24: Crisis Investing: Investing Through a Global Pandemic

Successful investing requires discipline and patience, especially during a bull market, which can be challenging even for seasoned money managers. Self discipline and identifying bear markets including points of maximum pessimism are durable advantages in the world of stock investing. It is easy to lose patience and succumb to impulsive behaviors when confronted with uncertain market conditions, but impulses create expensive errors. Effective communication with clients is a crucial factor in navigating the market together. The investor-client relationship is akin to a partnership and managing clients' expectations becomes a key responsibility. This is particularly true when working with generational wealth, since it involves managing longer-term goals and reconciling expectations within any given year stock market. With the right approach, dealing with these complexities need not be a double-edged sword.
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Hi and welcome to the Investing the Templeton Way podcast. I'm your host Lauren Templeton and

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today's guest is Bogumil Baranowski, founding partner of Sicart Associates LLC,

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a boutique investment firm catering to families and entrepreneurs on both sides of the Atlantic

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and the Pacific. He is the author of Outsmarting the Crowd, a Value Investor's Guide to

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Starting, Building, and Keeping a Family Fortune.  And Money, Life, Family: My Handbook,

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My Complete Collection of Principles on Investing, Finding Work and Life Balance,

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and Preserving Family Wealth. He also has a new book out called Crisis Investing,

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a Hundred Essays, Lessons from Managing Family Fortunes Through the Global COVID Pandemic and Beyond.

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As a passion project, he also wrote, Living Where Others Vacation. That sounds like a great read.

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I have not read it yet. A travelogue, a pandemic memoir, and a blueprint for a better life

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and work from anywhere. He is the host of the increasingly popular Talking Billions podcast.

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Scott and I have both been guests on this wonderful podcast. And the podcast features intimate

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conversations about money, wealth, and living a rich and fulfilling life. So it is with great pleasure

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that we welcome Bogumil Baranowski. Hi, my name is Lauren Templeton and you are listening to

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"Investing the Templeton Way." This podcast is for anyone interested in learning more about investing.

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In this podcast, I will be interviewing some of the greatest minds from the investment community

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and exploring topics ranging from international markets to behavioral finance.

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To learn more, please visit us at investingthetempletonway.com.

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The information presented in this podcast or available on the website is not intended as and

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shall not be construed as financial advice. This podcast is produced for entertainment value.

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Investing is inherently risky and I encourage you to seek financial advice from a professional

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who is aware of the facts and circumstances of your individual situation. Thanks for listening.

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Welcome to "Investing the Templeton Way" podcast. I'm your host Lauren Templeton.

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And I'm your co-host, Scott Phillips.

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And we are just thrilled to have today's guest Bogumil Baranowski, who we originally met in

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Switzerland. Bogumil, maybe share with our guests how we met in the conference where we met?

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So we met at Guy Spiers' conference, ValueX in Klosters, this winter, and then we had the

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pleasure of chatting more. I had both of you on my podcast, Talking Billions on two occasions, and then

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I got to see Scott again in Switzerland one more time this summer. So, we had quite a bit of time,

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and I was really looking forward to this conversation and chatting more with you.

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And did you give a presentation at the most recent conference in Switzerland?

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I did. I did. And I was talking about my lessons from the pandemic era.

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How I rethought my work and some of the topics, and I'm sure we're going to talk about how,

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what are the ways to become a better investor and how you can change your environment and how you

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can think differently about how you spend your time? What are the lessons I walked away with from

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this very unusual experience that we all went through? And of course, you describe these experiences

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in your new book, "Crisis Investing," which I had the opportunity to read. I have a digital copy of it.

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And I also have read your book, "Money, Life, Family." Scott has also read it. This is a great book.

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And also a really quick read. I think it would be easy for somebody to pick up this book

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and get through it in one day with some really key takeaways. So, tell me what inspired you to write

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three books now? Well, I don't know an investor that doesn't read, and I noticed that a lot

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of investors write even if they don't publish it. And I think it's very helpful to organize your

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thoughts and then look back and see what you thought at the time because we all think looking back that

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we knew everything. And specifically, the Crisis Investing book, that's a collection of 100 essays that

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I wrote for our clients. And when COVID started, I used to write twice a month, but people had so many

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questions and it was a peculiar time and I felt like I have to communicate more than usual. And I ended

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up writing every single week. I took a lot of calls from clients, but I told them to get my work done,

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I can't be on the phone all the time. And a few times they actually told me I just wanted to hear

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your voice and they said, "If you're calm and collected, that's all they have to know." 

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But, the collection of essays people started asking me, "Can you re-send those letters that

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you wrote, essays that you wrote back in the day?" And I started sending five, 10, 20, and it became a

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whole collection and a whole PDF and then somebody told me, "Why don't you just publish it so more people

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can read it?" And I thought, Well, it's different than the other books because the other books I wrote

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them from scratch. This is a collection of timeless and timely essays that I wrote, but I thought if

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there is interest, then I'll just publish it and see what happens. And I asked you for a little

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endorsement and a few other people wrote me a quick note as well. And I've been receiving wonderful emails

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about this book and people tell me that they wish they had the book and the essays in their hands in

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March of 2020 and they said they wouldn't have done some of the mistakes, made some of the mistakes or

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they would be more at ease or more patient. So, I'm glad that it's making a difference in people's lives.

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But I love writing. I think it's great for me to help me organize thoughts, but I call it a bit of a

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little flair that you send out to the sky and you never know who's gonna see it and all kinds of

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people reach out and I made friends through my writing and now through the podcast, people that have

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similar views, but also that challenge my ideas. So, I continue to learn through the process.

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Well, it's a great book. I enjoyed reading it. It's very approachable and I like the format of it.

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I like the essays because when I'm reading, I'm often reading a few books, putting something down,

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picking it up. It's easy to read one essay and put down the book and then pick it up again.

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So, I think it's a really user-friendly book. When do you write? Do you have a habit of, I know,

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some people wake up in the morning and they write for an hour or is it more sporadic than that?

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It's more sporadic. So, the ideas come to me randomly. I'm going on a walk, I'm going for a swim,

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and I come back with an idea, and I just write down the idea and then other ideas that are part of it

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just follow. And I think that initial idea creates this space for something bigger. And then it turns

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into a few-page essay, a story. And eventually, when I see that it's ready, I turn it into a full article.

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But I have a queue of ideas and I have to still get around to that I like to write about.

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And sometimes it's a question that I get from a client. Sometimes it's a conversation with a friend.

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The inspiration can be really random. But I feel like if something is on somebody's mind or if it's on

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my mind, it should be on a page and then I'm curious where it goes and what kind of response it will get.

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Well, you had, I know everybody had an unusual COVID experience, but where were you doing

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most of this writing from during COVID? So, I was in New York City, which was not the best place to be.

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And two, three weeks before the lockdowns, my wife and I went to Florida. I had a conference in

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Florida and I was seeing a lot of CEOs, CFOs from major consumer companies. And we were talking about

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the pandemic at the time and everybody was saying how it's far away, it's in Asia. And these were

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the leaders of big businesses with operations in 150 countries. And they basically didn't know

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what's coming. I came back from the conference, and I went to the office and then you know,

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In a week or two, I had a big trip to Europe planned. It was March 2nd, March 3rd. And I ended up talking to some

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friends in Italy. I read those headlines about lockdowns in Italy, and I had a few phone calls and I

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realized I think it might be a bigger deal than we all think. And I actually called my partners

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that day when I was supposed to fly to Europe, and I've never done it before. But I canceled the

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trip on the day of my flight. And I told my partners and I thought they'll push back. And I said,

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I just don't feel comfortable flying to Europe right now. I never had that feeling before. But I thought

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I don't know enough and the best thing I can do is not to go. And they didn't push back. They said,

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if you feel this way, don't go. And the following day, we met in the office, and this was the last day

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that we worked out of an office for a while. We took our laptops, and we ended up working from home.

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So, I was in a New York apartment, which is not the best place to be. And we wouldn't be able to be

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outside too much. We tried to bike. We went on walks, and we felt a little bit constrained. So, we

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ended up leaving New York and we stayed three months in one cabin in the woods on the Appalachian

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Trail. And then second period three months closer to you in Georgia in the mountains for another

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three months. And we loved it. We could hike. We could go on walks. We could go on a lake with a

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kayak. It was really lovely. We had great Wi-Fi. I continued to work. And I actually, I think

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wrote more and felt more inspired being away from the office than being at a desk. So, it was a new

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revelation for me, a change of scenery. Actually, somebody told me that my writing doesn't sound

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any more as if it was written at a desk in a high-rise in Manhattan, which I took as a compliment.

