One of our favorite investors at The Acquirer’s Multiple is Guy Spier.
Spier is the founder and managing partner of Aquamarine Capital, an investment partnership styled after the original 1950’s Buffett partnerships. In 2008 he, along with Mohnish Pabrai, had lunch with Warren Buffett after submitting the winning bid for Buffett’s annual Glide charity auction. He completed his undergraduate studies at Oxford and earned an M.B.A. from Harvard Business School.
One of my favorite Spier interviews was one he did with The Graham & Doddsville Newsletter. Here’s an excerpt from that interview.
Guy Spiers thoughts on value investing…
‘Oh my God. This is so exciting. There are market inefficiencies that I can exploit. If I just get a few things aligned right I could make billions and live this incredible life.’ And many people who do value investing end up living these incredible lives. And we live long lives is what we’ve figured out. We know from Warren Buffett that it’s not got to do with intelligence – he says some people get it, some people don’t.
I got it, but my God, have I strayed from the path in so many different ways. I had such a narrow understanding of the wisdom that Warren Buffett had to impart. If my investment career is the only thing we’re talking about, I definitely lost at least five years, perhaps more, getting started on it because my head was filled with all these ideas of efficient markets. But I’ve lost more time by not fully learning the lessons that are available there for all to see.
The basic tenets of The Intelligent Investor – Mr. Market, things having intrinsic value, stocks representing part interest in businesses – are fantastic. But I was in a position ten years ago not to charge a management fee the way Warren Buffett did, but I was charging a management fee. Why on earth was I doing that? I don’t know how many years ago I met Mohnish [Pabrai]. He was not charging a management fee. I was an example of the guy sitting on the other side of the road at the gas station. You know the Tom Peters story? Mohnish talks about cloning and seeing whether people are willing to clone or not. I’m sitting there, laughing at all those idiots who don’t clone. At some point I realized, ‘Wait. I’m the guy on the other side of the road who is not cloning what is obviously working.’ There are so many things that I lost time with and didn’t learn because I had too narrow an understanding of the wisdom that was to be imparted.
G&D: Mohnish Pabrai and the practice of cloning?
GS: What’s so beautiful about cloning is that it’s not mutually exclusive. The more you do it, it’s helpful for the whole community and enough of humanity will never do it. I’m at the Berkshire meeting with Mohnish and all of these people are coming up to him. He has spent the last twenty years making people feel glad that Mohnish Pabrai’s on the planet. In small ways and in big ways, just doing it as a habit. So if you’ve been handling people right for 20 years, you become a very real asset to whatever business you’re a part of because you’re just going to get lucky more often. I’ve experienced that over the last five years. I’ve gotten luckier with people more and more often and it’s just a lovely thing. I had to realize I was not put on earth to help Guy Spier. I was put on earth to help humanity.
I’ll give you an example. Bill Ackman got into doing this a year or two before me. I knew him; he was a year above me in business school. They had offices in 245 Park Avenue and he just said, ‘Come here, use Bloomberg, spend as much time as you like. Really happy to have you here.’ I remember that and I would leap at the opportunity to help him out in some way if he asked me to.
G&D: Mohnish got that idea from Robert Cialdini, right?
GS: There’s a huge amount of wisdom there. I told somebody 10 years ago, ‘I’m writing 20 thank you notes a week.’ And they say, ‘How ridiculous. Who are you writing thank you notes to?’ I say, ‘The doorman, anybody I can put my hands on really, the person who served me at the shop. You name it, left, right and center.’ They’re like, ‘How’s that working for you? Have you seen any changes?’ Not really. They say, ‘What a dumb idea.’ I say, ‘Well, the doorman was really nice to me this morning.’
So say I’m writing thank you notes like that and I attend the Pabrai Fund Annual Meeting and I write him a thank you note, one of twenty I wrote that week, but that may have been the only thank you note Mohnish received from the meeting he held in Chicago. And when he was in New York for some reason he had the idea to call or to e-mail me and to say, ‘Would you like to get dinner?’ These simple changes in behavior make such a massive difference because at the time my derisive friend is asking me how my relationship with the doorman is going, the thank you note to Mohnish Pabrai hadn’t been written.
I’ll tell you something else. It’s made me more successful that the average member of Joe Q. Public and the average person in my set of friends is incapable of giving it the attribution it deserves. They’ll say, ‘You’re lucky. You’re smart. You’re in the right place at the right time.’ And I’m like, ‘No, no, no. It’s because I was doing Cialdini for the last five years. You can do it too.’ You know, in some way that is even more surprising to me than value investing because value investing is a very narrow thing. All we’re talking about now is a strategy for anyone to improve their lives. Finally, after ten years of being married and five years of doing this, my wife gets it.
