Hello and welcome everyone. Today is a very, very special event for us. We have two previous Google author speakers and famous value investors with us. Let me introduce one of them first to begin with.
Monish Pabrai is the managing partner of Pabrai Funds. He's also the founder of Dakshina, a non-profit organization which has sent hundreds of impoverished kids to the IIs, which are the most sought-after colleges in India. We are very pleased to have you again with us.
So welcome, Monish. And let's start with a brief introductory remarks from you. Thank you.
Thank you, Saurabh. It's a pleasure to be here and pleasure to be back at Google. And now I'm a shareholder. So last time I came, I was not appropriately portfolioed.
But now I'm a shareholder at Google. So it's great to look at what my money is doing. And I'm bullish on the prospects, if you will. So just very quickly, before we get into Q&A, you know, like... many of you I'm an engineer and and I did my undergrad in computer engineering I actually never had looked at the stock market or stocks or went to business school and in 1994 quite by accident I read a book which is the one you can see on the slide it's by Roger Loewenstein and it's a biography on Buffett Buffett the making of an American capitalist and I was very lucky because just at that time the first couple of biographies on Warren Buffett had come out and When I read the book, it led to a very significant epiphany, which eventually led me immediately, actually almost immediately, to start spending something like about 20 hours a week on investment research.
And then about five years after that, to actually do a 180 and start an investment fund. And the thing that I found very compelling... compelling about the book was that, you know, Warren has this saying that I'm a better businessman because I'm an investor.
And I'm a better investor because I'm a businessman. You know, the interplay between running a business and managing an investment portfolio. And when I read Buffett's biography, it dawned on me that the, the tools you use when you're Making investments are almost identical to the tools you use when you're running a business. So, for example, when I was at that time running an I services company, and, you know, I would probably spend maybe 2 or 3% of my time on strategy and direction, you know, figuring out kind of which areas we would focus on and those sorts of things. And then 97% of the time was the heavy lifting, you know, the blocking, tackling, and making.
that strategy happen. And initially, when I was doing this for the first few years, it was very exciting because you'd basically have a hypothesis, and then you'd go out and try to execute on the hypothesis, and then you'd have real-world results to look at. Well, when I read Buffett's biography, what dawned on me is that that 3% of time that I was spending for someone like Warren Buffett was like 80% of time, because... what he was able to do was apply the same analytics towards understanding which businesses and industries and such were great investments. And so the parts of the brain that you use in figuring out, you know, business strategy and direction are pretty much almost identical to the same parts that you would use as an investor.
And I always found that the 3% of time was a lot more exciting, personally. than the 97%. I mean, I enjoyed the 97%, but nothing like the 3%.
And so the idea of blowing up the 3% to 80% by letting someone else, in effect, run the business, and you figure out where you want to allocate capital was very exciting for me. And so that's what led me to, I had sold a small A few assets in the business for the first time I had about a million dollars which I didn't have any need for and so I decided to take the million and put it into equity investments as an experiment to see how far I could take Buffett's model and applying those. Those same analytics that I was using and I tried to blow it up So basically I immediately got to spend about 20 hours a week on what was normally would have been just you know a week or two in a year and then a lot of time just executing and So if you can go to the next slide and so one of the first investments I made this was in 95 and it actually shows the interplay between the real world if you can call it that and the investing world and So I was running this I services company. There was this company in India which was called Satyam Computer Services. And Satyam was trying to expand its business in the United States.
And their sales team had visited me in Chicago. They wanted to see if we could do some kind of relationship. And we never did any business, but I liked them a lot.
I liked the people. And I liked the way they were going about their business and how they were positioning themselves. So then I decided to study Satyam as a stock because it was publicly traded in India at the time. And when I studied it, it was actually, you know, I was a novice investor at the time, but it blew my mind because the market cap of Satyam was less than what you might have valued their real estate in Hyderabad. So the stock was trading...
below what would be just liquidation value on real estate. And this was a I services company that was growing something like 70% a year, very high margins. And I really couldn't see the end of that runway.
That runway was really big. And of course, investing in India was a little complicated. But I did it, but I wasn't... confident now because we didn't have electronic trading.
There were these flimsy stock certificates you got. And I didn't fully trust the Indian government on the ability to actually get the money back in dollars, even though they said the rules would allow that. So anyway, I made a $10,000 investment in Satyam.