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I hope it was meant to be as one. Well, you definitely write and speak a lot about remote work,

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about your love of travel and how many countries you've visited. You've really spent your life

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traveling and learning. How many countries have you visited now? I think it's been about 80 more than

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80. In Europe alone, all the countries are so tiny. So, when you're in the US, you can travel coast to

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coast and don't really leave the country. In Europe, you drive for two hours and here are in Belgium,

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the Netherlands and Germany, different food, different language. So, in Europe, it's pretty easy to

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collect, you know, 20, 30 countries in a few summers. So, I was born in Poland, and I grew up in Poland

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and then I ended up going to schools around Europe in Brussels and Paris. And I picked up a book,

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"One Up on Wall Street" that you and I talked about by Peter Lynch. And my mind was made up. I knew I

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have to be an investor and I kept on learning. I found an internship in New York that turned into a job

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and I've been with the same team that I started with 18 years ago. I'm still with the same team.

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We left the original firm, became independent. But among friends, I think it's pretty unique

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from what I can tell to have been with the same team for 18 years. A lot of my friends have been

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with multiple different firms. I was really fortunate to have found the right crew to stay with for

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all this time and wonderful clients to work with and a free environment to grow and work. So, I feel

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very blessed, very fortunate. It's amazing. You know, I was also inspired by Peter Lynch's book and I

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have been invited by somebody and have the opportunity to have dinner with Peter Lynch in August.

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So, I'm pretty excited about that. He is really a childhood hero to me. But there's so much about your

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background that I just, I mean, I love to read about your background. Growing up in Poland, I have written

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down, you had a line from the book that I really liked about being born on the wrong side of the iron

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curtain and what your childhood was like. So please, I want to go into this a little bit on the

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podcast because I think it's just so fascinating. Can you talk about what it was like growing up in

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Poland when you were born, the changes that you witnessed, your experiences with your grandmother

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and grandfather? I think it's all so important in describing your investment style and philosophy.

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So, it's a great question. I think what I discovered is that there's this moment when we become

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investors, but when we really look back and I had conversations with both of you about your

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childhood and upbringing, you realize that you've been shaped in a certain way over time through all

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kinds of experiences. And even the fact there were value investors that we have a contrarian mindset,

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maximum pessimism that I'm sure we'll talk about. I think we're shaped in a certain way. So, I was born

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in 1980 in Poland and Poland was a country that had a centrally planned economy. It was one party.

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And in 1980 there were big strikes around the country against the government to basically demand

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more freedom. And my parents were in medical school. They were sent home about a year after I was born

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because a martial law was put in place. So, the government was not happy with the people on the streets,

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the solidarity movement was a big phenomenon at the time. And I as a child in diapers, I had no idea

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what's going on. But then in 1980s when I was little, I have memories of certain moments of life that

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I thought all the kids have the same experiences. We would go with my grandpa once a week and pick up

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ration cards. So, all the stores were owned by the government. All the businesses were owned by the

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government. There was no free market in the sense that you see everywhere else or most of the places

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in the world. And the stock exchange was shut down. But the government was so inefficient

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providing services that there was a shortage of everything in government stores. But then there

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was a gray and black market so you could actually buy things but not from the government but from

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the farmer, from everybody else. And I didn't grow up with the sense that we didn't have things.

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I grew up with a mindset of abundance and I had a very happy childhood. But that image of me walking

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with my grandpa to get ration cards for me was the event of the month. He would tell me stories, how he

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was growing up and we would go to a building that was actually a historic building in town. So, he

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would tell me tales about the knights and the kings and who lived in this building. Then looking back,

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I realized, oh, this was just an office at the time used by the government to hand out ration cards.

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And the ration cards would say how many ounces of flour, milk, meat, chocolate you can buy.

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Basic products. And if you had kids, then you could have a little bit more of certain products.

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And then you would go to a government store and try to buy it. And the stores were half empty,

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half of the time. So, you'd have to line up and actually get the products. So, these are the little

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images that I had. And only later I realized not the whole world works this way. And Poland was

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changing very quickly. And when I was eight or nine, we had the semi-free democratic elections and

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then fully democratic elections. I actually got to meet later on as an adult the first Polish

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democratically elected prime minister at the time, which was quite a big thing. It was an older

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gentleman. It was a very touching moment for me to see him. But things were changing quickly. We

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went to Austria, Vienna as the first trip to the west. So, we couldn't travel to the west. People

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couldn't have passports at home. It's hard to imagine those things when you think about it. But the

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freedoms were stripped away, even the basic freedoms. And Vienna for me was just an incredible experience.

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I saw supermarkets. I saw color. I saw ads. I saw cars and streets and people happy and

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dressed in all kinds of things. And it just felt like a different world. It's that moment and the

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technicolor when the movie goes from black and white to color. So especially winter is in Poland

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where the leaves are gone, and you have the seasons. It's all gray. So, seeing Vienna was really a big shock

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to me and I couldn't understand why the two worlds have such different outcomes. And then Poland

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started to open up and turn into what the west looks like. So, the supermarkets opened up. The stock

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exchange reopened up after 50 years. We had this very chaotic early stock market with five, ten,

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fifteen stocks that went up and collapsed and there were stories of fortunes made and fortunes lost.

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We had hyperinflation. We had bank runs. You name it. We had a hundred years of economic history in

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ten years because it was such a huge transformation from a frozen state to a free market economy.

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And I think I needed another decade or two and a few degrees to really make sense of, what did I

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witness as a teenager? What really happened? And how does this whole thing work? And I think it

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shaped me in a certain way and I was curious about numbers, people in history. I just wanted to make

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sense of it. And Peter Lynch's book pointed me in a certain direction. Peter Lynch writes that

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stocks are small pieces of businesses and I thought I can combine everything I'm curious about, the

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economy, the politics and all the pieces and the history, people, and numbers in one place. And if I'm

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right now, and then you can actually make money owning stocks. So, it spoke to me and it also spoke to

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me because I felt like the stock market doesn't care what's your age, what's your background, what's

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your experience, what's your gender. The stock market is just there available if you want to buy

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small stakes of businesses. And if you did your work and if you're more right than wrong,

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you'll do just fine. And for me, it was such an incredible idea, the fact that I get to own businesses

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when growing up, you couldn't even own a small business, everything was owned by the government.

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Tiny little businesses had licenses, a florist maybe had a license, but other than that,

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nobody could really own a substantial business. So, to me, it was just an incredible

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tale that Peter Lynch painted in my mind, and I was sold. Yeah, that's such a great story. I love

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your background. And I've heard you talk about how your grandmother taught you to go bargain hunting.

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Well, Scott and I were talking about those early days, how you pick up different ideas in your life.

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And then only later you realize, where did this idea come from? Why do I care about the value and

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price? Why do I care to get a deal? And I watched my grandma go and shop and you would go talk to

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farmers and they would have eggs and beets and potatoes and so on. And she would negotiate a price and

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she would never take the price that they had listed, and she would always find value and she would

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look at the produce if it's good or not. So, I grew this perception of, well, the price is what they

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ask, but the value is what you get. And looking at stocks when Peter Lynch was talking about businesses

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and then Warren Buffett and other books that I discovered; I realized you can apply the same

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thing, the same philosophy to stocks. And there was a contrarian mindset that I think I developed early on

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that I don't know where it came from. I think many sources. One, first of all, you wouldn't really

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listen to the communist government propaganda. So, you wouldn't have really taken the headline for what

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it is. So, from the beginning, I knew I have to think for myself. And the old history books were

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written in a way that wasn't exactly true. So, I always knew that you have to find a new edition or

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read between the lines because it's not the truth. And it's kind of the same with stocks. There are

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all kinds of opinions and you have to pause and think, what really matters? What's really true? What's

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really relevant in my case when I want to buy this particular business. And one more story that I

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share in the book, I'm left-handed. And I was the only or one of two left-handed kids in my early

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groups or classes at school. So, I thought I'm the only one. I didn't know that there are other

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left-handed people. Guy Spier, by the way. He's left-handed to the extent that I know.

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Scott is left-handed. There you go. But as a left-handed person, I always had

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immediately a different perspective than everybody else. The way I sit at the desk, the way I write,

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the way my elbow goes to the left, the way I pick up pencils, sports. So, I could always see the

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world from a different perspective. And I think the same way I look at stocks, I just look at them

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in a different way than a lot of other people do. And what Sir John talks about maximum pessimism

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really resonated with me. And Francois Sicart, who is my business partner, talks about being a

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contrarian as well, how the best opportunities have to be there when nobody wants to buy.

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And as an idea, as a philosophy really spoke to me, and I think it served me really well throughout

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all those years. Yeah, well, I mean, that's true. The only way to just see my share of results from the

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crowd is to do something differently than the crowd. That's really the only way. But I know at some point

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you found your way. You talk about being in a bookstore and finding your way to Benjamin Graham.

