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- [00:00]
Joel
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Matt
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Joel
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Matt
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David
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Charlie Munger
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- [00:36]
Mary Buffett
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- [01:08]
Charlie Munger
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Matt
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- [01:42]
Joel
Visit cprewards.com welcome to how to Money.
- [01:45]
Matt
I'm Joel.
- [01:46]
David
I'm Matt.
- [01:47]
Matt
And today we're talking the Tao of.
- [01:48]
Joel
Warren Buffett with David.
- [02:09]
David
Yeah, so you don't need to be a personal finance whiz. You don't need to be an investing nerd to know that Warren Buffett is the goat. Like, truly, when it comes to investing, he is the greatest of all time. Which is why we are so pumped to be speaking with David Clark. David is the co author of the new Tao of Warren Buffett, which is a collection of some of the wisdom that Warren has dispensed over the many esteemed years that he's been at it. David's been a friend of the family for decades now. He has some amazing insight as to what life has been like for Warren. He's also an expert on Warren's investment methods. I think he's got something like 10 books that he's written in the Buffetology series. And so, David, we're excited to have you joining us today to talk everything from value investing to, according to Warren, what it means to live and lead a good life. Thank you for joining us today on how to Money.
- [03:02]
David Clark
Well, thank you for having me, David.
- [03:04]
Joel
We're pumped for this conversation, especially as to Buffett's enthusiasts over here. I think there's a lot we're going to enjoy and glean from this conversation. The first question we ask everybody who comes on the podcast is, what do you like to splurge on? Because Matt and I, we like to splurge on good craft beer. But hey, we're not doing it at the expense of our future selves. We're still investing and being smart with our money, too. Maybe it's the equivalent of Warren's Egg McMuffin. I don't know. That's what our craft beer is. But so what is that for you? What do you like to splurge on?
- [03:34]
David Clark
Books.
- [03:34]
Matt
Books.
- [03:35]
David Clark
I splurge on books. I never hesitate to buy a book. And no matter what the price, well, sometimes I stop at the price, but.
- [03:43]
David
First editions get expensive. Let's be honest.
- [03:45]
David Clark
It's the one thing about Warren Buffett that a lot of people kind of some people know about and some people don't know about is he's addicted to reading. He reads a lot of books, and he reads them quickly. And many, many years ago, there's an antiquarian bookstore in town, and they were the purveyor of his books. And he would send them a list and they would get them for him. This is before Amazon, and you could go online and find things on ebay and things like that. And it was amazing. He reads a lot of business biographies and I a lot of business biographies, but he also reads on science and history and a lot of business books in general. And so I tended to follow that route and other things as well. But I like reading and he loves reading. And Charlie Munger, his kids used to say that what he was was a book and two legs sticking out. And so, yeah, books, never hesitate, splurge, yes, definitely.
- [04:48]
David
Speaking of kids and I guess I kind of want to go back to maybe some of Warren's early years. Sure. Whether it's like the pinball machine that he purchased and ended up selling, I think he called that actually the best business that he was ever in, whether that or maybe his paper route as a kid. Can you kind of describe for maybe Folks who aren't as familiar with Warren and his upbringing, what life was like for him.
- [05:10]
David Clark
Warren, as a very young age, was obsessed with making money. And he is the kid who would go around and shine people's shoes. He's the kid who, he would buy a six pack of Coke and take them and sell them door to door for a nickel a piece. He'd get them for like, you know, 15 cents for a six pack and wouldn't run around selling them. He was obsessed with making money. It's all he thought about. And he was obsessed with getting rich very, very early age. And he got into many sort of business adventures, you know, childhood business adventures. And one of them was he had a paper route that he made money on, but he also, I want to say 13 or 14. He would ride down to the local racetrack and he printed up a sheet of paper and he called it the Stable Boys Picks. And he learned how to bet on hors and he learned how to do odds. And he would be down there selling the Stable Boy Picks newsletter he had, and he would do that, those kinds of things. And then one of his business ventures was he bought a pinball machine and they convinced some barber to put it in. And they came back and they found like $15 in it, and they thought they invented the will. And then they ended up owning a couple of pinball machines. So they early gaming business and he really didn't want to go to college, but his dad sort of forced him into going. So those were his early adventures in business.
- [06:45]
Joel
Is this like the. Did he just come out of the womb like this, or was this something that was instilled in his family or did he meet somebody early on who was incredibly influential? Can you, like, do you have any idea where the roots of that come from?
- [06:59]
David Clark
I think he hit it right on the head when you said he came out of the womb trying to make money and he was obsessed with it. I'll tell you where it comes from. Mary and I are slowly working on a biography. It's called about him. It's called Warren Buffet, Titan of Wall Street, Volume one, Millionaire, Volume two, Billionaire. He was born on the eve of the Great Depression, 1929, and he was born into a world when there was no money and everybody was struggling to find money. And that's where he got his drive. Money was a worry in his family, and it was a worry in everybody's family during the early days of the Great Depression. And he was raised in that, and I'm sure on some sort of deep Psychological level, it was driven in him that if he made money, he would save his family or something like that. And they lived what you would call back then would be a middle class lifestyle, but it was not, you know, there was no mansion. It was a small house. And his dad had been a stockbroker before the Great depression in the 1920s, and then he lost everything and they had to struggle to get it back. And so there's that narrative in his early life that shows up, and I'm sure it drove a lot of people that way. You talk to people who grew up in the Depression, there's not many of them left, but they all talk about the struggles with money and the struggles of making ends meet and families living with other families because they couldn't find jobs and. And things like that. And that probably drove his early childhood.
