136: Is Warren Buffett the Best Investor of All Time?

Welcome to The Invested Dads Podcast. Simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb, and Austin Wilson.

Austin Wilson:
All right. Hey, welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. I am Austin Wilson, Research Analyst at Hixon Zuercher Capital Management.

Josh Robb:
I am Josh Robb.

Austin Wilson:
Yes you are.

Josh Robb:
Director of Financial Planning at Hixon Zuercher Capital Management.

Austin Wilson:
True.

Josh Robb:
All right. How can people help us grow this podcast?

Austin Wilson:
Well, we would love it if you would subscribe if you’re not subscribed already. That way you get a new episode every single Thursday directly to your device. We would also love it if you would leave us a review on Apple Podcast, Spotify, Google Play.

Josh Robb:
Google Podcasts.

Austin Wilson:
Is that a thing?

Josh Robb:
That is the most used thing.

Austin Wilson:
On an Android device?

Josh Robb:
On my phone.

Austin Wilson:
There you go. We would love it if you would subscribe. Josh, what are we talking about today?

Josh Robb:
Today, we’re talking about this guy, Warren, and his buffet. Warren’s Buffet, it’s smorgasbord of information.

Austin Wilson:
Yeah, all you can eat.

Josh Robb:
Yes. Warren Buffett, he is a investor, owns a company, and we’re going to give you more details about that, but he, in our world, is considered to be one of the best traders in the world, of all time.

Austin Wilson:
Best investors of all time.

Josh Robb:
We’ll talk about that and why people say that, but Austin, I know you are excited about this.

Austin Wilson:
Yeah.

 

[1:24] – Warren Buffett Highlights

Josh Robb:
I want to have you kick it off with some highlights.

Austin Wilson:
Some highlights. There was a great Forbes article, which we’ll link in the show notes, but some highlights that they had about Warren Buffett were that he was known as the Oracle of Omaha, really adding homage to his home in Omaha, Nebraska. Also known as one of the most successful investors of all time. He runs Berkshire Hathaway, very famous company, which owns more than 60 companies.

Austin Wilson:
It’s, what’s called a conglomerate that owns a bunch of different companies and pieces in other companies. That company owns insure Geico, battery maker Duracell, which, fun fact about Duracell. Duracell has recently spent some big money to get into advertising in Formula One.

Josh Robb:
Interesting.

Austin Wilson:
They have started branding parts of the car of the Williams racing team, the British team, it looks like a battery. It’s got the little copper and the black. It looks pretty sweet.

Josh Robb:
That’s right.

Austin Wilson:
Dairy Queen’s another one there. I got to have your ice cream.

Josh Robb:
Yes.

Austin Wilson:
He is the son of a U.S. Congressman. He bought his first stock at age 11.

Josh Robb:
Wow.

Austin Wilson:
Filed taxes first time at age 13.

Josh Robb:
Interesting.

Austin Wilson:
He promised to donate over 99% of his wealth. So far he’s given more than 45 billion away, mostly to the Gates Foundation and his kids foundations. Ironically, the Gates Foundation, their largest holding is-

Josh Robb:
Berkshire.

Austin Wilson:
Berkshire Hathaway stock.

Josh Robb:
He probably donated his stock as well.

Austin Wilson:
Yeah, exactly. In 2010, he and Bill Gates, he’s big buddies with Bill, launched the giving pledge, asking billionaires to commit to donating at least half their wealth to charitable causes. Those are some highlights, but there’s a lot to talk about when you talk about Warren Buffett, he’s very old. He was born in 1930. The Wikipedia is full of great information about Warren if you want more.

Josh Robb:
Great information.

Austin Wilson:
Born in 1930 in Omaha, Nebraska, he’s the second of three children and the only son of Layla and Congressman Howard Buffet, not Buffet, Buffett. That’s a joke. He began his education at Rose Hill Elementary School. In 1942 his father was elected to the first four terms in the United States Congress. After moving with his family to Washington D.C., Warren finished elementary school, attended Alice Steele Junior High School and graduated from what was then Woodrow Wilson High School in 1947.

Austin Wilson:
He graduated high school in 1947.

Josh Robb:
Wow.

Austin Wilson:
Which makes sense, because he was born in 1930.

Josh Robb:
Yeah.