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And then I saw you at the Berkshire Hathaway annual meeting. So, you're definitely a part of that

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group now. And you even got to ask Warren Buffett a question this year. And I remember thinking,

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"Oh, that's such a great question. I want to know the answer to it.” Can you recall the question

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that you asked Warren Buffett this year? I asked him about a hundred-year vision. And I have to tell

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you the reason I was at that meeting is you. Because you and I were talking on the podcast,

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On, Talking Billions. And towards the end, you asked me, "Are you're going?" And I wasn't really

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planning to go because I had a trip before and after. But I said to my wife, "You know, Lauren

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has asked me." And I told her, I told my wife that if one more person asks me, "I’ll, go."

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So, I was the straw that broke the camel's back. Did you enjoy it? Oh, I loved it. It was so

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much fun. And then one friend told me, "Put down your name." Well, he was putting down his name to ask

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a question. And I thought the odds are not in my favor. I mean, there's 40,000 of us and they will

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ask 20 people or 15 people. I don't remember. So, I thought, you know, it's a lottery ticket. So, I'll

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put down my name. And then we walked up, and they were reading the numbers and they read my number

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first. And I didn't even think it's my number. So, they're looking at everybody. And I look at them

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and I pulled out the number and it was my number. I asked him about a hundred-year vision because of

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the kind of investing that we do at Sicart Business Associates. So, we manage money for families.

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And the legacy business is multi-generational wealth and the newer clients, they created wealth or

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inherited wealth. And they would like to see this wealth last a lifetime and then maybe even

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beyond over multiple generations. So, we have those conversations about a hundred-year vision because

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those fortunes that we manage have been around for a hundred years or more. And the minute you start

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to ask yourself, what kind of portfolio would you build for a hundred-year investment horizon? We

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sometimes call it an infinite investment horizon because in an ideal world, you would like it to

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continue to grow and never deplete, which is, which is possible. You just have to think about

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opportunities, risks in a certain way. But I wanted to see how Buffett thinks about a hundred-year vision

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and they both gave me a beautiful answer how they think about it and how the business was built and

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he talked about Benjamin Graham because Buffett himself wrote about Benjamin Graham, how he was a

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person that would plant trees for other people to enjoy. And it's a saying that I've heard in many

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places and I think it's a wonderful idea when you think about planting a tree that you might not

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ever enjoy, but the next generation will. I think there's a wonderful thought behind it. There's a tree

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in a park next to my grandparents that my great grandfather planted 105 years ago. And every time

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we walk past this tree; he planted that tree as a teenager. I think of great grandpa that he planted

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that tree. So, this idea of a tree that can serve the next generation is really interesting and appealing

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to me. So, I ask him that question because that's how we think about the money that we manage.

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I call it the capital that our clients don't immediately need, but the capital they cannot afford to lose.

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And I think on one hand, it opens us up to all kinds of opportunities in terms of taking a long-term

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view and a lot of businesses. So, we can be contrarian and we can be patient, but also there are

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certain risks that we're not willing to accept. And we can come back to it, but I call it the no-zero

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policy. So, I don't want to have any investment in the portfolio that I can imagine going to zero

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at the point of purchase. And there's a whole list of situations that can lead to that.

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Can you name a few? Sure. Questionable management, too much leverage and secular decline.

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These are the three big ones. And sometimes they exist all at the same time. So, you have a questionable

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management that's managing a business that's slowly shrinking. They choose to use leverage to cover it up.

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And eventually somehow, obviously, the whole thing implodes. There was a company in South Africa

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that had operations in Europe and in the US that I won't mention the name, but I wrote about it so

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people can look it up and see. I wrote it up for our interns to show a case study of what can go wrong.

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And I started writing that article when this company was mentioned on a cover of a magazine as an

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example of a visionary management. And I was thinking, I'm seeing something that whoever wrote

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that article is not seeing. And I wrote it down as a potential, potential implosion.

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And a year or years later, they removed the management. There was some criminal proceeding

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against them. There was an accounting fraud and more things that happened. But when you see something

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that's not right, you don't have to exactly know what's wrong. You have the choices and investor to

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just go away, move away, don't even consider it. But for our interns, I write those things down

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because I feel like I want to show them what can go wrong because these are the places I don't want

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to go. Yeah. How do you evaluate management? Well, it's the, I think it's the hardest part. But the way

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I look at it, I like to, and these days there are so many ways to collect information beyond the

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annual report and the filings you can read transcripts from their earnings. I actually like to hear

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their voice. The same way my clients tell me, I just want to hear your voice, especially in moments

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of difficulty and distress. I want to hear their voice. I want to see how they're presenting ideas.

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And I prefer if they under promise and over deliver, I think if you find a management that does it

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consistently, not in an overly humble way, but in a way where they say, we just don't know. And this

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is what we know. And that's what we share. And that's how we prepare for all kinds of circumstances.

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I prefer that, than somebody that's a great salesperson and over inflates the story and eventually

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you can lead to a big disappointment. Maybe not a huge disaster, but a couple of disappointments,

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disappointments down the road. But ideally, I'd like to see this management go through ups and

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downs, which is challenging these days because the turnover among the top executives is so high.

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And there are some statistics that show that they spend fewer and fewer years in that role.

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But ideally, I'd like to see them go through an easy time and a hard time and just see how do you

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manage this business? And then what kind of practices you have? And how do you think about cash flow?

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So, do you have some cash left on the side. How do you think about using debt and leverage? Are you disciplined?

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And I'd like them to plan for a difficult time. COVID was a very stressful time for a lot of

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businesses and some businesses continued without any problems; some businesses end up asking for

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government help. And I won't name any industry, but there's one particular industry that seems to

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go through cyclical issues. It's related to travel. Let me say that. And the amount of money they

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spend on buybacks and dividends in the previous five, 10 years was the exact amount that they asked

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for from the government during COVID. And I thought immediately, well, what if you just let it sit

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on the balance sheet? Then if something like COVID happens, you don't have to scramble and ask for help.

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You can just use your resources and continue. But I think that kind of mindset is not as often seen

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as I would like to see it. So that's how I look at it. Yeah, there's certainly a risk of moral hazard

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these days. After a series of government interactions over the last 10 years or more,

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one of the things that I really enjoyed in your Crisis Investing book Bogumil, was a story you

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shared about hiking the Appalachian Trail and encountering some rattlesnakes. We have rattlesnakes

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in Tennessee, but that's quite a story. I'd love to hear more about it. But also, you know,

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you relate it to some really important behavioral aspects of investing. And I was wondering if you

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could touch on that. Like when we see a snake, how do we determine if it's a rattlesnake or a harmless

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snake metaphorically for the market? That is a great question. I don't know if you know, but I loved

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snakes growing up. So, I was always curious, and I had a fascination with snakes and I had books about

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snakes and I could tell them apart and I had all the names, and I would go and walk in the woods and

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pick up some harmless snakes and bring them to our little summer home. And my grandpa, who was

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so afraid of snakes, you couldn't be more, was not thrilled about my passion. But their stories

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in the family of me bringing as a seven-year-old those snakes to the house. Oh, that's awful.

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I didn't look at it this way. I was so proud of myself that I found a snake. But that particular day

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we were hiking and we saw a baby rattlesnake and the sun made it very hard to see the other ones,

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but there were six or seven of them all in one spot. And it was really cool to see for somebody

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that loves to see the snakes. It’s a tense moment, though. Cool is one way to put it. Not how I’d put it. Terrifying would be another way.

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But it reminds me of the moments in investing where there are parts of the market that I just choose

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not to go to. It's a bigger question. I remember my first conversation with François Sicart before he

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hired me and I was a fresh graduate from a school in Paris and he was visiting some clients in Europe

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and I saw him in the morning, and I asked him for an hour or two about all the things that can

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go wrong in investing. And Enron was a big story at the time, was soon after the dot-com bubble.

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And I think he found it really refreshing that this kid from grad school is not asking him how to

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get rich in stock, investing in stocks. But how's just mesmerized about if you can give me a list of

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the places I shouldn't go to. I thought - Reverse engineering it the way Charlie Munger does.

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Just tell me where I'm going to die, so I never go there. So that was my idea. I don't know where it

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came from, but I just wanted to know where I shouldn't go to. And it's a list of stocks that we can

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or sectors or segments that we can talk more about. But the ones that I mentioned, too much leverage,

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secular decline, questionable management. Now during COVID, an interesting 

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thing happened. There was a whole index created for companies without profits. It was a call,

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I think it was called profit-less businesses. So, these were businesses that were listed on the

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stock exchange. Some of them not really new or young because we understand that younger businesses can

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have trouble still generating a profit. But they were listed on the stock exchange, but on top of it,

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they had silly valuations as a multiple of sales or as a multiple, I don’t know - of hopes.

