RWH058: Winning Ways w/ Bill Nygren
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You're listening to TIP. Hi there, it's wonderful to be back with you again on the Richer, Wiser, Happier podcast. Our guest today is one of the great long-term investors, Bill Nygren. Bill is the chief investment officer at a firm called Harris Associates, where he oversees about $25 billion. He's generated a superb investment record over more than 30 years. Today's long, in-depth conversation with him

will give you a clear and thorough sense, I think, of what it takes to sustain that level of investment success over such a long period. As I see it, Bill perfectly embodies a lot of what it takes to beat the market over the course of a long and distinguished career. For a start, there's his raw intellect and his idiosyncratic wiring and an intensely competitive spirit. You'll also see that he has these very robust investing principles.

and a willingness to keep evolving and changing the way he operates and invests. There's also an exceptionally disciplined and rigorous investment process that he's developed over many years, and a really unusual openness to dissenting opinions from other highly intelligent investors who work alongside him in his team at Harris Associates.

In short, I think if you want to succeed as an investor over the long term, there's a huge amount to learn from Bill Nygren.

But before we get started with our conversation, I also wanted to mention a new venture that I'm really excited about and that I hope might interest you too. Later this year, I'm going to be launching a Richer, Wiser, Happier Masterclass for a very small select group of people who like to study with me over the course of a year. We're going to meet once a month over Zoom, typically for about two hours per session,

to discuss the themes in my book, Richer, Wiser, Happier. We'll also meet in person at a couple of really special events. I'm going to cap the group at a maximum of 20 people, so this is an unusual opportunity to study very directly with me in a small group.

What sort of people am I looking for to join the Masterclass? Well, really anyone who's deeply interested in exploring how to live a life that's truly richer, wiser, and happier. This is the second time that I've taught a Richer, Wiser, Happier Masterclass, and I'm planning to do this again because it's really been a totally joyful experience for me over the last year to teach the first cohort to take the class.

The group has included an amazing array of 20 people from six different countries. And I can tell you that the current members are an incredibly interesting, accomplished, and really delightful array of people. They include some extremely successful fund managers, some investment analysts, wealth advisors, heads of family offices, CEOs.

entrepreneurs, a management consultant, a really renowned physicist turned quant investor, and a friend of mine who's a highly successful professional gambler. The common denominator here, I think, is that they're all united in this desire to live a truly abundant life. And they're also all great learners.

One of the most joyful things for me personally has been to see the friendships form between these remarkable people as they learn from each other and support each other. In any case, if this sounds like something that might appeal to you, please email my friend and fellow podcast host, Kyle Grieve at Kyle, which is K-Y-L-E at theinvestorspodcast.com. Kyle is helping as he did last year to select the applicants for the group and

He'll be part of every meeting that we have with the masterclass. He can share more details with you about the price for this one-year masterclass and the dates and the application process and whatever other questions you might have. And now, as my friend Stig Brodersen would say, back to the show. I hope you enjoy my conversation with the great Bill Nygren. Thanks so much for joining us.

You're listening to the Richer, Wiser, Happier podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life.

All right, folks, I'm absolutely delighted to be here with Bill Nygren. Bill, as many of you know, is Chief Investment Officer of US Equities at Harris Associates, which is a renowned firm that he joined way back in 1983. He's probably best known as a portfolio manager at two great mutual funds, one of which is the Oakmark Select Fund, and one is the Oakmark Fund. And he has a superb long-term record since launching Oakmark Select back in 1996.

The fund has racked up an average annual return of a little over 11.5% a year, beating the S&P 500 by more than two percentage points annually over nearly 30 years. So it's incredibly rare for a fund to sustain that margin of outperformance over three decades. I've written about Bill in two books previously. The first was The Great Minds of Investing, and the second was In Richer, Wiser, Happier. And I'm thrilled to have you back here on the podcast today, Bill. Welcome. It's lovely to see you.