I bought three or four different stocks in India, and Satyam was one of them. And I decided this is one of those investments where you just buy and forget about, never... look at it again and just let it run for 10 years and I bought it at 40 rupees a share and about five years later And this is you know, of course we had the whole dot-com boom in in Getting getting getting going and Satyam had started to spun off had spun off one or two of these dot-coms The stock had gone from 40 rupees to in February or March of 2007 thousand rupees So it had gone up like 130, 140 times.
And currency had moved against me, but still, even with the currency movement, it was more than 100x. And so I decided to stop drinking the Kool-Aid and do an analysis of the financials at that time. Because I basically never looked at it after that. And when I did the analysis, it was trading at north of 100 times earnings. And they had all these dot coms, which I didn't think.
I couldn't figure out what they were worth. And I said, you know, I think we've got more than a million in Satyam's stock from the 10,000. And I think we're going to take our money off the table. The other thing I was concerned with, I didn't know whether they would allow me to pull it back from India. Because the government said you could come in, give us your foreign exchange.
And when you sell it, no long-term gains tax, and you can pull the whole thing back. And I didn't trust that. So I said, let's test that. And so I sold.
And I had these certificates. I didn't even know they were. authentic.
So it sold and the money got into my bank in India and then I said wire it to my bank in the US and the next day it was in the US. Okay so the whole thing actually worked exactly exactly like they said it was and I said well you know I should have trusted them a little bit more. So that was Satyam. We can go to the next slide.
And so there was this other company in the mid 90s PeopleSoft and one of the things where you know the interplay between investing and running a business. So we were basically doing system integration. So we would, for example, we had a team which had expertise in Sybase, in Oracle, all these different databases.
And what I started doing when I was looking at investing is I started looking at all the software companies because that was an area I understood. And one of the companies I found which had a very high P-E ratio was PeopleSoft. I think it was trading at more than 50 times earnings. And PeopleSoft was like SAP, basically, where they needed system integrators to go in and implement the product. So I said, well, you know, what I can do is I can't buy the stock because it's ridiculously priced, but I can do a backdoor.
And the backdoor I did is I said, well. The market is mostly efficient. So if it's at 50 times earnings, the market expects tremendous growth.
And so I said if there, and it looked to me like it would grow a lot. So I said if we in my company, TransTech, set up a people-soft practice, that would not be buying at 50 times earnings. I would just be hiring people. And then I'd, you know, have them build out of these different companies and it'd be, you know, pretty spectacular margins. because it was so new and growing.
So I decided we would set up a people's health practice. And I still remember the economics were just incredible because I hired this guy who was probably the most expensive guy we'd ever hired at that time. This was in 96 or something.
I think he was a people's health practice leader and he cost us like a quarter million a year. And when we hired him, we didn't know. what we would do with him.
But I just said, okay, I need to have some horsepower coming in so we can then figure out, because this guy knows what he's doing. I said, once he comes in, then we'll sit down and figure out what to do. So he comes into work the first day, and he says, by the way, you know, are you looking for clients?
I said, yeah, we're looking for clients. And he says, well, you know, I've got these relationships, and there are three or four places, and I can go in with a team of 15 people. So I said... Paul, I don't have the 15 people. Do you know the people?
He said, yeah, I know the people too. Okay, so he helps us hire these 15 buddies of his. And I don't think it was even a day that he was non-billable. So in two days, he's billing at multiples of the quarter million that are paying him. And...
the team is going in at 50% margins after covering all expenses. And so when I looked at what happened with PeopleSoft, our actual cash out the door would kind of be like the Dell model where you ship the PC and then you pay your suppliers later. I hadn't even paid the payroll on these people before we raised our first invoice. And the invoice was at a huge margin to what we were going to pay them. So when I actually calculated...
Dollars invested in the people's practice, I think, was a negative number. And in the end, a lot of the rest of our I business was kind of declining because it was matured out and getting competitive. This was very high margin.
And so that's an example of how I used the stock market to drive... I said, no, this is cool, you know, I'll just keep looking at companies that have 50, 60, 70, 100 times earnings. And then go build a practice.
And because I know they're going to go up. And so that worked very well. So we go to the next slide. And then we get to, so we had Satyam and stuff.
But from 95 to 99, I think I had done like north of 70% a year on that million dollars we originally had. So things had gone really well. But then in 99, and this is when Pabrai Funds had started.
One of the first investments we made is I was seeing the big bubble in the internet. And it was clear to me that the internet was transformational. But it was also, I was very skeptical of the pets.coms, if you will. So there was a side of me which said, yes, I can see how this will change people's lives.