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And eventually they represented this most attractive, hottest part of the market and some people

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got sucked into it. But we as analysts, when you look at the business and you see that for example,

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unit economics don't work, and somebody is losing money on every square foot that they rent out or

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in every car they resell, you realize that growth actually doesn't work in your favor because

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the bigger you get the more money you lose. So, it's a different kind of growth, right? It's not that

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you have some fixed costs you can grow out of your variable costs is your problem. But I think people

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are not even looking at what Peter Lynch says, like look at the actual business, what are you buying?

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Think for yourself for a moment. And people were just chasing what people have chased during a bubble

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and anything that's going up looked attractive. And I'm not going to hate much on crypto,

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but it was a whole big market. And to me, there was a moment in ‘21 when everybody from a bartender to a

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yoga instructor to a very wealthy real estate developer that I know was telling me that I should be in

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crypto. And I had no interest. I didn't participate. I thought it's not for me. I'm curious about the

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technology, but I feel like cryptocurrency is probably not the place to go, not for me. And I know people

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that lost a lot of money after that, and some people lost money they couldn't afford to lose.

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But these are the lessons that we walk away with. But Scott, back to your question, I think the best

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thing you can do is to learn from the mistakes of others. And it's the hardest thing to do because you

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can't relate to them. You’ve never felt them. So, it's very abstract. But I think it's the cheapest way

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to acquire knowledge. And if you're going to make mistakes, make them as small as possible,

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so they don't hurt you. And I have a growing list of things that I will not put in the portfolio.

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And I think that list will continue to grow because but at the end of the day, those stories tend to

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rhyme, businesses without profits that are over hyped. They continue to rhyme throughout history. So

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it's a different collection of businesses, but the story is really the same.

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We also don't invest in crypto. It is fascinating though from a technology standpoint. And then I think

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also, if you're very free-markets oriented to think through the possibility of not

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dealing, have asset pricing and fiat currency and you know that effects of inflation, etc. That's

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all a very interesting dialogue. Most people don't know this story about John Templeton, but I'll

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share it quickly. He tried to create his own country and partnered with two men and got really close

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to doing it. It was off the coast of Tonga. And eventually the US government was tipped off that

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they were doing it and the island was invaded. And now I think Tonga still controls it, but it was

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called the Republic of Minerva. And it was based on freedom, free markets. And you can actually buy

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some of the currency on eBay now. And I occasionally run across the coins and buy them there. So

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Bitcoin I think is fascinating from so many different perspectives, but we are not crypto investors either.

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I'm curious though. Can you run us through some of the other areas that you just totally avoid?

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You said you have a list, would you mind mentioning a few industries or different situations where

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you would completely avoid a company. Right. So apart from, as I mentioned,

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secular decline, leverage, questionable management, you can look at the quality of the industry. You can

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look at the quality of the business. And the big thing for me is can they actually make money in

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the foreseeable future. So, there are a lot of really exciting places in the market as a consumer,

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but you might not be able to find a business that works. And I think that's a challenge because

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for a lot of investors that get excited about the markets, they know a certain service or good,

369
00:36:45,840 --> 00:36:51,840
and they think it's really good because everybody wants it. But if you're giving away $100 bills for

370
00:36:51,840 --> 00:36:57,840
$50, I mean, there's no limit to how fast you can grow. And there are big stories in both

371
00:36:57,840 --> 00:37:03,120
you know, tech company that was really a real estate company and a used car dealership that was an

372
00:37:03,120 --> 00:37:07,440
online business where you could see that happen. So, these are the big parts that we avoid.

373
00:37:07,440 --> 00:37:14,240
Now what we focus on is the quality businesses with profits, with growth, with solid management.

374
00:37:14,880 --> 00:37:20,640
And it's not that hard to find those businesses. It's a lot harder to buy them because they're usually

375
00:37:20,640 --> 00:37:26,400
fully valued or overvalued. So that's where really the magic happens. And we like to buy them when

376
00:37:26,400 --> 00:37:32,320
they're down cheap and out of favor, which requires that moment of pessimism, even not maximum

377
00:37:32,320 --> 00:37:38,800
pessimism, but some sort of pessimism around the business. People have very short-term focus. And if

378
00:37:38,800 --> 00:37:44,560
the company misses a few quarterly earnings, you'll see a stock down 20, 30, 40, 50 percent sometimes.

379
00:37:44,960 --> 00:37:49,200
For reasons that are very short-lived. So, we're looking for situations where there's no

380
00:37:49,200 --> 00:37:55,440
permanent damage to the business. But for some reason, a delayed product launch, maybe they enter

381
00:37:55,440 --> 00:38:00,320
the wrong market. There's something that happened that's fixable and may take a while. We had a huge

382
00:38:00,320 --> 00:38:05,280
success in a particular business that had a product recall. And I won't mention which company,

383
00:38:05,280 --> 00:38:09,600
but it was fascinating to see how the market reacted when the product recall happened. And I actually

384
00:38:09,600 --> 00:38:15,440
heard the product recall on a radio in a car driving. And I wrote down the name and I went to the office

385
00:38:15,440 --> 00:38:20,160
and I looked up the company. And on the day of the announcement, the stock went down a percent or two.

386
00:38:20,160 --> 00:38:25,120
But once the earnings came out, and as you can imagine, if you're pulling out your major product

387
00:38:25,120 --> 00:38:32,160
from the shelves, your sales will come down, your margins will collapse. And the market was very

388
00:38:32,160 --> 00:38:36,640
unforgiving and that stock collapsed 50, 60, 70 percent at some point. So, we ended up getting

389
00:38:36,640 --> 00:38:42,240
really intrigued by it because we thought that the distribution is in place, the brand is in place.

390
00:38:42,240 --> 00:38:48,000
We like the management. We met them a few times. And I was watching that business for a while. So, I

391
00:38:48,000 --> 00:38:52,080
thought this might be a window of opportunity to buy it. But it doesn't have to be that extreme.

392
00:38:52,080 --> 00:38:58,880
Usually, it's a sentiment driven decline in the stock. What I like to do is any stock you find,

393
00:38:58,880 --> 00:39:03,600
look at the price range over the last 52 weeks. I think a lot of people get surprised to see that

394
00:39:03,600 --> 00:39:09,680
even the businesses they think they know very well; they trade in a pretty wide price range in

395
00:39:09,680 --> 00:39:15,120
obviously, the last year or two are unusual, but in a normal, more usual year or two, you'll see

396
00:39:15,120 --> 00:39:21,040
the price range is pretty wide. So, I'm always curious, what happened that made it possible for me

397
00:39:21,040 --> 00:39:26,160
to buy the stock closer to a low. And there are all kinds of events that can bring it down.

398
00:39:26,160 --> 00:39:31,040
They're usually driven by the behavior, the sentiment that Scott talked about. And being patient

399
00:39:31,040 --> 00:39:36,640
and disciplined gives you a chance to participate and go in. The peculiar thing about investing is that

400
00:39:36,640 --> 00:39:41,600
the best work you can do is when you're the least comfortable doing it. And so there are 

401
00:39:41,600 --> 00:39:47,840
months. It's very different than a lot of other pursuits where you pursue the sweeter and better

402
00:39:47,840 --> 00:39:53,120
and sweeter and better. In this case, you go in, you like the business, you like the management,

403
00:39:53,120 --> 00:39:59,280
you like everything about it. But for some reason, the market thinks it's not as attractive as it

404
00:39:59,280 --> 00:40:04,320
used to be. And the market has never been more short term focused. The turnover in stocks is very

405
00:40:04,320 --> 00:40:10,960
high. The turnover in management is very high. I think even if we don't change as a firm, as a

406
00:40:10,960 --> 00:40:17,600
philosophy, because the world is even less long term focused, there will be more opportunities,

407
00:40:17,600 --> 00:40:21,280
the way I look at it. And even with passive investing, when you think about it, the more money is

408
00:40:21,280 --> 00:40:27,360
invested without anybody looking at what's being bought and sold for active managers, I think that

409
00:40:27,360 --> 00:40:32,400
the opportunities will be incredible. They already are, but I think there will be more.