Thanks, William. Great to see you again. And I wanted to start by asking you about the early years, your teenage years, back when you were a very mathematically-oriented high school student growing up in Minnesota. And you would go to the local library in the suburbs of St. Paul, I think, to borrow all of their books about investing. And you were trying to figure out what would work and how you could crack the code. Can you give us a sense of that interaction?

intellectual adventure that you were going through back in those days as a young teenager discovering the glory of the stock market and thinking, wait a second, what if I could figure this out and figure out how to win?

Well, first, that's not nearly as heroic as it sounds now. Back then at a suburban branch of the St. Paul Library, the investment section was probably about this big, only maybe 30 or 40 books. Today, as investing has become so much more of a national hobby,

The collection of books about it has grown exponentially. But going back then, the book that was probably most influential to me was Intelligent Investor by Ben Graham. I've always felt that you're maximizing your chance of success in investing if you behave the same way as an investor as you do in the rest of your life.

And I had grown up in a middle class family. I remember from a very young age being dragged along to the grocery store on trips with my mom and shopping specials. We might go to two or three different stores because each store would have something different on sale.

And if it was summer and nobody had grapes on sale, then we didn't have grapes that week. And if cherries were at half price, we'd have lots of cherries and wait for the next week for the grapes. And that method of trying to stretch dollars applied at the grocery store. It applied when we went out to dinner. It applied buying clothing. So when I started reading investment books,

The books that were more growth investment oriented, kind of dreaming about how great the future could be, never really resonated with me. The way the books like Ben Graham, Warren Buffett, John Templeton, of basically buying things when they were out of favor and waiting patiently until they got back in favor.

And that followed me into school when I started writing in a security analysis class and we had to pick a company to write up. I wrote about National Presto, the small appliance maker out of Eau Claire, Wisconsin, that was selling below its cash value. And that kind of getting something for free aspect of value investing was

It is something that's still part of our process at Harris Associates today. But I think the reason it works for all of us is because it's kind of the way we live the rest of our lives. It's not asking us to be somebody different when we approach an investment decision than any other kind of purchase decision that we make.

Yeah, I remember Francis Chu, one of the great Canadian investors saying to me once how he had grown up in, I think it was Allahabad, this city in India. And he was one of five kids with a single mother because I think his father had died when he was seven. And so he used to do the same thing, but even more so than you, he would actually be responsible for going out as a little boy to the markets in Allahabad. And

And he said, you know, you'd go to several shops and you'd see what they're selling and how they're pricing it. And he said, you could always find a substitute that was cheaper. And he said, the stock market's exactly the same. If something's too expensive, you just go to the next one. So it was sort of this whole process of, as he put it, looking for alternatives.

And for me, it really even started before I knew what the stock market was. One of my grandfathers was a milkman back in the day that they actually delivered milk to the door and he would have to make collections. And so he would come home with this bag of coins.

And I was six years old in 1964, the year that the US stopped making silver-minted coins. So in '65, the coins were made of some metal blend that wasn't really worth anything. But people who were paying with older coins were still paying with the silver coins.

So I would save up my allowance, go through my grandpa's bag of change, and then substitute the less valuable quarters and dimes for those that were silver. And ended up when I was in college, I bought my first car with money that I made from arbitraging silver coins.

So you could have been another Soros, an arbitrageur instead of a value investor. And arbitrage has always had an appeal to me just because of the very low risk level and the certainty of it. But I think the opportunity in investing in companies tends to put you in a better spot because you have a much stronger tailwind.

