You're going to be trimming it as it goes up 20, 30, 50%.

• 49:20Barry Ritholtz?

  Because suddenly, it's fully valued.

• 49:21Speaker 05

  The IRR is three points lower than it was six months ago. And I just think if you look back, and again, like the last 15, 20 years, and, you know, your example of Facebook, selling it because the IRR was down slightly was a mistake. Understanding what the business was, in some sense, what the opportunity was, again, you can deal with this through position sizing, but be really thoughtful about selling businesses that you actually think are worth owning.

• 49:44Barry Ritholtz?

  You know, that makes a lot of sense. Both Buffett and Munger have emphasized staying within one's circle of competence. How can an investor expand that circle and how do you avoid fooling yourself into thinking you have some competence when you don't? This is classic Dunning Kruger.

• 50:04Speaker 05

  Yeah, I think it's time. It's a willingness to learn. It's a willingness to feel around and not always, you know, have the answers right away. I mean, for example, at TSOH, a lot of my initiations on company, they very rarely end with, you know, "This is my price target," or "This is a buy today." That's very uncommon for me. The conclusion is almost always, "Here's what I think's interesting about this company. These are the questions we kind of need to explore and get a better feel for over time." And it's just that continual learning process where sometimes you get, you know, three, four, or five years down the road from there, and you still don't have the answers. Other times, you get a couple of years down the road and things happen in a certain way and you go, "Wait a second, I think I'm seeing, I'm seeing this now in a way that I didn't originally." And you find enough examples like that and you can, you can have a portfolio.

• 50:48Barry Ritholtz?

  Really, really interesting. What do you think of all the principles that Buffett and Munger enumerated over the years? Often quoted, but really infrequently practiced by professionals, or just difficult to put into effect by mom-and-pop investors?

• 51:07Speaker 05

  Yeah, they've had things like, you know, permanent capital, which you look at an example like Terry Smith at Fundsmith right now. And, you know, when things go against you for a relatively short period of time, but your assets start going away, that's a huge problem. So, so things like that are just a prominent example of how thoughtfully they've constructed everything and, and what that then allows them in terms of their flexibility of, you know, being really patient or, or taking big swings, et cetera.

• 51:32Barry Ritholtz?

  What about avoid difficult decisions? Is that realistic today?

• 51:37Speaker 05

  Again, I think it's more difficult over time, but I think if you're patient, you can, again, as you learn more and more, decisions that may appear difficult might be, might be less so for you.

• 51:47Barry Ritholtz?

  I really like Buffett's comment about market forecasts. They tell you nothing about the market, but a great deal about the forecaster. They claim to have never made a Berkshire decision based on a macro prediction. How true is that?

• 52:04Speaker 05

  Well, I think you look at their cash position currently and, and wonder how much of that is, you know, maybe not a macro forecaster. There has to be some belief about markets or prices generally. I guess you could look at it at a micro level and say, "We can't find anything," and collectively, all the micro is the macro, right? You know, I think it's, I think the bigger point, and it's something that we've all seen over the past 15 years. I mean, I'm sure you can remember well, 2011, 2012, people are like, "Okay, we're back to another bubble. We got past the GFC and now we're, here we are again, and stocks aren't going to go anywhere for the next decade and..."

• 52:37Barry Ritholtz?

  Good call.

• 52:38Speaker 05

  People who overdosed on that have, have paid a very significant price, so.

• 52:42Barry Ritholtz?

  You know, it's funny you bring that up. I remember, I don't remember if it was late '08 or early '09, but Buffett wrote an op-ed, I think it was The Times, "Buy America." And that felt very much like a combination of a, "Everything has gotten cheaper, so there's a valuation issue, and we weren't quite down 56%, but we were on the way, maybe we were down a third by that time." But it felt like a macro, "Hey, this is a temporary crisis and we'll get past it." Or was it strictly a valuation decision?