Austin Wilson:
He’s no spring chicken, but he’s still kicking.

Josh Robb:
He’s going.

Austin Wilson:
His senior year picture in the yearbook reads “Warren likes math, a future stock broker.”

Josh Robb:
There you go. Nailed it.

Austin Wilson:
Nailed it. After finishing high school and finding success with his side entrepreneurial and investment ventures, which we’ll talk about soon, Buffett actually wanted to skip college and go directly into business, but his dad said, “No, you’re not going to do that.”

Josh Robb:
Nope.

Austin Wilson:
Buffett displayed an interest in business and investing at a young age. He was inspired by a book he borrowed from the Omaha Public Library at age seven called 1000 ways to make $1,000, which $1,000 back then…

Josh Robb:
That’s a lot of money.

Austin Wilson:
That’s a lot of money.

Josh Robb:
Yeah.

Austin Wilson:
Much of Buffett’s early childhood years were enlivened with entrepreneurial ventures in one of his first business ventures, Buffett sold chewing gum.

Josh Robb:
Oh, there you go.

Austin Wilson:
Coke bottles and weekly magazines door to door. He worked for his grandfather’s grocery store. While still in high school, he made money delivering newspapers, selling golf balls and stamps and detailing cars, among other ways. On his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route.

Josh Robb:
His watch?

Austin Wilson:
Well, yeah, you got to keep time, I guess.

Josh Robb:
Yeah.

Austin Wilson:
That is so funny. In 1945 as a high school sophomore Buffett and a friend spent $25. So 1945, $25 to purchase a used pinball machine. They then took that pinball machine and placed it at the local barbershop. Within months, they owned several machines in three different barber shops across Omaha, and they actually sold their business a year later for $1,200 to a-

Josh Robb:
Placing those in the barbershop, helped them shave some money.

Austin Wilson:
They shaved some money. Oh, Josh.

Josh Robb:
I was just wondering.

Austin Wilson:
That’s classic.

Josh Robb:
Yes.

Austin Wilson:
Buffett’s interest in the stock market and investing it dated all the way back to his days in school where he really spent in the customer’s lounge of a regional stock brokerage near his father’s own brokerage office. He kind of got to hang out there sometimes. On a trip to New York city, age 10, he made a point to visit the New York Stock Exchange. At 11, he bought three shares of City’s Service Preferred. He bought a preferred stock, I’m guessing for himself and three for his sister, Doris Buffett, who also became a philanthropist. At 15, he made more than $175 delivering Washington Post newspapers.

Josh Robb:
Oh, there you go.

Austin Wilson:
In high school, he invested in a business owned by his father and bought a 40-acre farm worked by a tenant farmer.

Josh Robb:
In high school?

Austin Wilson:
Yeah, that’s what it says. He bought the land when he was 14 years old, with $1,200 of his savings. By the time he finished college Buffett had accumulated $9,800 in savings, which is about $112,000 today.

Josh Robb:
Wow.

Austin Wilson:
By the time he had finished college-

Josh Robb:
That guy’s crazy.

Austin Wilson:
That is crazy. In 1947, Buffett entered the Wharton School of the University of Pennsylvania.

Josh Robb:
Pretty well known.

Austin Wilson:
Pretty well renowned. Yeah, absolutely. He would have preferred to focus on his business ventures, but yeah, as we talked about earlier, his dad was like, “Nope, Warren, you got to go to college.”

Josh Robb:
Got to go.

Austin Wilson:
Warren studied there for two years. He joined the Alpha Sigma Phi fraternity. If you’re a member of that fraternity, you’re probably going to claim Warren Buffett forever.

Josh Robb:
Sure.

Austin Wilson:
Probably a good wise choice to do that. He then transferred to the University of Nebraska at age 19, where he graduated with a Bachelor of Science in Business Administration.

Josh Robb:
There you go.

Austin Wilson:
He was rejected by the Harvard Business School.

Josh Robb:
Whoopsies.

Austin Wilson:
Afterwards he enrolled in the Columbia Business School of Columbia University, upon learning that Benjamin Graham taught there.

Josh Robb:
He was also well known.

Austin Wilson:
Also a very well-known famous investor from even before Buffett’s time.

Josh Robb:
Yes.

