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- [00:00]
Matt
This is an iHeart podcast. Guaranteed Human Indeed Sponsored jobs get you quality candidates when you need them most. Spend less time searching and more time actually interviewing candidates who check all your boxes. Less stress, less time, more results when you need the right person to cut through the chaos. This is a job for indeed Sponsored
- [00:20]
Joel
jobs and listeners of this show will get a $75 sponsored job credit to help get your job the premium status in it deserves@ Indeed.com podcast. Terms and conditions apply. Need to hire. This is a job for indeed Sponsored
- [00:34]
iHeart Announcer
Jobs Ice Cube's Big three season is heating up. The most competitive basketball league on earth is on CBS this Sunday. The defending champion Miami 305 led by two time MVP Michael Beasley and Lance Stevenson take on the Houston Rig hands looking for their first win. Then coach Steven Jackson and the DMV trilogy look to take down the undefeated Dallas power led by coach Nancy Lieberman and captain Greg Monroe. The game played the way you love. Watch live Sunday on CBS at 4pm Eastern, 1pm Pacific and catch replays Mondays on BET, presented by iHeart.
- [01:05]
Joel
Say you've always wanted to take a spontaneous trip to the Caribbean. Here's the thing. If you get smart with your money, you can do things like that. With Empower, you can start making the most of your money so you can go out and live a little. Isn't that why we work so hard to have some fun with our money? Like treating yourself to something special or
- [01:21]
Matt
spontaneously doing something extra for a loved one? Use empowerment and get good at money so you can be a little bad. Join their 20 million customers today@empower.com not an Empower client, paid or sponsored.
- [01:36]
Joel
Welcome to how to Money. I'm Joel.
- [01:38]
Matt
And I am Matt.
- [01:39]
Joel
And today we're talking about Buffettism's Lessons from the Goat Invest.
- [02:04]
Matt
And by the way, goat as in the greatest of all time. We're not talking about how to make money by investing in livestock.
- [02:11]
Joel
It also makes me think that's tomorrow's podcast.
- [02:13]
Matt
The the Men who Stare at Goats. Did you ever watch that? Who? Who?
- [02:17]
Joel
I don't think I did. But that was Jeff Bridges. George Clooney.
- [02:19]
Matt
It was a George Clooney.
- [02:20]
Joel
I remember it was an all star cast.
- [02:21]
Matt
An odd. One of those odd movies kind of reminded me in my mind it's very similar to oh brother. It's just kind of like this odd kind of quirky film. Was that Coen Brothers?
- [02:31]
Joel
That was Coen Brothers. Yeah. I do love the Coen Brothers.
- [02:33]
Matt
They are a good duo. But we are talking about investing. We're talking about what it is that you should be investing and maybe how long you should be holding your investments, and generally speaking, just how it is that you should approach investing your money. And so if this is something that you're looking to brush up on, if this is something that you're wanting to learn more about, well, we think that virtually everything you need to know about investing your money, you can learn from the man himself, Warren Buffett.
- [02:57]
Joel
Yeah, he's been doing it for a long time, and it's really tough to call someone the goat if they've been in, like, a league for a few years or something like that. But Buffett's 92, right. He's seen it done at basically 100, and I think he's.
- [03:09]
Matt
For a century. Yeah, he's been doing this, and his,
- [03:11]
Joel
like, prowess has been proved out over the decades. So we're going to kind of run through some Buffett quotes and some Buffett history to kind of talk about to extrapolate some ideas for how we can be better investors and just kind of better with our money.
- [03:23]
Matt
Totally. Yeah. Specifically, we've got a lot of Warren Buffett quotes for y' all today. But first, dude, really quick, we need to make sure that we thank a listener. So this is Joshua Jones, and he did us.
- [03:35]
Joel
I call him jj Personally, jj.
- [03:37]
Matt
He did us a massive favor. So sometime last fall, we mentioned how, oh, it'd be so great if we had a spreadsheet of all the different beers that we've had on the show. And obviously, we enjoy craft beer on the show just to demonstrate that we can be smart with our money now, investing it for the future, while simultaneously enjoying of it in the present. Right. And Joshua emailed us, and he said, hey, guys, I'd be more than happy to kind of work on that when I have some free time. And of course, we said, that would be amazing. That would be fantastic. And so he worked on it, though, over Christmas, like, over the holiday break, and he sent it over our way, and it totally got lost in the email. I remember seeing it and realizing that he had did an incredible workforce, but we never gave him a shout out. We never thanked him here on the show. So, A, Joshua, we wanted to publicly thank you, but B, we want to share that link with everyone out there who might be interested in knowing virtually all the different beers that we've had on the show over the past five years.
- [04:38]
Joel
They're not necessarily, like, ranked or anything star ratings by us, but you can see them all in order by episode
- [04:43]
Matt
or you can he did include a style type too.
- [04:45]
Joel
Yeah.
- [04:45]
Matt
He include the. He's like how about I include the ABV as well as the style of beer in addition to the brewery, what episode it was on. It's a sweet little database.
- [04:55]
Joel
But I'm not sure how many of our listeners are trying to like drink every beer we've ever had. But that is now a lot more possible for you to, for you to do by looking at this and seeing what your local bottle shop has. But we'll link to. Yeah, this we will this spreadsheet in the show. Notes on how to howtomoney.com it's a Google sheet. Yeah. So Google sheet. Yeah.
- [05:15]
Matt
Which is, yeah, it's up there for everyone. And honestly. So because it kind of fell off our radar, it means that we're actually kind of behind. So I want to do my best to get on there and start updating it as well. But that being said, I want this to kind of be a collaborative thing. And so if you see room for improvement or maybe you've seen that there is an episode or two that hasn't been updated, feel free to hop in there and update that information for sure.
- [05:37]
Joel
Speaking of which. Yeah. Let's mention the beer we're having on today's show for episode641. This is Blender Blackraz and it's by New Park Brewing. And this one comes to us from listener Matthew. Matthew, thanks. He sent some great beers. I'm looking forward to drinking this Berliner Weiss today on the show, man.
- [05:54]
Matt
Absolutely.
- [05:54]
Joel
Yeah. But let's get to the topic at hand. Buffet Isms. We're talking about lessons from the goat investor. And and I mentioned earlier. Yeah. You don't call someone the greatest in a sport if they've been playing for a couple of years. Right. You might say they've got potential or they could be the next mj. I mean that's always, that's always what happens in with like a new basketball player or something like that.