- [08:38]
David
Yeah, I've got to think. So I got to think some of those. Some of those formative years, I mean, they're just that they're formative and they can kind of shape who you are and what it is that you pursue. So, David, can we go from, I guess, the early years of Warren to how it is that he learned about investing, specifically, can you talk about value investing, what it entails, and why it has been Warren's strategy for so many years and decades now?
- [09:03]
David Clark
Well, his obsession with money took him to the library, and he decided he'd read every Quick Rich book he could find on making money, and he read them all. And this is the old library in downtown Omaha, which is one of those Carnegie Libraries, and very big and very built out of stone and brick, like.
- [09:27]
David
The kind of library you think of when you think of the first Ghostbusters.
- [09:30]
David Clark
Yes, definitely. And he read all the Get Rich QuickBooks, and then he started looking at stock books. And his dad was a stockbroker. So then he started reading stock books and he got heavily into it. And then he. Where'd he go? He went off to Wharton, to business school. He hated it. He went off to Penn and he hated it. And he came back and went to the University of Nebraska. And while he was at the University of Nebraska, he read a book called the Intelligent Investor, which was written by Benjamin Graham. And Benjamin Graham was like one of the early hedge fund managers in New York City. And we're talking in the 1920s. And he was friends with Bernard Baruch, who was a famous investor, and he was sort of, they called him the Dean of Wall street. And he taught at business school at Columbia University in New York City. Anyway, Warren Read this book called the Intelligent Investor. And basically it's a book of. It basically says this. He says the market often undervalues great businesses, just as it often overvalues businesses. And you want to be looking for the ones that are undervalued. And at that period, which was in the 1950s, there were still companies that were undervalued from the Great Depression, believe it or not. And what happened in the Great Depression, it drove the stock prices down to nothing. And as things started to come back up through the 40s and into the 50s, there were still many, many companies that never came back up because people didn't want to own stocks. And Benjamin Graham was highly skilled at looking for them, finding them and investing in them. And that's what Warren did as well. There was no Internet and you had to do your own investigations. And Warren was very skilled at that. Anyway, he read it when he was in college, was really, really taken by it. And then when he went to go to graduate school, he ended up going to Columbia where Ben Graham was his professor.
- [11:38]
Joel
It makes me think too, you're talking about him having to dig in and do the investigating to see which companies were undervalued so that he could make those smart investments. Makes me think of writing a book report when I was a kid versus my kids having to write a book report and how easy it is with the Internet, but that ease the Internet essentially making information accessible to all instantaneously. Does that make it more difficult to be a value investor these days?
- [12:04]
David Clark
That's a really interesting question. I like that question. In some ways, yes. In some ways, yes. Because in the old days you had to be an analyst to go look and find these companies and get the research reports and you'd have to get the annual reports. You just couldn't get on the Internet and click away and pull up a sec 10k or something like that in 10 seconds. Or you've can go shopping for companies and you could read about 10 companies tonight if you wanted to. He had to find the companies and then he had to get the annual reports and then he'd have to read them and then he'd have to figure out what it was worth. Now back in his day, they had Moody's, which was Moody's developed investment manuals mostly for bonds. There's a whole lot of bond. Understand the bond business was enormous and always has been enormous. And you would look for. He would thumb through the Moody's investment manual. And he once said, they said, how did you get so knowledgeable he said, you get the Moody's investment manual, which is about, you know, maybe 2,500 pages long, or, you know, there's multiple ones of them. And he says you start at A and you go all the way to Z and you just keep reading.
- [13:25]
Joel
And most people can't bear to read 2,500 pages of that.
- [13:28]
David Clark
Yeah. And that's what his obsession was. It's amazing what he knows, and it's amazing the companies he knows. And you could say to him, you know, some iron company in Wisconsin, he know about it. Some paint company that was publicly traded in Chicago, he know about it. And it's amazing what he knows and remembers. Yeah, he's got a phenomenal memory, too. He's a really, really, really bright guy on top of it.
- [13:58]
David
Yeah, you had to be an incredible analyst to kind of find that edge. And so it takes a whole lot of work. But do you think that there's a difference between Warren's pursuits and some of that natural talent that he had, as opposed to what most normal folks should be doing when it comes to their investments? Like, it just makes me think of when he's just like, yeah, you know, for most folks out there, they should be investing in the S&P 500 VU specifically. That one's always stuck with me ever since I read that quote then this is years ago. Do you think a lot of folks, should they be taking that path? Right. Should they be doing as Warren says, not necessarily as he does?
- [14:36]
David Clark
I would say yes, for most people, yeah. Unless you want to go into the world of being an analyst. And there's still wonderful. There are wonderful events that happen. Warren Buffett is a man waiting for something bad to happen, and he's very patient about it. He doesn't have to predict when it happens like a Black swan event. You don't have to predict it. You just have to know someday it's going to show up. And he's right about that. It shows up. And when it beats security prices down, he's in there looking at what is a bargain buy, and not only so much a bargain, but a fair buy. Because there are wonderful companies that never become bargain buys, but they do often become fair buys through the pandemic. Created buys. 2008 Created a ton of them. And it's open season when that happens for him because he comes into it with a lot of cash.