Austin Wilson:
He is like, if Buffett’s what everyone looks at now, Benjamin Graham was before right before Buffett, what everyone was talking about.

Josh Robb:
Buffett learned from Graham.

Austin Wilson:
Exactly. He earned a Master of Science in Economics from Columbia in 1951. After graduating, he attended the New York Institute of Finance.

Josh Robb:
There you go. That’s real life stats.

Austin Wilson:
It is.

 

[7:24] – Fun Facts about Buffett

Josh Robb:
Some facts, little more fun, little more kind of just random, but he still lives in Omaha, Nebraska.

Austin Wilson:
True.

Josh Robb:
Successful guy still stays in the in the same spot.

Austin Wilson:
He could buy whatever he wants.

Josh Robb:
He could be anywhere he wants, headquarters there. Everyone stays there.

Josh Robb:
He’s actually in the same home that he purchased in 1958. He bought that for $31,500.

Austin Wilson:
I bet it’s not worth that now.

Josh Robb:
It’s probably worth a little more as well. You mentioned he was rejected from Harvard Business School, which they probably kind of regret that looking back. I’m sure he probably could have been an alumni donor that maybe would’ve helped kick some money that way.

Austin Wilson:
It would have helped.

Josh Robb:
I don’t think they’re hurting too bad.

Austin Wilson:
Probably not.

Josh Robb:
Another fact, he gets McDonald’s almost every morning for breakfast pretty much every day. He oscillates between $2 and $3.17 cents. Now this was pre-inflation, so it’s probably gone up since then, but he orders 1 of 3 things depending on how he’s feeling.

Austin Wilson:
Yeah, I think he’s a big fan of the, not the McGriddle, the McMuffin, he’s a McMuffin fan. He also just loves Coca-Cola.

Josh Robb:
Oh, he drinks five or six a day.

Austin Wilson:
He drinks Coke every day.

Josh Robb:
Yep. He was once quoted as saying he looked at life expectancy tables and six-year-olds had the highest life expectancy, so he eats like a six-year-old in order to try to capture their life expectancy. Loves Oreos, loves Coke, like you mentioned. He also still continues to use coupons. He’s been known to use coupons at McDonald’s and stuff when he goes there.

Austin Wilson:
That is… Hey. You don’t get to be-

Josh Robb:
He’s frugal. In fact, he once had a license plate that said thrifty, that was the name of his license plate.

Austin Wilson:
Did he? He is famous for driving Cadillac. I think that he’s been driving Cadillacs since probably the beginning of his driving days. He still drives Cadillacs to this day, but he does not always, he drives used Cadillacs.

Austin Wilson:
I don’t think he goes out and buys the brand new ones.

Josh Robb:
He likes them-

Austin Wilson:
He drives them for years and years and years, and when he needs a new one, he gets a new one.

Josh Robb:
There you go. He can get a new one.

 

[9:12] – The History of Warren Buffett

Austin Wilson:
He drives them for a long time and I’m sure at his age of 90 plus, he probably doesn’t drive as much as he used to. All right. Back to the history of Warren Buffett, exciting stuff. Warren Buffett worked from 1951 to 1954 at Buffett-Falk & Co., which is where he was an investment salesman. From 1954 to 1956 at Graham Newman Corp as a securities analyst, from 1956 to 1969 at Buffett Partnership Limited as a general partner, and from 1970 on as chairman and CEO of Berkshire Hathaway. In 1951, to fill in some of those gaps, Buffett discovered that Graham, Benjamin Graham, who we were just talking about, was on the board of Geico Insurance.

Josh Robb:
Well, there you go.

Austin Wilson:
Gecko is not new.

Josh Robb:
No.

Austin Wilson:
Before they started using the Gecko in marketing, Geico was an insurance company well before.

Josh Robb:
It’s been there. Yes.

Austin Wilson:
For a long, long while. So, funny story, when taking a train to Washington D.C. on a Saturday, he knocked on the door of Geico’s headquarters until a janitor admitted him. He there met Lorimer Davidson, which was Geico’s vice president. The two discussed the insurance business for hours. Davidson would eventually become Buffett’s lifelong friend and a lasting influence and would later recall that he found Buffett to be an extraordinary man after only 15 minutes.

Josh Robb:
Nice.