- [06:13]
Matt
Or Michael, Michael Jackson.
- [06:15]
Joel
Yeah. Uh huh. No, Michael Jordan.
- [06:18]
Matt
There's Jordan, baby.
- [06:19]
Joel
It's like he's got the wingspan and the height. Then I don't know, Kenny Duncan the same way. We'll see. But like those debates are just never ending about who's the greatest like LeBron or MJ or should we throw Steph Curr in there? Kobe obviously. Just like a once in a generation talent. But then you're talking about like well what about what if we're including centers, the dominant guys like Hakeem Olajuwon or whatever. I will stop there because this is not a sports show. But these are the kind of things that, like sports talk shows can talk about incessantly. And I used to listen to sports talk until I realized, wait a second, this is so formulaic and I can't stand to listen to another second. I haven't listened to sports talk radio in forever now. But I mean, you could do the same thing and have just prolonged conversations about who the greatest is in any sphere. Like you talk about who's the greatest musician. Is it mj, Michael Jackson, or is it Beyonce? Or is it Bon Iver? I mean, it just depends on.
- [07:04]
Matt
I thought you were going to say Bon Jovi.
- [07:07]
Joel
Some might say I prefer Bon Iver. Yeah, well, again, so much of that is in the eye of the beholder. But we all, I think, have this desire to see what sets the greatest people in their given field apart from the ones who are just really good. And the greatest investor conversation, I would say it's not nearly as fraught as maybe some of those other ones. It fraught. It certainly feels like Warren Buffett is the goat in our eyes, right? He is the greatest of all time. And we're certainly not alone in that assumption. And it's not just because of the returns he's been able to gain and garner over the years. His longevity, his consistency and his humility, we would say are admirable. And so, yeah, today we're going to talk about the goat, what we can learn from him. And we're going to talk about where he falls short too, because we are Warren Buffett fans. But he's also not perfect.
- [07:52]
Matt
Yeah, we're not going to worship him, but we are devoting an entire episode to what we can learn from a 92 year old investor. And partly because he's the antithesis of a flashy investor. And so investing fads have come and gone, right? But Warren Buffett has remained consistently relevant over the decades. I don't think anyone has ever used the word sexy to describe anything that Warren Buffett does. And so much attention has been given to the sexy investments, like the new and improved ways of investing in recent years. We only need to look back to the explosion of cryptocurrencies to meme stocks just a couple years ago. And the reason for this, the reason those investments got all the attention, is because I think it's human nature to want to try and find shortcuts. Folks want to hit the easy button. And I get it right. A lot of folks had a sense of FOMO as speculative investments just shot through the roof. But Warren Buffett, he did not hit the easy button. And we don't want our listeners out there to think that that is the solution as well. And by the way, if you're wondering what Buffett's thoughts were on crypto, here's our first quote of the day. He said that they were basically rat poison squared.
- [09:02]
Joel
Wait, was that him or Charlie Munger?
- [09:04]
Matt
I think it was him.
- [09:05]
Joel
Okay. I thought it was Munger.
- [09:06]
Matt
Munger called it like some sort of Fox Hunt, something like that. What stands out my mind, neither of them like it. Neither of them like it.
- [09:14]
Joel
And Munger, by the way, if you don't know, is Warren Buffett's like, longtime best friend and fellow co conspirator when it comes to investing. So they're partners, they're besties and partners. And Munger is a little bit older. He's 99.
- [09:25]
Matt
Exactly. But regardless, wanted to mention that because crypto, obviously, that's something that most folks should, should probably stay away from.
- [09:31]
Joel
Yeah. So, yeah, he avoids the speculative crazes, has been able to kind of avoid them consistently over time. And for the most part, that's kind of what you and I suggested too. We, we didn't want HTM listeners going all in on the latest cryptocurrency or even on the most tried and true cryptocurrencies, which are still relative newcomers. And, you know, the reason I say that is because we feel that there's like this behavioral, psychological component to investing too, by the way, and it's incred. Incredibly difficult to sit on the sidelines while you're seeing folks on social media or even just friends in real life who are making bank while all of your money was invested in the good old boring index funds. It can be tough to sit on your hands and not do anything and just stay the course. For this reason, we believe that it can make sense for some folks who desire to invest in speculative assets actually to have some sort of pressure release valve. We've talked about this over the year. What that means is that we want you investing no more than 5% of your overall portfolio in individual stocks that you're excited about or even in different cryptocurrencies. So I think you can have a little bit of exposure if you're curious and if you kind of just want to scratch that itch. Warren Buffett, he would probably shake his head if he, if he knew that we suggested that he would say no.
- [10:42]
Matt
No, like he would be disappointed.
- [10:44]
Joel
He would say that all of your money should be invested in tried and true assets that are producing something. Right. But yeah, we believe it is smart to make some small allowances. And if that means if that allows the vast majority of your investments to be sitting in the tried and true index fund, if that allows you to stay the course kind of with the majority of the money that you're putting into investments.
- [11:04]
Matt
Exactly. Yeah. There's just more to successful investing than just doing the right thing. We've got feelings, we've got emotions that unfortunately can get in the way of the most proven ways of investing our money. But another reason that we're discussing Warren Buffett is because the annual Berkshire Hathaway meeting that just happened just over a week ago. So it felt like a good time to cover some of the wisdom that he'd doled out in his annual letter and to discuss the man, the myth and the legends brilliance here for a little bit and what it is that we can learn from him. And by the way, I say learn and not emulate for a very specific reason here. Right. Just because Buffett is the greatest investor of all time, that doesn't mean that we should necessarily try and take his path specifically. Makes me think back when Tim Ferriss, he stepped up to the mic at one of the conferences and he asked Warren Buffett about how it is that an amateur investor should invest a million dollars. And this is how Buffett responded. He'd say, I'd probably have it all in a very low cost index fund. That's my Warren Buffett voice, by the way. I'd recognize the fact that I'm an amateur investor, forget it and go back to work. And I think that was from back in 2008. Tim Ferriss asked him that question. But we obviously think that the same advice holds true today.
