#25 – The Celebrity Investor
Guy Spier is a value investor best known for his $250k lunch with Warren Buffett. He manages the Aquamarine Fund and operates a low risk, low maintenance strategy, designed to protect him from making mistakes.
Guy Spier is a successful value investor and has spent considerable time creating an environment which will protect him and his fund from making mistakes through his own temperamental idiosyncrasies. He talks much more about environment design than valuation which is refreshingly different – I learned a lot.
We discuss why the best ideas are simple, yet analysts always want to impress with their understanding of complex situations. Guy talks about his university chums, David Cameron and Chris Hohn and why his father entrusted his life savings to a young man with no investing experience and how that has coloured Guy’s investing approach. And of course we discuss that lunch with Warren Buffett.
Guy used to look up stock prices for his dad on the school run (in Iran). And he loved the HP-12C calculator which led him to understand the power of compounding from an early age. He only really became interested in investing age 27, having been “infected” with the efficient market hypothesis. His first job was a disaster with bucket shop DK Blair (no relation to the great firm Wm Blair) and his father then entrusted a young Guy, with very little investing experience with his life savings of $1m. This has led to Guy taking a very cautious approach to investing.
Lunch with Buffett
Guy paid $250k for lunch and it has been a great investment for him. He is clearly in awe of Buffett and sees huge value in going to the AGM to be in the same room as him, even with 40,000 others. He talks of how Buffett’s mind works with an extraordinary clock speed and he compares the investment to buying a sports car – you get a few drives and some envious looks and that’s about it (Guy drives a Porsche!). Having lunch with Buffett pays dividends for the remainder of your life.
The lunch helped him to grow in ways he didn’t want to grow. And he points out that spiritual growth happens when pain or discomfort is involved. Healthy relationships involve friction and pain. He points out that highly successful people may well have had some lucky breaks but usually they also possess rare gifts. You can learn a lot from being in the same room as them.
Guy believes that if you want your life to be an adventure, buy low cost lottery tickets and lead a more interesting life – he flew from Zurich to California for a friend’s birthday dinner and is about to visit India for two days.
Why his dad gave him his life savings and its effect
Guy’s first job first job with bucket shop DK Blair (no relation to the great firm Wm Blair) was a disaster and his father then entrusted a young Guy, with very little investing experience with his life savings of $1m. Guy explained that his father is very intuitive and has high emotional intelligence and that having served in the Israeli Army and seeing friends die, it wasn’t a difficult decision for him. But it was a scary and heavy responsibility for Guy and has made him more risk averse than he would otherwise be.
His friend Mohnish Pabrai has a very different attitude and is quite relaxed investing in Turkey which is a no-go for Guy. Guy believes that understanding your attitude to money and the history behind it can be helpful to your investing performance.
Guy’s Investing Rules
Guy checks stock prices only occasionally. This doesn’t cause him any issues because he only invests in companies which are glacial in their pace of change. He cites Charlie Munger who asked the question “which of the S&P500 will be better businesses in 5 years?”. Guy points out that if you stick to those types of businesses and pay a good price, you should do very well.
He also confesses in the podcast that he has abandoned one of his rules and surprisingly says he was stupid to write that rule in his book. We won’t spoil this by revealing it here, but it’s a tribute to Guy’s flexibility that he is able to change his mind and to reverse a hitherto iron clad rule in his investment approach.
ABOUT Guy Spier
Guy Spier is a Zurich-based investor and the author of The Education of a Value Investor. Since 1997, he has managed Aquamarine’s privately offered investment funds.
Guy previously worked as an investment banker in New York and as a management consultant in London and Paris. He has an MBA from the Harvard Business School, class of 1993, and holds a First Class degree in Politics, Philosophy and Economics from Oxford University. On graduating from Oxford, he was co- awarded the George Webb Medley prize for the best performance that year in economics.
Guy currently lives in Switzerland with his wife Lory and their three children, Eva, Isaac and Sarah.
Pushed to pick out a single investing book, Guy recommends Richer, Wiser, Happier by his close friend, William Green, also a former guest n this podcast. But he advises reading everything and finding the investing style that suits you.
And don’t forget Guy’s own book: Education of a Value Investor which is a great read.
HOW STEVE KNOWS THE GUEST
Steve met Guy in Omaha at a dinner with Chris Bloomstran and a few others and Chris persuaded Guy that he should come on the podcast. We met up on his next visit to London.
00:01 – Changing investing mindset
17:21 – Lessons from early career
27:23 – Family influence on investing
34:58 – Transformative experiences and lessons
50:42 – Adapting to a changing world
01:11:27 – Analyzing businesses and management
01:21:42 – Finding the right books
An AI Generated transcript follows which only has the lightest of edits but may be helpful.
STEVE CLAPHAM: Hi, welcome to the Behind the Balance Sheet podcast where we meet leading investors and commentators and educate ourselves about the world of investing and the world. Our mission is to remove some of the mystique around investing and improve our understanding of what makes a successful investment or indeed an unsuccessful one. Our goal is to inform, educate and entertain.
Disclaimer: We hope you enjoy this and every episode behind the balance sheet and affiliates and podcast guests may own shares or have an economic interest in securities discussed in this podcast which is aired for your education and entertainment. Only nothing in this podcast should be construed as investment advice or relied upon for investment decisions. Always do your own research.
STEVE CLAPHAM: Guy Spier is a value investor best known for partnering with Mohnish Pabrai and paying $651,000 to have lunch with Warren Buffett. Guy’s quarter of a million dollar share was clearly a brilliant investment and he explains why in our discussion and he talks about how Buffett helped him to grow as a person in ways he didn’t even want to grow.
STEVE CLAPHAM: Remarkably. Guy also explains why he was an idiot to write one of the investing rules in his book eight years ago because he has completely changed his mind.
STEVE CLAPHAM: He talks about how his father entrusted his life savings to a relatively young and totally inexperienced guy that has colored his approach to running the fund, which is focused on the avoidance of risk guy invests in businesses which move at a glacial pace, which means he doesn’t need to worry about the stock price from week to week or even month to month.
STEVE CLAPHAM: He explains why he prefers to do his own research than to rely on an Analyst. And he shares a tip on interviewing management from a former intelligence officer. But this episode is about more than investing. The guy tells his wife, he loves her.
STEVE CLAPHAM: He talks about the conversations he has with his children and he explains why he once flew from Zurich to California for dinner. This is quite a long episode. We then split it in two after feedback from the William Green episodes, but we only covered half the subjects I wanted to discuss even after we went for lunch and continued the conversation.
STEVE CLAPHAM: So I hope Guy will be coming back. I haven’t asked any of my guests for a second interview. What do you think? Email me at info at behind the balance sheet dot com and enjoy this episode.
STEVE CLAPHAM: So Guy, welcome to the show. Normally I’m pretty relaxed when I do these podcasts, but I, I’ve got a little bit of trepidation because I know, you’re good friends with William Green and I know he prepares for days for an interview even with you.
STEVE CLAPHAM: Now, look, I have done some prep. I’ve reread your book, but basically I make this up as I go along. So it’s going to be a bit of a magical mystery tour depending on our conversation.
STEVE CLAPHAM: I always start with the same question. Did you always want to be an investor?
GUY SPIER: And I’m delighted to answer the question, Steve, thank you for having me here. Please don’t be stressed. Yes, William does prepare a lot. I prepare when I have to interview somebody a lot less. And so let’s all relax and have fun. And did I always want to be an investor?
GUY SPIER: The answer is no, I didn’t really know what investing was. The first time I came across investing was my father driving me to or from school in Iran where he had figured out that he could buy stocks and shares and he was sending orders in to the bank of it where he’d opened a bank account in Switzerland.
GUY SPIER: And he would ask me to look up the price. I remember we’d get something like the International Herald Tribune and I’d look up the price of, for example, IBM and he’d get all excited if it had gone up and he’d get all unhappy if it had gone down. And I didn’t really think about investing until I would say for me, age 26 27.
GUY SPIER: 0, really? That’s quite late. And what had happened to me is that I was absolutely infected with this idea of efficient markets. So why would anybody become an investor? Because the markets are efficient, there’s no real input there. And so up to then I didn’t really think about it as something for me to do.
GUY SPIER: Investors were just people who are out there who are providing capital for reinvestment. The only thing that I did cotton on to early on was that around the same time that my father was asking me about shares. And I remember he specifically asked me about IBM, but there were probably others as well.
GUY SPIER: He got an HP 12 C calculator and I used to love sitting and playing with financial functions and, you know, I’d love to recreate in, I’d love to have a camera on me because I remember sort of looking at different percentage rates of return and knowing that my father had money to invest and asking myself what would happen if you had this percentage rate of return for X amount of years and pressing the FV future value button and discovering that was when I discovered the miracle of compound interest.
GUY SPIER: I mean, it just blew me away when I thought about how my father’s money could grow. But then I didn’t think about it for another decade and a half. I mean, I would have been like 10 years old. That funny.
GUY SPIER: And you grew up in Iran, it’s a complicated story. We came to Iran as a family in 1970 when my father took a job with a multinational chemicals company. And so I did part of my growing up in Iran from 1970 to 77 before we moved as a family to the UK.
STEVE CLAPHAM: And what was it, what was Iran like?
GUY SPIER: It was amazing. It really was. It was a, it is a beautiful place.
GUY SPIER: I have such positive memories of Iran. I learned to ski there. There are colors in Iran that I can’t wait to see again. There’s a kind of a blue that you get in blue glass. I guess there’s a, is the, is what they call it. But pomegranates in autumn, I just, just an amazing place, amazing people.
GUY SPIER: And I’ve not been able to go back since the revolution and would not go back because we were heavily associated with the Israeli embassy. And so until there’s a new government in Iran, I would not even think about going there. But the minute there is, I’ll go there in a heartbeat. Yeah, I know.
STEVE CLAPHAM: It’s a place I’ve always fancied going to and there’ve been a few frontier investors who have gone out, bought some very cheap stocks only to find that they got quite a lot cheaper. But I was interested that you believed in the efficient market hypothesis.
STEVE CLAPHAM: And you had this like amazing economics tutor, Peter Sinclair who’s regarded like one of the top academics. I mean, he’s taught people like Tim Harford, Dean Coyle Camila Cavendish and he also taught David Cameron, who was one of your contemporaries. So look, did he just indoctrinate you that you, that you believe this?