Austin Wilson:
Buffett wanted to work on Wall Street, but both his father and Ben Graham urged him not to. He offered to work for Graham for free, but Graham refused. Buffett returned to Omaha and worked as a stock broker while taking a Dale Carnegie public speaking course.

Josh Robb:
There you go.

Austin Wilson:
Using what he learned, he felt confident enough to teach an investment principal’s night class.

Josh Robb:
Oh, there you go.

Austin Wilson:
At the University of Nebraska.

Josh Robb:
Imagine being someone who attended that.

Austin Wilson:
Someone did. Yeah.

Josh Robb:
Saying, “Warren Buffett was my professor.”

Austin Wilson:
I know, man. It actually notes also that the average age of his students was more than twice his own. During his time, he also purchased a Sinclair gas station as a side investment. Not that it happened very often in Warren Buffett’s career, but it did occasionally, that business venture was unsuccessful.

Josh Robb:
Did not work out.

Austin Wilson:
In 1952, Buffett married Susan Thompson, Dundee Presbyterian Church.

Josh Robb:
There you go.

Austin Wilson:
The next year, they had their first child, Susan Alice. In 1954, Buffett accepted a job at Benjamin Graham’s partnership. He did get in, eventually.

Josh Robb:
Finally.

Austin Wilson:
His starting salary was $12,000 a year, which is about $121,000.

Josh Robb:
Pretty good starting salary.

Austin Wilson:
Exactly. There he worked closely with Walter Schloss. Graham was a tough boss. He was adamant that stocks provide a wide margin of safety after weighing the tradeoff between their price and their intrinsic value. Key thinking of how Buffett has invested throughout the years. That same year, the Buffett’s had their second child, Howard Graham. In 1956, Benjamin Graham retired and closed his partnership. At this time. Buffett’s personal savings were over $174,000, which is about 1.73 million today. He started Buffett Partnership Limited. He’s getting his feet rolling here.

Josh Robb:
Mhmm.

Austin Wilson:
In 1957, Buffett operated three partnerships. He purchased a five-bedroom stucco house in Omaha, where he still lives for $31,500, like we talked about. In 1958, their third child, Peter Andrew was born. In that year, Buffett operated five partnerships. In 1959, the company grew to six partnerships and Buffett met future partner, Charlie Munger, of whom he still works closely with to this day.

Josh Robb:
Yes.

Austin Wilson:
By 1960, Buffett operated seven partnerships. He asked one of his partners, a doctor, to find 10 other doctors willing to invest $10,000 each in his partnership. Eventually 11 agreed and Buffett pooled their money with a mere $100 of original investment of his own. Famous for using other people’s money to make money. In 1961, Buffett revealed that 35% of the partnership’s assets were invested in the Sanborn Map Company. He explained that Sanborn stock sold for only $45 a share in 1958, but the company’s investment portfolio was worth $65 a share.

This actually meant that Sanborn’s map business was being valued at minus $20 but had eventually purchased 23% of the company’s outstanding shares as an activist investor, which then allowed him to have a board seat for himself on the board of directors. He allied with other dissatisfied shareholders to control 44% of the shares. To avoid a proxy fight, which is really just where you actually have to get voting from the shareholders, the board offered to repurchase shares at fair value paying with a portion of its investment portfolio. 77% of the outstanding shares were turned in and Buffett had obtained a 50% return on investment in just two years. That’s well above normal returns, right? Moving on in the sixties, in 1962, Buffett became a millionaire.

Josh Robb:
Oh, there you go.

Austin Wilson:
That’s an M, he’s a millionaire as of 1962. This was because of his partnerships, which in January, he had an excess of 7 million dollars, of which 1 million belonged to him.

Josh Robb:
There you go. Look at that.

Austin Wilson:
Yeah. He merged these partnerships into one. Buffett invested in and eventually took control of a textile manufacturing firm, which was known as…

Josh Robb:
Berkshire Hathaway.

Austin Wilson:
Berkshire Hathaway. He began buying shares in Berkshire from Seabury Stanton, which was the owner whom he later fired actually.

Josh Robb:
Yeah. You know, that happens.