But I was kind of having a hard time of what kind of bet I can make, which would be a safe bet. And so then I find this company, which is headquartered not too far from here, Silicon Valley Bank. And these guys, it's a very well-run bank. It wasn't trading at a significant multiple to book. It was just a modest premium to book.
But what they did is every time they did deals with these venture-backed companies where they did asset-backed loans and all this stuff, they got warrants. So every company that they did a loan or leasing or different deals. They collected warrants in addition to what they would get from the loan spreads. And so they were sitting on this basket of like 300 or 400 of their clients with these warrants.
And many of these were pre-IPO. And there was no disclosure. There was no disclosure that they had made of, OK, look, here's a list of companies. Here's the amount we own and this and that.
I just knew they are sitting on this massive amount of warrants. And so I said, well, if we buy the bank and it was. publicly traded, we're buying a well-run bank and we have an automatic upside if these warrants come in. And I don't know whether they would come in or not, but I said, you know, it's kind of heads I win, tails I don't lose much. You might have heard that before.
And so we bought Silicon Valley Bank, and I think within about six months, we had a 4X on it. Because then they started reporting that, yeah, we had this huge amount of income because these companies went public, we sold, and it was dwarfing their interest spreads. And so then, we can just go to the next slide. And so now we...
we come full circle where about a year ago, I set up a company called Dhandho Holdings. And, you know, so now it's been about 16 years that I've been, you know, 80% time doing strategy, if you will, which is great. I'm getting paid for it.
What a country. And, but I found that, you know, the Pabrai funds is somewhat limiting because I'm limited to public markets. I'd gotten rid of the... technology company, so I didn't have a way to kind of go and do these kind of roll up your sleeves type things.
And so I set up Dhandho Holdings about 18 months ago, and we raised about $150 million, and we just bought an insurance company. And now it allows me, this platform allows me to buy any kind of asset. I can buy private companies, public companies, real estate, anything I want.
And so it allows a little... wider playing field, if you will, and it allows for the first time we have insurance float, which I've heard is a good thing to have. And so now I have, you know, which is the part I was always kind of interested in is that, you know, if you can control the business without really meddling or running the business, and if you can control the capital allocation of the business, That has some superiority to just being a passive public equity investor.
And so we have some elements of that in Dhandho, and so we'll see how that plays out. So I just wanted to give a little backdrop on how an engineer goes from what I was doing to where I am now. Thanks, Monish. It's a fascinating journey.
Thank you very much. So our next guest is also a previous Talks at Google speaker. He wrote an investment book, The Education of a Value Investor, a best-selling book.
But unlike few investment books, this was also a book that touched a lot of individuals at a very, very personal level. He's the managing director of... Aquamarine Funds and it's my great pleasure to welcome Guy Spear.
Thank you Monish, thank you Saurabh. It's a pleasure to be here with my family and I think I'm going to stand, I'll just go take a seat over here and I won't take long. So what do the rest of us do when confronted with the brilliance that we see over here?
And I would say that I think that I was brought up most of the time that I was at school and university, I was in places where I was probably the smartest guy in the room. And then as inevitably happens in life, you end up at Google where there is a huge number of smart people. You're in your own profession.
You end up bumping into some... somebody like Monish Pabrai. And I think that a lot of us who are smart have a big problem when we hit that, because it's kind of you hit a wall. And it's a bit like being perhaps, you know, there's a very high suicide rate at Cambridge University Maths.
subject because you get all these super bright mathematics students and they hit a wall and they suddenly realize that there are people there who are much more brilliant than they are so I hit Monish Pabrai and I saw a guy who can quote poetry to me from the back of a taxi, who's incredibly good at playing the game of investing, who up close I can see absorbs information and analyzes it much faster than I do. And so what I want to tell the group here is... is that there is life on the other side of that. And just a couple of ideas.
One is that I think that something that's been really remarkable for me is to realize how we don't think on our own as human beings. So I think Google engineers understand that. Saurabh and I were talking about how effectively one of the things that Google is doing is that it's helping us to delegate a whole bunch of mental functions out into the cloud. And we can focus on the things that we do best.
But that also happens in smaller circles. So I've learned that if you combine that with not worrying about who gets the credit in a certain way, who to be the bad boy for, you can get a lot more productive. I think that the minute I stopped trying to be the originator of all original ideas, so cloning is good, is something that I learned from Monish.
Then I learned not to worry about who gets the credit for something. You can end up being extraordinarily productive. And before we open it up to questions, I'll just leave you with this one thought that I find just extraordinary, is that I decided I was learning so much. First of all, there were a few things I started doing right to get into the presence of Monish Pabrai.