GUY SPIER: First of all, Peter Sinclair is you know, they say that your teachers become like your parents and he became like a parent to me, he changed my life. I was an unhappy law student and he made it possible for me to switch subjects. So and so he, he really is like a father figure to me, became a friend.
GUY SPIER: And it’s very tragic that he passed away early in COVID. He was quite overweight and I reconnected with all of those people actually through the memorial service that was held for him. And I wouldn’t say that Peter Peter was not an indoctrinating type at all. He was just very excited to see somebody who’s enthusiastic about his subject.
GUY SPIER: And he was a classical academic economist and got excited about great ideas and the efficient market hypothesis and something that was very prevalent at the time, rational expectations, which is an assumption that economists made to make their models work, just made it so elegant. And so you would get excited about the elegance of the idea.
GUY SPIER: And I think that I just have a mind that loves those things. I mean, I think perhaps we all do, we love elegant ideas and sometimes elegant ideas do explain the world, but sometimes they don’t, sometimes the world is very, very messy and messing world usually is quite messy. Right? And, you know, and it’s interesting.
GUY SPIER: So, so years later I’ve kind of discovered what some people call chaos theory or this idea that systems in biology, for example, are far better explanatory of the economy. And I came to Peter and I said, you know, this, this, there’s a better word than chaos theory for it because it doesn’t, it doesn’t capture all of it.
GUY SPIER: It’s complex adaptive systems is a better word for it. And this guy Michael, whom you should interview is at the Santa Fe Institute where there’s a lot of research done into this. And I come to Peter and I say to Peter, all of these biological systems and complex adaptive systems are much better way of modeling human behavior, don’t you think?
GUY SPIER: He said? Yeah. And he said the problem is is that you either have to do text descriptions or the mathematics is just too complex and complicated to make any predictions. And so, you know, and, and in a sense, I’ve started reading economics again in a sense, in part out of to kind of honor Peter Sinclair and to honor a career path that I didn’t take.
GUY SPIER: Economists get excited about taking the complex world and turning it into a simple model and often those models are super useful, but sometimes we get carried away. And the efficient market hypothesis was certainly a place in which many of us got carried away.
STEVE CLAPHAM: And what was it like? So you, you were a contemporary of David Cameron, our former Prime Minister at, at Oxford and you were a contemporary of Chris Hohn and Bill Ackman at Harvard, two highly successful hedge fund managers, both billionaires. I mean, you’re a pretty successful guy, you’re pretty wealthy.
STEVE CLAPHAM: But I’ve been wondering, is it difficult to be satisfied when you compare yourself with billionaires and prime ministers and did studying with these guys raise your game at university? And does having peers like that make you continue to raise your game?
GUY SPIER: Yeah, it’s a fascinating question. So, you know, you, you become like the people you hang out with. And so those are some of the people that I hung out with early in my life just to give you a little more color. Thanks to Peter Sinclair, I participate, he, he from time to time would put three or four or five students together.
GUY SPIER: So normally a tutorial was two students, one of them reading out an essay and one of them handing it in and he, he put sort of four or five students together. So I shared, I don’t know how many sessions with David Cameron and this was in probably what was my third year at Oxford, but my first year of studying economics and it would have been in his second year studying economics.
GUY SPIER: And I mean, I I was at the time floored as in on the floor by his capacity for self expression, elegant self expression, his understanding of the underlying concepts and the confidence, but also the humility with which he expressed them.
GUY SPIER: I mean, I was, it was kind of, I, I came to Oxford ill prepared for what it was and was, was kind of racing to catch up for pretty much all of the four years that I was there because, but so that that’s David and then I really had zero contact with him. I mean, our paths did not cross in any way, shape or form.
GUY SPIER: In the Case of Bill and Chris. Chris, I did spend quite a bit of time with him at Harvard Business School and quite a bit of time with him in the year or two or three afterwards. But he moved to London. He was in New York and Boston for a while. But then he moved to London. He regularly asked me if I was coming back and I, and I kind of wanted to stay in New York.
GUY SPIER: And so I, I did not see him as much and I would say that I see him now maybe for a coffee in his office. Once every year or two. And, but he’s always very kind and, and gives me the time of day in his office. I did not, I mean, he was always as intense as I think the people who experience him today, he.
STEVE CLAPHAM: Couldn’t have been that intense when he was young.
GUY SPIER: Surely he was extremely intense and unbelievably focused. And, so, so I didn’t, I don’t think at the time that I quite understood the intensity and the focus and and then Bill Ackman, I mean, so I can’t say that I’m directly friends with Bill Ackman, but we share a friend in this Whitney Tilson who sees him a lot.
GUY SPIER: And I, and he’s my experience with Bill. The times that I’ve been in the same room as him and the stories that I’ve heard from people one step removed is that he’s an extraordinarily generous guy. I don’t think people quite realize how extraordinarily generous he is.
GUY SPIER: I mean, I know people who have shown up in his office to just try and talk to him about some charitable organization. They walk out with a substantial check. I don’t know if he still does that. So please don’t go and quote that to Bill and expect him to write you a check.
STEVE CLAPHAM: Listen, don’t go to Bill’s office in Columbus Circle and disturb him, but.
GUY SPIER: He’s an extraordinarily generous guy and he’s been extraordinarily generous with me. Actually, when I started getting interested in investing. I came to his office in it was in, it was close to or perhaps in the best building on Park Avenue.
GUY SPIER: And he just said, oh, just come use the Bloomberg outside. You can’t come into the inner sanctuary but feel free to. And that was like, wonderful for me. It was so extraordinarily grateful for it. And so those are my interactions. It’s not a, it’s not any kind of deep friendship with any of them.
GUY SPIER: Not even, it’s kind of like they know who I am, but not a lot more. And I would say that, yeah, I think that especially living in New York, It’s not that I asked myself to ask the question, but the question just arose in my mind and and, and especially to the extent that I was friends with Chris and spent a lot of time with him.
GUY SPIER: So there’s inevitably there’s the question arises or even arose when at a time when I was sort of like doing fundraising rounds or going on beauty contests in places like Geneva and the bankers would say, first of all, they, they doubt that I had known Chris at all.
GUY SPIER: And then they’d say, well, why aren’t you doing what he’s doing or why aren’t, don’t you, aren’t your returns the way his returns are? And I think that I struggled with it for a while until, and I struggled it as well with Warren Buffett. I mean, I literally when I came across Warren Buffett, I had the arrogance to think that maybe I was smart as Warren Buffett.
GUY SPIER: I was capable of putting out the same returns as Warren Buffett. Like I think a bunch of other people. I’m not alone in that and it was hard for me to realize that I was not. And I guess the only appropriate place to go is to realize that you’re on your own path. And there, there are many, many things that come together to generate outlying success.
GUY SPIER: And you should be happy with the success that you can generate. We will never ever know what combination of things came together in, say, Chris and Bill to develop the results, they may not know themselves. And there’s certainly skill and hard work plays a part. Luck also plays a part and they come together in an unusual way.
GUY SPIER: And there’s a kind of like a, an, an increase in wisdom that come, that comes from realizing that it’s actually not important to be the most outlying outlier. And it’s funny because I have conversations with my children who, you know, obviously like any human want to say that they own their intelligence.
GUY SPIER: This is mine, you know, and I kind of say, well, no, actually it’s not yours. You happen to inherit the genes that you inherited because you won an Ovarian lottery or you maybe didn’t win it.
GUY SPIER: You got your particular ticket in the Ovarian lottery and you were born with a particular set of genes in a particular family, in particular circumstances and all that has come together together to make you you. And so we should have a little more humility for people who or you should have a little more humility around people who may be not as smart, not as motivated, not as a whole bunch of things.
GUY SPIER: So, I think that that’s an important step on the path to wisdom. But you’re absolutely right though, that it was bugging me enough that it helped me to take the decision to leave New York. And it’s far easier to say those things not living in New York than it is living in New York.
STEVE CLAPHAM: That’s interesting. So when you decided to leave New York and you, you moved to Zurich then?
GUY SPIER: Yes, that’s correct.
STEVE CLAPHAM: So, how did that conversation go with the wife?
GUY SPIER: Well, we’re going to, I have an amazing wife and, and you know, I need to tell her that I love her in front of as many people as possible. So I hope you don’t mind Stephen Laurie. I love you very, very much. I’m so lucky to be married to you.
STEVE CLAPHAM: One more listener.
GUY SPIER: And all of her friends in Mexico and all she grew up in Mexico. But Laurie is an adventure, some type. I mean, she came to New York age 21. I met her on the second day that she was in New York and she was up for the adventure. And how did you meet Laurie? And I met through mutual friends. I like to say we met at a bar, but that’s not entirely accurate.
GUY SPIER: We met through mutual friends, but friends of mine that she’d met the day before actually in New York. And it was her birthday when we, and, and, and this guy said, well, it’s your birthday, I’ll take you for dinner and I’ll call up a friend and see if he’s free. And I actually brought a date with me.
GUY SPIER: How funny. So, but no, she was, well, you know, and I was, I was talking to her about the desire to move and we, it was also driven in part because the situation with children and schools in New York City is complicated and we didn’t understand how to play the game.
GUY SPIER: And I think that if we had not left, if we had not moved to Zurich, and if we’d have stayed in New York City, for example, we might have moved to a place like Park Slope or just a more Westchester County or a place that was more reasonable to have children.
GUY SPIER: So, but she was totally up for it and, she’s an adventure of some type. I feel very grateful and lucky for that we’ve been on many adventures as a family together. But, that’s that’s quite cool.
STEVE CLAPHAM: I mean, that, that, that I could have that conversation. But if you enjoy this.
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STEVE CLAPHAM: Anyway, let’s go, just go back to your career because I was interested, you know, reading your book, your first job was at William Blair an institution which you clearly didn’t like and experience, you clearly didn’t enjoy and you left there without having another job, right? Do you want to just very briefly, just tell us about the circumstances? Because I think it’s quite a lot of lessons to learn from that.
GUY SPIER: There’s so many and just to be clear, William Blair is a highly reputable smaller brokerage firm that makes still be around and we must make sure that so all the folks at William Blair, you guys are great and there’s, there’s so, so let’s just be clear we’re talking about a farm that is, I don’t think anymore in existing in existence and it’s called DH Blair.