- [15:36]
Joel
You could maybe even classify it like some of his Apple buys in that fair price. It's not like this bargain basement deal. Right. But he kept investing in Apple, even though Apple was the most valuable company in the world because he thought it was still a fair price.
- [15:50]
David Clark
Correct. And it was a fair price.
- [15:51]
Joel
What about, like, where market valuations are right now, David? Like, there are a lot of banks out there, investment banks, saying, oh, the market overheated. Even some of the, like, vanguards of this world saying, when you're thinking about, you know, expectations for returns over the coming decade, don't get your hopes up. Like, how does he think about investing given kind of specific market conditions?
- [16:15]
David Clark
Well, this market is high and you're looking for a quality company at a fair price. And in this market, you're not going to find a quality company at a fair price. But something weird might show up in this kind of market. In a down market, it's much easier to find it. But things do show up because companies individually have problems and odd things happen and it creates opportunity. It's just not as much opportunity as like in a pandemic or a 2008 kind of situation. I have to take you back in time for a minute. In the late 60s, the market was roaring like this one was. And Warren woke up one day. He had a hedge fund and he woke up one day and he said, I can't find anything to buy. And he told his investors, I don't want to go to a different strategy and I'm just going to quit. And he folded up his hedge fund and took his money and he sat on it and as he said, I sat on it for years. And you know, this is the late 60s. And he sat on it until I think it was 72, 73, 74. And there was suddenly a market crash. And he said, I woke up and there I was. It was like I was an oversex man who woke up in the middle of a harem. And he said everything was selling dirt cheap and I had all this cash. And Charlie Munger, who had a hedge fund during that period, lost his investors half their money in the 7374 crash. He regained it over the next three or four years. But as he said, it was like the most horrible moment in his life where Warren walked into 7374 loaded with cash. Today, Berkshire is loaded with cash. Which tells you Warren thinks that somewhere in the not too distant future there's going to be some kind of correction on the downside, dramatic. And it will be an opportunity for him to buy.
- [18:21]
David
And that makes sense, right, if you are a hedge fund manager. For most folks listening who are just looking to dollar cost average into their 401ks?
- [18:30]
David Clark
Sure.
- [18:30]
David
I mean, we say to not time the market. So, like, on one hand you've got Warren, who's always waiting for an opportunity to, you know, to snatch up the next deal. And then on the other hand, it's just like, hey, just keep investing.
- [18:43]
Charlie Munger
No matter what, just keep buying. Is there any overlap there?
- [18:46]
David
Or do you feel that these two sort of schools of thought when it comes to the average investor as opposed to the greatest investor of all time, are those mutually exclusive?
- [18:55]
David Clark
In some ways, yes. In some ways, no. I think we talked about this in the book. You would sit on your cash and then buy the s and P500 in a down market and not go in and buy an index fund in a down market as opposed to averaging it in all the time. There would be periods you'd be sitting on cash in periods you would be buying. The problem with that analysis is that when things start going down, people freak out and they freak out, and even though they're sitting on a lot of cash, they hoard it. My own personal solution to that is that I just make myself allocate and it goes down. I allocate 20% in, it goes down again, I allocate 20% in, and if it starts going up and I've only gotten 40% in the market, it still turns out well. And so I work it like that so you don't get in. The market goes down, and you get in and let's say you put all your money in and then it keeps going down, you know, then you go throw up your lunch, you know, you think in those terms and stockpile your cash. And when things go bad, and things do go bad, not on a. Almost on a regular basis, frankly, then you go looking for things to buy. I look for companies. But you could just put your money in the s and P500. I have a friend who's done really, really well doing that over the years. He hoards up on cash and things go to hell. He just goes in and buys the s and P500, buys an index fund. He's become fairly rich. I mean, rich in the context of investment rich, which is, you know, tens of millions of dollars. So.
- [20:43]
Joel
Yeah.
- [20:43]
David Clark
Yeah.
- [20:44]
Joel
What do you. What do you think, David, from a perspective of what it takes to become wealthy? Some people would say, oh, I wasn't.
- [20:50]
Matt
Born on third base.
- [20:51]
Joel
I don't have like tens of thousands, much less, you know, maybe I've only got a few thousand dollars a year that I can be investing. And Warren Buffett, it seems like he doesn't think you need tons of money in order to build wealth in this country. Do you agree with him?
- [21:06]
David Clark
Yeah, completely. I started with nothing and I started with nothing and got something and then invested it. And for many years, main source of income was investing. And I lived frugally like he did. I mean, he was a multimillionaire driving around in a Volkswagen Bug. You know what that is?
- [21:31]
Joel
Oh, yeah.
- [21:32]
David Clark
Okay.
- [21:33]
Joel
They're still cool.
- [21:33]
David
We grew up playing punch Buggy. Don't you worry, David.
- [21:36]
David Clark
Okay. And he still lives in the same house he bought when he came back from New York City. But you go into the early numbers on Warren Buffett, and you're not talking a millionaire. You're talking about a guy with $15,000 and $20,000 and things like that, and he started managing people's money. What happened is he got out of business school, he came back to Omaha, Nebraska, worked as a stockbroker, finally got kept writing Benjamin Graham saying, I'd like to come work for you. And Ben kept saying, no, no, no, no, no. And Warren said, well, I'll work for free. Da, da da da da. And finally Ben said, okay, you can come work for me. And two years after Warren went to work for him, Ben decided to retire. But he started with a small amount of money, and he just kept growing it. And that's how I did it. And then he started managing people's money. And that's like the magic formula for getting super rich is managing other people's money. But you can make yourself a millionaire over time. You're not going to do it overnight, but you can easily do it. Yeah.