That itself was fascinating to me. I was so excited by the things that I learned, I decided to write a book about it. If you take a look at the book, There is, I basically start the book saying, I am not worthy, I am nothing. Look at what I learned from this person, look at what I learned from this person.
Look at all these ways in which I failed until I learned from Tony Robbins, Monish Pabrai, Warren Buffett, Charlie Munger. It goes on and on each time to somebody else. And I find the world an extraordinary place that even when you do that, you end up getting a huge amount of credit. And so I think that the secret for the rest of us is to find...
people by acting in the right way, giving credit to other people, and then just being part of a meta thought process that allows us to benefit as well. And I think that when you get into those ecosystems, it's a lollapalooza, extraordinary things happen. And just going back to the sort of the founding stone for me in Monish, I think that's what we see at Berkshire Hathaway.
We see a group of people who learned how to do that within a web of deserved trust. And with that, we can open up to questions. Thank you very much. So I have questions for both of you. And, uh...
Oh, just one second. You wanted to... You want to switch with Guy? Yeah, let's have Guy sit closer to Monish. Yeah.
Good. Yeah, I can face both of you. but I ask you questions. Let me start with you, Monish. This is a question, you know, you mentioned your journey from technology to investing, as it were, and I learned somewhere, and fill in the gaps for us, that you went to a retreat, and there was an industrial psychologist, psychiatrist, help correct me later, who did a 360 on you, and you were managing a company, and they said, Monish, stop.
managing this company and you would work best in a team size of one. Is that right? Yeah, yeah so I'm part of a group called YPO, Young Presidents Organization, which I think is one of the one of the best nonprofit groups out there.
It was set up to make business leaders better, better leaders, better husbands, better fathers, mothers and such and so it's been a great book, great great group to be part of. And so I've been at YPO, I think now for about almost 18 years. In fact, I just left because now I'm too old.
And so it was a great 18 years. And as part of YPO, we get set up in forums, which are groups of eight to ten individuals who are in non-competing businesses. And the forums meet once a month in a very confidential setting for about four hours.
And then once a year we go on retreat, where we go into deep deeper dives where we explore longer term goals, personal growth and development and so on. So one of the individuals in the group suggested that we have these industrial psychologists do a deep dive on us. And so there were these two individuals and they had a company called Conquest. And I thought, I was intrigued by the name, so they said that they named it after Genghis Khan. And They said, you know, people think that Genghis Khan was a tyrant.
But they said that Genghis Khan was extremely effective at getting to his objectives. And so they said that, in effect, each of us is wired a certain way on the inside. So let's say, for example, if this is your inner map, what happens is the world expects us to act a certain way. And so in many ways, we...
try to please the world, and so we will have an outer map in many, many times which is misaligned from the inner map. And that inner map, according to these conquest guys, was between your genetics and the first five years of your life experience is hard-coded. That inner map is not going to change. You know, things that you like or dislike, those are like very core parts of your psychology and your makeup. And so their perspective was that there's no point for Genghis Khan to try to be like Gandhi.
Because he'd be completely ineffective at it. Because at the core, he's a tyrant. And so they said, if you're a tyrant on the inside, be a tyrant on the outside. Because that's the best thing for the tyrant. It may not be best for the rest of humanity, but they were focused on the individual.
So their take was that each of us is born without an owner's manual. And what they told us that they would do for us at that retreat is at the end of the retreat, we would basically have an owner's manual. And I got a 20-page document, which I actually read every year now, reread it.
And so what they did was they did 360 interviews, so they talked to all our spouses. If the kids were old enough to talk to the kids. If you had employees, they talked to employees, your friends, just a full 360. You know, people, if you were reporting to someone, they talked to your boss. If you had people reporting to you, they talked to people under you.
And then they had us to do a bunch of tasks. And... based on all of that, they got a map of who they thought we were. And then they sat down with us individually, not individually, but in a group setting for three days at this retreat and went through the findings, went through the owner's manual for each of us.
And with me at the time, I was running this company with 170 people, with these people soft consultants and all of that. And they said, you know, We don't even know how you do that because this is not you. So what they said is, with me, they said that something that is very core to my psyche is I like to play games. But I like to play certain types of games. So I like to play games where the outcome depends on my performance.
It doesn't depend on a team. So I wouldn't be a good guy on a soccer team, for example. So they said that you like to play games where the outcome is heavily dependent on you, and you like to play games where you think with whatever you have to bring to bear to the game, you have a likelihood of winning. And when you pair yourself, they said, with this game where it seems to match up with the type of things you like to do, then you'll kill it.