GUY SPIER: This and, and there’s no problem with you doing that because Stephen, that is a very, very important point. What these bucket shops do is that they want to play off the perception that there’s something else.
GUY SPIER: So they would name themselves, they would take the name of a well known farm and, you know, instead of calling themselves Goldman Sachs, they’d call themselves Gelman, believe it or not, that there would be people who’d be duped by that. And it’s just kind of insane. And in a certain way, you made the exact mistake that the people at DH Blair wanted you to make.
STEVE CLAPHAM: Well, you know, what I did was when I was writing up my notes, I actually, I, I’ve got a friend at William Blair and we were, we were meant to be meeting up for a drink.
STEVE CLAPHAM: And that was, that was in my mind as I was, as I was writing the notes. So I profuse apologies to William Blair, but might even become clients.
GUY SPIER: But it makes a really, really important point that a friend of mine and I have played around with. So the mind creates positive associations. It’s not very good at creating negative associations. So, we, we kind of like toyed with the idea of writing on one of our Wikipedia pages, you know, Guy Spear has never worked for George Soros.
GUY SPIER: And it doesn’t matter that there’s a negative there because in the human mind, most human minds will make a positive association there. So, so DH Blair is a sort of like, I wouldn’t say carbon copy Wolf Of Wall Street. If anybody here has watched the movie, I’m sure most people have is a sort of an exaggeration of what happened at DH Blair and extraordinary misjudgment on my part and lack of judgment at age 27.
GUY SPIER: So you’d think that I was, you know, that’s getting a little late in the game to start to be making really big career mistakes. And I would call that a really big career mistake. And if you want to, we, I’ve thought long and hard about what were the circumstances that came together to make such a big career mistake.
GUY SPIER: But yes, I went to work at a Wolf Of Wall Street type place in which the people at the farm, many of them did not have university degrees. A small number who did it was run by a guy who was actually a Harvard Business School graduate who owned the firm extremely smart and aggressive in his interpretation of the rules.
GUY SPIER: And they were very, the whole firm was of the mindset that the marketplace and the participants in the marketplace are a resource to be exploited by playing fast and loose with the rules and being highly aggressive and burning relationships and what’s amazing is, is that, that is a strategy for life. It, it, it works actually. And there were people who made significant amounts of money there.
GUY SPIER: I think it doesn’t allow you to become Warren Buffett wealthy, but it allows people who might have had jobs running a car mechanic workshop or maybe even drug dealers or whatever it was that they were doing with maybe just a high school certificate to make far more money than they could have ever expected to make. Just like the people at Wolf Of Wall Street.
GUY SPIER: And I was fascinated by finance and I loved, I, one of the reasons why I made the mistake is the guy gave me the title of vice president and he said you’ll be doing deals from day one. And that kind of appealed to me.
GUY SPIER: And I can remember telling friends of mine that I was going to be Vice President of Investment Bank and that, you know, in this sort of out of scorecard world of Harvard Business School at the time, there were some who were kind of struck with envy with that, you know, and instead of investing in myself and investing in relationships with people that could, could I could build for the long term, I was going for the stupid external scorecard stuff.
GUY SPIER: But the lessons as you say are, are profound and deep because I think that I saw in microcosm and in extreme ways, some patterns that repeat themselves time and again, all over Wall Street. And so, I have these debates with my father about whether it was a good idea to go there and he thinks it was, I still think it was a terrible idea.
GUY SPIER: There were other ways to learn those lessons. And the worst part is, is that I really did have a, a reputational hole to fill. And I think that, you know, the younger you are, when you make reputational mistakes, the better you people will give you the benefit of the doubt. But the older you are, when you make them, the more time it’s gonna take for people to really kind of like start trusting you.
GUY SPIER: Why did your dad say that it was a good idea for you to go, you know, coming, coming when I saw, I mean, just to give examples of what was standard practice, you’d take these companies public with no earnings and just a projection and obviously a highly charismatic sales person that works well as a CEO and you would wrap these kind of like, options into the security that allowed it to be unraveled at some point.
GUY SPIER: And you would have a bid ask spread of, you know, you take the company public at five, but the bid was at four and you know, unsuspecting retail investors didn’t think much of that, but you’re actually taking a bid ask spread of 20% which is just enormous not to mention the fact that the company took an underwriting fee and it also took options.
GUY SPIER: And so you, they were taking money every which way. But that allowed me to, to see what was going on. For example, in my father’s bank account with his Swiss bank, where kind of, I started asking about the fees.
GUY SPIER: And, and they said, well, well, actually they’re very low. I remember this banker saying because we just charge a custodial fee. And I remember looking at the, the brokerage statement and, and I was telling my father, they are, you’re receiving a bond coupon and they’ve charged you a processing fee for the bond coupon. Where on earth does a bond coupon require a processing fee?
GUY SPIER: And my father came and asked the question. He actually brought me to one of the meetings and they kind of hummed and hawed. So I, I had now and my father had this approach to a banker that they’re a bit like a doctor, you know, and you really do trust a doctor to give, a professional opinion. And he felt like it should be the same at a bank.
GUY SPIER: And I started telling my father stories about how I worked at a bank. And these people were all, you know, I mean, there was a famous expression, you probably know this, some people who’ve worked quote on Wall Street as a rip. They, you would have brokers on the 14th, 15th floor who would boast about ripping the client’s face off, you know?
GUY SPIER: Wow. So, so it was, it was in a way, it was also a learning curve. I mean, we were immigrants. My father had grown up in Israel. My mother on a, on a, on a, not a kibbutz on a Moshav but in a sort of like socialist environment. My mother had grown up in South Africa.
GUY SPIER: And so I think that we as a family were going up a learning curve and becoming more deeply understanding of sophisticated things like financial markets and he was going up a learning curve. So, so yeah, I, so he feels like because of my experience at DH Blair, he went up that learning curve.
GUY SPIER: I think he would have gone up that learning curve if I’d gone to work at Goldman Sachs, which probably if I’d continued with the interviews would have been an option for me, but I was just too desperate to get off the train tracks. You know, that was another part of me.
STEVE CLAPHAM: Well, go Goldman Sachs are also good at extracting money from their, from their, from their clients. But I apologize again to William Blair, which I’m, I’m actually a big fan of that was DH Blair. But your, your dad gave you a million dollars to invest and, and later with two associates gave you $15 million. Why did he trust you with so much money or was it not a meaningful thing?
GUY SPIER: That was very, that was very meaningful. That was everything. So why did you do that?
GUY SPIER: I asked myself the question to this day, you know, he’s around, you could ask him, he might, he might give you an answer or we might do a post script or do a Zoom call with your dad. I mean, you know, I’ve just been lucky enough to spend time with him over the last couple of days and he’s a very different personality to me in that.
GUY SPIER: So I am, I am good with numbers relatively, but I’m not that good on the EQ side, at least not compared to him. And he on the other, on the, on the other hand is just amazing with relationships. But, and, you know, maybe not as good at numbers as I am, something like that, but he also had some pretty amazing, amazing.
GUY SPIER: He was a farm boy, wasn’t up to much, but somehow the Israeli military saw leadership qualities in him and took him and put him through an officer’s course and put him into various leadership positions in the Israeli army for the time that he was there. And I think that at least in his Case, leadership is taking bold decisions.
GUY SPIER: It’s also, and I, I’ve learned this, you know, you, you just, you either trust somebody or you don’t and if you do trust them plunge in with both feet and it’s kind of scary, but he’s capable of doing that. And I think that he’s faced very dangerous situations where his life was at risk multiple times and he’s seen friends die in various wars.
GUY SPIER: And so I think that you have a very different approach to decision making and in a certain way, risk taking. Once you’ve seen that investing all of your liquid liquid net with your son is a no brainer and just easy, I suppose.
GUY SPIER: But it scared the hell out of me, scared the living daylights out of me because I knew that there wasn’t anything else around. If I got that wrong, he would be relying on his business for taking care of him in retirement. So, and I think that it made me more risk of us than I would have been otherwise, but perhaps I would have been very risk averse.
STEVE CLAPHAM: Anyway, is it you, you write in your book that given your family’s history of loss in Nazi Germany that you’re nervous about losing money, you don’t like debt. And you explain that’s one reason for having beer in the portfolio. It’s balanced financially and emotionally. But you also write that investors need to understand their relationship with money and with that understanding, you could make adjustments.
STEVE CLAPHAM: I thought that was a very astute observation and something I hadn’t previously thought about. I was wondering how you got to that conclusion. You obviously think about a great deal about how to be a better investor, how to be a better person. How do you arrive at these conclusions? I thought that was really interesting.
GUY SPIER: You know what I’m, what I’m realizing is that we’re, we’re so, we’re both, I’m realizing now, Steve out of the box thinkers and that, that’s kind of like a hackneyed phrase. But some people’s minds don’t go in straight lines and, and I think that, those of us who have minds that don’t go in straight lines don’t understand why they don’t go in straight lines.
GUY SPIER: They just do, they make jumps in ways that other minds don’t make. And we don’t even realize that those, those jumps are unusual. But I think that I think that my point that you’re getting at and it’s, I guess maybe it should be blindingly obvious is that every single individual’s perspective is different.
GUY SPIER: And well, I, I, and even before that, so, so a point that I’ve made many times and, and people always sort of like, are surprised by it when I make it, when you read a story in the financial press that looks at the moves that one investor or another.
GUY SPIER: Most of the time, those stories don’t show the move in the context of the whole portfolio. The person where I think it’s potentially the most damaging or misleading is this guy Carl Icahn who I think has made a exquisite art form. If you like of revealing some of what he’s doing to the market for his purposes.
GUY SPIER: But the reality is far more complex. So, II I remember reading somewhere that one of the things that he would do is he would, he would establish a position that was neutral, using options in a company and then just do stuff to increase the volatility.
GUY SPIER: You didn’t know if it was going to go up or down, but it didn’t matter as long as the volatility increased and it, it appeared to people that he was either long or short, but he neutralized that out through options and he was just pushing volatility, but that was not the agenda that he appeared to have. So not everything is what it seems to be.
GUY SPIER: If you like, I’ve, I’ve been reading a book is going to be coming out shortly by a guy called Chris Chabris called Nobody’s fool. And he’s the famous man behind the experiment of the guerrillas where you count the basketball players and you see the guerrillas and Nobody sees the guerrillas the first time around. Things aren’t what you see in our minds, play tricks with us.