Austin Wilson:
Buffett’s partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett’s partnerships began purchasing Berkshire aggressively, they paid $14.86 per share while the company had working capital of $19 per share. Again, significant discount to what they were actually worth. This did not include the value of the fixed assets, which were the factory and equipment of the textile manufacturing, which was actually making it worth even more. Buffett took control of Berkshire Hathaway at a board meeting and named a new president, Ken Chase, to run the company. In 1966, Buffett closed the partnership to new money. He later claimed that the textile business had been his worst trade. He then moved the business into the insurance sector. In 1985, the last of the mills that had been the core business of Berkshire.

Josh Robb:
There you go.

Austin Wilson:
That’s a crazy story of how Berkshire kind of came to be.

Josh Robb:
When you know, every time I hear Berkshire Hathaway, I do not think textile or anything besides insurance, because that is their primary source of… I mean, they’re conglomerate, like you said, but their bread and butter is insurance and that’s all I think of, so it’s crazy when you hear that history.

Austin Wilson:
Buffett wrote letters to his shareholders. He still does to this day, but-

Josh Robb:
Which are well read, even by non-shareholders.

Austin Wilson:
Oh yeah. Is his second letter, Buffett announced his first investment into a private business, which was Hochschild, Kohn & Company, which was a privately owned Baltimore department store in 1967. This is key. Berkshire paid out its first and only dividend of 10 cents. That’s actually to this day, they don’t pay a dividend. In 1969, Buffett liquidated the partnership and transferred their assets to his partners, including the shares of Berkshire Hathaway. In 1970 Buffett began writing his now famous annual letters to shareholders. There were periodic ones before that, but in 1970 they became annual. He lived solely on his salary of $50,000 per year in his outside investment income at that point. 1973, Berkshire began to acquire stock in the Washington Post Company. Sound familiar? The newspaper?

Josh Robb:
The Washington Post?

Austin Wilson:
Yeah. Buffett became friends with Katharine Graham, who controlled the company as flagship newspaper and joined its board. In 1974 the SCC opened a formal investigation in Buffett and Berkshire’s acquisition of Wesco Financial due to a possible conflict of interest. However, no charges were officially brought to him. In 1977, Berkshire indirectly purchased the Buffalo Evening News for 32 and a half million dollars. Antitrust started being investigated by its rival the Buffalo Courier Express. Both papers lost money until the Courier Express folded in 1982, by which the Buffalo Evening News probably took over making good money.

Josh Robb:
There you go.

Austin Wilson:
In 1979, Berkshire began to acquire stock in ABC Capital Cities. They announced a three and a half billion-dollar purchase of ABC on March 18th, 1985, surprising the media industry and ABC was four times bigger than Capital Cities at the time. Buffett helped finance the deal in return for a 25% stake in the combined company. 25% is a lot. The newly emerged company known as Capital Cities ABC or Cap Cities ABC was forced to sell some stations due to U.S. Federal Communications Commission ownership rules, FCC.

Two companies also owned several radio stations in some markets. In 1987, Berkshire Hathaway purchased a 12% stake in Salomon Inc. making it the largest shareholder and Buffett director. In 1990, there was a scandal involving the former CEO of Salomon Brothers that surfaced, which made this whole thing seem a little bit more interesting, but there was a rope trader named Paul Moser. He was submitting bids in excess of what was allowed by treasury rules. That causes scandal. Don’t do that. Don’t do things that are in excess of treasury rules.

Josh Robb:
Yeah.

Austin Wilson:
Yeah. Just very interesting kind of the way we got to be where we are today. Generally speaking, Buffett has done very well at avoiding scandals and issues and things like that, but as is the thing, when you’re dealing with people, people are messy. He’s found that out through a couple of his deals.

Josh Robb:
Yes.

Austin Wilson:
In 1988, Buffett began buying the Coca-Cola Company stock, eventually purchasing up to 7% of the company for a billion dollars. It would turn out-

Josh Robb:
Does he get a discount then on all the Coke?

Austin Wilson:
His free Coke. It would turn out to be one of Berkshire’s most lucrative investments and one which he still holds. Flash forward again to 1990 Buffett became a billionaire in 1990.

Josh Robb:
With a B.

Austin Wilson:
Now was when his stock closed at $7,175 a share.

Josh Robb:
Let’s go back. He became a millionaire.

Austin Wilson:
Yes.

Josh Robb:
Millionaire with an M…

Austin Wilson:
1962.