• 53:17Speaker 05

  Yeah, I think it was a little bit of both. I mean, as he, as he said later on, you know, I wrote that in, I think he said October of '08, and to your point, people were like, "Wow, it was a great call." It's like, "Well, it was down another 30%, another 30% six months later," or whatever it was, so my timing wasn't particularly great. You know, I think the bigger, the bigger takeaway for particularly individual investors is, in my mind, is understanding something like a structural asset allocation and having, having clarity on what you're trying to achieve. And again, coming back to this idea over and over of what your, the mistakes you're trying to avoid. And, you know, we saw, we saw over the past 15 years, people, big swings in and out of cash or in and out of the markets, I think you're just making the game more difficult than it needs to be, and when you're wrong, it really hurts.

• 54:00Barry Ritholtz?

  So, having studied every answer Buffett ever gave about succession over 31 years, what does the record tell us about how he set up his succession and what did his Thanksgiving letter last year add?

• 54:17Speaker 05

  That's kind of funny, starting with the, starting with the '94 meeting, they were asked every single year about succession.

• 54:25Barry Ritholtz?

  And he's what, in his, he's my age back then. He's in his early 60s back then.

• 54:29Speaker 05

  It turns out he had another three decades to go. You know, I think they've, they've said over time that there's nobody who cares about the answer to this question more than we do. And, you know, a lot of the businesses, BNSF, the railroad, Warren's not really involved in the decision-making there. Same at GEICO, same at a lot of other businesses. A lot of the equity positions, like I said, Coca-Cola, Amex, like these other ones, they're just in there and they're, they're almost certainly not going to be sold by Warren or anybody else. So I think, I think a lot of the pieces are in place. The biggest challenges Berkshire has, as I mentioned, there's some operational issues at businesses like GEICO that had to be fixed, and the massive, you know, massive cash pile is another challenge.

• 55:10Speaker 05

  Those challenges existed two years ago with Warren, and, you know, they still exist today, and solutions are, are difficult. But it seems like Greg Abel is starting to move in the direction of trying to, trying to resolve those issues.

• 55:22Barry Ritholtz?

  So, so let's talk a little bit about Greg Abel. He took over as CEO of Berkshire on January 1st of this year, 2026. You were at the meeting in Omaha, his first annual meeting, Buffett just sitting in the audience like any other Berkshire shareholder. Well, well, maybe not like any other Berkshire, but not on stage. What was that like? How was Abel? Are you confident that this was the right choice and Berkshire was in the right hands?

• 55:51Speaker 05

  Yeah, I think that, and this is also informed by writing the book, the questions over time, in the early days, the questions were really focused on Berkshire and investing. And I think as time went on, they became a lot more about life advice and other things that, while still interesting, are not really Berkshire-specific. And when you got to things like, like I was saying with GEICO and Telematics, or at BNSF, where their results were lagging some of the other Class I rails, I think Warren had a tendency to, to not want to point fingers at the managers, and he wouldn't really talk specifically about the issues there, which is, you know, for, for the people who are kind of the die-hard Berkshire shareholders, we want to hear those things. Greg took those questions head-on, which was really refreshing to hear.

• 56:36Speaker 05

  And I, I think everything we've seen so far would suggest that, you know, as Warren and Charlie said, we've thought about this more than anyone else, and I think that's probably reflected in their decision.

• 56:43Barry Ritholtz?

  So, you mentioned the huge cash pile, a couple hundred billion dollars just lying around. I know that's walking-around money.

• 56:51Speaker 05

  Yeah.

• 56:51Barry Ritholtz?

  What does capital allocation look like under Greg Abel? Is, is he going to emphasize buybacks or going out elephant hunting, finding some big acquisition, or something else entirely?

• 57:03Speaker 05

  I think repurchases will surely be a big part of the strategy.

• 57:09Barry Ritholtz?

  And by the way, Munger and Buffett have both been very explicit about buybacks. Hey, when you're below your true value, when fair value, it's a deal, absolutely do buybacks. But if you're fully or richly priced, it's a disaster waiting to happen. They made no bones about it and they acted on that. Where do you think Greg falls on that?