GUY SPIER: So so that perspective of you cannot really evaluate a move that somebody’s made if you don’t see their whole portfolio because otherwise, you know, you’re just not seeing the whole agenda and the whole picture. And in the same way, I, I know clearly, I mean, I think that in part just to try and answer your question a little bit better.
GUY SPIER: Is that at the time that I’m writing that book, I’ve already been spending an enormous amount of time with Moni Pabrai and I’m seeing that he has an extraordinarily different approach to money than I do.
GUY SPIER: And, and this comes, comes through even things that we’ve been discussing recently, I mean, this well known that he loves Turkey and I don’t, for example. And, for him, he, I, I don’t enjoy going to a casino and sort of like placing bets and even with games like blackjack, I don’t, and blackjack, the odds are pretty good.
GUY SPIER: I mean, you can, you can argue that in certain casino tables if you count and what have you, you can do almost as well as the house. He, he doesn’t mind that he doesn’t mind seeing, seeing the pile of chips go down for half the evening because he’s using the strategy will eventually get them back. And I just don’t like that.
GUY SPIER: So he clearly has a different approach to money than I do. And I started asking myself why. And I think that you can tie that to experiences that people have had in their childhood. And so I think that that’s extremely important to understand in ourselves rather than me sitting there.
GUY SPIER: And I guess it also came from this, I’m sitting there going, why am I not able to take the same decisions that Mona pa is able to take. Why am I not able to develop the same degree of comfort? And when you ask your question, the question enough. And he, he laughs, he says, yeah, I’m gonna tell Guy Spear this idea and, and he’s going to go into his bomb shelter.
GUY SPIER: He calls it the bomb shelter. He called me up, he’ll say, have you come out of the bomb shelter yet? And so asking that question, I started realizing that it’s got to do with our very different childhood experiences and, and possibly even before that, a very different approach to what life is and what the world is about.
GUY SPIER: I think that if you, if you grow up in a Jewish environment or Judeo Christian environment even, there is history, there is tragedy, things unfold for the better or for the worse. But if you grow up in a, as I understand it and I’m not claiming any expertise here, there’s, there’s the idea in the Hindu world of reincarnation of souls and, and there’s a circular life.
GUY SPIER: History doesn’t unfold towards some destination. Life just repeats itself. And maybe in a world where life just repeats itself endlessly, you have a different approach to money because it kind of comes and goes.
GUY SPIER: Whereas that’s not the feeling, there’s tragedy, there’s loss and then there’s rebuilding, you try and hold on to it, something like that. But, and it seems to me that if we understand all of the stuff behind all of those kind of psychological underpinnings and just the perspective of consolidating the person’s balance sheet.
GUY SPIER: We do better.
STEVE CLAPHAM: So you’re most famous for, for having lunch with Warren Buffett and you underwrote a third of the cost of that launch $250,000. Now, it was a little while ago when $250,000 worth more than it is today, you’re a wealthy guy and we even then, but it’s like an expensive lunch.
STEVE CLAPHAM: What did you hope to get out of it? And obviously it’s been worth much more than $250,000 to you. But, what’s the moral of that, of that? What, what should we take away? What should we learn from that.
GUY SPIER: You know, a phrase that has just stayed with me so often, which is slightly unrelated, but maybe I’ll find a way to make it related is if you want an adventure, tell the truth.
GUY SPIER: And, and I think that in this Case, it’s not so, so in this Case, if you want your life to be an adventure, if you want to live an interesting life, pick up those low cost lottery tickets, you know, and, and actually even that you could argue that that was not a low cost lottery ticket. It was actually pretty expensive lottery ticket.
GUY SPIER: But, but, you know, when, if you can afford it. And I remember on, on an Israeli interviewer asking me. So, you know, how do you decide to invest in a lunch? And I said, look, you probably don’t want to do it if it’s more than 5% of your net worth or you’re probably even less, but pick up those lottery tickets because you live a more interesting life.
GUY SPIER: And actually, if I stop and think about it with you right now, so there was a huge element of that was just saying, I mean, there are people who spend more money on a motor car and you know, what’s the most car going to get you? It’s gonna get you a few nice drives.
GUY SPIER: It’s gonna be, get you a little bit of envy, it’s gonna get you some nice experience. I’m not saying it’s a terrible thing but the range of outcomes and the possibilities that unfold for your life when you go and have lunch with Warren Buffett are way beyond. I mean, so, so you have a huge, ok, so, so from the car enthusiasts perspective, you’re not going to get all those wonderful drives in that car.
GUY SPIER: So you, they, they could say that the, you know, the downside is less protective because it only gets one stupid lunch. You know, and how long could the lunch last? But the upside is far more likely to be infinite in the lunch Case.
GUY SPIER: So why not pick up that lottery ticket if you can afford it and actually why not pick up a lot more lottery tickets. I mean, I think there’s some, there’s a book or a movie or something. The year of saying, yes, it’s my year of saying yes, in a certain way that’s saying, pick up the lottery tickets, there’s so many lottery tickets that are offered to us and we just have to be smart about them.
GUY SPIER: So, you know, I don’t think that the thrill of jumping off a cliff in a wingsuit is worth the downside, which is a great big fat zero. And I think that many of us probably even in the financial markets, pick up those kinds of lottery tickets.
GUY SPIER: But if you can see that the downside is totally affordable and limited, why not get more of those things that are unlimited upside. So I think that’s an enormous lesson and to put that into more specific terms, if I know that somebody is interesting or I’ve met somebody who’s interesting or where I kind of get the feeling that there’s potential there for something.
GUY SPIER: It’s ok to, travel across the planet to see them even just for dinner. And I actually did that. I, I went, I, based on that reasoning, I went, I flew basically to California from Zurich to celebrate a friend’s birthday because I knew it would be a special event and that is not a dumb thing to do.
GUY SPIER: Just, I mean, and because you’re putting yourself in the presence of potentiality, which creates all sorts of other things. And so I think that’s just an enormous, enormous lesson for me.
GUY SPIER: And what’s also very interesting is that Mona saw that and I didn’t, he needed to spell it out for me and, and, and when he spelled it out for me, I saw it and I think that there was an element of me that wanted to, wanted to have the adventure if there was an adventure. And in a certain way, I got the a doing that would get me the adventure with Monash anyway.
GUY SPIER: And so, and I’ve, I’ve said this that just meeting Warren Buffett and the things that happened subsequently was certainly transformative for me. But that whole experience would have been transformative for me. If none of the things around Warren Buffett would have happened and just the things around Mona would have happened.
GUY SPIER: And in, in the Case with Monash, it’s not just that I met all sorts of interesting people and I completely reconfigured my business based on what the conversations that I was having with him. And the biggest change for me in moving to Zurich was that I could make a clean break with what I’d been doing in the past, which is some kind of New York hedge fund model and do a very, very different model for, for running my business.
GUY SPIER: So I feel like between you know, my father certainly taught me an enormous amount. But Monash has taught me an equally enormous amount about how to run a business in a way. That’s fun and interesting and makes sense.
GUY SPIER: And then, you know, with Warren Buffett, I mean, there were, I think that, you know, and I can dive in as much as you like Steve. But so, so somebody says, well, you can go to the Bucks Hathaway meeting and, and be in the same room as him. And that’s absolutely right.
GUY SPIER: Well, you see him far away with all 50,000 of mine and Warren’s closest friends. It’s still a wonderful, wonderful, wonderful thing. But I think that being in the room with Warren for those three and something hours help me to grow in ways that I didn’t want to grow.
GUY SPIER: You know, and, and I think that, I’ve been seeing this in all sorts of relationships where we want to grow without the pain, but actually growth, spiritual growth. Most of the time happens when there’s, when there’s pain involved.
GUY SPIER: And I actually think that a healthy marital relationship and also a healthy relationship with our children involves friction and pain. It’s, it’s not supposed to be harmonious. If it’s harmonious the whole time, we’re not actually growing as individuals.
GUY SPIER: And so the pain for me being around Warren was, first of all was, it was just, you know, I don’t think that my mind will ever have, have as high a clock speed as Warren’s does.
GUY SPIER: And I think there is an element that when you’re with somebody who’s far younger and far less experienced than you are, then you can appear to have a higher clock speed to that person. You can appear to be more intelligent than you really are because there’s this sort of difference of perspective.
GUY SPIER: And I like to tell younger people all the time. You think I’m smart. It’s not, it’s just that you don’t have the experience that I do. But I think that I can correct for that.
GUY SPIER: And, and, and even if you take that into account, he has a mind that has an extraordinarily high clock speed, really exhilarating to be around and, you know, I, I’d leap at the opportunity to spend more time around it, you know, one on one, but, you know, it’s not not happening.
GUY SPIER: Or maybe it does, who knows what happens? You know, I’m Hankering after II, I did a project where we hypothetically looked at what it would take to get IKEA to sell itself to Berkshire Hathaway.
GUY SPIER: And my sole goal was I knew that if if I know that if ever I had a hand in helping a deal like that to happen, Warren would take me for lunch one more time with happily, I’m sure he would, but just out of the interest of getting the lunch. But so being in the presence and I think that what’s really hard is. And I, and I guess, you know, I should, I should remember Steve that we’re talking to an audience.
GUY SPIER: You know, it’s, I, I, as I’ve kind of progressed to where I am right now. Never, if I could tell a couple of things to the person I was 20 years younger is that I’d say guy, you have no understanding of how limited, how limited the time is of some of the people that you adulate. And if you want to get into their lives, you really have to learn how to respect their time. And there are all sorts of techniques for doing that.
GUY SPIER: So, yeah, I was going to make a second point about talking to my 20 year old self. But yeah, it’s this that if, if you’re an ambitious person, you know, don’t think that these highly successful people are versions of your friends who won the lottery ticket. They have, they may have, there may be a lottery ticket aspect to it.
GUY SPIER: They may have won the ovarian lottery, they may have come across. But there are also personalities that have learned to project themselves in the world a certain way and use the world in a certain way. And whatever they’ve got is actually very, very rare. And so investing the resources to be in the same room as them because you can learn from that simply being in the room with them makes an enormous amount of sense.
GUY SPIER: And so, you know, if it take the time and, and yes, 50 being in, in with Warren and me and 50,000 of our friends is not the same as being just in the room with Warren, but it’s still worthwhile doing that.