And when you were going off to the library and you were reading all of these books, presumably things like Burton Malkiel's book, A Random Walk Down Wall Street had just come out because this is 1973. I think that was published. And I'm assuming that things like John Train's book, The Money Masters, which was also published in the 70s, was there, or Adam Smith's book, The Money Game. And I'm wondering why you didn't look at stuff like Burton Malkiel or all of the academic thoughts coming out of

Chicago, the University in Chicago and say, well, yeah, short-term movements in stocks are basically random. Everything's priced in and there's no way that you can consistently outperform the market. What led you at such an early age to say, well, I don't really believe that. I believe actually that I can do pretty well regardless. I mean, maybe I was lucky with the order that I read the books in, but starting out with Intelligent Investor, that laid out the framework for

for a different way of thinking about stocks than the kind of things University of Chicago or Bert Malkiel were saying didn't work, where you would look at it as a business, you'd try to understand what the business was worth, and then only consider investing in the stock if it sold at a significant discount to your estimate of business value.

So when I would read some of the things that Malkiel or the professors at U of C were testing, like if you bought a stock after it went up 10%, would it continue to go up or down 10%? And they were testing all these things that really had nothing to do with underlying intrinsic value of the company and showing that those things...

There wasn't a way to build an investment philosophy around them that would be predictable and successful. So I was pretty pessimistic about the efficient market theory books by the time I did read them. The growth books, like the Phil Fisher books, I knew that wasn't my personality to find something that was great, dream about how much better it might be a decade from now,

So those never resonated with me. But the John Templeton, Ben Graham, some of the stuff that it wasn't necessarily in book form yet, but like John Neff's interviews in Barron's, Michael Price at Mutual Shares, those thought processes made a lot more sense to me.

And you were watching Louis Rukeyser on Friday nights on PBS, right? Back in the day when there wasn't really as much round-the-clock coverage of this stuff, right? So I'm wondering when you saw people like Sir John Templeton in those days, or Marty Zweig, or Henry Kaufman, the famous Salomon Brothers chief economist, or Jim Rogers, I assume, when he was kind of a young analyst, these guys coming on the show, like,

What was the impact on you as a young guy watching these quite a bane, polished, really smart people coming in and opining about the economy and the future? Did it have a big effect on you?

Well, first, it probably says a lot about me and my high school years. That was before we had even VCRs and time shifting and there was no on-demand. And at 7:30 on Friday nights, I was sitting at home in front of the TV watching Wall Street Week. The appeal to me first

Lou himself was such a different personality than most of the figures that we have on TV today. Lou had access to you in your home once a week for 30 minutes, and he was always the calming voice. Even in the midst of stock market crashes, he was the one who would come on and tell you to think long-term, tie yourself to the star of America, and eventually your investments would do fine.

And he tended to have guests on that reinforced that point of view. And again, it was a great insight into how lots of different people with different personalities have found a way to be successful in investing. But I could kind of listen and hear the ones that I could imagine myself thinking like. And my thought process squared a lot more with how John Neff talked about how people

how he talked about companies and the decision to invest and things being more out of favor made them more exciting to him, or the way John Templeton talked about taking advantage of when other people were getting overly concerned about the environment. So yeah, that had a tremendous impact. And I feel very privileged that I had a chance to be on Lou's show twice before he passed away.

And to go out with him and talk about his career, dealing with all these successful investment people, he was one of my heroes. And it's interesting. I remember Tom Gaynor once saying to me how when he was a really young boy, he would sit there with his grandmother watching Lou Rukeyser as well. And he sort of, in his usual self-deprecating way, used it as an example of just how uncool he was as a young kid.

And you said to me back when I interviewed you in 2015, originally, I think, for The Great Minds of Investing, and later I wrote about the conversation in Richer, Wiser, Happier. You said to me, social popularity never mattered to me. And you kind of presented yourself as this sort of very math-driven, statistics-oriented kid, really loved baseball, tended to hang out with other kids who were really good at math. And you

You were saying that you were just very comfortable from the beginning diverging from the crowd, thinking for yourself. Can you talk about that? Because it seems to me that makeup is so important for any really successful value investor.