So they said, You need to focus on driving that, you know, feeding that. And this was just about two or three months before Pabrai Funds was launched, and I had the idea for it. So I was explaining to them what I was trying to do about it.
And they said, yes, Pabrai Funds, perfect. That's what you should need to do. And they looked at my other company. They said, as quickly as possible. Sell it, find a CEO, whatever you can do, exit.
And I did that. And actually... You know, like for example, I love to play bridge.
I spend, you know, five or six hours a week playing bridge. And I look forward to it. Like Saturday and Sunday, I played about five hours of bridge.
It was incredible. I loved it. Probably love it as much or more than equity research.
And you can see that there's no reward by playing bridge, you know. But there is a reward for me because I only like to play duplicate bridge. Because in duplicate bridge, we keep score. And if, for example, many of my friends will say, hey, Monish, we're having a party. We're going to play some, you know, social bridge.
I have no interest in social bridge. What's the point of playing social bridge? You know, there's no scorekeeping. And so scorekeeping, just in my psyche, is very important.
And so just, I would say that this whole area doesn't get covered in our education system. I, you know, I think universities ought to... Pretty much give everyone their owner's manual. In fact, I think you should get your owner's manual when you're 10 years old. And so to the extent that individuals are able to do that, and I think it's not very hard to do it in the sense that the, I would say, poor man's version would be Myers-Briggs.
You could just pull it off the internet and do that. But I would say even if you just on the yellow pages look for an industrial psychologist or a psychologist. and just ask them that this is what you want them to do. I think for...
Maybe $1,000 or $2,000, maybe $3,000, you could get quite a ways because the body of work is so extensive. And I think the rewards are priceless. Thank you. And Guy, this idea of... And by the way, I just want to say that I went through this in 99, and Guy is now part of this other group.
I'm part of Lattice Work, and I had the group go through it last year. Actually no, 2013. And Guy was part of that as well, so he went through it as well. I want to ask you about your owner's manual, but before I come to that, you know, this idea of alignment and authenticity also comes out strongly in the book that you wrote.
And it's been a while since the book came out. Since then it's been on all sorts of bestseller lists, broken all sorts of records. I'm just curious. Given the months have passed, and if you were to add an afterword or a final chapter now, what are the things that you might want to mention in there?
I would just tell you that I think it's too soon to add something. I feel like I... The book was five years in the making.
In fact, you could argue that the book started when I first met Monish, because he talked to me about Mahatma Gandhi, and it was only because he talked to me about Mahatma Gandhi that I even read... the autobiography of Mahatma Gandhi and was inspired by it. I would say the only thing that I'm struggling with right now is that the book is, on the positive side, a great big act of commitment and consistency, which is good because it commits me to certain values.
I think those are great values to be committed to. But it also commits me to a certain standard of behavior. And I have various members of the planet showing up in various ways in my email inbox and in letters and what have you, and they're expecting a certain standard of behavior, which is easy enough to do when you have a relatively small circle of friends, but when you have a large group coming at you, and so I'm struggling with how to remain congruent as more and more people come into my life, which is not an easy task. Absolutely, absolutely.
And I guess which is why you are you. So. There's a question here that we have from the audience, and I think you've probably both seen this question before several times. But it's an important enough question to, I guess, reflect upon for all the audience that you're going to have here live as well as on YouTube. The question is simply, what was the most unexpected, surprising thing that you guys felt when you met with Warren Buffett during your lunch with him?
You want to go first? You know, one of the things that really got to me at the time was when I asked him this question about envy. And I was asking about...
I had the courage to... ask about myself. So the question that I asked him was, Warren, imagine that I'm one of your managers of your businesses, an important business that generates a lot of cash for your office.
And imagine that I come to you and I say, say, you know, I'm sort of gripped with envy of other people in my industry, and it's affecting my performance. And I expected Warren to come back to me with some brilliant answer. And, you know, he just looked at me, and I said, so what would you do? And he just looked at me, and he went, I don't know.
And I was both a little sort of shocked and disappointed, because I was expecting some wisdom. And I think that what that did for me is it made me struggle with that afterwards. And and forced me to come up with my own answers. And I think that it's a testament to Warren Buffett that he is so congruent and aligned. I think that when you're congruent and aligned with yourself, when you love what you do, you don't get envious of other people, because you're happy for them to be happy, and you love what you do.