410
00:40:32,400 --> 00:40:39,760
In terms of opportunities, so these are kind of, timeless ideas, more timely thoughts if you're

411
00:40:39,760 --> 00:40:46,720
curious about the more recent pandemic era, COVID era. So, there are moments where we took advantage of

412
00:40:46,720 --> 00:40:53,360
the market sell-off in March of 2020. But more recently, when you look at 2023, there's really a

413
00:40:53,360 --> 00:40:59,600
tale of two different markets year to date, six months. And as much as I watch it, I mean,

414
00:40:59,600 --> 00:41:05,760
intrigued by it, we don't have to act on it immediately, but you can see that in the market,

415
00:41:05,760 --> 00:41:10,320
it seems to be up year to date, if you took the S&P 500 as an equal weighted index,

416
00:41:10,320 --> 00:41:16,240
or if you took away the seven top performing stocks, equities are actually flat or down.

417
00:41:16,240 --> 00:41:21,040
And you'll see quite a few businesses that are bigger, better than they were before the pandemic,

418
00:41:21,600 --> 00:41:28,320
but the prices are at the level that we've seen last time in March of 2020. So, there's an interesting

419
00:41:28,320 --> 00:41:33,840
phenomenon happening in terms of value that accrued because the businesses are better, but the price

420
00:41:33,840 --> 00:41:40,480
that collapsed because of a very different mindset sentiment in the market. So, there are always

421
00:41:40,480 --> 00:41:46,320
opportunities. You just have to know where to look. And we have very low turnover in the portfolio,

422
00:41:46,320 --> 00:41:52,480
but they're always opportunities to look at something. Yeah, how do you think about career risk,

423
00:41:52,480 --> 00:41:59,200
though? I mean, that's the game everybody plays, finding the right partners, that they understand

424
00:41:59,200 --> 00:42:06,160
your investment philosophy, but when your partners are looking at an index that has posted a positive

425
00:42:06,160 --> 00:42:12,320
return. And most, I mean, I think Scott, you actually crunched the numbers, and you were showing

426
00:42:12,320 --> 00:42:19,040
that year to date, the S&P 500 absent those seven stocks was like a 41-basis point loss or something

427
00:42:19,040 --> 00:42:25,680
like that. Negative 23 basis points through May. It's up a little bit, ex-those through June,

428
00:42:25,680 --> 00:42:31,520
but still not much. It's a massive contribution from those seven. The other thing that's interesting,

429
00:42:31,520 --> 00:42:38,400
that you kind of hinted at, Bogumil, was that I saw another measure that referred to implied correlation

430
00:42:38,400 --> 00:42:43,440
within the index. So, most people look at the index and they see the VIX at 13 and they're like,

431
00:42:43,440 --> 00:42:50,480
oh, everything's great. It's up, you know, 16%. The VIX is at 13. But if you go within the index,

432
00:42:50,480 --> 00:42:55,440
the reason the implied correlation is so low is because all these different stocks are going in

433
00:42:55,440 --> 00:43:02,160
different directions. You can find lots of depressed names in the market right now. It's really

434
00:43:02,160 --> 00:43:06,320
interesting time to be a bottom-up stop picker and have that discipline and approach.

435
00:43:07,040 --> 00:43:13,120
If you have a chance to collect, we collect 30 to 60 stocks at a time that we'd like to hold at

436
00:43:13,120 --> 00:43:18,800
least three, five years. But if you have that kind of focus among the 500 or the 2000 if you open

437
00:43:18,800 --> 00:43:25,840
yourself to global equities, there's always something to look at. But it's an interesting point that

438
00:43:25,840 --> 00:43:31,600
Lauren is bringing up and I think it's the idea that the clients that you choose and the clients

439
00:43:31,600 --> 00:43:36,960
that choose you that really matters in business. So, you might be a very successful investor using

440
00:43:36,960 --> 00:43:42,800
your own metrics, whatever it means to you, irrespective of returns or whichever benchmark of whatever it

441
00:43:42,800 --> 00:43:48,400
is that matters to you as an investor. But then to have the right clients that are on the same page

442
00:43:48,400 --> 00:43:55,040
and appreciate and value the same philosophy and metrics and the same idea behind the way we

443
00:43:55,040 --> 00:44:00,960
invest. I talk about the quality of sleep at the end of the day. I want good quality of my sleep

444
00:44:00,960 --> 00:44:05,760
and the client's sleep and a lot of the things that I talk about in the books are more qualitative.

445
00:44:05,760 --> 00:44:12,480
And I realize that they resonate with certain clients more than with the others. And we continue to

446
00:44:12,480 --> 00:44:18,240
onboard new clients, but it's always a very slow process for us. I'd like to see them a few times,

447
00:44:18,240 --> 00:44:25,920
talk to them a few times. And even if we think we know this is the right fit, the real test is going

448
00:44:25,920 --> 00:44:30,560
through a bear market and a bull market. And sometimes I feel like the bull market is harder than the

449
00:44:30,560 --> 00:44:35,440
bear market because the bear market, everybody knows that prices are down. But in a bull market,

450
00:44:35,440 --> 00:44:42,080
you see a divergence of sorts. And it's it always rhymes somehow or often enough that you have this

451
00:44:42,080 --> 00:44:49,600
group of stocks that have no business, no profits that take off. And sometimes they make a difference

452
00:44:49,600 --> 00:44:54,000
in the whole index and they pull the index in a whole direction. And then the valuations come in

453
00:44:54,000 --> 00:45:01,440
that get expanded. So, to outperform the benchmark in a time like this, that could be really short

454
00:45:01,440 --> 00:45:08,400
lived, but very trying for your business. It's not worth pursuing because the only way to perform

455
00:45:08,400 --> 00:45:14,560
a high-flying index is to have too much or a lot more of the high-flying stocks, which will be the

456
00:45:14,560 --> 00:45:21,040
stocks that will lead the decline in the following year and or year or two. And it rhymes every single

457
00:45:21,040 --> 00:45:27,360
time. But I think it's the biggest test for you as an investor and for your business and for your

458
00:45:27,360 --> 00:45:34,400
clients, if you're really on the same page. And when I noticed in ‘21, I think this was probably an

459
00:45:34,400 --> 00:45:40,400
exceptional time on so many levels, but I noticed the FOMO, the fear of missing out. And if

460
00:45:40,400 --> 00:45:45,120
the seeing that your neighbor is getting richer faster than you, JPMorgan said that this was this is

461
00:45:45,120 --> 00:45:50,160
the source of the biggest disaster in investing when you can't stand when your neighbor is getting

462
00:45:50,160 --> 00:45:55,360
richer faster than you. I think people got tested so much in this period of time. I've seen a lot

463
00:45:55,360 --> 00:46:00,400
of people that I respect a lot, very smart and seasoned investors that gave in to some of the things

464
00:46:00,400 --> 00:46:08,080
that we talked about and lost quite a bit in that part of the part of the market, and they don't

465
00:46:08,080 --> 00:46:13,520
talk about it anymore. But I noticed that on a behavioral side, the emotional discipline here,

466
00:46:13,520 --> 00:46:21,520
it was an amazing test for all of us. And it came with a big price if you couldn't just sit it out.

467
00:46:21,520 --> 00:46:28,240
I agree. I think you can condition yourself to look forward to a bear market or a bout of maximum

468
00:46:28,240 --> 00:46:36,000
pessimism. That's something that can really be learned. I believe it can be, but it's really hard.

469
00:46:36,000 --> 00:46:43,360
The true test is a bull market. And are you going to participate in irrational behavior because you

470
00:46:43,360 --> 00:46:49,600
can't sit on the sidelines or are you going to be patient and wait? It's very hard for even well-

471
00:46:49,600 --> 00:46:56,320
established money managers and can be very challenging for certain clients. So, communication, very

472
00:46:56,320 --> 00:47:02,320
clear communication about what your strategy is, what the client can expect from you during those

473
00:47:02,320 --> 00:47:07,920
scenarios. I think it's critical and you're obviously a great communicator. Your books are very

474
00:47:07,920 --> 00:47:15,760
clear and concise. Your essays are easy to understand, but they have very powerful concepts in them.

475
00:47:17,280 --> 00:47:24,240
You talk about the infinite time horizon as you call it with your families where you invest

476
00:47:24,240 --> 00:47:33,520
their capital. It reminds me that John Templeton was often asking me, or he would say, "I'm considering

477
00:47:33,520 --> 00:47:39,920
the best investments to make from my foundations over the next 200 years." And it was always

478
00:47:39,920 --> 00:47:44,800
shocking to hear him say it because you're like, "Wait, what? 200 years? That's where your brain is."

479
00:47:45,600 --> 00:47:52,400
You're thinking out 200 years. It's so different than the perspective of today's market, which you

480
00:47:52,400 --> 00:48:00,800
mentioned is very short term focused. And I'm curious when you're positioning portfolios for that

481
00:48:00,800 --> 00:48:07,360
infinite time horizon, how do you think about that with stocks and bonds and asset allocation?