• 57:32Speaker 05

  Yeah, I think Berkshire started buying shares more significantly in the last, I think they started in 2019. The pace has slowed down lately.

• 57:40Barry Ritholtz?

  Implying they're close to fully valued?

• 57:43Speaker 05

  Yeah, I believe they're, I believe that they have, they have views about the market or the opportunities set more broadly, I think would be fair to say, based on how they've been acting for some time now. You know, it would have been helpful if they started repurchasing shares earlier. I don't think Warren was particularly interested in doing that for, for, for a good amount of time and it got to a point where they basically, you know, either had to or have to pay a large special dividend, whatever it may be. I think Greg will be a lot more, more open to leaning into these things. And as I said many times, I mean, obviously we haven't had huge shakeouts outside of maybe a brief period during the pandemic, but if we get a period where equities really trade, trade off meaningfully and they can put a decent amount of dollars to work, they're willing to spend tens and tens of billions of dollars or potentially even over a hundred

• 58:27Speaker 05

  billion dollars if the right opportunity is there, so.

• 58:29Barry Ritholtz?

  What's the cash holdings right now?

• 58:31Speaker 05

  I think it's north of 300, yeah.

• 58:34Barry Ritholtz?

  Yeah, it's a crazy number. That sounds to me like a war chest waiting for a disaster to happen.

• 58:39Speaker 05

  Yeah, I think the thing is you got to find a willing seller, which is if you're going to buy a whole business is.

• 58:44Barry Ritholtz?

  Do you? Do you have to find a willing seller or can you wait for a, a, a era of distress where everybody's a seller and you're the, you know, you're, that's what I meant by war chest waiting for disaster to strike.

• 58:58Speaker 05

  Well, that would be, that'd be a nice way to deal with this issue. And we haven't seen it yet, but I'm sure the day will come where things look really ugly and I'm sure they'll be ready to act and will act.

• 59:06Barry Ritholtz?

  So the whole idea of the annual meeting taking place in Omaha was really built around these two men, Warren Buffett and Charlie Munger, one of whom is no longer with us and the other one is now sitting in the audience. So the question that comes to mind is, does Omaha still matter today? What's it going to look like, you know, a decade from now?

• 59:30Speaker 05

  Yeah, it's funny, I think, and I said my experience here, and it's from people I know who are also Berkshire shareholders, it sounds like their, their experience has been similar, is it's become an event where, you know, people go there and, and there's so many events around the meeting now that aren't the meeting and it's people coming together, you know, who are hosting their own meetings of one variety or another, having investor conferences and, yeah, I think that's become a really important part of this trip for a lot of people. So I, I sense for, I mean, the size of the audience will get smaller, as it has already, I believe.

• 1:00:01Barry Ritholtz?

  Oh, is that true?

• 1:00:02Speaker 05

  Yeah, I think it was, it was smaller this year than it's been in the past. But for these, these core group of, you know, the diehard value investors, I think they'll continue to show up for a while, as long as those events keep going on.

• 1:00:11Barry Ritholtz?

  Do you have any insight into who the average Berkshire shareholder is? Is this primarily Main Street or is this more professional investors or some obvious, some combination?

• 1:00:23Speaker 05

  Yeah, I think it's a combo of the two. Yeah, it feels like a combo of the two. It feels a little bit more, they definitely attract a more Main Street audience than I think just investors do generally, or investment managers especially.

• 1:00:34Barry Ritholtz?

  And, and I've never made it out to Omaha. I'm curious, who goes to these events?

• 1:00:38Speaker 05

  Value weirdos.

• 1:00:40Barry Ritholtz?

  Really?

• 1:00:41Speaker 05

  Yeah. People, people always like to joke that, you know, I'm, I'm a contrarian and I'm sitting in here with 40,000 people who think the same way I do.

• 1:00:48Barry Ritholtz?