- [22:49]
David
Okay. So speaking of Warren Buffett living in the same house, we've got more to get to, actually. We might even be able to talk some about crypto, talk about a little more about McDonald's as well. We've got more to talk to with David Clark about Warren Buffett's. We'll get to all that right after this.
- [23:08]
Matt
I love what I do. I also love the idea of not.
- [23:12]
Joel
Doing it one day. But it's getting harder to know the.
- [23:15]
Matt
Best way to move into the future towards retirement. Right.
- [23:18]
Joel
We hear about inflation, rate hikes, the.
- [23:21]
Matt
Changing market, got to get the kids through college, build an emergency fund. Then there's retirement.
- [23:26]
Charlie Munger
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- [23:40]
David
They'll also show you what's called Timely.
- [23:41]
Charlie Munger
Insights, which are small tips on ways to save and invest to help meet your goals. And you can monitor your plan so you can stay on target.
- [23:50]
Matt
The future is coming, and so is retirement. Fidelity can help you take it on your way. Learn more@fidelity.com future expenses charged by your investments and other costs and fees associated with trading or transacting in your account Apply Fidelity Brokerage Services Member NYSE SIPC Matt we were at a restaurant the other night. The waiter had a cool suit on completed by a really dapper looking bolo.
- [24:14]
David
A bolo? Yeah, you heard him right?
- [24:16]
Joel
And of course I had to congratulate.
- [24:19]
Matt
Him on his smart fashion sense.
- [24:21]
Joel
The truth is, you can tell a lot about a person just by the.
- [24:23]
Matt
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- [24:35]
David
That's right. And Joel, the Indochino process was totally legit.
- [24:39]
Charlie Munger
We're talking about a customized suit made.
- [24:41]
David
To order for you. We both went in store, we got measured up which was dude, it was a really cool process. This was totally new for me but it makes so much sense now. I'm wondering like maybe all my clothes should be measured custom fitted as opposed to something that's pre made off the rack. Now I've got a great looking suit with all the accents and customized details that I picked out. Look like a million bucks but at.
- [25:03]
Charlie Munger
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- [25:04]
David
I was able to pick out a super high quality fabric and it's no surprise that Indochino that they work with fabrics from some of the best mills in the world.
- [25:12]
Charlie Munger
You get these European fabrics for an incredible price.
- [25:15]
Joel
Yeah, creates your next headlining look with.
- [25:17]
Matt
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David
It's a morning cuddle.
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Joel
That's what we call it. Well, creating a trust and will is.
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Matt
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David
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- [26:21]
Charlie Munger
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- [26:27]
David
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- [26:30]
Charlie Munger
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David
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Charlie Munger
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Matt
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Unknown
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- [27:53]
Okay guys.
- [27:58]
Joel
All right. We're back from the break. We're still talking with David Clark. We're talking about Warren Buffett and the newly updated the Tao of Warren Buffett book. I want to talk more, dig in a little bit more on Warren's frugality. David, I think that is people think of it as quirky, but it really is quirky. I guess when you think of somebody with that amount of money being as frugal as Warren Buffett is the fact that he pinches pennies when those pennies are essentially insignificant. He famously eats at McDonald's most mornings. He seems frugal to the extreme right, given his net worth, but he also encourages people to enjoy their money. So how, what would you say, like, his ethos of frugality is having witnessed.
- [28:44]
David Clark
It over the years. In the early days, he was a big believer of compounding interest. And Mary has this great story where he's in an elevator and he sees a penny on the floor and he picks it up and he goes, the beginning of my next million. The fugality he believed strongly in, that his wife went and bought a new carpet once, and he came back and it was home. And he goes, you have no idea how much money I won't make because you bought carpet. He was that obsessed. And he saw everything in terms of compounding. And if you take a penny and you double it like 32 times, you keep doubling it over and over and over, it ends up a fabulous sum of money. And that's how he saw it. He just saw it in that context. He didn't see it as today. He saw it as, you know, 20, 30 years down the line. And for that reason, he was very, very cheap and very tight with his money. And he lived. And he lived in Omaha, which was fairly inexpensive to live. And he lived in what was, I mean, he was worth $40 million. And he's living in, basically would be considered an upper middle class neighborhood or a middle class neighborhood to this day. He lives in a house like that.
- [30:09]
David
So as I hear you say that, like, on one hand you can think, oh, it sounds like he's incredibly content with where he is. But what I hear you saying more is that it's less of, like, contentedness, and perhaps it's more like you said, more of, like that cheapskate mentality where he's looking ahead to the future and knowing what that could turn into. And therefore he's sacrificing in the here and now. So if you disagree with that, let me know. But that's what I'm hearing you say. But as he's gotten older, has he kind of come to terms with that, where you're forsaking the present for the future? But I think as you get a little bit older, I'm curious if. If that sort of changed his tune a little bit?
- [30:51]
David Clark
I think it did change his tune, and it shows up in some of the things he says, and he says them at the annual Meeting. He says things like, being frugal is smart when you're young, but you shouldn't deny your family fun. Things like take them to Disneyland and education and things like that, which he never denied his kids anything that they needed in the way of that. However, he didn't spoil any of them, and they all grew up wanting things that they didn't get. However, when it came to education or something like that, he wouldn't hesitate to spend money. But no, he was tight and tight for a long, long time, and it just went on and on and on with him.