- [12:21]
Joel
Yeah, and that kind of continues to be Buffett's advice for investors who have full time day jobs. He doesn't suggest that people try to replicate what he does, but his suggestion makes sense for people who don't have the time to scour market deals and don't have the capital to really invest in the way that Buffett does. This is the same reason, Matt, that Warren Buffett has said that when he dies, the fund for his widow will be 90% invested in an S&P 500 index fund, which is pretty much the path that we want most of our listeners to take as well. He knows that even though he's been able to beat the overall market, there are few individuals who would be able to do the same thing. And for one, Buffett was incredibly hardworking. Right. As a 13 year old, he was earning more than many of his teachers at the time, which, which says a lot about his industriousness. He was making around $175 a month, which adjusted for inflation, was the equivalent of a $40,000 annual salary today. How many insane, how many 13 year olds do you know that are that ambitious and hardworking that are making that kind of income? Not many. Right. But Buffett, he also had a natural gifting as well. He had the uncanny ability to memorize long lists of statistics from baseball cards. And he and his friend would sit down and they would write the numbers from license plates of passing cards just for fun. There wasn't as much to do back
- [13:39]
Matt
in the pre Nintendo days.
- [13:41]
Joel
Right, Exactly. No Nintendo switches, none of that stuff. So yeah, he was drawn towards numbers in a way that very few individuals can emulate. So I think there are lessons that we can learn. But trying to emulate and do what he's done is like something different altogether. And that's not what we're suggesting here.
- [13:55]
Matt
Yeah. And so much of life circumstances have to do with luck as well. He readily admitted that had he been born in a different country, in a different era that valued different things like physical strength, for instance, that he likely wouldn't have fared nearly as well as he did being born here in the US when he was born, Warren Buffett, he called this winning the ovarian lottery that because he happened to possess a unique set of skills that lent themselves to the creation and the acquisition of businesses over the past century here in the US he's been financially rewarded and he's been rewarded quite handsomely, I might add. He's something like the fifth richest person in the world with a net worth of around $106 billion, give or take
- [14:39]
Joel
a bill, depending on what's going on in the market that day, I guess. Right, exactly. But you're right. I think so much of our success, hard work plays a massive role. But it's like the final question, right? In How I Built this, the guy Raz asks every business person, he says, you know, do you attribute more to luck or to skill? And I think like, you can't have one without the other. You, you need both in tandem to achieve greatness or to even do wonderful things. And Warren acknowledges that. He realizes that the hard work certainly plays a role, but so does timing too. Makes me think of Bill Gates and how he wouldn't probably have started Microsoft if His high school didn't have access to a supercomputer, one of like four high schools in the country or something like that at the time. So it's part of it is luck sometimes. And another Warren Buffett quote that fits in here. He said, America would have done fine without Berkshire, which is his company, Berkshire Hathaway. But the reverse is not true. And so he just admits that he's greatly benefited from the time and place he was born. And if you're listening to this podcast, there's a really good chance that you've won the ovarian lottery too, right? That because of where you live, you have more opportunity than a massive percentage of the people across the globe. But even still, there's just this like, microscopic chance that you've got the skills necessary to make investments like Warren Buffett. And so we probably all need the humility to admit that there's going to be a gap there and none of us are going to be able to achieve kind of what he's been able to achieve the way he's done it. But here's the good news. You don't have to be as smart as him and you don't have to be as hard working. You just need to follow some of his advice, some of the principles that he teaches, which is something that virtually anyone can do. And we're going to spend the rest of the episode discussing just that. We'll get to some more Buffet isms and what we can learn from them right after this.
- [16:29]
Matt
There are plenty of personal finance rules that are really just rules of thumb. So I'm thinking about the 6040 portfolio. Giving away 10% to charity, having 25 times your expenses for retirement. But a non negotiable is having life insurance when there are others, depending on your income, like when you have kids. Man, I've got five mouths counting on me, Joel. Not only do I want to provide for my family now, but also if I happen to die sooner than expected. That's when Ethos helps to provide some financial security.
- [17:00]
Joel
Ethos makes getting life insurance fast and easy 100% online, you can get a quote in seconds, apply in minutes, and get same day coverage. There's no medical exam. You just answer a few simple health questions. You can get up to $3 million in coverage. Some policies are as low as $30 a month.
- [17:16]
Matt
Take 10 minutes to get covered today with life insurance through Ethos. Get your free quote@ethos.com howtomoney that's ethos.com howtomoney Application times may vary rates may vary.
- [17:28]
iHeart Announcer
Ice Cube's big three season is heating up. The most competitive basketball league on earth is on CBS this Sunday. The defending champion Miami 305 led by two time MVP Michael Beasley and Lance Stevenson take on the Houston ring hands looking for their first win. Then coach, coach Stephen Jackson and the DMV trilogy look to take down the undefeated Dallas power led by coach Nancy Lieberman and captain Greg Monroe. The game played the way you love. Watch live Sunday on CBS at 4pm Eastern, 1pm Pacific and catch replays Mondays on BET, presented by iHeart.
- [17:58]
Joel
Say you've always wanted to take a spontaneous trip to the Caribbean. Here's the thing. If you get smart with your money, you can do things like that. With Empower, you can start making the most of your money so you can go out and live a little bit. Isn't that why we work so hard to have some fun with our money? Like treating yourself to something special or
- [18:14]
Matt
spontaneously doing something extra for a loved one? Use Empower and get good at money so you can be a little bad. Join their 20 million customers today@empower.com not an Empower client, paid or sponsored. All right man, we are back from the break talking about how we can invest our money, how we can grow our net worth. Maybe not to like $100 billion status by the time we're 92, but you know, maybe a little having a little more in the BIC in 20 or 30 years, that'd be nice. And so just before the break, we touched on some of the key differences between Warren Buffett and the other 99.99% of all investors out there. But one of the key differences between Buffett and how it is that others invest is his overall approach to investing. He says that he's a business picker, not a stock picker. So what he means by that is he's not looking to see what's happening with the specific stock price of a specific company over the last 30 days or honestly even over the last couple of years. What he is doing is he's assessing whether or not it makes sense to own a piece of that business based on the fundamentals and how successful that business is likely going to be moving forward. Just giving a number of proprietary factors that I'm sure that he keeps stored away in his mind. But bottom line, I just don't see Warren Buffett making a split second decision to buy something to buy a stock based on a Kramer recommendation on cnbc. Buffett is all about value investing. He followed in the footsteps of his mentor, Benjamin Graham. But it is about finding value. It's the ability to know a deal when you see one, essentially, which is
- [19:57]
Joel
a lot of work on the investment front. It's so much easier to spot 70% off on one of our favorite items of clothing. It's more difficult to assess a company and say, wait a second, everybody else doesn't see the value here. There's a gem in the making. This company has what they like to call like a moat. Right. If a company has a moat, it means that it's going to be really hard to compete with that company because they have like, special ability to make or create something. And so he's looking for advantages, he's looking for value when it comes to the investments that he's making, not. Not just the stuff that he's buying. And I think it just goes to show how hard it can be though, to find those great companies to invest in, which. Which is why, Matt, you and I, we, we basically opt to invest in basically all of them.