GUY SPIER: It’s still worthwhile if, if, if that person resonates flying 12 hours just to celebrate a birthday with them or just to go and have a lunch, I actually, in a couple of weeks time will go to India with Monash for a couple of days. And really, it’s just to spend one day in the presence of a few people who have an extraordinary business. And so, yeah, I’ve learned from that and they reinforced that in me if you like.
STEVE CLAPHAM: So, so any other, you’ve been to California going to India, anything else that you, that you’ve splashed out on the, that, so investing large resources into, being in the presence of somebody?
GUY SPIER: I really don’t think I’ve done it enough actually. And nothing comes to mind right now. I think that what, what in a more general sense we can, we can allocate, we can put all of that into the bucket of investing in one’s psychological, intellectual and social capital. And actually, it’s funny because in London there’s a kind of a slightly different perspective on it.
GUY SPIER: I think that there are a lot of people in, in London or in the UK, especially some of the people that either am from friends with or was friends with, who are doing it in a kind of the British social structure class system. I don’t want to necessarily dive into that rabbit hole.
GUY SPIER: But, but there’s a certain element of that, which is kind of pointless. And I’m, and, and I think that it’s hard to dis if it’s harder for me in London to distinguish between the two. But, and I’m not talking about that, I’m not talking about, I, I, you know, recently there was the coronation of now King Charles.
GUY SPIER: So I’ve joked with people and said, Steve, I didn’t see you at the coronation. Where were you? You know, it’s really fun to say that in London because there are at least some of the people who they do a double take because they get the first reaction is no, wasn’t there. He’s just messing with me. They go. Was he there? And I wasn’t.
STEVE CLAPHAM: But they know you were at Berkshire Hathaway meeting.
GUY SPIER: They should know but they don’t even, they, they wouldn’t, many of these people wouldn’t know what the Berkshire Hathaway meeting was. But I would give you an example recently. And I can’t, I mean, I can’t remember exactly in what context it was.
GUY SPIER: But somebody that you’re probably aware of, Nick Sleep invited me to join him at Goodwood. He loves racing cars. So, you know, I made the special effort, flew back to London a couple of days before my available.
GUY SPIER: It doesn’t seem like Nick does podcasts. I, I would tell you that, it’s Nick and Case Case is, is a genius mathematician. He’s as best, I can tell a supporter of the London Mathematical Institute. There’s a guy called Olie Peters at the London Mathematical Institute. He’s very well. I’ve not met him in person.
GUY SPIER: But, yeah, so I went and spent time there and here’s something that’s also interesting is that, I mean, I explained to my children, the reason why you go to a wedding is because you just want to be at the event so you can build your relationship with people at the wedding even if you don’t talk to them.
GUY SPIER: And so, you know what I did at Goodwood is that I said hello to Nick’s wife for like two minutes and we all watched him racing around the track, which was kind of pretty fun, but it wasn’t more than that. But I know that next time I’m with Nick, that experience will kind of inform.
GUY SPIER: And actually funny enough if I stop and think about it, we, we share an interest in cycling. And so, he talked to me about this thing to the forest where you cycle on the route of the, tour De France, either a few weeks before or after. I don’t remember exactly when very tough cycling for me.
GUY SPIER: I couldn’t even finish one of the full days that the tour De France cyclist do. So I was taking a bus but Nick couldn’t be there that year for some reason or another. But it’s ok because we kind of share the experience that we’re both around the same people and did the same kinds of things. So there are all sorts of ways to do it.
GUY SPIER: And it’s something that, you know, get yourself into the environment that activates all those things for you and often that’s just being around the right people.
STEVE CLAPHAM: And you, you said that the, the buffet lunch helps you to grow in ways you didn’t want to. I mean, what, what sort of things, I mean?
GUY SPIER: Yeah, I mean, no, that very, very. And how did he do that?
STEVE CLAPHAM: How did he exert influence?
GUY SPIER: I still could not put to bed the idea that maybe if I just focused on the right things did the right work, you know, was actually as good as Warren Buffett.
GUY SPIER: And so, you know, I, but the the experience of being at lunch with him forced me to grow in that way, forced me to accept that that wasn’t the Case, forced me to put that to bed, didn’t allow me. I would have, you know, I would have had to be in total denial and drinking kool aid to be walking around afterwards thinking that I could be some version of Warren Buffett. And of course, there’s pain associated with that.
GUY SPIER: But once I’d put that pain to bed and accepted it, it freed me up to focus on what I really could do, which is to live. Guy Spear’s best possible life. And, and, you know, I think that when you have a hero that’s really, really hard. I think it’s also probably, I’m, I’m the father of teenage children.
GUY SPIER: You know, the, the, the, the feeling that you can’t have your child live the best possible life that you would like for them to lead. You have to let them become the best possible person that they want to be. And that’s still a lesson that I’m learning with the help of all sorts of people.
STEVE CLAPHAM: But yes, I, my children don’t listen to the podcast, so II I don’t need to worry about that. Now, you, you, you work on your own now without an Analyst. You, you, you said in the book, your assistant sold his personal holdings in 2008, was that the right decision?
STEVE CLAPHAM: And how did you find the time? Because you do a load of stuff? You’ve got value, you’ve got your own podcast. I mean, how do you fit it all in? And, and why is it better to be on your own? Having somebody else to bounce ideas off? Of course, you’ve got Monish, I suppose.
GUY SPIER: Well, the thing is, is, you know, it doesn’t help if all Moni wants to talk about is Turkey and I’ve kind of written Turkey off for one reason or another. So then, so, so in that Case, certainly one needs more than, I mean, more than one relationship to talk to people to, to talk to about and, and has plenty of relationships in addition to me. And I think that’s, a good thing.
GUY SPIER: So I would say that getting into doing this 25 years ago, I, I remember I was single and people would meet me and they’d, they’d go, oh, wow. So now I’d been upgraded from vice president at Sleazy Investment Bank to you know, CEO I guess you call it managing partner and, and at the time, you know, in early early thirties, late twenties in age, people were impressed with that.
GUY SPIER: And then I kind of continued to say, well, I’m also the male boy, you know, the phone answerer, chief assistant chief Analyst, you know, investor relations, whole bunch of things.
GUY SPIER: And so, so I mean, I was asked this question at that time, I think that I was spending well, more than 50% of my time administering all sorts of things in the business because I was a kind of a 11 man shop.
GUY SPIER: So I think that I have more, more capacity to do other things because I have a team around me, an administrative team around me that helps me with those things and to some degree, the other things that I do reflect things that I’m willing to do, but things that the team are interested in. So the team, then we had a value X event at Berkshire. They loved it, they loved organizing it.
GUY SPIER: And I kind of said to them, look, I’d love if you come to the Berkshire Hathaway meeting. So I think you’ll learn lots of good training and they’d much prefer to be involved in organizing a sort of an event like that than just being at the Berkshire Hathaway meeting.
GUY SPIER: So to some degree, it’s kind of allowing the team to do the things that they’re interested in and they enjoy doing that and they enjoy. But then, but it’s true that it takes up a certain amount of my time. I think that when you have the investing style that I do, you know, I mean, Warren Buffett said from time to time that he would have done better to have just snuck into the cinema and watched movies.
GUY SPIER: And so the action that he took was probably counterproductive. And I think that based on the time that it took for me to administer my little business 25 years ago, I developed an investing style in which inaction is almost invariably the right thing to do.
GUY SPIER: And what I focused on because of that inaction in terms of the business is to keep driving down the costs of investing with me. So that helps. I also, I mean, I think it’s lovely to have people to bounce ideas off. And I kind of, I think that if you have a, a partnership like Nick and Case, it’s really, really lovely.
GUY SPIER: And that seems to have worked really, really well for them. But I got, I had the experience of, I don’t want to talk to this person anymore because for one reason or another, I’m just not interested in what they have to say for me to me right now, but now they’re an employee.
GUY SPIER: You know, I can’t just like, say, you know, get rid of them because I don’t want to talk to them anymore. And so the experience around the Analyst that I had in New York is a lovely, lovely guy and he’s a friend and he was an investor in the fund for the longest time.
GUY SPIER: I just the fraught of when it’s not going right was, and you know, I’ve seen investment partnerships, I mean, the Case and Nick one was a great one but in partnerships like that break up and that’s kind of like worse than a divorce now, maybe it’s not worse than a divorce, but it’s a kind of a divorce.
GUY SPIER: And so, that’s why I’ve chosen the path that I have. I would tell you that the more time I spend talking to smart investors, I think the better I am for it and we work hard at ensuring that I do that. So I have in addition to Mona, at least 10 people that I, that I want to talk to more often than I do if you like.
GUY SPIER: And, you know, for, for the listeners interest, Steve and I met at Berkshire at a dinner, which I mean, that dinner blew me away in terms of the, the, the knowledge around that table. I really, really enjoyed that. And if I could spend more time doing that, you know, I don’t think I need an Analyst. I don’t know if I’ve answered your question. I don’t know.
STEVE CLAPHAM: And Chris Blooms, if you’re listening to this, we’d like to be invited back, both of us.
GUY SPIER: So, thank you, Chris.
STEVE CLAPHAM: Now look, I just, this, this brings us actually quite neatly to your investing rules and one of your investing rules is check, check stock prices weekly or monthly.
STEVE CLAPHAM: And I, I read you’ve got your Bloomberg in a different office or in a low and uncomfortable table and you can go weeks without checking it at all.
STEVE CLAPHAM: I, I find this slightly bizarre. Right, because, well, to me, the stock price is the most important signal and if you don’t check your stock prices, how do you know if something’s happened?
STEVE CLAPHAM: I mean, you know, how do you know that if a stock has fallen 10% you need to know that you need to be able to investigate it or if a stock, even something you don’t own something that you’re interested in is falling 10%. But that might be a better opportunity than something you own.
STEVE CLAPHAM: So, I, I, II, I sat there with the Bloomberg screen and the watch list and it was there one of two or three screens, depending which place I was at, that was on all the time. I wasn’t watching it in a minute to minute takes, but I just needed to know if something had happened. I mean, I had a dealing desk, something bad happened. They would, they would be on me.