With Monish's playing bridge, he doesn't care that some other guy is driving a Formula 1 racing car. And because Warren has been so aligned for so long, the thought was just utter anathema to him. And I think it just made me realize that the answer was to drop all these things that I was doing, that I was trying to, in which I was misaligned, basically. And it's actually one of the great clues that you're misaligned is that you're feeling envy of somebody else.
That's the great, you know, emotions are a call to action. And the emotion of envy says there's something in my life that I need to change. And if you direct yourself inwards, which I, by some miracle, managed to do.
So that's one of the. of the many surprising things. Thank you.
Well, what I found very surprising was that Warren's Warren's got plenty going on. He's got more than 300,000 employees, huge company. Obviously, he agreed to have lunch as a charity lunch.
But the thing that surprised me is that he truly showed up. So his perspective when he came for the lunch was that these people who I don't know very well, don't know at all really, for them this is a big deal. He understood that really well. And he understood that...
He was there to deliver value and so he wanted to make sure that we felt like we got a bargain. And so whenever we asked a question he converted the question into a learning opportunity. And so I would just ask him a question like like for example, hey Warren there was this third kind of pseudo partner of yours Rick Gurin and then after the 70s he kind of dropped off the radar. What happened to Rick Gurin?
And, you know, he took that opportunity to give us a lesson on leverage and different things, which was very powerful. And the other thing I would say is that, you know, in meeting him and meeting Charlie Munger, both these individuals are off the chart brilliant. I mean, I would say that they are unworldly brilliant.
Because I asked him questions that I know he would have never had any thought that I'm going to ask and had any prior processing, but the way the answers came out, and especially many times when I've done that with Charlie Munger, with these extremely left-field questions, I would say this, that I have never, ever met a person who is anywhere close to the brilliance of Charlie Munger. I would say he surpasses Warren, sorry Warren, he surpasses Warren by quite some distance. And Warren himself surpasses most of humanity by quite some distance. So that was the thing, the other thing was you could just see that there is just horsepower coming out of their ears. Incredible horsepower.
And they get output out of that engine. A lot of people have horsepower, they don't get output. These are Formula One Ferraris which are delivering output.
So I would just... to riff on that, if you, we get asked, I get asked all the time, was it worth it? And I can't tell you the feeling. So somebody, here's the richest man on the planet, or maybe it was the second richest, I don't remember.
And he's determined to deliver extreme amounts of value to complete yo-yos and their wives and children. And that almost makes you want to jump out of your seat. It's not what you expect.
And here's what I've learned. If Warren Buffett was doing that for us, you can be sure that he does that for every single one of the Berkshire managers. He does it for many, many other people. And it made me realize, you have the sense that the richest guy on the planet, most successful businessman, most successful investor, he would not feel obliged to do that. He'd feel like his presence is sufficient.
And it just gives, there's no other way, I think, to really have learned the insight that... We really are here to serve other people, and we get success in life when we take that very seriously and we deliver with enthusiasm, value, to even two yo-yos who've showed up for a charity lunch. But I would even argue that, so we're at the end of the lunch, and of course our attention is totally focused on him. There are many other things that we'd like to do and ask, and he says, wait a second, let me just take care of these waiters here.
He went and personally tipped at least one or more of the waiters. So it wasn't just for us. It was for everybody who made the occasion possible. I don't think there's any way I could have learned that lesson other than being at a lunch like that. Awesome.
Thanks for sharing that. Actually, this is a question you should have expected. This is a question that asks you about, you know, the stock market being overvalued or not currently in the context of quantitative easing and so on. And I'm going to just sort of... rephrase that and put that in the context of remarks that I've heard come from you guys, and correct me if they're misattributed.
There's this notion of what Maggie Maher has written in her book, of breaking the stock market into 15 to 17 year sort of cycles. And with that notion, you know, 2016 is supposed to be closer to the start of another bull market. But given the interest rate environment that we've seen in the past few years, you know, not necessarily at the next two, three years, but I'm just curious, how do you see things moving in the next decade or so?
I have no clue. I believe that if you continue to do quantitative easing, you'll eventually get inflation. I think that everything that I don't want to be anywhere other than stocks, because they have unlimited upside, and just about every other instrument does. I want to be in stocks that are inflation protective. And this idea of going to cash or some other instrument, what are you going to do if you do get inflation?
But I think other than that, if we look at the success of Warren Buffett, it's because he did. didn't waste too many brain cells thinking about Mary Maher and when the next cycle is going to come and he just focused on businesses? Well, guy is no fun. So let me try to do a little bit better. Thanks, Monish, for playing sports.