482
00:48:07,360 --> 00:48:14,640
I mean, do you do total asset allocation? Are you just selecting stocks? Are you advising on

483
00:48:14,640 --> 00:48:20,800
their total portfolio? Can you explain that to me? It's a couple of great questions. From the portfolio

484
00:48:20,800 --> 00:48:27,200
perspective, we invest in public markets, stocks, and bonds. Although bonds were not interesting at all,

485
00:48:27,200 --> 00:48:34,960
and now finally they have some yield. It was an interesting phenomenon in the last 10, 20 years

486
00:48:34,960 --> 00:48:40,560
investing in bonds. But 99% of our attention is on stocks, picking actual businesses.

487
00:48:42,240 --> 00:48:48,160
We think of the cash level as a sort of a buffer. So, there are times when we're not finding enough

488
00:48:48,160 --> 00:48:53,760
ideas that are priced in a way that would offer sufficient returns. So that's how we look at it. It's

489
00:48:53,760 --> 00:48:59,280
not that we're not finding businesses we like, but the prices are not attractive in our mind. So, in

490
00:48:59,280 --> 00:49:04,960
moments like this, and it was actually late to 2019, our cash position was growing, and it was

491
00:49:04,960 --> 00:49:09,840
growing to the point that it became part of many conversations with clients. Why is the cash

492
00:49:09,840 --> 00:49:15,520
growing? And we said, we're trimming quite a few positions that we think are truly overpriced on.

493
00:49:15,520 --> 00:49:21,200
We just ran out of runway, and we have to move on. And we were not finding enough replacements. So

494
00:49:21,200 --> 00:49:25,760
going into March of 2020, we had this buffer of cash. We didn't know that COVID will happen,

495
00:49:25,760 --> 00:49:32,400
but the economy was performing at its peak, unemployment, margins we’re looking at, sales. It looked

496
00:49:32,400 --> 00:49:37,440
like it was getting better and better. So, it created a moment where we were just comfortable

497
00:49:37,440 --> 00:49:42,640
holding a bit of cash just to see where things go. And that cash became really helpful in March of

498
00:49:42,640 --> 00:49:48,800
2020. And just as an example, in times like this in terms of allocation, we are willing to put

499
00:49:48,800 --> 00:49:53,280
quite a bit of that cash to work very quickly if the market creates an opportunity. And that's what

500
00:49:53,280 --> 00:49:59,840
we were doing in March of 2020. But we kind of let the market tell us where we should be. And if

501
00:49:59,840 --> 00:50:04,480
the prices are low, and the businesses are great, and we're finding a lot of opportunities, we're

502
00:50:04,480 --> 00:50:09,760
happy to be fully invested. So, it's not a set target when people say, "Do you always call 5%

503
00:50:09,760 --> 00:50:15,200
cash or 10% cash?" It doesn't work that way. We just let the market tell us where we think we

504
00:50:15,200 --> 00:50:19,120
should be. We want to be the least wrong. And I really like that idea of being the least

505
00:50:19,120 --> 00:50:23,680
wrong in investing. We don't have to be 100% right. And outperform all the time, we just want to

506
00:50:23,680 --> 00:50:27,920
be the least wrong. And I think it really matters with a 100-year or 200-year vision.

507
00:50:27,920 --> 00:50:34,320
There's this concept that Luca Dellanna talks about, “game-overs” in his book, Ergodicity.

508
00:50:34,320 --> 00:50:38,880
That you might be familiar with. But he basically tells us about the games that we play.

509
00:50:38,880 --> 00:50:47,600
If you are a competitive skier, you want to show up for all the competitions. So, it's not the fastest

510
00:50:47,600 --> 00:50:52,320
skier that wins, but the one that shows up to all the competitions without a broken leg. And actually,

511
00:50:52,320 --> 00:50:58,160
that's the one that ends up winning. And life is the same as an investor. You don't want to have a

512
00:50:58,160 --> 00:51:03,120
total blowout in your portfolio. So, the way you structure, the way you build your portfolio, the

513
00:51:03,120 --> 00:51:10,400
kinds of risks that you accept matter. So that if you're managing a family fortune over decades,

514
00:51:10,400 --> 00:51:17,440
the last thing you want to see is a massive permanent loss of capital in any particular year,

515
00:51:17,440 --> 00:51:23,360
because it's so hard to make it back. People don't think about it. But a 50% decline requires a

516
00:51:23,360 --> 00:51:29,760
100% return just to come back to where you were. And it becomes almost impossible to come back.

517
00:51:30,640 --> 00:51:35,360
And that's how we think about navigating the ups and downs of the market. When you have substantial

518
00:51:35,360 --> 00:51:42,000
capital and a lot of time, the infinite horizon in an ideal scenario, then the rate of return,

519
00:51:42,000 --> 00:51:48,160
it just has to be respectable. You don't have to be winning all the trophies on the way, being the

520
00:51:48,160 --> 00:51:53,280
best manager. Actually, I don't know of anybody that's been the best manager of every single year,

521
00:51:53,280 --> 00:51:57,680
year after year because the styles go through ups and downs, even between the big labels,

522
00:51:57,680 --> 00:52:02,720
between value and growth, which I don't think fully describe the nature of investing, but

523
00:52:02,720 --> 00:52:08,880
the market goes through its ebbs and flows. So as long as you keep showing up and don't make a massive

524
00:52:08,880 --> 00:52:13,680
mistake, and if you have 30, 60 stocks, you know the businesses very well. You bought them at the

525
00:52:13,680 --> 00:52:20,480
prices that made sense to you. You know that you didn't put in anything that could be a potential zero.

526
00:52:20,480 --> 00:52:26,240
That portfolio will do just fine. Will it outperform in every single month? I don't think so.

527
00:52:26,240 --> 00:52:31,280
Will outperform in every single year? I don't think so, but I think it will do just fine.

528
00:52:31,280 --> 00:52:38,240
Especially in moments when the market collapses, I think people end up making a lot of silly decisions.

529
00:52:38,240 --> 00:52:44,800
So, it's better not to have a big drawdown. Emotionally, I think it's very interesting to have this

530
00:52:44,800 --> 00:52:49,920
conversation with a potential client before it happens. How would you feel if the portfolio was down

531
00:52:49,920 --> 00:52:55,360
20%, but I think the truth comes out when you actually go through a downturn and you both see,

532
00:52:55,360 --> 00:52:59,920
how do you react when the portfolio is down 20%? What kind of decisions would you make?

533
00:52:59,920 --> 00:53:04,960
And how would you operate? Are you okay just sitting out and holding onto those positions? And I

534
00:53:04,960 --> 00:53:10,400
think you can learn a lot about how clients think in moments and how they feel in those moments.

535
00:53:10,400 --> 00:53:14,960
And that's where we earn, that's where we earn their trust and confidence in moments like this,

536
00:53:14,960 --> 00:53:20,880
where they see that we could actually have a steady course and make it through and don't do anything

537
00:53:20,880 --> 00:53:27,520
that's unnecessary or irresponsible and good things will follow. That's how we think about it.

538
00:53:27,520 --> 00:53:32,480
It's a lot of responsibility on the investment manager to, A. Manage the portfolio,

539
00:53:32,480 --> 00:53:41,200
B. Manage your clients' expectations. I have some, you know, it just sometimes, it feels like a lot,

540
00:53:41,200 --> 00:53:46,640
because it is a partnership between you and your client. And even if you have great returns very

541
00:53:46,640 --> 00:53:52,880
consistently, you can still post a not-so-great number if the client is constantly doing the wrong thing

542
00:53:52,880 --> 00:53:58,400
and adding to the portfolio and the markets up and removing capital when the market's down.

543
00:53:58,400 --> 00:54:03,040
So, it is critical and sometimes I think, gosh, well, the list of responsibilities just,

544
00:54:03,040 --> 00:54:11,040
doesn't stop. It's, it's a lot, right? So, you're managing career risk, you're focusing on the portfolio,

545
00:54:11,040 --> 00:54:18,000
you're trying to make good long-term investments; you're managing a client's psychological issues.

546
00:54:18,000 --> 00:54:24,800
Can be intense. And it's not static. Even clients that we've had, they, they change because it's

547
00:54:24,800 --> 00:54:28,720
a different point in their life than five or 10 years ago. They have different needs. They have

548
00:54:28,720 --> 00:54:33,440
different expenses. They might have children, that children might be going to school right now.

549
00:54:33,440 --> 00:54:40,160
And the interesting phenomena about what we do is when we work with multi-generational wealth,

550
00:54:40,880 --> 00:54:47,280
we work with new sets of clients with every generation. So, we've had a wonderful relationship with

551
00:54:47,280 --> 00:54:53,440
the grandfather or the grandmother. And now we're working with two or three siblings. So, you get to

552
00:54:53,440 --> 00:54:58,960
learn a lot about family dynamics and then how do we manage it as one? Do we divide it into three?