  It's the scene from Money Python's Life of Brian.

• 1:00:52Speaker 05

  Yes, exactly.

• 1:00:53Barry Ritholtz?

  You're all individuals. You don't have to follow the crowd and they just repeat in unison, we're all individuals.

• 1:00:59Speaker 05

  No, I think it's people who, who want to learn and I, and I, for myself, it's, you know, I've learned a ton from Warren and Charlie about business, but I've learned a lot more as well about life and, and other things that, that I think are, you know, as important as part of your development as an individual and as an investor. And that's, yeah, I, I wrote them, it's funny, I wrote, I wrote Warren in 2010 and I said, hey, I'm not asking you for a job and I have fantastic parents who are my role models, but outside of that, you've been really important in my life and I just want to say thank you for that. And he, and he wrote a response and it's, it's framed in my office, it's like my one material possession that I care about, but, you know, I think it's people with that mindset who have come to really appreciate all they've taught people and, you know, what obviously

• 1:01:42Speaker 05

  Warren through charity and other things has done a lot for the world at large as well. So, yeah.

• 1:01:47Barry Ritholtz?

  Huh, really, really interesting. So I only have you for so much time and we don't have the studio for so much time. Let's jump to our favorite questions that I ask all of my guests, starting with, and I kind of have a suspicion as to the answer of this. Who are your mentors who helped shape your career? I, I know you have the letter from Buffett, so I, I want you to address Buffett and Munger as well as anybody else who might have shaped your, the, the, the curve of your career.

• 1:02:19Speaker 05

  Yeah, my start was with Peter Lynch, actually.

• 1:02:22Barry Ritholtz?

  Oh, really?

• 1:02:23Speaker 05

  I think I read One Up on Wall Street, it was one of the first books I read, which I, even to this day, when younger people ask me, what should I read? I, I think that's a perfect book for getting a feel for what investing is and it's very approachable. So I've always liked Peter Lynch. Other investors like Chuck, Chuck Akkery and some of these other fund managers that I, Don Yockman's another example, fund managers that at least like in the early 2010s were names that, at least the, the world that I, that I track in, they were, they were well known and people that I learned a lot from, obviously Warren and, Warren and Charlie are, are at the top of that mountain for me.

• 1:02:55Barry Ritholtz?

  Let's, let's talk about books. What are some of your favorites? What are, what are you reading currently?

• 1:03:00Speaker 05

  Currently reading the Jeremy Grantham book, which I, which I thought is, it's an interesting book. I'm reading a book about Fairfax. What else am I reading right now?

• 1:03:09Barry Ritholtz?

  About Fairfax?

• 1:03:10Speaker 05

  Yeah, Fairfax, Canadian insure. It's called The Fairfax Way. It's a good book. I have, I have two young kids, so my reading time has been, been changed in for 4:00 AM walks with my daughter and podcasts. So I listen to a lot of podcasts now as opposed to reading as many books as I'd like to.

• 1:03:26Barry Ritholtz?

  Well, that's my next question. What, what are you streaming these days? Either Netflix, Amazon, Disney or, or podcasts? What, what's keeping you busy?

• 1:03:34Speaker 05

  I've been listening to your podcast. I love the, the Hagerty's episode was really good that you had here recently.

• 1:03:38Barry Ritholtz?

  So, so interesting.

• 1:03:40Speaker 05

  I mean, your knowledge of cars, that helps the podcast.

• 1:03:43Barry Ritholtz?

  You know, I go out of my way to, to learn as much of, about each guest and their business as I can before the podcast, but that was easy.

• 1:03:53Speaker 05

  Yeah, yeah.

• 1:03:54Barry Ritholtz?

  I didn't have all that much research to do for that one.

• 1:03:57Speaker 05

  You could tell you love that topic.

• 1:03:58Barry Ritholtz?