- [31:35]
Joel
You've used the word obsessed or obsession a lot.
- [31:38]
David Clark
Yeah, sure.
- [31:38]
Joel
Yeah. And I think, like, you're really pointing kind of at the root of something with Warren is this kind of obsession with compounding and that. That maybe kind of took over his brain in a certain way, and then it became the lenses in which he saw everything through. And it seems like, too, though, that he loves his work. Right. So that even having a certain amount of money where he never had to worry about money ever again for him, for his progeny, he still hasn't really changed his work ethic or his desire to kind of be at the office most days. So is that just because he's in love with the idea of what he does and with his pursuits?
- [32:23]
David Clark
He talks about that. He talks about being in love with what he does, and he shows that he's in love with what he does. Well, let me comment on something else. People say he doesn't spend his money, but here's a guy who's. I see him mostly as a collector of great businesses, and he never hesitates to write a check for billions of dollars. And in the early days, he wouldn't hesitate to write a check for millions of dollars if he was buying a business. If it came to buying carpet for the house, that was another story. I mean, and it's separated in his head like that. I see him mostly as a collector and a man who's out collecting things. And if he sees value in it, he'll spend the money, and if he becomes overvalued, he'll sell it and go on and buy something else. He's very. He doesn't hesitate to sell either if he thinks it's overvalued or he thinks that he could put the money to you somewhere else. He doesn't fall in love with something, he'll sell it. And that's an interesting aspect of his life. But he never hesitates to spend money if he thinks he's getting a Good deal on a business. He collects businesses. It's like a guy who collects art or a guy who collects cars or something like that, but it's completely different.
- [33:42]
David
David, what is Warren's take on financial advisors? We're going to take more of a turn towards personal finance. Do you think that most folks need outside advice, outside of maybe the bits of wisdom that they're able to read from Warren Buffett?
- [33:56]
David Clark
Most financial advisors are highly overrated. Most of them. I don't know how they're paid anymore. They take a percentage of what you have, and then they do things like suggest, well, we're, we're going to split your portfolio. It's a third in bonds and the rest in stocks. And now we've got an idea of two years later they're saying, we're going to put it all in bonds and then in stocks and things like that. And Warren never liked them. I don't like them. I think you're better off following his strategy of investing in an index fund in a down market as opposed to using one. I mean, if you have no idea what you're doing, that would be the best strategy for you. And if you don't know how to do that, then you maybe should have an investment advisor. Like, if you came into a lot of money and you seriously had no interest in it at all, then you would be better off with a financial advisor.
- [34:51]
Joel
Talk to us about how Warren's take on cryptocurrency.
- [34:55]
Matt
Has it evolved at all?
- [34:56]
Joel
Because especially in the early days, he didn't mince words. His late partner, Charlie Munger, also didn't really have anything good to say about cryptocurrency. I think he called it rat poison squared. So, like, immediate death, I guess, is what cryptocurrency is from their point of view. Is that, is that still how Warren feels? And I guess the, the meme coin space, too, has gotten kind of out of control in terms of how much money has gone in there and how much. How much money? Just normal, average investors trading from the comfort of their home have been able to lose in that space through a lot of kind of grift and scamminess. What's his take on that space right now?
- [35:34]
David Clark
His take on cryptocurrency is that it doesn't make any money. It's not a business in many ways. It's kind of like cash. It's not a business. The problem with cryptocurrency, you can't even put it in a bank and earn interest on it. So it doesn't make any money. However, it is a medium of exchange, and it's largely a medium of exchange in sort of nefarious world. It's kind of the underworld medium of exchange. And crypto converts into dollars. There's an argument for crypto that it's not like the Federal Reserve bank can't print more crypto and inflate it, but nobody really understands. Nobody really knows how much crypto there is, and nobody really understands how it's made. People do understand, but the public doesn't, and people speculate on it. Now, I just said the word speculation. So now you're speculating on something that doesn't have any true inherent value. And so the price goes up, the price goes down. And that the gambling aspect of it creates a problem of it someday going to zero and speculative. And the zero part is what Warren never liked about those kinds of things.
- [36:57]
David
Well, I mean, I think that gambling aspect of it, that's what worries me the most when it comes to how it is. A lot of folks are investing these days, especially folks who maybe got into it four years ago, when all of a sudden they found themselves with more cash on hand, whether it's because of stimulus checks or whether it's because of the fact that they weren't going out and blowing money at restaurants and bars anymore. And I think for. I can see an argument going back to financial advisors. I think that's some of the value that some of those advisors are able to provide is the fact that, hey, there's some folks out there that don't know one end from the other. And for them to have somebody to essentially kind of coach them through making worse decisions, it's less about the. I guess maybe the optimization of their investing dollars as opposed to keeping them from losing it completely. Does that make sense?
- [37:45]
Joel
And probably better than getting their investing advice on TikTok, which is where some people get it these days.
- [37:49]
David Clark
Well, that's a really good point. And I like that. Thank you for sharing that with me. I like that a lot. Yeah, you're right. And for those people, an investment advisor would add value to their lives and stop them from doing something highly speculative. Like, again, in speculation, you can make an enormous amount of money very quickly, but you can also lose an enormous amount of money very quickly, and that's a problem. And Warren wasn't about getting rich overnight. He was about getting crazy rich over a long period of time.
- [38:19]
Joel
Yeah, crazy rich over a long period of time. That would. If you were looking for an alternative title for the biography, that would be a good one too. I like that. Yeah.