Right. My close friends in high school were kids that were in the National Honor Society, and that was never the group of cool kids in high school. But it was kids who were confident in their own intellectual ability. And especially in things that were quantitative or mathematical, if you worked out a solution on something, the fact that a bunch of people disagreed with you

It doesn't trigger you to think you made a mistake. You first thought is I did this work. I'm probably right. And I don't really care that a bunch of other people came to a different conclusion. And my interests were different than other kids were. My focus on math, because it was something I was good at, was different than other kids were. So I never really felt like I needed the support of the crowd.

And I think that's an important attribute in value investing because, I mean, by its nature, we're buying stuff other people are punting and giving up on. So you have to be comfortable taking a position that isn't in the majority. And that's something I've been comfortable with since I was a kid.

When you were a kid and you were trying to figure out how to make money, I remember you once saying to me, basically, your motivation wasn't really just the money. As you put it, it was the challenge, the math challenge of being able to outsmart the system. Was that something that drew you to read about blackjack and the like? Were you studying people like Ed Thorpe and the dealer book, which had come out in the 60s? Were those sort of things intriguing to you as well?

Absolutely. I mean, it wasn't about the money. The money was great, but it was solving a puzzle. And to me, casino gaming is the same thing. The only game in the casino that you can get an edge on the house is blackjack if you're card counting. And it's one of my frustrations and unmet goal in my life. I've always hoped I could get kicked out of a casino for card counting.

And I make no bones about varying my bets based on what's left in the deck. And I've managed to attract a lot of attention at a blackjack table by the casino management, but have never been successful enough that they haven't wanted my business.

Have you actually managed to make money overall playing blackjack, do you think? I would say probably not. It's been about flat, but oddly, another hobby of sports gambling has been successful enough that I have a difficult time placing bets on teams that I want to. When the app-based sports gaming apps came out,

So it was mobile and you could do it from home. All of the different companies had their own odds engine. So they all had different odds. And if you looked for the opportunities, there are opportunities to bet on both sides of the game and profit no matter who won. And I did that very aggressively to the point that most of those apps don't let me play anymore.

That's interesting. So probabilities were always something that was a natural strength for you. And I remember, I know Howard Marks is someone you admire greatly. I remember talking to both Howard and Joel Greenblatt about my struggles to understand probability. And they were both like, well, yeah, you just have to think that way. To be a successful investor, you just have to be wired to think about probability.

Yeah. And I think I am. Like I said, I've always enjoyed math more than English or any of the non-quantitative subjects in school. Statistical analysis made sense to me before I even started applying it to businesses. And I think everything we do as an investor is

You're looking at an uncertain future and a range of possible outcomes, and you're trying to assign probabilities. And you're looking to capitalize on those where you've got a different view of the possible outcomes than the average investor does.

And when you were starting out studying this stuff back in the 70s, it was an incredibly tumultuous era, right? I mean, we had the crash of 73, 74. After, I guess, the go-go years, you had runaway inflation, you had the oil shock, all of these things.

It was a time where a lot of people kind of got washed out of the market and you saw a lot of the speculators and the growth investors who were sort of reckless getting washed out. Do you think backdrop was also part of you deciding that you wanted to be more rational and more value oriented? Were you conscious of that backdrop and how it should affect the way you invested?

It was very conscious of the backdrop. Oddly, it didn't seem that out of the ordinary at the time because there were consecutive years that were tough years for the economy, very high inflation, and you kind of just got used to it.

I think what probably struck me more than anything was how few people were interested in a career in investments. And again, being kind of a natural contrarian, that was part of what attracted me to the area was that none of my friends were interested in pursuing the same avenue. And

I think back at that time, lots of high quality, stable businesses were selling at four or five times earnings. Student loan money was available to anybody. You didn't have to have need. And it was available at like a 5% interest rate. Money market funds were at 12%. So that was an arbitrage I took advantage of. And then eventually decided I'd be better off if I put that money into...

stocks that were selling at four or five times earnings rather than the money market fund. So for me, that was kind of the start of the personal investment journey. It all started in this time where we had double digit inflation, very low economic growth.

the Jimmy Carter malaise years. And that was all I knew. So it didn't feel that abnormal. I was not a great student of history. So I think I know much more about the pre-1975 stock markets today than I did back then. And you then fairly logically went off to do an accounting degree at University of Minnesota, and I think graduated in 1980. And you've often talked about how when

We need to understand accounting because it's the language of investing. You wrote a business plan in your entrepreneurship class back when you were a senior. So I guess you were 21. Tell us what happened.