So, well, I think Maggie Maher's book is a great book to read. You know, Bull is a fantastic book to read. And I think if you go back and I was actually recently looking at just the numbers, you know, if you go back to late. early 2000, and you look at companies like Microsoft and GE and a lot of these high flyers, they were sitting, you know, GE was sitting at 40 times earnings.
And then 15 years later, it's sitting at 14 times earnings. And of course, earnings have grown considerably through then, and the stock hasn't done a whole lot. And so basically, you definitely see this pattern of in 1982, markets were very undervalued.
You know, again, a company like GE was in single-digit PEs. You know, Coke was at nine times earnings or something. And again, in 99, 2000, Coke was at 40 times earnings.
And so, we had this massive bull run from 82 to 99. And we haven't had much happen to equities from 99 from today. In fact, if you look at it from the point of view of the NASDAQ, it's almost played out perfectly according to what Maggie would have said, because because the NASDAQ peaked at 5,000 in first quarter 2000, and it just hit 5,000 first quarter 2015. So that was a 15 year end to end. Even the Dow and the S&P, they haven't done a whole lot in the last 15, 16 years.
But I would say that we are not at a point which is like 1982. And in the sense that we We are not at a point where we have screaming bargains all over the place. For the last couple of years, I have not been able to find anything meaningful to buy in the United States. And it's not because things are at 40 times earnings.
So they're not euphoric, but they're not cheap. And I don't think that most things are in bubble territory. I think some things, especially in this part of the world, are in bubble territory.
I don't think Google's in bubble territory. But there are certainly, even in terms of private valuations of some of these venture rounds and such that go on, I think those are in bubble territory. So we have some bubble-like behavior in certain pockets. So history doesn't repeat itself, but it does rhyme.
So we don't know whether 2016 or 2017 is a low, but I would say that the odds are high that when you get to the 2030s, to the... 2035s and that type of a time period that the lessons of 99 that generation is going to say this time is different because it's so far it's 35 years and that's why we have these cycles because one generation kind of you know retires a new generation comes in new kids of the block and they say are these guys don't know what they're doing we know and so I think that it's good to be cognizant of those cycles but I agree with God that you're far better off focusing on individual businesses and making the investments based on the economics of the business. Thank you. So actually I'm not going to let you go off that easily guy.
So one of the questions alludes to this and it's basically the fact that you know Monish gave nice examples Satyam, Silicon Valley Bank but the thing with those examples is they're more than a decade old now. So that was on purpose. I'm sure.
So I'm just wondering, Guy, if you can be a little more sporty than Monish and give us some examples which are maybe from this decade and if not from this year. Well, you know, I filed, I was forced to file my first 13F this year. So, you know, you can look up Monish's 13F or my 13F or a whole bunch of other 13Fs and see exactly what he may have bought, when he might have bought it.
I don't know. I think that he will have maybe 100 baggers. I don't know.
I think he probably will have more 100 baggers in his portfolio. I think it's very dangerous to speak about specific stocks that you own, especially when it's a potentially infinite audience because the commitment consistency issues are so high. I would just share one thing with you, which is, so what you saw here is a guy who loves to play games with odds. And so he can't help himself. When he's looking at Mary...
Maher, stock market, 17-year cycles. He may not know the answer, but he's calculating probabilities all the time. What's the probability that this model of the world is true?
And he has a very strong hunch that that model of the world is true. But let's say that you're like me, and you're less into playing games with odds. That's just fine.
The fact is that if you apply the right investing philosophies, you can do extraordinarily well. And I would actually argue that there's a, for the vast majority of us, trying to get into those kinds of questions. is actually going to mislead us, first of all, because it's hard to do, but also because it's just not the way our minds work.
There are very few people in the world who are wired to think probabilistically the way Monish does and the way some other people do all the time. What we have to do is find a way of investing, a way of implying these value investing tools that is consistent with who we are. And it's totally fine to be friends with other people who do it differently, but to try and start looking at the world the way Monish looks at it, I'm going to get into trouble.
You know, one thing I would say, Saurabh, is that I was looking back recently at, you know, you brought up the 100 baggers. 100 baggers are good for your health. The problem is that they don't come along that often.
I wish they'd come along more often to be even better for my health. And so, you know, but the thing is that, you know, I look back and they do come along. And in many cases, we're too dumb to see them.