553
00:54:58,960 --> 00:55:04,800
Are the interests the same? Should some of it be managed together? Some of it should be

554
00:55:04,800 --> 00:55:10,640
managed in separate accounts. So, there are all kinds of things that come to play that go way beyond

555
00:55:10,640 --> 00:55:18,000
just picking stocks that go up. And it's never ending. Bogumil, do you see completely different

556
00:55:18,000 --> 00:55:22,480
investment perspectives on an intergenerational basis? Because I would assume that the older

557
00:55:22,480 --> 00:55:28,640
patriarchs have seen a lot of markets. And some of these younger clients have only known one market,

558
00:55:28,640 --> 00:55:38,400
which goes up. So how do you bridge the gap there philosophically? So, a couple of things that we were

559
00:55:38,400 --> 00:55:45,040
able to do. We have the practice of inviting the next generation as interns to spend at least

560
00:55:45,040 --> 00:55:49,920
a month with us in the summer. And we've done it over the last 20 years. So, some of the kids that I

561
00:55:49,920 --> 00:55:55,600
started with that are close to my age, then we were both at the firm and they ended up choosing

562
00:55:55,600 --> 00:56:00,640
completely different careers, but they feel empowered to ask the right questions now that they're responsible.

563
00:56:00,640 --> 00:56:07,280
They have a whole different role in the family. So, educating them and allowing them to see what is it

564
00:56:07,280 --> 00:56:11,280
that we do? And they don't have to understand all the technical side to it, but just to understand

565
00:56:11,280 --> 00:56:17,440
the philosophy and how it has served their grandfather and their great grandfather. So, I've been with

566
00:56:17,440 --> 00:56:24,080
this team for 18 years with Francois Sicart, Allen Huang and Patsy Jaganath. And Francois Sicart started in

567
00:56:24,080 --> 00:56:30,800
1969 and some of the legacy business that we have dates back even before him. So, his

568
00:56:30,800 --> 00:56:38,640
late business partner. It was managing those assets before in 1969 until he passed away in 1980.

569
00:56:38,640 --> 00:56:43,840
So, there's a lot of history and a lot of legacy. And I noticed that among the newer clients that they

570
00:56:43,840 --> 00:56:50,720
created wealth in this generation, a lot of them resonate with what we do. And they realize there's the

571
00:56:50,720 --> 00:56:54,960
money making time in life and then money growth and preservation that follows.

572
00:56:54,960 --> 00:57:00,720
Getting rich and staying rich, completely different approach, different sets of risks. Usually, you

573
00:57:00,720 --> 00:57:06,000
create wealth in one single business or two or one career move that was really beneficial. And then

574
00:57:06,000 --> 00:57:12,400
you think of the following path that's more diversified portfolio of investments that can do very well

575
00:57:12,400 --> 00:57:18,640
over the long run. But you can't have the same expectations as your initial startup or family

576
00:57:18,640 --> 00:57:24,400
business that you sold. So, it's fun to see how it resonates with some people. And

577
00:57:24,400 --> 00:57:30,480
they just get it. Some people are willing to learn and want to find out how it all operates. And

578
00:57:30,480 --> 00:57:35,840
obviously, there's some personalities that somehow it doesn't resonate with. And then it gets a little

579
00:57:35,840 --> 00:57:41,840
bit tricky. It's an ongoing experience. But I think what people don't appreciate when they think

580
00:57:41,840 --> 00:57:45,760
about investing. And I asked that question in my podcast quite a bit and I actually asked

581
00:57:45,760 --> 00:57:50,240
Guy Spier that question because they said people manage their own money, then they manage family

582
00:57:50,240 --> 00:57:54,240
money and then they manage other people's money. And there are three different experiences. When

583
00:57:54,240 --> 00:57:59,760
you're managing your own money, well, let's say you're not happy with it. That's just one person

584
00:57:59,760 --> 00:58:05,680
that you can be angry at. And then you respond. You have to respond to. If you're managing family

585
00:58:05,680 --> 00:58:12,720
money, which some people think is alluring, but it's actually a hard job because you're responsible for

586
00:58:12,720 --> 00:58:17,440
quite a few new human beings that have their emotions, their expectations, and they will challenge

587
00:58:17,440 --> 00:58:22,720
and ask why you do what you do. And then you open it up even more and you have people that are not

588
00:58:22,720 --> 00:58:27,600
your family or not even your friends, just people that were referred to you or you were recommended

589
00:58:27,600 --> 00:58:33,280
to them. And you have to learn how they think, how they operate. And the first conversation,

590
00:58:33,280 --> 00:58:39,520
the first impression matters. But then actually seeing how they really feel in all kinds of markets,

591
00:58:39,520 --> 00:58:44,000
what we spoke about is really fun to see. But I think that part of investing is not

592
00:58:44,000 --> 00:58:48,560
talked about enough. People look at the performance, people look at what kind of stocks do you buy?

593
00:58:48,560 --> 00:58:54,720
But to me, what's really important is whose money are you actually managing? And what do they want?

594
00:58:54,720 --> 00:59:01,600
What do they need? How do they feel about it? And it's a very tricky place and a fascinating

595
00:59:01,600 --> 00:59:06,800
place to be. And it's an ongoing learning process of how do we do a better job? How do we serve our

596
00:59:06,800 --> 00:59:12,880
clients better? And how do we earn and keep that trust? Yeah, family dynamics are really interesting

597
00:59:12,880 --> 00:59:19,840
to me. And I can attest that managing money for family can be a double-edged sword. There are

598
00:59:19,840 --> 00:59:27,920
pros and cons to all of it. Where are you looking in the world for investment opportunities right now?

599
00:59:27,920 --> 00:59:33,360
I can imagine your turnover is not very high. So, you're probably not trading every day.

600
00:59:34,640 --> 00:59:39,040
So, what is your process and where are you finding opportunities?

601
00:59:39,040 --> 00:59:45,440
So, the big picture idea is looking for quality businesses that are down cheap and out of favor.

602
00:59:45,440 --> 00:59:50,960
And the portfolio has 30 or 60 stocks at any given time. Some of them will be more cyclical. So

603
00:59:50,960 --> 00:59:55,360
these are businesses we can't hold forever. There's something that will play out when we have to

604
00:59:55,360 --> 01:00:02,400
exit. And some that I prefer, we can hold them for almost forever. Although these days, I think

605
01:00:02,400 --> 01:00:07,120
things changed too much to find too many that too many businesses that I could hold forever.

606
01:00:07,120 --> 01:00:13,280
But I wrote this article that I called a stock for a grandchild. And it was inspired by a question

607
01:00:13,280 --> 01:00:17,760
that one client asked us if they wanted to give one single stock to a grandchild that was just born,

608
01:00:17,760 --> 01:00:23,920
what stock would it be? And I won't mention what it was. But I wrote down the list of things that I

609
01:00:23,920 --> 01:00:28,960
would be looking at. Right? So, it has to be a publicly traded company. I would like it to be -

610
01:00:28,960 --> 01:00:33,920
see that it's been around long enough. So, it has a proven business model, hopefully already profits.

611
01:00:33,920 --> 01:00:40,880
And I could see that they have a long runway to grow that they're more markets they could enter or

612
01:00:40,880 --> 01:00:46,800
more price points or more consumers. And when you really think about it for a moment, what kind of

613
01:00:46,800 --> 01:00:53,600
a business would you be comfortable buying once and not selling for 20 years? And I think it increases

614
01:00:53,600 --> 01:00:58,000
and improves your quality of work and research when you start thinking about it. Even if not every

615
01:00:58,000 --> 01:01:04,320
single stock you're going to end up holding for 20 years, I think that will improve your quality of

616
01:01:04,320 --> 01:01:10,720
work. Chris Mayer that you might know wrote "100 Baggers" book. He talks about this idea

617
01:01:10,720 --> 01:01:14,800
of finding a stock that will go up a hundred times and people tell him, well, not all stocks will go

618
01:01:14,800 --> 01:01:19,440
up a hundred times. But he has an interesting point that the minute you start thinking about what would

619
01:01:19,440 --> 01:01:25,040
it take for a business to stock to go up a hundred times, you immediately filter out so many stocks that

620
01:01:25,040 --> 01:01:31,920
it will be up only 10, 20, 50 percent or maybe 75 percent. And you focus on businesses that really

621
01:01:31,920 --> 01:01:37,760
have a huge potential, not only because they can grow, but also maybe because you bought them so cheap

622
01:01:37,760 --> 01:01:43,280
in a moment of maximum pessimism that there is already an upside because of the valuation that can