So the University of Minnesota offered an entrepreneurship class probably ahead of its time. There weren't a lot of them back then, and they're fairly common today in college programs. The class was mostly business school students, and I was one of the few seniors who was in the class. And for our, instead of a final exam, our final project was to write a business plan about a small business that we thought we could start.

So I wrote about starting a mutual fund. Part of my research, I contacted mutual shares and asked if I could speak to somebody about starting a mutual fund. They put Mike Price on the phone and he had no idea what I was talking about when I said I wanted to start a mutual fund. He said, I don't take orders for it, but if you want to put in more than $500, I'll connect you to somebody who will help you invest in our fund. And I'm like, no, no, no, that's not what I want to do.

I actually would like to start up a fund and I'm writing a school paper project on it. So I wrote about completing my accounting degree, working in the accounting industry for a couple of years, working for an investment firm for a couple of years, and then trying to start a mutual fund. And we had to come up with financial statements.

I said back then the average fee was about 1%. If I could get people to trust me with $25 million, that would be a quarter of a million dollars in fees. And if expenses ate up half of that, I'd be able to make a very nice income and be off to the races on a successful fund.

And the presentation was oral, so it wasn't just a written paper to the professor, but it's in front of all the other kids in the class. And when I said that the goal would be to get investors to invest $25 million with me, there was such loud laughter in the room that I just walked away dejected with my head down.

But like a lot of people who have had successful careers in business, investing, sports,

The more people told me that I couldn't do it, the more I was committed that I was going to achieve it. And how much money do you oversee now? About $25 billion. So they underestimated you a little bit. Yes. And at the time I wrote that paper, I never envisioned being surrounded by such an incredible team as I am at Harris Oakmark. So obviously, it's a very different...

position I'm in today than what I had envisioned if I was a one-man shop managing a small amount of money in a mutual fund. Did you ever see any of those people from that class again in later years and say, actually, it worked out? Not quite, but my closest story to that was when I was in college, I worked as a bag boy at the local supermarket. And if you worked a five-hour shift, you would get a half-hour break.

And I would always buy a Wall Street Journal and go down to the break room and read that. And one of the stock boys was just, again, bent over in laughter coming down and he's like, oh, big time bag boy thinks he's a Wall Street genius. And I remember about 10 years later, I was at my parents' house for Thanksgiving and was running to the store to get something that my mom had forgotten for dinner.

and saw this same guy loading up frozen food into the frozen food aisle, TV dinners into the frozen food aisle, and just kind of smiling to myself and just said hello to him, didn't say anything further. But he was still there in the same job that he'd had a decade earlier. And it did put a smile on my face. This should be an advertisement for the Wall Street Journal.

The one difference there, Bill, was you were reading the journal. So where does that sense of competitiveness and intensity and drive and indomitability come from? I mean, were you always like that? I think it's probably from my dad. And we were a family of games players. And it didn't matter, you know, ping pong cards. We'd turn anything into a challenge. And...