Josh Robb:
1962. Then he became a billionaire with a B in 1990.

Austin Wilson:
1990.

Josh Robb:
Okay.

Austin Wilson:
28 years.

Josh Robb:
28 years to grow, compound a million dollars to a billion.

Austin Wilson:
A thousand time return in 28 years.

Josh Robb:
All right, that’s pretty good.

Austin Wilson:
It’s that sort of long term performance, and he loves the power of compounding.

Josh Robb:
He does.

Austin Wilson:
That’s compounding, he would say that has led his superior returns over time. Like the market did not do that kind of performance over that time, but his investments did, which was crazy. A couple of interesting points. Buffett has some interesting thoughts on gold. Gold we’ve talked about it before. We have a whole episode of it we’ll link in the show notes, but he’s not a fan of investing in gold. He’s been critical of it as an investment. His critique is primarily based on the fact that it really doesn’t do anything.

Josh Robb:
It doesn’t.

Austin Wilson:
No, it does not produce income or dividends or interest or anything. In 1998, he addressed Harvard, which he didn’t get into, but he addressed them anyway.

Austin Wilson:
He said, “It gets dug out of the ground in Africa or someplace. Then we meld it down, dig another hole, bury it again and pay people to stand around, guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

Josh Robb:
He is not a fan.

Austin Wilson:
In 1977, he talked at a discussion about stocks, gold farmland, inflation. He said, “Stocks are probably the best of all the poor alternatives in an area of inflation. At least they are if you buy them in appropriate prices.” We are in an era of inflation now, and he would be saying, this is really the time to be backing up the truck on stocks. Not necessarily selling stocks. A couple other quotes that we’re going to talk about later. About times like this.

Josh Robb:
He a similar stance, at least now on cryptocurrencies.

Austin Wilson:
He’s not a fan of them.

Josh Robb:
Because they, again, they’re not a company that provides value or has some sort of production associated with them.

Austin Wilson:
Yes.

Josh Robb:
Yes.

Josh Robb:
All right. Now it’s time for a quick break.

Austin Wilson:
Oh yeah.

Josh Robb:
Dad joke of the week.

Austin Wilson:
Buffett joke of the week.

Josh Robb:
Well, it’s a dad joke.

Austin Wilson:
Okay.

Josh Robb:
But it does go along because do you know, I was actually named after Warren Buffett.

Austin Wilson:
No.

Josh Robb:
Yeah, my name’s Josh Robb, but my name was given to me after Warren Buffett’s. I was named after Warren Buffett. There’s your dad joke.

Austin Wilson:
Okay. I like it.

Josh Robb:
Warren Buffett.

 

[20:35] – 25 Amazing Buffett Quotes

Austin Wilson:
I like it. All right. That was a long history of Warren Buffett, but he’s had a fascinating career and life, right?

Josh Robb:
Yep.

Austin Wilson:
I think it would be great to leave our listeners with 25-

Josh Robb:
25. That’s a lot.

Austin Wilson:
Amazing Warren Buffett quotes, and this was from a-

Josh Robb:
That’d be great.

Austin Wilson:
Yahoo Finance article, which will also link the show notes. Quote number one, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Josh Robb:
Ooh, that’s interesting.

Austin Wilson:
Buy good companies. And you know, one of Buffett’s or it is his largest holding right now?

Josh Robb:
Apple.

Austin Wilson:
He thinks it’s a wonderful company.

Josh Robb:
He likes that company.

Austin Wilson:
He keeps buying it.

Josh Robb:
Yeah. Well that comes to the idea that there’s, what’s called value investing where you look for something that’s undervalued, and you buy them hoping that’ll grow in value. Although he is considered to be a value investor, his process isn’t you always buy the cheapest thing, you buy a company, you really like, and you have to buy it at a good price.

Austin Wilson:
Absolutely.

Josh Robb:
Yes.

Austin Wilson:
Speaking of price, “Price is what you pay, value is what you get.” That’s quote number two. That’s a very good differentiation between the two because they are not the same.

Austin Wilson:
Number three, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” I think-

Josh Robb:
That is very true.

Austin Wilson:
We can all live by that.

Josh Robb:
It’s a good life lesson.

Austin Wilson:
Number four, “A simple rule dictates my buying. Be fearful when others are greedy and be greedy when others are fearful.” That is something he said in October of 2008.