- [20:37]
Matt
Yeah.
- [20:37]
Joel
Because it's just too hard to pull off the buying great companies approach when this isn't the field you've dedicated your life to. Which just goes back to that Tim Ferriss question and Buffett's answer that we just talked about and in one of the best Warren Buffett quotes ever, by the way, is you never know who's swimming naked until the tide goes out. And so this goes to his thoughts on kind of speculation and kind of how regular amateur investors should be allocating their investment dollars. And it might look like speculators are getting R for a minute. Right. And that us boring investors are missing out on all the fun. We're sitting on the sidelines while folks out there are making just like bukus of dollars. But that is until market conditions change and folks who are making errant bets with no real plan, they didn't have an investment plan. They were just kind of like flying by the seat of their pants. Yosemite Sammy it.
- [21:28]
iHeart Announcer
Right.
- [21:29]
Matt
Like, pew, pew, pew.
- [21:29]
Joel
Like, I'm gonna, I'm gonna try this and give this a shot. Well, it can be kind of tough to watch other people making lots of money. But the thing is, when the tide changes and when the market conditions change course. Well, I feel like we've all just experienced a crash course on the impact of speculation that it can have on the market and on individual investors. I feel like even some of our listeners have been forthright, Matt. They've reached out to us and they told us, hey, I didn't put it all at risk. But I lost more than I would have liked to in crypto. I think Warren's take on speculation is something we all kind of need to probably continually relearn, but especially in an era like today's. Yeah.
- [22:07]
Matt
And honestly, just even aside, in addition to speculation, just investing with single companies, because you just might, you might have a terrible quarter or a terrible year, a terrible couple of years, or there's accounting was cooking the books and all of a sudden you've got a company like Enron that was a legitimate company. It wasn't necessarily speculation. They were producing an actual product.
- [22:27]
Joel
Right.
- [22:27]
Matt
Because that's Warren Buffett's criticism of crypto, is that there's no, there's nothing actually being created because. But even still, it can be difficult to know which of these companies to pick. Like you said, what he recommends is that, yeah, I'm readily admitting that this is all very difficult to do. Instead, basically bet on the American economy. It's a sure bet.
- [22:46]
Joel
Adidas. You never know when those celebrity partnerships are going to blow up and then the stock's going to tank. Those are things you can't predict.
- [22:52]
Matt
Let's talk about another way that you should be approaching your investments. Warren Buffett is all about extending the timeframe of his investments. Here's another quote for you. Someone sitting in the shade today because someone planted a tree a long time ago. What he's saying here is that by investing now, by taking the long term approach, you are planting that tree for quote, unquote, future you. And honestly, I think the reason that so many folks avoid investing, it's not because they don't have maybe a few dollars, you know, that like, it's not that they don't have a few disposable dollars that they could opt to sock away into their 401k or into their Roth IRA. It's that they have a hard time just conceptualizing that proverbial seed turning into a big old shade tree. And so the more that we can just connect our current actions to the future possibilities, the future reality of what we're going to turn into and what we are going to need our portfolios to turn into in order to be able to support us, I think the more likely that, you know, we're going to be able to make the smarter but often more difficult moves of prioritizing that future shade over the current discomforts of taking the steps necessary to make sure that that shade happens.
- [24:02]
Joel
Yeah, I think you're right, Matt. More people could be investing at Least something it doesn't have to be a ton. We'll get to that, too. But it does take starting and it does take regularity to be a great investor. The Warren Buffett approach takes that longer timeline. It takes the understanding that trees don't grow overnight, that it's going to take many decades until the little bitty sapl planet turns into something meaningful, a place that will actually provide any semblance of shade. But it takes that in addition to patience and something else that. Something that Warren Buffett's mentor, Benjamin Graham Matt said that in the short run, the stock market is a voting machine, but in the long run, it is a weighing machine. And Warren's even simpler way of describing that phenomenon is when he says that the stock market is a device to transfer money from the impatient to the patient. And he just, he lives out this reality. We talked just a few weeks ago on the Friday flight. We talked about how the average investor holds a stock position for like 10 months these days. It used to be five years back in the 1970s, but Buffett's holding period is on average 17 years, which is a major gap.
- [25:10]
Matt
Years, yeah. Not months.
- [25:13]
Joel
So he's holding whatever he buys, whatever his investment is, he's holding it 20 times longer than the average individual. And there's just a. That's a big gap. And if we're going to learn one thing from the goat investor, it's to worry less about immediate results and to have a longer timeline when it comes to evaluating our success.
- [25:31]
Matt
Yeah. Yeah. And you know, the great thing about going that route and being more patient when it comes to the results means that you can just worry less about the short term market moves. You can worry less about that volatility. You can tune out the advice giving stock pickers. You can even avoid looking at your 401k statement. Most of the time. You can just remain blissfully ignorant, knowing that doing the right thing by buying and holding for the long term, that that's going to pan out decades down the road. You don't need to sweat the small stuff. Joel makes me think of, like our kids. I think oftentimes we can be so concerned about making sure that they're eating right. Like, did they eat their, did they take their vitamin. Oh, they got a cut. Making sure that they're healing up fine. We're concerned about our kids development, essentially. Right. And it can be so difficult to see the progress that they are making that they actually are growing up. Until you see maybe a friend that you know that you haven't seen in a long time. They're like, oh my gosh. And they're not doing it just to be, you know, do the oh my gosh, your kid's so big thing. Like, they truly are amazed at how quickly our kids are just sprouting up
- [26:33]
Joel
or even when we're fed those like, Google memories and the like three years ago. And it's impossible not to think that happened quick.
- [26:42]
Matt
Yeah.