As you can see, in a certain way I’m more enthusiastic about this than value investing. Having read Ben Graham would not have helped me if I was a poor boy in Bangladesh, but this Cialdini reciprocity stuff is much more basic and would have helped anyone. Warren has this famous saying about how he was very lucky as to where he was born. If he was born in Bangladesh those good business practices wouldn’t have made a big difference.
It’s like Wal-Mart. Sam Walton figured something out with Wal-Mart: stack it high, sell it cheap, keep delivering massive value to the consumer, always give them better value than they can find elsewhere, work really hard to negotiate with your suppliers to give [customers] great stuff at low cost. Who would have thought that piling it high and selling it cheap would have developed into the amazing business franchise that Wal-Mart is now.
Where I started off on this little reverie is that we can do the same things. I can’t be Wal-Mart and I can’t be Sam Walton but my God, I have the tools to develop a similar unique Guy Spier franchise just by getting mind space and getting people to feel a certain way about me. It’s just caring about them, caring about the outcomes in their lives, and figuring out a way to help them. That’s the ideal, actually helping them, but the second best is to let them know you would have wanted to help them. That’s effectively what a card does. I have a rule—every single person who sends me a job application gets an e-mail back. It’s particularly important for people who apply as analysts because they’re likely to go on and do great things so I want them to like me. I want to help them.
G&D: Could we talk about the lunch you had with Buffett? Can you give us some questions that you asked him and were you surprised by any of the answers to his questions?
GS: One of the things that Mohnish did is he set the tone of the lunch in the right direction. We were there to say thank you. What can you guys give the people that you want to get close to? The first natural response is, ‘Nothing.’ But we can. First of all, thanking people. Every human being wants to feel thanked. We were there to say thank you and we were there to appreciate him, not just some idiot on the street, but as people who had studied him really closely.
I sent my most recent annual letter to Debbie Bosanek. Here’s what I said to Debbie. I said, ‘Debbie, there’s no wisdom in here Warren’s going to glean, nothing about the world that he doesn’t already know, but I think he might enjoy seeing what a powerful impact he has had on me. This thing has got ‘See what Warren Buffett inspired me to do’ written all over it and he might enjoy it on that level’.
I think the mentors that you and I want, we can’t necessarily spend every day with because they don’t have time and you may not know them and they may not even be alive. So studying them really closely to get a good sense of the answers they would give to the questions we have is totally the right track and a very, very smart thing to do, especially with people who are not alive. What would Shackleton say? What would Ben Graham say? What would Franklin say? You can go to Seneca. You can go to Marcus Aurelius. They’re all available the minute you drop the idea that they have to be in the room with you to mentor to you.
Before our meeting with Buffett, we sent our bios over. I sent this bio, ‘I grew up in South Africa and Israel, lived in London, and moved to the United States.’ My wife Lory, the only thing her bio says pretty much is ‘born in Salisbury, North Carolina.’ Warren had no interest in the fact that I’d lived in Iran, Israel, whatever, but he liked the fact that Lory grew up some place. That’s his mind-set. He’s not just an American guy; he’s a guy from the American mid-west and he knows what he likes and he likes what he likes and he’s not interested in experimenting very much with other stuff.
The starfish and the spider that I talked about was really an awakener for me. It was not just what he said, but the way he said it because he knew exactly where I was coming from. In a certain way he was teaching me a really important lesson. ‘Don’t try to build the best business you can build. Build the business that suits you the best. Build your life in a way that suits you.’
Realize you only have one life to live on the planet. ‘Yeah, Berkshire Hathaway is this wonderful big company, but it suits me.’ That’s the most important thing about Berkshire to Warren. So in a certain way I came away with a renewed appreciation of how unusual Warren is. Given the choice between building a bigger Berkshire and building a Berkshire more suited to him, or building a Berkshire with higher returns, he takes the Berkshire more suited to him. He said, ‘We’re not going to make any decision that would get us more money if it means we lose one night of sleep.’ That’s effectively saying, ‘I want this to suit me. I don’t want to be the best, biggest, fastest.’
That’s just a profound insight and I can tell you it’s scary for me to stand up in front of my investors and say, ‘I’m not trying to have the highest possible returns. I’m trying to run this in a way that fundamentally really suits who I am.’ Half your investors leave the room.
I’ll just give you one final thing. We talked about the limits to the size of Berkshire. For some reason we haven’t had a company that’s broken through a trillion dollars in market cap and somehow that seems to be the limit to size. The fierce pride with which Warren asserted that Berkshire wasn’t subject to that was fascinating.