My dad would never let us win. He might play left-handed so that the game would be competitive, but he would always try to win. And like the old wide world of sports, the thrill of victory and the agony of defeat, we knew when we beat my dad that we should be thrilled because it was a real accomplishment. And I remember for years playing ping pong against him left-handed. And

And then finally winning enough that he switched to right-handed and it put me back down at the bottom again and working my way up till I could, I could finally beat him when we were both playing right-handed, but everything was competitive and we were always trying to win at anything we did. And, uh,

Both parents always instilled in me that if you do something to the best of your ability and you fail, so be it. But it's never acceptable to fail because you didn't try hard enough. And your dad, if I remember correctly, was director of credit at 3M, right? This big company. So he was this accounting type, kind of like you, very logical, very rational, and was having to figure out whether to extend credit to customers like Chrysler when they were in bankruptcy, right? So

Were you getting your sense of rational analysis from him as well, do you think? Probably somewhat. But the big thing that that did for me was I could contrast my dad's job to those of other equally successful people inside and outside of 3M. And what I loved about my dad's job was that it was outward focused.

And the companies that were in the news were usually companies that in one way or another, he was involved with because they were frequently customers of 3M. And you mentioned Chrysler. 3M sold a lot of like auto body decorative decals to Chrysler. And my dad ended up on the creditors committee when Chrysler went through bankruptcy and

And, you know, he was involved when W. Grant went out of business, the old like five and dime store. And I like the fact that his job kind of gave him things that were interesting to talk about. They were things that were in current events. And I had an uncle who also worked at 3M and he was in charge of all the forms that 3M used.

He knew more about the depth of 3M than anyone else I had ever met. But to me, once you got to a certain level there, that ceased to be exciting. And my interest in accounting, rather than working inside of a company, I thought public accounting seemed more interesting where you got to focus outward on lots of different companies.

And as you mentioned earlier, I thought accounting was important to know kind of as the language of finance. And I didn't know how you could be a fundamental investor if you didn't understand accounting. So it is what I majored in in undergraduate. I did internships at both General Mills and Pete Marwick and Mitchell, both in corporate accounting and public accounting.

Spent enough time knowing that wasn't what I wanted to do for my entire career, but I think it was a really important foundation for me. Let's take a quick break and hear from today's sponsors. As nation states explore Bitcoin for strategic reserves and corporations buy it for their treasuries, it's becoming clear by the day that Bitcoin is here to stay. But navigating it alone leaves too much to chance and knowing what to do isn't the same as having someone to call when it really matters.

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All right, back to the show. You then had this very lucky break and got advised by, I think, someone from General Mills to apply to this one-year master's degree program at the University of Wisconsin that you graduated from in 1981. And you met a remarkable guy there who I think really has remained a close friend of yours, Steve Hawke, who is a money manager who had also, I think, set up this program there back in 1970.

with something like 12 students and directed it for about 15 years, where you would get to manage money as a student, the applied security analysis program. Can you talk about why that was such a formative experience for you? Why it helped you to understand who you were, what your strengths were going to be, and how it set you on the path?

So at General Mills, at the end of the internship, the final week, the students that they were hoping they could then hire after they finished their senior year, we had consecutive lunches with a different executive from General Mills for an entire week. And their job was to recruit.

And I was lucky enough to have lunch with someone who happened to be a friend of Steve Hawke's, who I didn't know. I'd never heard of Steve Hawke.

And he was asking me what I thought I wanted to do at General Mills. And I told him my real interest was investing. And General Mills, like most companies back then, had a defined benefit pension plan. And I thought maybe working in that area would be an important enough tie to the investment world that I'd be satisfied with it.

And he said to me, he said, you know, you're never going to rise to the level you want to be at in this company if you stay in the investment side and work in the pension fund.

I've got a friend who's a professor at Madison. General Mills had had a problem. They were a diversified company back then. It wasn't just a food stock like it is today. They owned Kenner Toys, Ship and Shore Apparel, and the Ship and Shore business, like most apparel businesses, was very cyclical, and they'd had some problems in that business. And this particular executive, his daughter was in school at Madison, so he was going down to see her.

And he said his friend Steve asked if he would speak to this investment club that formed a class that Steve was teaching because they had happened to pick General Mills in their portfolio. And he said, it's a bunch of really smart kids. Steve's a good guy. This program sounds more like what you should be doing with your time than trying to work your way into our pension fund.