GUY SPIER: But, but my experience has been that when something happens, I do find out but how you know, I get emails in my inbox, I get analysis from somebody. I say the news kind of finds me in a certain way. And I think that maybe it, it’s being a slightly more prominent investor. Perhaps I, I put up on my not every single company that my fund invests in, but I’ve put up on linkedin, some of the companies I’m investing in.
GUY SPIER: I just add as if it’s a job description. I say investor in, you know, and, and then people think that I’m some private big investor and I’m just a portfolio investor. So I think that, that the feedback does come to me that way. I also think that it’s really, really important in terms of what I’m invested in.
GUY SPIER: I there are some businesses that change by the second or where, you know, you’re in a biotech firm and they either get approval or they don’t get approval, but there are some businesses which are kind of glacial in terms of the pace of change. And so, so when, if you decide that you’re not going to be checking stock prices, you’re forced into these businesses, which are absolutely glacial.
GUY SPIER: I, a question that just stuck with me that came up in one of these interviews that I printed out and read was, I think it was Charlie Munger asking not Ted Wexler, but the other Lieutenant, you know, which of the, the members of the S and P 500 do you think will be a better business in five years?
GUY SPIER: And I think that, you know, that, that question just struck with me because it’s such a powerful question.
GUY SPIER: And if you just, if you just stick around businesses that you feel that you believe you have some confidence that they will be better businesses in five years, you only restrict yourself to investing in those possibly if the, if you get a good price, you know, and it does mean that anything where things are happening on a monthly, weekly, half annual basis are just outside of the, and there’s a book by his last name is and sent it to me recently.
GUY SPIER: I forgive me for not remembering the full name.
GUY SPIER: But he talks, pardon?
GUY SPIER: Put it not.
GUY SPIER: Yeah. And, and he talks about the evolution and how we’re looking. So, so there’s this idea, I don’t know a lot about evolution and he goes into some analysis of it, of how at first Darwin kind of expected there to be sort of like a gradual drift in species from one thing to another. And as I understand it and I hope I haven’t gotten the idea completely wrong.
GUY SPIER: The, the, the kind of the scientific consensus is that if evolution is punctuated, there are long periods of very little change, then change can happen unbelievably quickly. And so, you know, in a certain way, I think that his point is that why not look for businesses which are in these periods of status where the stasis where there are good businesses, but there’s very, very little change for a very long time.
GUY SPIER: And, you know, and I, it really bugs me because every time I figure one of these things out or a book, like helps me to figure something out. I realize Warren already knows it because I think that probably Coca Cola is an exemplary example of that where it’s kind of in status stasis, it’s been a great business for a very, very long time, continues to be a great business.
GUY SPIER: So I think that here’s an interesting perspective for you, Steve is that if you’re, a biotech investor and Guy Spear is saying, don’t check the stock price, you, you’re gonna have your head handed to if you’re a biotech investor or all sorts of other industries, definitely check the stock price.
GUY SPIER: But, but so you have to restrict yourself to certain kind of like, very glacially changing businesses. I think that probably I’ve had my head handed to me because I, because I thought a business was glacial and it wasn’t, or I thought that it was definitely something that would be better in five years and it wasn’t, I mean, I mean.
STEVE CLAPHAM: The, the, the stock market tells you, gives you a report every day, which is quite useful.
STEVE CLAPHAM: I, I find and, and, yeah, I mean, I understand that you’re, if you’re having a, you know, very slow moving set of businesses, the problem with that is, of course, we’re in a very fast changing world and, you know, it might be a glacial change and then all of a sudden something comes from that field you didn’t know about or whatever and then you, and then you have to pay attention and I, you know, I, I would say, I mean, it makes me think of a comment that Jeff Bezos made in a world where everything is just changing.
GUY SPIER: Look for the things that aren’t changing, you know, people like cheap stuff conveniently delivered. It would be one of the things that seems like Jeff Bezos found that wasn’t changing. It’s also, it, it’s, it’s a decision about how to live your life.
GUY SPIER: So I think that, maybe I quite likely I have given up returns that I could have had if I’d been willing to look at a broader set of things, where things were changing more rapidly. And I’ve chosen that I don’t want to live that life because it’s kind of a stressful life.
GUY SPIER: I also think that there’s this a statement that the see Taleb has made, he made this comment. Well, it’s not a comment. It’s just in a, if you have a volatile market that’s up. I think that historically, the market is up, maybe it’s seven years out of 10, I’m not sure.
GUY SPIER: But if you look at that, the volatility that creates that or the price movement that creates that and you look at shorter and shorter time periods, the shorter the time period, the less likely the probability is that it will be up in that particular time period.
GUY SPIER: And so you look at the market over a broad sweep of 20 year periods and there’s very few periods where it’s not up and you shorten it and shorten it.
GUY SPIER: And if you look at on a, on a day by day or, or five minute time section by five minute time section, it goes to 50 point xx 1% of the time it’s up and 49 point dot dot dot And if you have a asymmetry between what you feel when you see a gain, what you feel when you get a loss, certainly that says, check the stock price less frequently.
GUY SPIER: And then the, the, you know, what I would put to you and I find this very, very hard is that, so you see, you, there’s a piece of news, something has happened, there’s price action and then, you know, I have to decide whether that’s significant or not and I don’t think that I’m capable of being rational very often in those kinds of circumstances because I, I believe that I’ve seen far too many times.
GUY SPIER: People let you know, they don’t believe that the price action is instructing the analysis, but that is actually what, what’s happening. And too many times I’ve seen where I just ignore that the market turns around and suddenly there’s a different world and actually all the analysis that people had x weeks ago is completely turned on its head.
GUY SPIER: And so the, the, the market plays really strange games with you and it’s really dangerous. I think to, I understand that the stock price contains an enormous amount of information in it, but it’s really dangerous for me to look at it regularly.
GUY SPIER: And I think that I’m trying to create an environment. I really do believe this. I mean, I think that there are some people who maybe are more rational and are faster and quicker and better with the analysis. And I don’t want to rely on that for myself. I want to actually rely on being the dumbest investor in the room and create an environment where the dumbest investor can actually win and succeed.
GUY SPIER: I, you know, I’d like to believe that I’m intelligent, but I don’t want to make my living off being intelligent. And I think there’s an extraordinary mistake that some of the best analysts make and some of the smartest friends that I have is that they naturally gravitate towards situations where it’s too hard for less smart people to figure out.
GUY SPIER: But there with their prodigious and analytical capabilities and capacity to think through scenarios, they love that. But actually, you know, I, I, I’d like to be able to solve math problems. I’ve been playing a lot of chess recently. I’d like to be better at chess, but I like to divert or use that ability in that direction.
GUY SPIER: And I’d love, I mean, you know, if you take Warren Buffett seriously, you know, invest in any, in a business that any fool can run, but sooner or later, one will, well, you know, one day I’d like, I might have dementia and I’d like to look smart in my job. So create that environment around me.
STEVE CLAPHAM: No, that’s a great thing to, to take away because, you know, the overly complex stuff people do love and it’s never, it never works. I mean, if it’s that complicated, the stock market will never work it out.
STEVE CLAPHAM: So, you know, I always think exactly the same, you know, if it’s a really complicated story. I’m not going to invest in it because how do you know, you’ve got multiple ways of being wrong? First of all, and second of all, how do you know that when is the stock market going.
GUY SPIER: There’s multiple places ways of being wrong? But you’re still drawn into it and you’re not even aware of the multiple ways it’s being, it might be wrong and that just going back to the Analyst idea.
GUY SPIER: So if you’re an Analyst, I, I find value investors club, a really, really interesting website because I think that many of the smartest analysts are on value investing club.
GUY SPIER: But if you’re going to display your extraordinary talents as an Analyst, you’re not going to be able to do it with a really simple idea that works well. You know, I remember and it’s just a, I’ve, I’ve mentioned this before, but the way I met Nick Sleep is that I’m reading about Tom Russo and I see that he owns shares of this company.
GUY SPIER: We and I, I’m all over that. I know the brand and it didn’t take much market research to discover they had a 50% market share. I went and visited, it was a family owned business at the time, a traded, I went and visited them up somewhere outside in Cambridgeshire.
GUY SPIER: And you know, I had to, the guy knew that I was an investor, but I went in, if you as the only people that would meet with you were quality control people and they were willing to meet with people who consumed the brand on the quality control. And he knew I was an investor and he took me around and he showed me, but the, the write up was like one paragraph.
GUY SPIER: You know, this is a brand, a serial brand that is beloved in the UK. It has 50% market share. There’s no way that anybody can compete with them is run like a family business that has no debt and trades at four times earnings. Next question, that’s it.
GUY SPIER: Nothing else to say. How’s an Analyst gonna demonstrate how knowledgeable he or she is with that. So they, they, they get attracted to really, really complicated things and that’s a danger about having an Analyst. They’ll kind of want to show you how smart they are and sooner or later you might buy what they’re showing you.
GUY SPIER: It’s a very, very, the investing world is an extremely strange world because whatever’s been figured out, you know, coming here, Steve, I was thinking about how little of what you teach is actually used by analysts today because or what you used to teach, you may have updated your teaching in this way.
GUY SPIER: You know, quality of earnings, forensic, looking at the notes to the company’s accounts to try and understand which way they are biased. Are they aggressive on depreciation? Are they not aggressive? Are they?
GUY SPIER: But that’s not what passes for analysis these days. And in a certain way, I think we perhaps went through a period where everybody was doing that and when everybody’s doing that and when there’s a lot of knowledge in that area and everybody’s read security analysis, then the return on that goes down. And so I’m pretty sure that we will come back.
STEVE CLAPHAM: But, well, the good news is that Nobody’s been doing that for the last 10 years, right? Because it hasn’t worked because understanding, you know, that companies are becoming more aggressive, made no difference to the stock price. And it’s only now as we enter the new regime that this will become.
GUY SPIER: Important again and not only did it, did it make no difference to the stock price? It probably actually hurt the stock price.
STEVE CLAPHAM: Well, I mean, it hurt your performance because you’re paying attention to all the stuff that I worry about and you were buying, you weren’t following into the junk that he was floating. You were your performance suffered.
STEVE CLAPHAM: And so it’s only now that, you know, real investors will, will come to the fore. I I reckon and I, you know, my belief is that, and it would be interesting though if you, if you, you might not even have a view. But, you know, it’s my belief we’ve had sort of 40 years of falling rates.