- [26:42]
Joel
Yeah, you're right. And so I think on a day to day basis, it's hard to see the progress, but when we step out, we take a longer timeline. Amazing to see the kind of progress that happens just from a human development standpoint with our kids, but, but also with like wealth building. When you look just month to month or week to week, and if we're checking our statements all the time, it can feel a little disappointing because it doesn't feel like the progress is happening quickly.
- [27:03]
Matt
I think it can be maddening.
- [27:04]
Joel
Yeah.
- [27:04]
Matt
Like, what is it? A watch pot never boils.
- [27:06]
Joel
Yeah.
- [27:07]
Matt
Like you're, you're just like waiting for it to just like where the compound returns. I've heard about this, this wonder, eighth wonder of the world or whatever, but there's just some frustration because it's not happening at the. As quickly as you might hope it would.
- [27:19]
Joel
Yeah. Okay, so the lady who wrote his biography, her name was Alice Schroeder, and she had this quote in there. It said, life is like a snowball. All you need is wet snow and a really long hill. And that just defines, I think, Buffett's approach to investing and approach to kind of the reality of compounding. And for some reason made me think of Forrest Gump. Life's like a box of chocolates. Life is like a snowball.
- [27:42]
Matt
Life is like a snowball.
- [27:43]
Joel
But compounding is just.
- [27:45]
Matt
I wonder if Forrest Gump would be allowed to be released today.
- [27:48]
Joel
Well, that's a good question. Makes me want to go back and watch it.
- [27:51]
Matt
Yeah.
- [27:52]
Joel
It's been so long.
- [27:52]
Matt
Yeah, it's same.
- [27:53]
Joel
Well, I mean, it just, it helps you realize just that compounding really comes about by investing regularly, but then also just by your ability to be incredibly patient. And it reminds me of a story I saw about a mother, Matt. Like, but she wasn't just a mother. She was a grandmother and then a great grandmother as well. As it turns out, not only did she have 11 kids of her own, but those kids had 56 grandkids.
- [28:17]
Matt
Which, first of all, let's just start with 11 kids. Like, that's just, that's Kind of mind numbing.
- [28:21]
Joel
That's high pollutant procreation right there, right? Yeah, that's a lot of kids to have. But. And then like then 56 grandkids, but then those kids had 100 great grandkids, which equals this family of 167, not even counting spouses. And that's crazy. I think it's physically impossible for an individual mother to give birth to that many children on her own, but with a little time and patience, you're talking about a lot of people. And so it's just kind of a good goofy example. But similarly, like when a snowball starts rolling down a hill, that snow attracts more snow. You've got this really large snowball over time. And the same thing happens with our money. It feels small, it feels incremental. Especially in those first year, the first decade, we talk to any investor and it's that first hundred thousand or whatever, that's the toughest to get to. And then it's amazing, like a few years later, that money working on your
- [29:08]
Matt
behalf start gaining speed.
- [29:10]
Joel
Yeah, the speed happens. The rapidity of your asset accumulation starts to happen so much more quickly. Yeah.
- [29:17]
Matt
And it's sort of like going back to the mother. It's not the number of kids that. Well, in her case, she did have a lot of kids, I guess like 11 kids, but she definitely didn't have 100, whatever, 67. It's not that she had all those kids. It's that her kids and then those kids that they all had kids. Right. And so it's not necessarily the.
- [29:32]
Joel
It's a very fertile family is what we're talking about.
- [29:35]
Matt
So we're talking about gains upon your gains. Right. It's not the fact that you are going to have the ability to earn millions of dollars, but the money that you do earn and the money that you do invest, well, it's gonna work for you. You're gonna see a return on that money. And then that money is gonna combine with the money that you did set aside, and it's all gonna build upon itself. And compounding is just one of those things that I think we have a hard time grasping. We understand incremental growth, but when you start layering and adding things upon other things, that's when it kind of short circuits our brains to a certain extent and things go off the rails.
- [30:08]
Joel
Makes me think about like my first, my first real job. I'm pretty sure my salary was like $24,000 a year. It was not great, but I was putting in 6% of my paycheck and my employer matched 3%. I'm just curious to know those dollars. I guess I could go back and do the math, but those dollars, they felt very limited at the time. Yeah, it's like I'm not doing a whole lot. But what it was able to multiply into over the years, just because by dint of when I started by where the market was basically 18 years ago, those dollars have probably tripled or quadrupled by this point in time, which is pretty incredible to think about even starting small. I think that gives me hope. That should give all investors hope that even just when you begin with very little, it can amount to a whole lot.
- [30:59]
Matt
Totally. For early investors, I think it can be really difficult. But even where we are, we're more in the middle of our careers. That's. I think this is the period when you do start to see some of that speed increase. Like you start to see more gains. And you do get to witness your money starting to work harder than you would have ever imagined it working for you. Like, honestly, even just money that I've got set aside in a savings account, a interest rates are going up. So it's nice to see a higher return there. But just as you set aside a fat emergency fund to handle in our case, we like to keep six to nine months worth of living expenses in there every month. It's really cool to see the, you know, what, what it is that we're earning on that money, and that's just on savings. We're not even talking about investing here. So let's keep talking about some of these different life lessons that you can learn from Warren Buffett. Something else that's cool about Buffett is that, you know, we kind of talked about his partner in crime, Charlie Munger. Warren, I think he would have been great without Charlie. He was fairly successful before they met.
- [31:56]
Joel
He was off to a solid start
- [31:57]
Matt
before they started working together like he was. He was an attorney. But I don't think either one of them would be what they are today if it wasn't for that partnership. And so I think there's a little lesson for us to tease out here, because surrounding yourself with brilliant folks and honestly, individuals who challenge the way that you think about things, that that can be so incredibly valuable. Warren Buffett, he said at one point that we've had nothing but fun together. And I think the relationship, it's admirable. And I think it's something that we can all learn something from. It just makes me think of the power of Community as well, Joel. And when you've got individuals who you're. You're doing life with, you've got shared goals. Well, the way that you achieve those goals might differ from person to person, but when you have similar goals laid out off into the future, I think that can be incredibly helpful when it comes to the ability to keep you accountable. And one of the cool things, too, about Munger, about Charlie Munger. Warren and Charlie have both said that they're basically each other's alter egos. And so I think what's cool about that is they found in each other complimentary skill sets. And what's cool is that I feel like you and I. I don't know,
- [33:04]
Joel
I was just thinking that I don't
- [33:05]
Matt
know my Munger, since I'm slightly older.