- [38:29]
David Clark
Thank you.
- [38:29]
Joel
That's good.
- [38:30]
David Clark
See, I'm getting things out of this.
- [38:33]
David
This isn't a total waste of time.
- [38:34]
David Clark
No, no, no. You're giving me ideas. I like it. It's fun.
- [38:37]
Joel
Talk to us about how Warren thinks about inflation because that's, I think the normal average American these days would be like, man, inflation sucks. My groceries cost more. Look at the cost of eggs and housing and insurance. And it certainly feels like it's this tax on the average person. But Warren would also say that there are certain upsides to inflation too, Right?
- [38:59]
David Clark
Well, the upside to inflation is it raises asset prices, including stocks, and it's sort of like built in. We live in an economy that is basically perpetually in a state of inflation. And it's built into the, the Federal Reserve's projections. They want like, I don't know, what is it, 2% inflation a year. And the reason they want inflation is because the opposite, deflation destroys everything. You understand that the banks are highly, highly leveraged businesses and they only have about 10% equity behind them. And if you had 15% deflation, you would deflate their asset values by 15%. Technically, you would wipe out all the equity value in a bank.
- [39:46]
Joel
It's like the scene from It's a Wonderful Life. Right? Everybody's going to get their money and they don't have all the money.
- [39:51]
David Clark
Yes, exactly, because the bank has loaned out all the money, but now it's not worth as much. So that kind of thing. So it's built in, inflation wise, and that lifts security prices over time. It doesn't happen overnight, but perpetual inflation for security prices, which helps your index fund constantly rise over a long period of time. Understand there's going to be gyrations in there, but it's kind of built into our economy that investment stock prices will rise over a long period of time. As a whole, that's not individual, but as a whole, yes.
- [40:33]
Joel
And that's actually beneficial to people with fixed rate debt too. Right. Like I'm thinking about my 3% mortgage. It only looks better and better and better as inflation continues to, continues to soar.
- [40:43]
David Clark
Definitely. Because you're paying for it in inflated dollars down the road.
- [40:48]
Joel
Yeah.
- [40:49]
David Clark
My parents built a house in the 60s. It cost $34,000 to build. I still own the same house and today it's worth close to a million dollars.
- [41:00]
Joel
Dang.
- [41:01]
David Clark
And, and you know, but it's just the same house that they paid for 34,000. I said to the guy, I was having some work done and I said, let's just reside the whole thing. And he looked at me and he said, dave, it's cedar. And I said, so? And he goes, it's going to cost 34,000. 30. It will cost you $40,000 to reside your house today. And I said, the house only cost 34,000. He said, well, that was back in the 60s. Well, that's inflation. It's the same house, it's worth more money, but really it's just the same house.
- [41:36]
Joel
Looking back at those Sears Roebucks, catalogs of those, like beautiful homes that they ship to your door for like so, like so little money in the 1920s.
- [41:43]
David Clark
Sure.
- [41:43]
Joel
And they were gorgeous. And yeah, you can't get, can't get anything like that today for that price. Right, you're right.
- [41:49]
David Clark
Do you remember when McDonald's hamburgers were 15 cents?
- [41:52]
Joel
I remember on like Tuesday nights they'd have 29 cent hamburgers when I was a kid.
- [41:56]
David Clark
Yeah, I remember when they're 15 and fries were a dime and a Coke was a dime. Right, but you make more money today, but you're paying off your mortgage on a value that was 5, 10, 15 years ago. Yeah, your 3% mortgage is great.
- [42:16]
Joel
I'm holding onto that forever. We got just a few more questions to get to with you, David. We'll get to those right after this.
- [42:26]
Matt
I love what I do. I also love the idea of not.
- [42:30]
Joel
Doing it one day. But it's getting harder to know the.
- [42:33]
Matt
Best way to move into the future towards retirement. Right.
- [42:36]
Joel
We hear about inflation, rate hikes, the.
- [42:38]
Matt
Changing market, got to get the kids.
- [42:40]
Joel
Through college, build an emergency fund.
- [42:42]
Matt
Then there's retirement.
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Charlie Munger
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David
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Charlie Munger
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- [43:08]
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- [43:25]
Unknown
Do you want to understand an invisible force that's shaping your life? I'm Os Veloson, one of the new hosts of the long running podcast Tech Stuff. I'm slightly skeptical but obsessively intrigued.
- [43:36]
I
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- [43:40]
Unknown
And often on tech stuff. We travel all the way from the mines of Congo to the surface of Mars to the dark corners of TikTok to ask and attempt to answer burning questions about technology.
- [43:52]
Charlie Munger
One of the kind of tricks for.
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Joel
Surviving Mars is to live there long.
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David Clark
Enough so that people evolve into Martians. Like data is a very rough proxy for a complex reality.
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David
How is it possible that the world's.
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Unknown
New energy revolution can be based in this place where there's no electricity at night?
- [44:09]
I
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- [44:19]
Unknown
So join us, listen to tech stuff on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
- [44:28]
Joel
We're back for the break. We're still talking with David Clark, talking about one of our heroes, Matt and I's mutual heroes in the finance space, Warren Buffett. And David has just updated the book the Tao of Warren Buffett, which is definitely worth a read. And we really like, I guess, David. I'm curious to know why you think Warren remains so culturally relevant. I we got some backyard chickens recently, and my kids got to name one, my wife got to name one, and I got to name one.