And so about a week later, I had managed to get an appointment with Steve, drove down to Madison, met with him, and he told me that the class was limited to students that had taken his security analysis class. But if I would read Graham and Dad's security analysis and submit a book review to him from that, he would consider that as a substitute for taking the class.

So that quickly became my project. I had anticipated going to school at Berkeley, which also had a 12 month program for business undergrads. And I was interested in what was going on there because the options theory professors like Richard Roll were largely from Berkeley. And I like that very quantitative approach to how to value securities.

But when Wisconsin gave me an offer to join this class, 12-month program, be in a group that actually got to buy and sell stocks in a portfolio, that was too good to turn down. And Steve was an incredible teacher. He unfortunately passed away two years ago, but he ran the program single-handedly for about 15 years and then was an advisor to it.

up through its 50th anniversary. And I think what made Steve so special

was he had a foot in academic finance, but also a foot in the real world advising an investment management firm on their portfolios, as opposed to the finance professors I'd been exposed to at the University of Minnesota that were very academically oriented and didn't really have much of a feel for how to blend academic finance with what was going on in the real world.

And Steve, unlike like a Columbia or Bruce Greenwald, who's done a great job with the value investing class there, Madison wasn't known for a specific investment philosophy. And I think that was one of the things that really made Steve special was he would get to know us.

and have an idea of what might resonate with us, suggest books or other ways of furthering our education, kind of opening those doors that he thought might be appealing. And the students that I graduated with, most of whom are still close friends, they're very successful growth investors, hedge fund investors, mutual fund investors, bond investors that all came out of that same program

And we all look at Steve reverentially as the reason that we were able to be as successful as we were. I think the other thing about the program, you know, it kind of attracted these nerdy kids that were kind of off on their own. Yeah, not usually the most socially popular kids.

And we thought we were kind of unicorns in being interested in investments. And then there'd be a group of 13 of us that spent the whole year together

And when I say spent the time together, this was before business schools had, you know, do two years at an investment banking firm and then three years in PE, and then we'll consider taking you. We were all right out of school. So we were at a stage of life where we didn't really have anything to consume our time other than school. I go talk to the kids that are now and

We'll go out for a beer after the market closes. And then at 4.30, they're telling me they have to get home to their wives and kids. Anybody that came and spoke to us, we would try to keep out till two in the morning. First, because it was a challenge, but also these were people that were successful investment people. We wanted to learn as much as we could from them. So it was this group of kids that spent so much time together

And, you know, it's been an invaluable resource throughout my career to have friends that have succeeded in so many areas in the investment community. You then went off and spent a couple of years as a stock analyst at an insurance company in Milwaukee, Northwestern Mutual Life Insurance. And you've talked quite a lot in the past about, in many ways, how that was a good example for you, at least, of how not to invest, what you were having to do there with people kind of

piling into companies because they were recommended by Wall Street. And just to fast forward a little bit, you would then in some ways saved by your professor, Steve Hawke, who basically calls you and says, look, there's an alum from my course, Clive McGregor, who's about to call you and would like to hire you and you should take the job. So you then go off in 1983, a couple of years after college,

to Harris Associates, which is where you've been for the last 42 years. Tell me when you went and met Clive McGregor, who was one of the, I guess, senior stars at Harris Associates back then in the early 80s, and he invited you out for dinner with other partners from the firm. What was that experience like? What did you realize you were getting exposed to in terms of

in a sense, finally coming home and finding a place within the investment world that you were like, oh, this is where I should be at least for now. So at the insurance company, there are a couple of things that

that I learned partially about myself, but also about being a part of a business where the success or failure of the business was driven by something other than investments. Like any life insurance company, their success was going to be determined by how well they sold life insurance. And the investment side was more of a don't screw it up approach.

And that was something I wanted to avoid. Whatever my next job was, I wanted to be at a firm where the success or failure was driven by the investment results. The other thing I realized was that as an analyst, if I didn't share the same investment philosophy that the portfolio managers were using, my work wasn't going to be useful to them. Didn't matter how good it was, how successful or unsuccessful.