- [33:07]
Joel
You are like the older, older, grouchier
- [33:11]
Matt
guy with fewer words to share. But I think they recognize that and they were able to lean into that. And in the same way I think you and I man our relationship, I guarantee that I would not be where I am with my financial goals if I, you know, if Kate and I hadn't met you and Emily and. Yeah, you know, I'm thinking maybe you say the same thing.
- [33:28]
Joel
Completely, completely gracious.
- [33:30]
Matt
Even just leaning into complimentary skill sets, whether you're looking for, like, a significant other or in our case, like a business partner, I think that can be incredibly.
- [33:37]
Joel
Well, we started off as just friends and not business partners. And that friendship has led to a lot of great things, including just one of the byproducts, really, I think has been better financial habits. Right. As we've kind of, like, challenged each other in different ways. But then growing the business together, like, the business, like what we're. What we're doing here, wouldn't be the same if one of us was trying to go it alone, that's for sure. And so initially it was more like
- [33:57]
Matt
small potato personal wins, and now we've kind of seen that, like, grow into, like, something bigger.
- [34:01]
Joel
Yeah, for sure.
- [34:01]
Matt
Totally fine.
- [34:02]
Joel
I mean, I don't know that we'll ever be as influential as Warren and
- [34:06]
Matt
Charlie, but pretty much guarantee that we won't.
- [34:09]
Joel
But it's cool. Like, we get to enjoy what we do and we get to help people every single week, which is something we're passionate about, and we get to kind of, like, enjoy it and spur each other on at the same time. Something. Something else that I love about Warren Buffett, by the way, is that he's always willing to admit his mistakes, and he uses the Word mistake a lot in his letters, actually, especially in this year. He used it it quite a bit, which just really shows to me that he's a humble guy. And he says that studying the company's mistakes with his partner, Munger is more important than analyzing their successes. And I think there's a lot of truth in that. I think there's a lot of benefit to analyzing your mistakes. Not many of us want to do that or are prone to do that, though. And while knowing what is working is a helpful thing, well, I would say figuring out why your endeavor fell short can be even more helpful when it comes to moving forward and, you know, achieving more success in the future.
- [35:01]
Matt
That's right. Yeah. So we're kind of talking about some of these life lessons. I guess we're kind of veering off course from. From investing territory. But these are important to point out, I think.
- [35:10]
Joel
I think it just shows that he's more than just a great investor. Like, he has other things to teach us about running a business, about how to live a successful life. And we don't agree with like or we're not trying to, like you said, emulate everything that he's done, but we also think he's got. He's.
- [35:25]
Matt
He's got more to give than just diversified index.
- [35:29]
Joel
Yeah. And he's more than just a great numbers nerd.
- [35:31]
Matt
But along the line, again, of life lessons, I think one of the hardest things in personal finance is to not move the goalposts. Specifically, I'm talking about intentional spending here. It can be so easy to let lifestyle creep increase, causing us to change our habits and to start spending more than we should, and then we just end up falling into consumeristic behaviors that ultimately undermine our financial progress, and they don't really lead to any additional happiness. And it sure seems like Warren has been able to avoid that lifestyle creep. He's been able to avoid moving those goalposts, at least from where we're sitting. I know he seems like he still eats McDonald's pretty much, like, every. Every Single day.
- [36:12]
Joel
Yeah.
- [36:12]
Matt
Don't think he's the font of healthy living in that regard.
- [36:17]
Joel
He would. He would make a really bad TikTok nutrition influencer.
- [36:21]
Matt
He lives in the same house in Omaha that he bought back in 1958. Could he afford something bigger? Something. Something a little more updated? Something nicer? Absolutely. That's an understatement to say that he could afford a different house. And granted, I'm sure he's got plenty of houses, probably all around the world.
- [36:38]
Joel
I know he's got a beach house, shopping, but I don't know that he has a ton of houses either. I'm not sure that's a good question.
- [36:43]
Matt
But considering he's the fifth wealthiest person in the entire world, he. He could own entire countries, essentially, it's okay if he has a few, if he's got a beach house or if he's got a mountain house. It seems that he still takes joy in the simple pleasures and that he's able to spend money in the ways that bring him the most happiness.
- [37:02]
iHeart Announcer
Yeah.
- [37:03]
Joel
And not just spending to try to fill a hole, to try to make himself happier, to try to get a dopamine rush, which is what a lot of, obviously a lot of people are chasing right through their consumption is that dopamine hit, that's going to give them a feeling for a short period of time. But then you got to go back to the well. And that creates some of that lifestyle creep. It makes it really hard. And I'm not going to lie, like, even as someone who's intentional about this or attempts to be intentional about this, it's not easy, right, to spend intentionally, to not move the goalposts. I think it is human nature to get more and then want more. And so. But I think calling it out that one of the world's richest men has been able to keep this in chain check just says, like, hey, you don't have to inflate your lifestyle just because you got a raise. You don't have to change your desires just because you have more money in the bank. And I think Warren Buffett is a great example of that. And one of the things he said, Matt, he talks about contentedness and he says the big question about how people behave is whether they've got an inner scorecard or an outer scorecard. It helps if you can be satisfied with an inner scorecard. And basically, if anyone could flaunt their wealth but chooses not to because his inner scorecard is maxed out, it's Warren. Right? And he's not trying to impress anyone. He's not wearing fancy suits. He doesn't care about the fanciest new trends in anything. And I don't know, I think that says a lot about him, and I think that's something we can all learn from. That's right.
- [38:27]
Matt
Yeah. I don't know him personally, but it certainly seems like he's a very content gentleman. But we have a few additional lessons that we're going to get to here right after the break, including the ability to focus on the things that matter. We'll get to that, plus a couple others right after this.
- [38:46]
iHeart Announcer
Ice Cube's Big Three season is heating up. The most competitive basketball league on earth is on CBS this Sunday. The defending champion Miami 305 led by two time MVP Michael Beasley and Lance Stevenson take on the Houston Rig hands looking for their first win. Then coach Steven Jackson and the DMV trilogy look to take down the undefeated Dallas power led by coach Nancy Lieberman and captain Greg Monroe. The game played the way you love. Watch live Sunday on CBS at 4pm Eastern, 1pm Pacific and catch replays Mondays on BET, presented by iHeart.