So, you know, Satyam. was one that I was able to write. Of course, it happened at a time when I didn't have much of a net worth and I had even less of an appetite for these, you know, non-computer traded Indian stocks and such.
But then, you know, after that, I had another case where I made an investment in a shipping company, Frontline. And it was, you know, undervalued, distressed, and all this stuff. And I think I bought at $7 and I sold at $11, you know, and because I was just trying to play that arbitrage.
between the price of the ships and the net asset value. But that stock front line from seven, it went up to 150. And then it was issuing dividends which exceeded what I had paid for the stock. And that whole thing played out in about four or five years.
And so that was at least a 25 bagger that I missed. There was another one. And this one I should have actually been more cognizant of.
But it was. complicated. So there was this company which had Mary Whitman on the board and had Satyam Zell. And I don't know if you guys know, but Satyam Zell is a great dancer, great guy to follow into different investments. So these two individuals had bought this dilapidated shell of a company which had huge amounts of NOLs.
And it was an insurance company that had gone under and had a lot of NOLs. So they bought the. a public shell because it had those NOLs.
And then they bought some barge company in Mississippi. Basically, the idea was to marry a profitable business to this NOL stream and make money off the tax savings. And then the barge company went under. It didn't do well.
So they got more NOLs. So they got NOLs to the power of NOLs. OK, and I had not invested that well.
And then after that, they found a very unusual waste to energy company. So this company basically took waste and in this plant basically converted it into electricity. Almost everything was very high temperatures and such.
And then they were doing a rights offering and different things. And that's when I saw it. And I was too dumb, because I couldn't, just like Satyam, I couldn't believe.
The significance of the upside, I thought I must be doing something wrong with the number, either because it was like John Malone's deals, you know, it's just very hard to figure out. And so I had, I think, a double or a triple and I moved out. And again, that was about a 20 bagger from there. And so, you know, the thing is that there have been a few of these that have come along in the last 20 years. And I hope the next time, I know they'll come along, I hope the next time I'm smart enough to see it.
And. Write it and put enough money behind it so there's still time. We'll see if we can write one of those properly. There's hope for all of us.
Yeah. But those are good ones to study and they do come along and they're quirky and they're special situations, but I think it's worth looking at them, yeah. Especially for the small investor, I guess.
Absolutely, yeah. So I know you guys are on a tight schedule, but one final question, and I have to ask you because I know you're both engaged in a lot of activities outside investing as well. And I recently read the Dakshina annual report, and I was blown away by how data-driven, how quantitative, and yet how inspirational that whole report was.
And it's one of the best non-profit reports that I've ever come across. So I'm sure it must be a conscious, deliberate effort, was it, to do things in a certain way for you? Yeah, but you know I like to play games. So I try to explain to the Dakshina team in India such that I'm not really doing any good. I'm just playing the game.
And it's a great game to play. And so one of the things that is a fact is that it's way more more difficult to give money effectively, give away money effectively, than to make it. As you can see from my Satyam Escapade, you can just blunder along and make some money.
But giving it away is harder. And the reason, and I've learned this from Warren, is the reason giving away money is harder is you're forced to confront issues like poverty, health care, environment, education. And these are issues where governments have spent Billions and trillions, well-meaning individuals have spent billions and trillions, and we still have these problems. So it's not like these people were stupid, and it's not like they were all corrupt and such. Many well-meaning people have had a tough time.
And so my wife and I, we want to recycle our assets back, because it's a game. We play the game and recycle back, right? And so... but I don't want to recycle back by writing a check to Red Cross. There's nothing wrong with writing a check to Red Cross, can do a little bit better than that.
And so just like all the other games I play, I thought about, well, how would we give away money effectively? And so the way I answered the question was the first way was to not wait till you're really old. You know, we can't do a whole lot when we're in our 70s and 80s.
So I felt like I wanted to start in my 40s, at least on a small scale, so that we could we could get some traction. And so I inverted the problem, and the, which I got from Munger, which is most things in charity cannot be measured, right? So I rejected everything that we could do where measurements would be hard. And I focused on areas where measurements would be easy.
Because if you have an engine where you can measure easily, then you can, you know, kind of tweak the ship and navigate. So Dakshina basically does well because its entire model is focused on easy measurements by an independent third party, which is the II entrance exam. And then all the other metrics, which is how much it costs us, how poor the kids are, all these things, all numbers we can look at. And which is why it works out as well as it does.
Great. Well, with that, I know you guys have to go to the next event. Thank you very much, Guy and Monish, for being with us today. Thanks. Well, thank you.
Thank you.