Seth Klarman interviewed by Charlie Rose at the Facing History and Ourselves New York Benefit Dinner. This event was at Chelsea Piers in New York City on November 1, 2011.

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0:00
let me turn to why is it that margin of safety
0:03
you can't get it for example 2012 eBay I mean I've never I knew that was a fact
0:10
but I didn't I still don't understand why you can get a charlie is also a new
0:16
one
0:17
well I know I know what I mean is it is it true so margin of safety
0:22
the idea for margin of safety came with a business school classmate called me up
0:27
and said he said Virginia Smith here working at Harper Collins Harper and row
0:32
at the time anything and you know they've asked me to talk flying into
0:37
aspiring authors and would you like to write a book on investing and I said you
0:41
think about that people have said that you know they like my letters to clients
0:45
maybe you should do it so I took the chips and wrote the book they didn't do
0:50
a very good job advertised it
0:52
editors kept getting fired because of me and by the third editor we we finished
0:58
the book and then it sold about 5,000 copies and died out so in my I did
1:05
nothing for a while it was dead with richard's prediction was right
1:09
temporarily and it died and then it started to get a cult following and I
1:15
thought well maybe I'll bring it back someday raise money for charity and
1:19
that's the truth about the cell wall street edition for $500 thousand bucks
1:23
and and raise a million or two for charity and not the time or energy to
1:30
actually do that so I think we could delegate this rather quickly
1:34
I'll have to get on that what was it about margin of safety because in a
1:39
sense it's a term that you believe in and you know it according to what I read
1:43
a book that's on line but thats desk
1:48
you both are great when you were disciples but you're great
1:53
followers of the teachings of Ben Graham think it's probably on warrants bookshop
1:59
under a pile of papers I don't think were next to read it anymore
2:02
no I don't I don't really know I tried to write it to be accessible to the lay
2:12
person or or the the professional entering the field and so I tried to use
2:18
layman's layman's language and just make it accessible and it's certainly the
2:23
terms borrowed from security analysis and it it's meant to be in some ways it
2:27
intellectual successor to Intelligent Investor which was the more accessible
2:32
of gramm's book so I think it's the other book in in that tradition but when
2:38
you had called on media people can't get something they want to be very well
2:41
maybe a lot of that I think they call that supply and demand suppose you wrote
2:48
recently the preface to the new edition of security analysis at the right time
2:52
suggested else what is it you want to say and why has it remain a furloughed
2:58
star and secondly sort of this remarkable but I had you everybody knows
3:03
I've probably done more conversational more about that than anybody alive and
3:08
and there we talk about all the time and how you know his own been RAM experience
3:14
in coming to Columbia and what it meant to him understand why this has been such
3:20
a profound series of principles that have made you and investments who you
3:28
are today first of all I wish I'd met Ben Graham I never was was fortunate to
3:33
do that the I think warren ketchup captured the idea himself in his 1964
3:41
article the super investors are Graham and Dodd still in it he talks about
3:46
value investing is like an inoculation you either get it right away or you
3:51
never get it and I think it's just true I actually think there's a gene for this
3:55
stuff whether it's a convincing Jeter contrarian gene I think that everybody
4:00
appreciates a bargain but when the market's going down and most people
4:05
overreact and skit scared by stock is going down what am I gonna do so if
4:11
you're buying a sweater and it goes on sale for $2 250 you get excited when you
4:16
get to the store but if you have a stock worried about the sweater 400 maybe not
4:20
so happy so I think it's for me it's natural but for a lot of people it's
4:24
fighting human nature but it is true what it's what warren buffett said when
4:29
you find out about it it's like being lit on this little secret and so if you
4:33
can remember that stocks are pieces of paper that I read all the time that
4:37
stocks are fractional interests of businesses it all makes sense if it's
4:42
almost like it to slow the game down like to talk about baseball speeding up
4:45
on you need to slow it down I can buy this thing for a huge fraction of what
4:50
it's worth what am I worried about if it goes down a little bit what's the gift
4:54
yet knowing what it's worth I think that the the analysis is actually the easy
4:59
part of what I want to speak to business school students I tell them investing at
5:03
the intersection of economics and psychology the economics the valuation
5:07
of business is not that hard but psychology how much do you buy at this
5:12
price to wait for a lower price

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