- [39:16]
Joel
Say you've always wanted to take a spontaneous trip to the Caribbean. Here's the thing. If you get smart with your money, you can do things like that. With Empower, you can start making the most of your money so you can go out and live a little. Isn't that why we work so hard to have some fun with our money? Like treating yourself to something special or
- [39:33]
Matt
spontaneously doing something extra for a loved one? Use empowerment and get good at money so you can be a little bad. Join their 20 million customers today@empower.com not an Empower client, paid or sponsored okay, Joel, I am excited about this one. Here on the show we are all about comparing prices to save money on so many things in life. So why wouldn't we compare prices for our next ride share? Taking a few seconds to check Lyft can save you real money on your next ride. And I did this last time. I caught a ride home from the airport after some travel and guess who came out on top? It was Lyft. Don't just price check with your flights and phone plans and groceries. Comparing rideshare prices will help you to save money every time you ride. Save money. Check Lyft.
- [40:23]
Joel
All right, we're back. We're still talking Buffett here and kind of talking about some of the lessons that we can learn. Buffett Bain from the investment goat. Like he really there's just so much I admire about Warren Buffett, but in just a second we're going to talk about the limitations of what he can teach us. But let's hit a few more things, Matt, that we can all learn from one of the greats as we're kind of assessing his life, assessing his investment style. And so I feel like we've already done a lot on the investment front. But let's hit a few more things that we can all learn from one of the greats. And one of those things that Stands out to me is that Warren, he realizes that taxes, they just mean that you've been successful. And you don't often hear people get excited to pay their taxes. I still haven't filed mine yet this year and I'm not necessarily looking forward to it. But Warren, he said at this year's annual meeting that at Berkshire, which again is a company he owns, we hope and expect to pay much more in taxes during the next decade. Hope and expect. I was like, dude, the fact that you hope to pay more taxes, and again, you never hear anybody talk like that. But I think that's a really good way of looking at things and I think it's a really good way of kind of thinking about even your tax bill that's due coming up soon next month. And we live in an incredible country basically full of opportunity. And with great privilege comes great responsibility. What is that? Spider Man? Something like that. Peter Parker. Peter Parker, yeah. And so it's more than okay, we would say, to use tax efficient vehicles and to be smart on the tax planning front. We talk about that kind of stuff on the show. We don't want you to pay taxes unnecessarily or to avoid investing in the best accounts because you are choosing to pay more in taxes for some reason than you owe. But it's also good to see that a bigger tax bill, it's not the worst thing in the world. And it typically, it means that you're thriving inside of a really fortunate system that does set up a lot of people for success. Right. And so I think Warren's ability to see that, to recognize that is a good thing. And it's something it's going to make me feel a little differently about April 18th this year, maybe.
- [42:22]
Matt
By the way, I think it's with great power comes great responsibility.
- [42:25]
Joel
Okay, my bad.
- [42:26]
Matt
It could be privilege. I forget though.
- [42:28]
Joel
No, I think, I think you're right. No, I think it is great power.
- [42:30]
Matt
But then let's talk about what Warren does with the billions of dollars that he's amassed. Well, we know he's not inflating his lifestyle in a significant way. Instead, he is giving a lot of that money away. He's actually given away more than $48 billion at this point. But he's not planning to stop there. He signed the Giving Pledge and that means that he's committed to giving away 99% of his wealth when he dies. He signed that back in 2006. And when he signed it, he said that were we to use more than 1% on ourselves neither our happiness nor our well being would be advanced. This 99% can have a huge impact on the health and welfare of others. And I think that's true. Well, I mean, when you, when you are that wealthy, like, what difference will those additional dollars make in their lives? And he even acknowledged how his gift is a less difficult commitment than most families when they are giving their money away. And so we wanted to touch on this because I feel like in the past we've sort of crapped on Warren before just about the incredible amounts of wealth that he has accumulated, but he has committed to giving it away. He signed the giving pledge. And we are all about giving. And, you know, we think it creates just a more healthy relationship with your money. And we actually have a up on the website, it details how it is that you can go about giving away your money and how it's an awesome thing. We'll make sure to link to that in the show notes for this episode.
- [43:58]
Joel
Yeah, and we talk in that article about how to do it effectively because there are a lot of scams out there and there are just a lot of charities who aren't using your money in the way that you think they are. And so we want you to do your due diligence before you start giving your money away, but we also want you to give your money away. We think that it creates, like, a healthy detachment from the money that comes into your life. It gives you a proper perspective on money because money can't cure all your ills. And there's lots of good that can be done that you can, you can actually see with your own eyeballs if you're giving your money away in the here and now. So I love that, that not only has Warren pledged to give away the vast majority of his wealth in the future, he's also doing it now. He's putting his money where his mouth is and he's giving away a lot of money every single year, which is cool. So I think that's something that we can all. We aspire to emulate. And on that note, Matt, there's a good quote to, to end this podcast episode on. And Warren says, basically, when you get to my age, you'll really measure your success in life by how many of the people you want to have love you actually do love you. I know people who have a lot of money and they get testimonial dinners and they get hospital wings named after them, but the truth is that nobody in the world loves them. If you get to my age in life and nobody Thinks well of you. I don't care how big your bank account is, your life is a disaster. And man, the guy, again, again, not just a great investor, although he is. He's the greatest. He's the goat. He has life perspective at this point that he's accumulated that he's just sharing with us regularly. I feel like through his shareholder letter, through interviews that he does. And this is great perspective to have. Obviously what he's been able to achieve in his lifetime is admirable in a lot of ways, but that dedication and singular focus that it takes to amass that kind of wealth, I will say it's just not something that I'm terribly interested in, Matt. I don't think it's something that you're interested in. We're not looking to accumulate. Think in our, the bio on our website, it says like, we're not looking to accumulate billions of dollars of wealth. That is not a goal that we have. And you know, more power to you, I guess, if, if that's what you're after. But. And even if it means having an outsized impact on a grander scale. Sorry, like, that's just not the thing that I'm going for. But I still think that, that this is advice that's important to hear when we're younger because the trade offs of a not so great family life or not being active in our community, and they might not be worth the additional dollars in the bank account. Like if, let's say you take a job that pays $50,000 more a year, but it causes you to be away from your family 20 days out of the month, maybe it's worth it and maybe it's worth it for a short period of time. But these are the kind of trade offs and things we have to think about as people who want to be good with money, but also don't want money to be the end all. Be all in our lives.