STEVE CLAPHAM: I been doing this presentation to various investment conferences saying it’s not just the 40 years of falling rates, everything else has been a a tailwind, you know, demographics, globalization, cheap imports from China to the inflation, everything’s going now going into reverse.
STEVE CLAPHAM: So you know your comment that, you know, if every in in most 20 year periods, the stock market has gone up, well, we might be in a period in which that be true and that of course, makes things very much different.
STEVE CLAPHAM: And therefore people will actually have to probably trade more because you have to buy things and see their value you recognized and then move on to the next thing and you, you have to look at balance sheets and our company really is high quality as they appear. I don’t know, do you think about any of that stuff or you just, you just, you’re all bottom up, you don’t care about the macro.
GUY SPIER: I mean, I, I had the hardest time with, I mean, not so much macro, but these new ways of looking at what the intrinsic value of the company is. And the, the time when it really, really struck me was when a friend took me through his valuation model for sales force. And, you know, I saw a company that was not very profitable that dumped a huge amount of expenditure into marketing.
GUY SPIER: And I’ve really enjoyed going to a Dream Force event, a Dream Force event that I went to in New York once. It kind of like amazing event with all sorts of enrichment opportunities. Of course, it’s a enormous amounts of marketing.
GUY SPIER: And in order to sort of come to a conclusion that this company was cheap, you had to kind of make assumptions about how on the one hand, the char of the customers so that the natural turn over the customers, once they’ve been acquired was going to be below a certain certain level.
GUY SPIER: So that the customers you acquired through this enormous marketing expenditure were worth had a lifetime value, which was sort of like the the cash flows from that customer would sort of like you could project them out 20 years. And you also had to have the assumption that at some point you switch off the marketing spigot. And so there’s enormous cash flows to develop.
GUY SPIER: And if you look at the history of Amazon, you know, I mean, you know, it’s, I don’t know how many times this has worked, but Jeff Bezos realizes that he can make enormous investments today, take the profitability of the business down to very low zero or even negative and that they are going to develop these extremely high cash flows 10, 15 yards down the line. And that actually happened.
GUY SPIER: And now you got a whole bunch of people looking for that all over the place. And so, you know, I mean, what I wrote about and I wanted to find that myself, I so wanted to find it and I, I just couldn’t find one that made sense for me with the numbers.
GUY SPIER: I think that, but, but to your point, I think that what, what happened to me in, in the last period is that I think that if you, if you kind of had some kind of training in accounting, looking at the inventories, looking at where the inventories are, how much capital is invested in the distribution channels, how much of the distribution channel, I mean, so many of those businesses.
GUY SPIER: So I actually looked at one recently that I’m happy to talk about a company called Master Craft, which makes speed boats for water skiing. And it’s a relatively small business market cap about $500 million.
GUY SPIER: And basically, if you are, if you want to do water skiing, right? I think believe, I believe you have a choice of two brands. You have a Master or Chris Craft or only the really two brands. And even there Master is the better brand for people who really want to do water skiing, right?
GUY SPIER: As a professional sport. And you know, then you’re kind of looking at how much product do they have in infantry, how much of the product is finished product, how much capital is really invested there, how much of the, all of those questions, those are really hard businesses there.
GUY SPIER: You really do want to do that analysis and every now and then you might come across a business where they’ve been incredibly conservative in the way they’ve reported all of that stuff. But that’s hard work.
GUY SPIER: And, I found myself drawn, for example, in the credit rating business, you don’t have that in the stock exchange business. You don’t have that because they’re kind of like, you have an expense center and you have cash come in. Basically, there’s none of that stuff. And so it, well, I think that died in the Wool.
GUY SPIER: Financial analysts and accounting analysts have to accept is that the, the proportion of businesses that have that kind of classic model of manufacturer’s model, the capital invested in the, in. And the distribution system is not the only model around.
GUY SPIER: It is true though that if I, if we look at Berkshire Hathaway, I think it’s true to say that most of their operating businesses do have that model and it’s an interesting question why? And I, I think that part of the question, why is that those moats are easy to analyze and they, they may ultimately be more durable even if they’re less exciting businesses to look at.
GUY SPIER: It’s fun to dive into that with you a little bit because I think you have an enormous amount of expertise there and I think it’s still great stuff to teach and I think that many analysts. Yeah, they probably haven’t done it ever.
STEVE CLAPHAM: Yeah. Well, the, the people don’t like to read the accounts.
STEVE CLAPHAM: That’s a simple fact.
GUY SPIER: Right. Chris. Chris Blooms does or does.
STEVE CLAPHAM: But, I mean, he’s an exceptional.
STEVE CLAPHAM: Yeah. And I mean, you.
GUY SPIER: Know, I think that more people would enjoy reading the accounts if they knew what they were looking for.
STEVE CLAPHAM: Well, we have, if you, if you would enjoy reading their accounts, if you knew what you were looking for, we have a solution for you. So, I don’t even need to put the advert in for this, for this podcast. But, listen, we’re coming to the, to the point where we probably should close and I hope we’re going to do this again because I’ve got a written all these questions down and I seems a shame to bin them, especially.
GUY SPIER: With a wonderful sound engineer.
GUY SPIER: Yeah.
STEVE CLAPHAM: Well, absolutely. So, just, one thing on your rules that the other thing II I really disagreed with was the management.
GUY SPIER: I really appreciate that you disagree with it. That’s possible. That’s a good thing, you know? That’s great.
STEVE CLAPHAM: I mean, look, there’s no right way of doing investing. I mean, that, that’s the beauty, the marvelous thing about it is that everybody does it in their own way. Everybody’s very, very different and you can make money in all sorts of ways. But if you don’t talk to management, how do you know that you can trust them?
GUY SPIER: It was a very dumb thing that I wrote in the book and, I’m eight years on from it and if I was to write a new edition, that is something, in fact, I, I would say that one of the, there’s very little that pains me about having written the book and I’m proud of it and I’m delighted that it’s had an impact.
GUY SPIER: But it pains me that some people will read that and think that that’s what guy Speer thinks today. And, and not only is it not what I think today, I think that I’ve had some enormous losses because I applied that role and I think that I can go back and do it now a little bit and maybe if we do a second edition, I can kind of think about it in more depth.
GUY SPIER: What was it that led me to such a clearly wrong conclusion? I mean, II I, you know, I’m happy, you know, there may be some things you vehemently disagree with. I mean, checking the stock price, I think we’re in different places there. But, and the, the analogy that I’ve used is that I think that part of my fear of talking to management is that I’m not very good at it.
GUY SPIER: I’m hyper aware of my capacity to be duped, say of to be to be taken in by a nice story. But you know, that’s similar to saying that a chainsaw can cause enormous injury. But if you need to cut down a few trees, what are you going to do? Take out a pen knife. Of course, you got to take out the chainsaw and you’re done well, better learn how to use it well and safely.
GUY SPIER: And so talking to management is fraught with opportunities for getting the wrong end of the stick being duped by the story being misled being pointed in a direction where they don’t want you where they want you to look but not, they may be duping themselves, it may be not be nefarious. They may just themselves not want to look in a particular place. And so they kind of reinforce something.
GUY SPIER: But the fact of the matter is the management team is a nexus of enormous amounts of knowledge and insight about the company and you would be absolutely nuts not to talk to them. I also think that it, when I’m, it’s much easier to read a book in French or to learn French when you’re in France. Can you intend to learn French sitting here in London or somewhere else?
GUY SPIER: Yes, but you’ll do, you’ll be far more efficient in France. Maybe all I do is visit. I mean, just to take a probably a trite way of looking at it. But you know, if, if maybe I go to Atlanta and all I do is walk around outside the headquarters of Coca Cola because for one reason or another, I can’t get inside, but that’s going to stimulate me to think more clearly about Coca Cola say, than if I’m not in Atlanta.
GUY SPIER: So I think that just going and kicking the ties in one way or another, the story that I tell about this one bankruptcy that was in my portfolio is that I believe that if I’d have gone and visited the plant and just talk to people outside, it’s far more likely that I would have come to the decision that this was not something that was right for my portfolio.
GUY SPIER: So, so you, you’re jumping through an open door and I think it’s really, you know, we, when we, when, when we grow and learn, we change our opinions and so changing one’s opinion is a good thing. And yeah, I, I don’t know what idiot would write that in a book on investing. And and I fundamentally disagree with that guy.
STEVE CLAPHAM: That’s quite funny. And I know credit to you for, for changing your mind. I mean, I, I think that, you know, what I was going to say is that, I mean, when you first go and invest, first of all, you can learn quite a lot from the management and you, the way they think about their own business can tell you a lot because they, they know more about it than you do.
STEVE CLAPHAM: But when you want to own shares for a long time, having a constant dialogue, I say constant but you know, meeting the management every year and checking that what they said last year has come true and check that they aren’t changing their story because if you’re going to own a stock and, you know, I’ve owned stocks for multiple years.
STEVE CLAPHAM: I mean, I worked for hedge funds but they were very fundamentally driven hedge funds and we didn’t have any reason why we wouldn’t own a stock for five years.
STEVE CLAPHAM: And if you’re going to own a stock for five years, you know, at some point, it’s quite likely that you will want to sell that stock because there’s another opportunity or because the results aren’t coming through, but you might also want to sell the stock. But you think the strategy is drifting or you think that there’s, there’s something that you don’t feel comfortable about.
STEVE CLAPHAM: And I think that checking in with the management, how’s it going? And of course, the longer you own the stock, the closer you’ll come to the become management and they’ll trust you. And you can also have an influence on the way the business is run. You can, you can mention the ideas that you’ve got. And so you’re actually being a positive influence, but the feedback I think is, is, is enormously important.
GUY SPIER: It is.
GUY SPIER: And I think that one thing that I would add to that is that and for the benefit of anybody who’s new to this is make, make, and it’s easiest to talk about this in American companies where I understand the reporting cycle is the best is that, remember, that the press release is considered to be informal statements that were mentioned at a conference talking the the standard of reporting that comes through in a 10-K which is prepared or at a 10-Q which is prepared by lawyers and accountants.
GUY SPIER: And the statements made in the, in the 10-K and the Q and in the, in the, in the, in the in the financial statements have to be far more carefully looked at. And so not only what the management team is saying from year to year, but what are they saying relative to what’s in the statements and what’s being left out?