623
01:01:43,280 --> 01:01:48,160
recover. But then you can have all the upside because it could be a much bigger business. But I think

624
01:01:48,160 --> 01:01:54,560
it helps build a portfolio where you have the cyclical part that comes and goes depending on where we

625
01:01:54,560 --> 01:02:00,880
are and then the long-term growth kind of market. But specifically, right now, as I mentioned,

626
01:02:00,880 --> 01:02:06,000
and Scott pointed it out, how you have really two tails in the market. You have the indexes up,

627
01:02:06,000 --> 01:02:10,800
but the equal weighted index or without the top seven stocks is actually flat. And when you look

628
01:02:10,800 --> 01:02:17,920
closer, there are so many businesses that are trading at three, five-year low. And the businesses are

629
01:02:17,920 --> 01:02:23,520
much better and stronger. During COVID, we had such a big leap in adoption rates in so many different

630
01:02:23,520 --> 01:02:31,120
services. And the businesses grew, but the market doesn't seem to give them much credit. And I think

631
01:02:31,120 --> 01:02:37,600
there are some opportunities to be considered in this market. At any given point in an ideal world,

632
01:02:37,600 --> 01:02:43,760
I would like to add a few new ideas, even if they are starter positions each year. And we give ourselves

633
01:02:43,760 --> 01:02:49,840
a lot of time buying and selling, unless it's March 2020, then we act quickly. But because we can go

634
01:02:49,840 --> 01:02:54,720
in gradually, we don't have to pick the absolute bottom. And when we sell, we don't have to pick the

635
01:02:54,720 --> 01:03:02,880
absolute top. Nobody can. So, I'd like to find a few ideas every year so that the portfolio keeps on

636
01:03:02,880 --> 01:03:07,360
getting refreshed and refreshed and refreshed over time, even with a low turnover.

637
01:03:07,360 --> 01:03:13,280
And it's a global portfolio, correct? Well, the majority of these days is in the US, but we have

638
01:03:13,280 --> 01:03:20,960
a mandate so we can go out and buy something outside. Now the US market is so big, so liquid, and

639
01:03:20,960 --> 01:03:25,920
there's so much going, it has so much going for it, disclosure, the shareholder-friendly mindset,

640
01:03:25,920 --> 01:03:33,360
the depth of liquidity, and so on. When we go outside, the hurdle is pretty high because we can't

641
01:03:33,360 --> 01:03:39,840
really replicate always the kind of benefits that we get in the US market. So, we'll look and we'll

642
01:03:39,840 --> 01:03:48,320
consider, but it has to have a lot more appeal than a US stock for those reasons. And I think the US

643
01:03:48,320 --> 01:03:54,320
market is big enough to build a really healthy portfolio. But if we see something that's non-US,

644
01:03:54,320 --> 01:03:59,040
I grew up in Poland and I lived in Europe, so I'm very comfortable looking at European stocks.

645
01:03:59,040 --> 01:04:03,840
Allen grew up in Asia, so he's very comfortable looking at Asian stocks. And we both looked at

646
01:04:03,840 --> 01:04:09,040
South American stocks at some point. I actually went to Brazil at some point to visit some

647
01:04:09,040 --> 01:04:15,760
companies. So, we're open to look at opportunities wherever they are. But the US market is a big

648
01:04:15,760 --> 01:04:23,520
ocean to fish in. It is a big ocean to fish in. Well, this has been such a delightful

649
01:04:23,520 --> 01:04:31,040
conversation. Do you have parting thoughts for our audience on family, money, and life, and how

650
01:04:31,040 --> 01:04:42,320
to build a happy one? These are big questions. I like the idea. Sorry. No, I love it. Thinking for yourself.

651
01:04:42,320 --> 01:04:47,520
And when people think about investing and even clients mention what the neighbors are doing,

652
01:04:47,520 --> 01:04:52,080
what the friends are doing, I always want to pause and say, just think for yourself, does this work

653
01:04:52,080 --> 01:04:58,000
for you? Would this work for you? And I'd like them to consider the worst-case scenario. I hear

654
01:04:58,000 --> 01:05:03,840
about the upside, but what's the worst-case scenario? Not losing money I think matters a lot in investing.

655
01:05:03,840 --> 01:05:10,800
And people don't appreciate it. And then in terms of patience, I think patience will be a privilege

656
01:05:10,800 --> 01:05:16,240
and luxury going forward. I think we have so many distractions out there, including our phone

657
01:05:16,240 --> 01:05:23,840
in our pocket that has been beeping and sending us notifications. I'm a fairly patient person. My wife

658
01:05:23,840 --> 01:05:31,440
calls me a turtle, and I can really sit and wait and cruise slowly if I have to. But I think

659
01:05:31,440 --> 01:05:36,480
anybody that has a hard time with patience, there are few things that you can do. Don't check your

660
01:05:36,480 --> 01:05:42,480
portfolio every day. Have a big filter in terms of all the noise that you have coming your way.

661
01:05:42,480 --> 01:05:46,480
And then create a certain environment that works for you, especially if you want to be a lifelong

662
01:05:46,480 --> 01:05:51,600
investor. Guy Spier chose Zurich to be away from the noise, Buffett chose Omaha,

663
01:05:52,640 --> 01:05:57,280
Sir John picked up the Bahamas. I think the environment, spending this time in the woods,

664
01:05:57,280 --> 01:06:03,120
really showed me during COVID how the environment has a huge impact on how we operate.

665
01:06:03,120 --> 01:06:09,440
And the less noise and stimulation there is, the more patient we can be. And it will really pay off

666
01:06:09,440 --> 01:06:14,720
in investing because the less you do, especially if you do the right thing, the less you do, I think

667
01:06:14,720 --> 01:06:21,120
the outcome will be really favorable. And stay curious. When I love about investing, it allows me

668
01:06:21,120 --> 01:06:25,120
to stay curious. I mean, the people I get to talk to and the stories I get to hear and then through

669
01:06:25,120 --> 01:06:29,760
the podcast, I've had so many wonderful guests, including the two of you and the conversations we can have.

670
01:06:29,760 --> 01:06:36,320
I think whatever people do in their lives, just stay curious and keep on learning new things. I find

671
01:06:36,320 --> 01:06:41,120
it fascinating. And the side effect of it is that we end up buying stocks that go up and make money,

672
01:06:41,120 --> 01:06:46,480
but the intellectual pursuit is so much more satisfying than the fact that I see that the

673
01:06:46,480 --> 01:06:53,680
portfolios do go up and that puts a smile on my face too. Yes. And I mentioned your podcast in the

674
01:06:53,680 --> 01:07:00,720
intro and your bio, but where can investors go to read your essays? I mean, they can definitely buy

675
01:07:00,720 --> 01:07:08,000
your books, Money, Life, Family, Crisis Investing, all of those I assume are available on Amazon.

676
01:07:08,000 --> 01:07:12,720
Where else can people go to learn about you and read about you if they're interested?

677
01:07:13,360 --> 01:07:20,720
So, they can search my name and Sicart Associates and all the articles are on our website.

678
01:07:20,720 --> 01:07:25,440
I also post them on LinkedIn, so if people look up my name, they'll find it. And I just created a

679
01:07:25,440 --> 01:07:30,240
Substack where I repost them for free as well. So, if you search my name on Substack, you can have

680
01:07:30,240 --> 01:07:34,560
your notifications and get the same articles. I noticed that people like to consume content in seven

681
01:07:34,560 --> 01:07:42,720
different ways these days. So, I post it everywhere and it's fun to see how people discover the content

682
01:07:42,720 --> 01:07:47,200
and how they follow and how they read it. And then they want to know how they can sign up. But I think

683
01:07:47,200 --> 01:07:52,560
Substack is a good place to get both the podcast episodes and the essays that I continue to write

684
01:07:52,560 --> 01:07:57,440
every two weeks. And there's a good one coming out this week that I wrote about game-overs and do-overs.

685
01:07:57,440 --> 01:08:02,720
One of the topics we talked about. But by the time of this episode is out it probably will be,

686
01:08:02,720 --> 01:08:09,600
it will be public by then. Good. I will look forward to that article. And I'm sure everyone will

687
01:08:09,600 --> 01:08:14,320
want to check it out. We will also have all your information and your bio links to all of this

688
01:08:14,320 --> 01:08:20,880
available on investingthetempletonway.com. So, you can visit there, read the show notes. We'll have

689
01:08:20,880 --> 01:08:26,720
a transcript of this episode. And we just really appreciate your time with us today. Thank you so

690
01:08:26,720 --> 01:08:32,240
much. It was a real pleasure to see you both again. All right. Thank you. Thank you, Bogumil. Thank you.