Josh Robb:
Oh wow. He did very well.

Austin Wilson:
He did very well buying things when they were cheap coming out of that crisis. He’s also notably been buying this year as the market’s been down pretty sharply.

Josh Robb:
He was getting a lot of pushback for how much cash he was holding in recent years when the market was doing really well.

Austin Wilson:
He thought things were overvalued.

Josh Robb:
I think he holds true to that.

Austin Wilson:
That’s something that is just a long term thinking of when “markets are falling apart and people are really not optimistic about it.

Austin Wilson:
That’s probably the time to be backing up the truck. Right. Number five. The important thing is to know what you know and know what you do not know.”

Josh Robb:
Yes.

Austin Wilson:
It’s okay to admit when you don’t know something. He’s okay with that. Number six, “You cannot make a good deal with a bad person.” This goes back to buying good companies, not just cheap companies. He buys businesses. Typically, he buys a lot of whole businesses. He buys businesses with management he can trust. Management is key and trust in the management is key there. Number seven, “Just buy something for less than it’s worth.”

Josh Robb:
That’s like the simple investment philosophy.

Austin Wilson:
That’s really simple. If you think it’s worth $10, try and buy it at eight or less. That’s a very good point from Warren Buffett there. Number eight, “Whether we’re talking about socks or stocks, I like buying quality merchandise. When it’s marked down.”

Josh Robb:
There you go.

Austin Wilson:
It goes back to his couponing.

Josh Robb:
I like things on sale.

Austin Wilson:
I do, nothing wrong with that. Number nine “Uncertainty actually is the friend of the buyer of long-term values.” What does he mean by that?

Josh Robb:
The uncertainty causes disruptions in the market, which gives you the opportunity to buy at a price below what it’s worth.

Austin Wilson:
Absolutely.

Josh Robb:
Yes.

Austin Wilson:
Hopefully, maybe like what we’re seeing now in the markets, as they’re not doing so hot. Number 10. “As in the case with marriage, business acquisitions often deliver surprise after I Do’s.”

Josh Robb:
There you go.

Austin Wilson:
He’s had his fair share of surprises with some of the businesses he’s acquired over the years. Number 11. “Wall Street makes its money on activity. You can make your money on inactivity.”

Josh Robb:
Sometimes the best decision is no decision.

Austin Wilson:
Don’t do anything at all, and don’t look at it. Just don’t do anything. Stick to the plan. Number 12, “Every decade or so dark clouds will fill the economic skies and they will briefly reign gold.”

Josh Robb:
Give you opportunity.

Austin Wilson:
Exactly. When the economic skies are dark, that could be a great opportunity to make some good long-term decisions. Number 13, “Don’t pass up something that’s attractive today because you think you’ll find something better tomorrow. If you see something attractive, buy it.”

Josh Robb:
Yeah. That kind of goes to, I think it was Ben Franklin that said “Don’t put off tomorrow. What you can do today.” The idea is just you there’s always something. You can always have an excuse to prolong or push something off, but if there’s an opportunity, take advantage of it.

Austin Wilson:
Yeah. Number 14, “The sillier the market’s behavior, the greater the opportunity for the business-like investor.” Markets are often irrational, and markets are almost always overpricing things down and or up. Things are either too bearish than what’s reality or things are too bullish for what’s reality. That’s why there’s corrections. He’s saying when the markets are silly like that, that is a great opportunity for a business-like investor. Number 15, “You only learn who has been swimming naked when the tide goes out.” If you have all your eggs in one basket and the market falls apart, that’s when you find out who had all their eggs in one basket.

Josh Robb:
Or a company who is artificially adjusting their returns or using accounting gimmicks to make them look more profitable. Well, when there’s a slowdown, you’ll see who actually is running the business properly.

Austin Wilson:
Number 16. “The best way to think about investments is to be in a room with no one else and to just think if that doesn’t work, nothing else is going to work.” He spends a lot of time thinking.

Josh Robb:
Yes. In fact, I saw that he does not have a computer on his desk at work.

Austin Wilson:
He can’t think with a computer, obviously.

Josh Robb:
According to the article, he had one email in his life he’s ever sent.

Austin Wilson:
Woah. Who was on receiving end of that?