GUY SPIER: And I, I think that just this idea of collecting understanding things in the right order, look for the written, look for those authoritative documents. First, before you go to the non authoritative documents, often there are, there are significant differences between what the press release says and what the 10-K or Q says because of those different standards and you get a sense of where the management is kind of pushing.
GUY SPIER: And then when you take that into account with that background, now you ask the management questions or you see how they respond to questions on conference calls, you can get a sense of whether they’re dealing with reality or not, whether they’re kind of trying to puff things up or whether they’re trying to take things down. And so you’re absolutely right.
GUY SPIER: And I think that my bias there is that my, the, the, the sort of the module in my brain that evaluates people is really not that good in comparison to others. So I have a deep seated desire to want to shy away from it. But in this particular, and I think that it’s good to focus on the things that you’re good at and to leave other things to people, other people who may be good at those things.
GUY SPIER: In this Case, it’s something where I actually have to make a little bit more effort. I don’t like writing as much as I like doing numbers, but I have to make a little bit more effort if I want to communicate. Well, this is something where I, sometimes you can focus on your strength and sometimes you have to say, well, this is something that even though I’m not that good at it, I need it.
STEVE CLAPHAM: You know, I mean, just because you’re not good at it, it doesn’t mean to say that you can’t do, you know that you should ignore it. I mean, you might not be as good as somebody else you can and it’s a skill you can develop and you meet enough managers and get lied to often enough. Then, you know, you can remember the guy who lied to you.
GUY SPIER: And, and it’s, it’s also a fascinating thing that I think is maybe true of life, but it’s certainly true in financial markets is that if you ignore your weakness, it’s, it, it might come and clobber you when you’re not looking.
GUY SPIER: But if you say this is something that I’m not very good at. It is a weakness for me, then, then in a way it can become a strength because because now you’re allowing for it and, and this pattern seems to emerge time and time again in investing.
STEVE CLAPHAM: And you can also train, I mean, I, I’m, I’m still a bit irritated because COVID came and interrupted the the development of we did, we were developing a new product. So I found this guy who trains policemen in interrogating suspects. And so he’s brilliant at body language and I, I agreed with him that we would do a course for investors.
STEVE CLAPHAM: So in fact, one of my, one of my investor clients had said to me, oh, you know, do you know anybody? Could you do? Could you do this course? And I found this guy just by accident and I thought brilliant this is going to be and I thought it would be really fun for me as well that we do this course about how did you interview a manager and how do you tell, you know, how did you face the questions? How do you tell if he’s lying?
STEVE CLAPHAM: And unfortunately, the guy had his, his personal circumstances changed during COVID and we now can’t do that. Course, I’m looking for the, the, the right person to replace him. And we do, we, we do a little bit of this in my forensic accounting course, but we do a bit about the psychological makeup of people that lie and managers, that lie. And how do you, how do you, work that out?
STEVE CLAPHAM: And you know, what sort of questions do you ask? Because we weren’t very good at asking questions. But we, we’ve got to two of your eight rules. So you’ll need to come back. But the, the, the closing question we always ask everybody is, is there a book or a practice that you would recommend to a young person thinking of becoming an Analyst or an investor?
GUY SPIER: Yeah. So so I’ve had some time to prepare for that and before I get into that, I just, it’s just come up for me and I just want to share it that you’ll get a preview of some of what Steve and I will talk about. Hopefully at a, at a, at a really enjoyable lunch because I haven’t spent nearly enough time talking to Steve and I, I’m looking forward to doing it offline as well.
GUY SPIER: But I met a guy who’s a former intelligence officer and he was just meeting me in my office and I kind of had asked him a similar question.
GUY SPIER: I’d kind of said, look, I think that what you do in your world has huge implications for investors and we haven’t really start to kind of investigate that. And there are no real books that I can read. So he’d read my book and he says, oh, yeah. And I love the fact that you wrote about meeting Warren Buffett and talking about your car was a Ferrari, wasn’t it?
GUY SPIER: And I kind of jumped on.
GUY SPIER: Correct. And he said, and he said, you see, that’s, that’s, that’s where we start trying to figure people out. So I deliberately introduced that Mistruth and I wanted to see how you reacted to it. Did you accept it or did you let it go by?
GUY SPIER: And and that, that, that’s just like sort of, it’s a fascinating idea in meeting with the management team to introduce something that flatters their business and see if they correct it or not, you know, something. And I didn’t realize there’s a kind of a proactive way in which they do it.
GUY SPIER: So it’s kind of like, I, I think that some of the most brilliantly psychological genius people are in that world and I think you’re absolutely right to try and figure out what can apply to investing. And so, you know, happy to share that person’s name with you and maybe we can collaborate on that. But so in terms of books, I, I, you know, William Green collaborated with me on my book.
GUY SPIER: I don’t want to appear on your podcast without having talked about William Green’s book. It’s an absolutely wonderful book which takes you through the minds of some of the greatest investors around today. And William spend enormous amounts of time with them. You’ve interviewed him.
GUY SPIER: So, I, I wanted to mention that, but then I just wanted to give a facetious answer, which I think is actually really helpful. And so that the answer is which book would particularly help somebody who’s getting into this. And the answer is all of them.
GUY SPIER: And my point to the listener is in the same way that we’ve had, we, we talked a little bit about how seeing somebody’s investment moves without seeing the full psychological picture. And without seeing the full balance sheet is not really particularly helpful. Potentially, it can be misleading. I would say that what’s more important is not what I say is a great book.
GUY SPIER: But that you should go to the library and start pulling out 2030 books and start figuring out what is the right book for you in that moment. And when I say all of them, if you have an intent to make progress, your job is to get as many candidate books as possible.
GUY SPIER: Unfortunately, you can’t read them all in parallel and try and figure out through a process of rapid elimination. What is right for you to read right now and develop in a certain way your own reading program and realize that even if a book is going to be really, really good for you, it might not be the first book that you should read.
GUY SPIER: And so I think that the best learners and the best readers through their experience of reading something develop an intuitive sense of what if it’s right for them right now and if it is right for them they’ll continue to read.
GUY SPIER: But it may be that what you want to do is dip and then put it aside and go to something else. And I think that that capacity to kind of like decide what your diet will be and feed yourself that diet and update your knowledge of what that meta knowledge of what the diet is and where to go is super, super important and realize that so what what I recommend is not going to be the most important thing.
GUY SPIER: And I think that a lot of the time people in my shoes in a conversation like this will want to recommend something that is recognized as being a good recommendation, but may not actually end up being the best recommendation for you.
GUY SPIER: As Steve told me, there’s a wonderful, I really enjoyed so short story about William Green. So William Green wrote which wise are happier. He also collaborated with me on my book in which I had a finished manuscript, which was pretty crappy.
GUY SPIER: It would have passed muster with the publisher and then William and I went through a project which took about three or four months of rewriting most of it and making it way, way, way better. But there were many moments when what William had to do after having worked through the existing text and interviewed me was rewrite it and he would go away and rewrite it and he would go gray when he had to do that.
GUY SPIER: And, I’d say I’d be sort of like wandering around upstairs and, you know, this, this baby of mine is now in his hands and extremely, extremely good hands. I’d be like, well, what am I supposed to do?
GUY SPIER: And I tried my hand once at editing his writing, which was a totally disastrous thing to do. So, William would say to me derisively say, well, why do you just work on the bibliography? So there I am upstairs in Zurich working feverishly on the bibliography while William is creating chapters of great beauty out of my original writing.
GUY SPIER: And and so the bibliography is worth looking at and, and, and, you know, maybe another way of answering the question. I hope you’re ok with me being so discuss of such a long answer to such a simple question. I could have just given a book is, something that my daughter asked me.
GUY SPIER: So my daughter’s currently learning Italian in Rome and she’s trying to pick electives for her first year of university and she has to do a language. She’s wondering if she should do a language with that. She already knows what she do a new language that she doesn’t know. And like the options like Sanskrit, Japanese, Russian.
GUY SPIER: And I strongly urged her, I kind of said, look, it all depends on the teacher who else is in the class, all of those good things, but I just think building the broadest base possible. So, you know, I urged her, she, I kind of Sanskrit sounds like fun to me.
GUY SPIER: I mean, I told her the more she progresses in life, the less like she is to do these kind of random big jumps. And so, you know, my urge to the reader is, you know, approach a text not saying is this something that some authorities told me is a good text to read is what can I learn from this text that is gonna help me?
GUY SPIER: Maybe you’re gonna come across something that none of the other people have. And, and that’s kind of fun and interesting and, and I have, I think that that applies to literature as well. Tyler Cohen has written a fascinating thing where he said, you know, literature is an interesting laboratory for economists.
GUY SPIER: So, when, when authors, great authors have written really interesting stories, there may be interesting lessons that one can learn. And so I, I, you know, I would not restrict it to fiction and just develop that sixth sense of whether this thing is right for you right now.
GUY SPIER: It’s a long way of not answering the question, but boy, I’m really good at taking a long time to say nothing while not answering the question but trying to be entertaining. So, thank you for listening to me.
STEVE CLAPHAM: Oh, no, thanks are all mine. Thank you so much for coming on. I’ve really enjoyed our conversation and, we didn’t have enough time in, in Omaha, but we had a little bit more time now.
GUY SPIER: Thank you so much. Yeah, it’s been, it’s been a pleasure, Steve and I looking forward to having more conversations with you online and offline.
STEVE CLAPHAM: Well, I could have chatted for much longer with Guy. I only got one third of the way through my list of topics and we then went on to chat for much longer over lunch. And after for coffee guy spent almost all of those conversations making suggestions as to how I could improve my business. His focus is on helping others. Guy’s attitude to money was colored by his family’s experience in Germany before the Second World War.
STEVE CLAPHAM: Understanding such attitudes can help you become a better investor. I was especially interested in guy’s philosophy of investing in companies that change at a glacial pace. It’s certainly a lower risk route guy has thought extensively, not just about investing but about how to live a better life. As with my conversations with William Green and Vitaly Captain Nelson.
STEVE CLAPHAM: I’ve probably learned as much about life as about investing from our discussions and that was one of the goals of the podcast to learn about the world of investing in the wider world. I really enjoy talking to guy and hopefully he will come back and we can continue our conversation. Thanks as ever for listening. And please share this with all your friends and please leave a five star rating on Spotify or Apple podcasts.