- [46:36]
Matt
That's right. Yeah. And again, this is something that Warren has shared in his later years. And I think, I think we would all be served to listen to that advice in the here now. Because, yeah, Warren, he didn't have the greatest family life, his relationship with his first wife, it was kind of weird that like they had an open marriage. And that's not something I'm interested in replicating in my own life. But Warren Buffett, he's.
- [46:59]
Joel
Didn't you mention at one point, like when you were reading the Autobot, like, didn't he step over one of his kids who was throwing a tantrum or something to go up to his office because.
- [47:06]
Matt
Yeah, that was what it was like as a father for him. I mean, he was singularly focused on business and on reading up on the balance sheets of different businesses that he was basically looking to scoop up at a deal.
- [47:19]
Joel
So if we're talking about one thing, maybe that one of the things that we don't admire about Warren or one of the things that we don't desire is kind of the lack of balance that he had, at least for a bunch of years. I think he. I saw something recently that he plays a lot of bridge now, apparently, like eight hours worth of bridge.
- [47:33]
Matt
He's always played a lot of bridge.
- [47:34]
Joel
Oh, really?
- [47:34]
Matt
Okay. So even when he was. Even when he was younger, it was something he. He was infatuated with. Well, I guess it wasn't an infatuation. It's a dedication to a game that he loves, which is great.
- [47:44]
Joel
I'm all about cheap hobbies and stuff like that, but I think that's cool. But I guess even while he had a hobby, something that he enjoyed doing besides just work, that work for a whole lot of years definitely took away from some of the relationships that I would imagine, if you would ask him in a personal context, he would say he wishes he had dedicated more time and energy into.
- [48:05]
Matt
I definitely think so.
- [48:07]
Joel
Yeah.
- [48:07]
Matt
And, yeah, we don't want a carbon cop and replicate his life. And essentially, there's a zero chance that we could even come close to his investing prowess. But there is still a bunch that we can learn. At the end of the day, we want you to be a long term, widely diversified investor, not somebody who's jumping in and out of stocks, who's watching all the latest headlines. That's something that Warren recommended. And Joel, that is how you and I, how we invest our dollars as well. Okay. One last thing I appreciate about Warren is that it seems like he's just always been. Been an incredible teacher. Right. He shares his wisdom, and I think that's something that you and I seek to do here on the show. We're seeking to help those who follow how to Money, who listen to our show, so. And hopefully kudos to a guy that we have mad respect for completely. He's out there doing the. Doing the good work. We love the dude. That's what we're doing.
- [48:54]
Joel
I'd love to meet him someday. I mean, Warren, you're welcome on the podcast anytime if you want to come on. So glad we could kind of talk about our buddy, our pal, Warren Buffett today on the show.
- [49:03]
Matt
That's right. Man.
- [49:04]
iHeart Announcer
Man.
- [49:04]
Matt
Let's mention the beer that you and I enjoy during this episode. This was a blender and I guess black razz. That's the. I'm guessing they make multiple different blenders, but this is the Berliner Weiss that is brewed with blackberries and raspberries. What were your thoughts on this beer, buddy?
- [49:20]
Joel
Oh, man, this was delightful. It was light where we are. It feels like spring right now. Already.
- [49:25]
Matt
This particular day that you're recording, it is quite warm.
- [49:28]
Joel
Yes. And which. So this is a perfect beer for that. It's like, like delightful sour. And I love berry sours. I will say my kids would be disappointed that any berries went into a beer and not directly into their mouth. Like, my kids eat so much money's worth of berries this time of year.
- [49:42]
Matt
Season, man.
- [49:43]
Joel
Like, oh my gosh.
- [49:44]
Matt
Yeah. Granola with yogurt on it this morning. Topped with all the berries.
- [49:47]
Joel
Yes, they were like all the. All of them. Like raspberries, blackberries, strawberries. Like they don't discriminate. They want them all. And so. But yeah, I, I love some good berries in my beer. And this was. I kind of like the. The Black Rascal.
- [49:58]
Matt
Yeah, it was tart, it was fruity. I felt like it had the right amount of sweetness going on to kind of back the flavor of those berries, but also had the right amount of wheatness as well. So this is a Berlinerweiss.
- [50:09]
Joel
I like that.
- [50:10]
Matt
Wheatness. Yeah, Sweetness and wheatness. Berlinerweiss is a German style wheat and so oftentimes the flavor that you're left with in your mouth after you swallow and you're kinda sitting there doing the kind of thing, it's like this wheatiness. It reminds me of Cap' n Crunch specifically oftentimes with Berliner vices. So definitely picked up some of those notes with this one and I liked it. So, Matthew, thank you for donating yet another fantastic beer here to the show.
- [50:39]
Joel
Again, I don't know why you just made me think of Katy Perry. Like, but what? I drank some black rasp and I liked it.
- [50:47]
Matt
I gotcha. But yeah, this is a beer by New Park Brewing and that's gonna be it for this episode. We will link to some of the different resources that we have had mentioned and you can find those show notes up on our website@howtomoney.com but dude, that's going to be it for this one. Until next time, Best friends out. Best friends out.
- [51:20]
iHeart Announcer
Ice Cube's Big three season is heating up. The most competitive basketball league on Earth is on CBS this Sunday. The defending champion Miami 305 led by two time MVP Michael Beasley and Lance Stevenson take on the Houston ring hands looking for their first win. Then coach Steven Jackson and the DMV trilogy look to take down the undefeated Dallas power led by coach Nancy Lieberman and captain Greg Monroe. The game played the way you love. Watch Live Sunday on CBS at 4pm Eastern, 1pm Pacific and catch replays Mondays on BET presented by iHeart.
- [51:50]
Matt
Okay Joel, I am excited about this one. Here on the show we are all about comparing prices to save money on so many things in life. Life. So why wouldn't we compare prices for our next ride share? Taking a few seconds to check Lyft can save you real money on your next ride. And I did this last time. I caught a ride home from the airport after some travel and guess who came out on top? It was Lyft. Don't just price check with your flights and phone plans and groceries. Comparing rideshare prices will help you to save money every time you ride. Save money. Check Lyft.
- [52:21]
Joel
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- [52:52]
Matt
This is an iHeart podcast.
- [52:55]
Joel
Guaranteed human.