- [44:54]
Matt
I named mine Warren.
- [44:56]
Joel
That's how much I like Warren Buffett. So why do you think he has become and then remained such an important cultural figure? As someone who's like just kind of a good investor, what defines or what's the appeal?
- [45:09]
David Clark
Well, let's point something out. He never, ever made anything like he's not Elon Musk. He didn't invent anything. He didn't invent an Amazon. All he did was allocate money, buy and sell things. And so that's a very unique position. The other thing about him is he's really, really funny, really entertaining and very charming to listen to. And he has been. And his annual meetings have gotten bigger and bigger and bigger. And I mean, there were times in the early days there was like 20 people showed up and then there were 50, then it was 100, then it was 200, then it was 500, then it got a thousand. They kept going to bigger and bigger venues and people showed up to listen to his wisdom, and he was entertaining when he was talking and he made a lot of sense to people. And then he entered into a sort of the international world. And this book that we just wrote, the New Tao of Warren Buffet, has been translated into 14 languages already. It's in Chinese, it's in Japanese, it's in Thai. It's all over the world. And he is a cultural. He's a worldwide cultural phenomenon. Why? I think it's his folksy way of talking with people. And he's funny and people like it, and he talks about things that one thing they're interested in more than anything else and which is money. And. And he makes sense. And he got super, super, super rich doing it.
- [46:49]
Joel
I think authenticity is part of the appeal too.
- [46:51]
David Clark
Yeah, I like that. Authenticity. Yeah, it's very authentic.
- [46:54]
Joel
Like what you see is what you get.
- [46:56]
David Clark
Yeah, what you see is what you get. And Charlie Munger was the same way. Charlie was caustic. And I mean, that's to put it mildly. And that had its own humor to it.
- [47:09]
Joel
Yeah.
- [47:09]
David
I do wonder how Warren's folk see aphorisms translate to Mandarin, like if there's something lost in translation there. But speaking of the book, there is, one of the notes of wisdom was about writing your own obituary and then trying to live up to it.
- [47:26]
Charlie Munger
Right.
- [47:26]
David
Where you're setting those sort of end of life goals. Do you feel that Warren has done a good job in that regard?
- [47:35]
David Clark
Yeah, I think he's done a really brilliant job at it. As he's gotten older, he's gotten more reflective, but he's always embraced the world with a kind heart. And he has always been generous in giving away his money. And he didn't give his way as much as in the early days, but he gave money away locally and he gave money away. It's remarkable how much money he's given away and how much money he's given away and not had his name put on the building and anonymously, so to speak. I mean, the university has got things in it, and I know he paid for them, but his name's not on the building. And there's a scholarship fund in town in Omaha for any indigent person who wants to go to college that he pays for, but nobody ever writes about it. It's just the university doles out the money and he pays for it. Yeah, he's extremely generous. And as he's gotten older, even more so.
- [48:37]
Joel
When you think about people in our country who have been highly successful, made billions and billions of dollars, the typical.
- [48:44]
Matt
Route for most of them has been.
- [48:47]
Joel
To give away the vast majority of that money as they get older and especially when they pass away, it's like, man, 99% of my money is going to such and such organization. Whether it's like, you know, Bill Gates's arm, philanthropic arm that oversees, you know, the disbursements of, of money to really need the organizations across the world. How does Warren think about this vast sum of wealth that he's built up and what kind of good it can do for not even for his legacy, because it sounds like he doesn't care about that as much, but for the good it can do when he's gone.
- [49:22]
David Clark
He's always said that he didn't like thinking about it, and so he's always left it to others to think about how to allocate it. And he's allocated it to his three children at the end of his life and it's no longer going to Bill Gates. For a while it was going to Bill Gates, but his three kids, he's been giving money to allocate over the years and they've done a brilliant job with it. All three of them are really great kids. You know, they're older people now, but they're, you know, they're, all three of them are hard working. All three of them are real smart and all three of them have a really kind heart. So, you know, they, and they, they have a spec, they, they cross the spectrum too. One of them is extremely liberal and one of them is very conservative. So they, they'll do a good job with giving his money away and it will benefit society as a whole. But it's this, it's his children and the kindness in their heart that will dictate where the money will go.
- [50:25]
Joel
That's cool.
- [50:26]
Matt
Very cool.
- [50:26]
David
Well, David Clark, we really appreciate you taking the time to speak with us today. We'll definitely make sure to link to the book that you and Mary Buffett have co authored together. But thanks again for taking the time.
- [50:38]
David Clark
Oh, thank you for having me. It was a real pleasure. I enjoyed the conversation and your ideas are great. Thank you.
- [50:44]
Joel
Thanks, David.
- [50:45]
David Clark
Take care.
- [50:46]
Charlie Munger
All right, Joe.
- [50:47]
David
It almost kind of felt like we were talking, speaking to the man himself, Warren Buffett. Did it feel that way to you?
- [50:52]
Joel
You've been rubbing shoulders that long with him, as David has with him and his family.
- [50:57]
David
He's there in Nebraska. He's at the epicenter.
- [50:59]
Joel
We were joking before we started recording that. Have you, have you ever, did you ever think you would know more about another individual human being than you know about Warren? And he was like, yeah, it's pretty insane. By the way, I Cannot wait to read the two part biography on Warren and then the three part biography on you, my friend.
- [51:15]
David
Oh, sure, sure. What's your big takeaway from our conversation with David about Warren Buffett?