Josh Robb:
It was to Microsoft.

Austin Wilson:
Was it? That’s funny.

Josh Robb:
I’m sure he has assistants send stuff, but he likes to think and likes to have time, so he does not have a computer on his desk so he can read. That’s what he loves doing.

Austin Wilson:
Yeah. Number 17, “What we do is not beyond anyone else’s competence, I feel the same way about managing that I do about investing. It’s just not necessary to do extraordinary things, to get extraordinary results.” That just goes back to sticking to a plan, keeping it simple buying things when they’re cheap.

Josh Robb:
Yes.

Austin Wilson:
That’s kind of his very simple mantra over time. All right, Josh.

Josh Robb:
Yes.

Austin Wilson:
Number 18.

Josh Robb:
Number 18.

Austin Wilson:
Warren Buffett quote, “Rule number one is to never lose money. Rule number two is never forget rule number one.”

Josh Robb:
That’s true.

Austin Wilson:
That’s a pretty good one to keep in mind.

Josh Robb:
That’s right.

Josh Robb:
Number 19 is he’s a very rich person, so should “leave their kids with enough money to do anything but not enough to do nothing.”

Austin Wilson:
See, and that goes back to his point of donating 99% of his wealth. Well, he’s a bajillionaire. Therefore, his kids will have some money coming. They’ll still have to do something.

Josh Robb:
Enough to do anything they want-

Austin Wilson:
But not enough to do-

Josh Robb:
So they don’t have to do anything.

Austin Wilson:
Exactly.

Josh Robb:
There you go.

Austin Wilson:
All right. Number 20, “When seeking directors, CEOs don’t look for pit bulls, it’s the Cocker Spaniel that gets taken home.” That’s an interesting way to look at-

Josh Robb:
You know Cocker Spaniels though, they’re notorious for peeing when they get excited. I don’t know how that plays into anything. I just know that about that dog.

Austin Wilson:
We have a spaniel breed and all I can say is those ears are a breeding ground for ear infections.

Josh Robb:
Oh yeah.

Josh Robb:
Any dog with that.

Austin Wilson:
Floppy ears.

Josh Robb:
They cover.

Austin Wilson:
It’s not good. All right. Number 21. “Our experience with newly minted MBAs has not been that great. It’s difficult to teach a new dog old tricks.”

Josh Robb:
That’s kind of the reverse what you normally say.

Austin Wilson:
That’s kind of funny, right?

Josh Robb:
That’s funny.

Austin Wilson:
Number 22. “It’s always been a mistake to bet against America since 1776.”

Josh Robb:
Yes.

Austin Wilson:
It’s actually a really good point.

Josh Robb:
I like that. I want that quote on a shirt.

Austin Wilson:
He said that in 2011. Number 23, “I have every possession I want. I have a lot of friends who have a lot more possessions, but in some cases I feel the possession possesses them rather than the other way around.”

Josh Robb:
There you go.

Austin Wilson:
Don’t be a materialistic is what he’s saying there. Number 24, “My wealth has come from a combination of living in America, some lucky genes and compound interest.”

Josh Robb:
There you go. That’s all you need, I guess.

Austin Wilson:
That’s pretty good. Number 25, “Your best investment is yourself. There is nothing that compares to it.”

Josh Robb:
There it is.

Austin Wilson:
Josh, that is Warren Buffett in a nutshell, some words of wisdom to live by. What can listeners do?

Josh Robb:
Yes. Make sure if you know somebody who likes Warren Buffett, share this episode with them.

Austin Wilson:
Like if they’re hungry?

Josh Robb:
A little more about it.

Austin Wilson:
Buffet.

Josh Robb:
That’s right. If you have any thoughts, suggestions, questions, or anything along that way, shoot us an email at hello@theinvesteddads.com. By the way-

Austin Wilson:
By the way.

Josh Robb:
Make sure everybody is playing our Invested Dad stock draft.

Austin Wilson:
2nd Half Stock Draft.

Josh Robb:
That’s right. So, check back. We have an episode all on that. Also, on our social media tells you how to get involved. It’s not too late to sign up and get invested.

Austin Wilson:
Absolutely. Until next Thursday, have a great week.

Josh Robb:
All right. Bye.

Austin Wilson:
Bye.

Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.

Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct.

Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.