  It, it was fun. I've, I've had a few really interesting automobile people over the year, but it's still, you can't, you have to do the deep dive because you'll find stuff that you wouldn't have without doing the research and I just think it makes a better conversation. What else? Give us some other podcasts.

• 1:04:18Speaker 05

  My buddy, Bill Brewster, has his podcast called The Business Brew. That's a great podcast. I listen to a ton of, as, as part of my research, I listen to a ton of old interviews and things like that, that I find, like I'll listen to Reed Hastings from 2005 and listen to him talking about Netflix and what their strategy is. I find those, along with old articles, is so helpful in terms of getting your mind to, what were people seeing and what were they thinking at this point in time? And how does that, how'd that translate from, from then to now? As an investor, I think that's like a fascinating way to learn about businesses and people.

• 1:04:46Barry Ritholtz?

  So our final two questions. What sort of advice would you give to a recent college grad interested in the career in investing?

• 1:04:55Speaker 05

  I mean, I think there, I think it's become harder with, with Twitter and some of these other tools over time in terms of getting your, your voice out there, but I recommend people, writing is the greatest thing for me that I ever, that I ever did in investing because it helped me to, one, build my audience, but two, it helps you to, you, you learn how to think, which might sound weird to people, but when you put something on a piece of paper and you read it and you go, okay, well, that, there's no defense for that part or this doesn't even really make sense. What am I trying to say here? When you sit down and go through that process, I think there's so much learning and to the extent that you do it, and I find this as well, when you, when you reach out to people who are established in the business, you say, hey, I did a one pager on XYZ, I really worked my butt off on this and I'm a college grad, almost everybody is willing to respond.

• 1:05:38Speaker 05

  If, if you're really showing the effort and you're, you know, conscious of their time. So, so take advantage of that while you're young and people are willing to talk to you.

• 1:05:45Barry Ritholtz?

  And our final question, what do you know about the world of investing today? Might have been useful 15, 20 years ago when you were really first starting up.

• 1:05:53Speaker 05

  Yeah, I know that I don't know everything. I know that I, that I've learned a lot along the ways, as I said before, that there's, you know, there's different ways to play the game and I've, I've kind of found, found the version of this game that I want to play and that I think I can, can do well at and, you know, just continuing to try to get smarter every day.

• 1:06:09Barry Ritholtz?

  That, that sounds like you're bringing it back to the circle of competence.

• 1:06:13Speaker 05

  Yeah, a lot of things come back to what Warren and Charlie have said. They're pretty smart. They had some good ideas on investing in business.

• 1:06:19Barry Ritholtz?

  Those, those guys are definitely on to something.

• 1:06:21Speaker 05

  It was hard to get this to 500 pages.

• 1:06:23Barry Ritholtz?

  Oh, really?

• 1:06:24Speaker 05

  Yeah.

• 1:06:25Barry Ritholtz?

  Because they just repeat.

• 1:06:26Speaker 05

  Well, I went through 1,700 questions and I was like, okay, I tried to keep 1,100 of them. I think we've got to cut this down a little more.

• 1:06:31Barry Ritholtz?

  What was the original length of this monster when it, it first?

• 1:06:35Speaker 05

  Oh, it was a huge word document. I think it was, I think, I think it was seven or 800 pages. But then I had to go through, okay, what, what should these comments on value investing do I really need to keep? Like, so, that's, that was one of the harder processes of writing the book.

• 1:06:49Barry Ritholtz?

  I could imagine. Alex, that, thank you so much for coming in. I have really been enjoying, like halfway through, and this isn't like a book you pick up and, you know, read three or four chapters. It, it's just dense with knowledge and information and you really have to chew on everything on the way through and I, I've very much been, been enjoying it. We have been speaking with Alex Morris, author of Buffett and Munger Unscripted. If you enjoy this conversation, well, check out any of the 659 we've done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube, wherever you get your favorite podcasts.

• 1:07:33Barry Ritholtz?

  I would be remiss if I didn't thank the crack team that helps us put these conversations together each week. Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my producer. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.