- [51:20]
Joel
So I loved when he was talking about Warren's depression roots and, and when he talked about kind of the macro. Yeah, the macro events that were influencing who he became. I think the truth is for all of us there are either macro or micro events that influence significantly who we become. And I talk about this in my own personal journey with money, about how my parents money struggles. When I was a kid, I was just at this particular age where the impression was strong right when my parents were having issues. And I do think why I do what I do has a lot to do with kind of that history and my experience there. And so it's a good idea for all of us to kind of maybe take a, take a look back and say, well, what are those things that might have influenced who I am and why I think about money the way I do? Because some of it might be good, some of it might have actually led to good money habits, but it might actually be bad in some ways. And over time, hopefully we can tease some of those, those things out so that we can have a healthy relationship to our money. I don't know, it just. That struck me too as he was talking about that. I was like, oh man, I feel like I have a.
- [52:25]
David
Struck a chord, huh?
- [52:26]
David Clark
Yeah.
- [52:26]
Joel
I didn't go through the Depression, but I went through like a micro familial version of it.
- [52:30]
David
Yeah, your own version of it for sure. My big takeaway is going to be the fact that David kept coming back to the fact that Warren is just this brilliant investor. And it's true. But if you want to outperform the market, you have to be an analyst, essentially. Like you have to be willing to dig in. And we do know some folks who do that and have found success. But otherwise most people who are listening to this, they've got another job, they've got a life, they've got kids, they've got other things that they are interested in. Even if you do have the time and the skill and knowledge to be able to dive into it. And so if that is you and you still want to invest your money, index it an S&P 500 fund, the ability to over time amass large amounts of wealth. He mentioned a friend of his and all he does is invest in the S&P 500. And he's got tens of millions of dollars that's more than me, Joel. So I'm going to keep at it.
- [53:19]
Matt
Well, not by much.
- [53:20]
Joel
Come on, please.
- [53:21]
David
But yeah, I want that to be the biggest takeaway, at least that you hear from me. Because I think a lot of times you kind of get carried away with this notion of it's an overly romanticized sort of idea, right? Of like pouring over books. You're diving into the financials, you're going to find the next up and coming business to invest in and you're going to 10x100x your money just in a few short years as folks are trying.
- [53:43]
Charlie Munger
To get rich quick.
- [53:44]
David
But most folks aren't going to be able to pull that off.
- [53:46]
Joel
I do think this conversation revealed that Warren has like this secret combination that's really hard to come by. It's like the Depression roots, the superior intellect, the hard work ethic, the boring.
- [53:56]
Matt
2500 page analysis of Bonds that nobody.
- [53:58]
Joel
In their right mind wants to read.
- [54:00]
Matt
But he finds it fascinating.
- [54:01]
Joel
No wonder he's such an incredible investor and most of us just don't have that inclination or the intelligence level, myself included, to invest in the way Warren has. So maybe we should be like, wow, amazing that he can do it. But I'm probably not going to replicate it.
- [54:16]
Charlie Munger
That's right, the beer that you and.
- [54:18]
David
I enjoyed during today's episode is called Space Broccoli, which is by other half and other half has to make more of my favorite beers than any other brewery out there. Like every time I drink an IPA by them, it just tastes like the most perfect ipa.
- [54:31]
Joel
Yep, I would love to try them side by side too, because I just always think of them in the same vein. They all taste similar to me, but they're all fantastic.
- [54:38]
David
They're so good, this one. So Space Broccoli, they've got regular broccoli, but I'm pretty sure this is the double dry hop version. Yeah, of that ipa, but which also makes me think of a local brewery, Space Lettuce by Monday night, which I wonder which one came first, space lettuce or space broccoli?
- [54:55]
Joel
It's a good question.
- [54:56]
David
Makes me think that maybe Monday night did some ripping off one of the most delicious beers in the country. But yeah, did you dig it?
- [55:03]
Joel
Loved it. And I only wish this could count as my vegetable serving for the day. Sadly, no. I'm going to have to eat some so good veggies for dinner tonight. But yeah, I mean this is basically IPA perfection. Other half continues to just, I mean, rocket every time they make beers.
- [55:19]
David
So super dry hopped a word that you use to describe it before we started recording was like chalky.
- [55:25]
Charlie Munger
And it does have like not chalky.
- [55:27]
David
As in not bad powdery, but like almost like this dryness that you get when it's dry hopped like this. There's a sharpness like the hops are.
- [55:34]
Joel
Sticking to the sides of your mouth.
- [55:36]
David
It is so freaking good. It's so hard to describe, but of course I'm glad that you and I got to share one of these during our episode today while we talked with David Clark and we'll make sure to link to his book as well, the New Towel of Warren Buffett that was co authored of course by him, but then also Mary Buffett, daughter in law of Warren Buffett.
- [55:55]
Joel
Yep. All right, Matt, we'll link to that book. We'll put up in the show notes on our website@howtomoney.com that's gonna do it for this episode.
- [56:01]
Matt
Until next time, Best friends out.
- [56:03]
Charlie Munger
Best friends out.
- [56:19]
Matt
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Unknown
Want to see into the future? Do you want to understand an invisible force that's shaping your life? Do you want to experience the frontiers of what makes us human? On tech stuff. We travel from the mines of Congo to the surface of Mars, from conversations with Nobel Prize winners to the depths of TikTok to ask burning questions about technology, from high tech to low culture and everywhere in between. Join us Listen to tech stuff on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.