If it didn't meet the criteria that they wanted for their investments, it was just never going to work. So those were the things I was focused on when I went to this dinner at a country club in one of the northern suburbs of Chicago.

They generously picked a spot that was kind of halfway for both of us, even though there were four of them driving up for dinner and just me driving down. But I was looking for, could I get comfort that they thought the same way I did and that their success was driven by how well they invested. And we started to talk about stocks. It wasn't a formal interview. It was discuss some of the things you've been working on.

And I'd start talking about a stock and I could see these sideways glances, kind of knowing looks going on among them. And I didn't realize till after I'd been hired that the reason they were looking like that is almost every stock I was bringing up was something that they were currently working on or owned.

And that was the reason they wanted to delve in so deeply to see. They were not only trying to see how much I understood, but see if they could learn anything from me. To me, I took that as tremendously reassuring that they were actually caring about a lot of the same metrics that I was using to justify my investment recommendations.

And the similarity when they started talking about some of the other names they were working on, they were things that I had considered working on. So I was quite comfortable we had a match in the way we thought about investing.

Their firm, I mean, all it was was high net worth investments, mostly in the Chicagoland area for customers and also the Acorn Mutual Fund. And their entire success or failure was based on how well they invested client money.

And that was the challenge that I wanted. And one of the things that appealed to me of investing compared to the accounting world, in the accounting world, if you're 10% better than the partner sitting next to you, maybe you could make 10% more money. In the investing world, if you're 10% better, that's the difference between having a very, very successful career and being average and being replaced with an index fund.

So that leveraged bet on myself was something that I really wanted and never felt I had at the insurance company.

You also got lucky that you had this boss, Peter Foreman at Harris for the years that you were a research analyst before you became director of research. So this is in the early to mid eighties, I guess. And you described him to me before as this incredibly savvy sort of common sense investor who had a great gift for analyzing management and kind of sort of assessing people.

That's clearly been a really important part of what you've done. I know you've done thousands of management meetings at this point. What do you think you started to learn very early on from Peter Foreman about how to assess management and how to figure out whether they were aligned with you, whether they were talented, whether they were going to screw you, whether they were looking out for themselves? What did you figure out during those years from him? Peter was an amazing mentor.

Just real old school in the investment business. He didn't have a great academic background, but his work ethic was second to none. His street smarts were amazing. His ability to form relationships was

with management teams was something I learned a tremendous amount from. I started out as an overconfident kid. I thought because I had great quantitative skills that I could be a great investor. And I kind of wondered how this guy who was not that savvy quantitatively had amassed the track record that he had. And early on, there was a

IPO roadshow that was coming through Chicago. And Peter asked me if I could go to it and report back to him. Don't even remember the company's name. It's not important to the story. But I came back and I said, Peter, this was a really impressive management team. And Peter stuck his cigar in his mouth, takes a big drag on the cigar, exhales,

Says, I don't ever want to hear you say another word about quality of management until you've seen a hundred of them. Of course, this guy's impressive. He's the CEO of his company. They get to be CEO because they've got good interpersonal skills. They can talk a great game. You think you can tell if he's impressive or not? Come back to me after you've seen a hundred of them.

And I was so crestfallen. I thought I had made this important observation. And of course, in hindsight, Peter is 100% right. After you've seen 100 management teams, you can start to tell who's the top decile, which are the ones that are really side by side with the shareholders, only focusing on maximizing long-term per share value.

compared to those that on the other end of the spectrum are maybe more concerned about how valuable their career will be as CEO of the company. And if they make the company bigger, they'll make more money.

And they pursue growth paths that don't really add per share value. Later, I became friends with Lou Simpson, who was running the investment portfolio for Geico and learned from Lou the approach that I was taking of identify something that's really cheap and then try to figure out if the management team was good enough to invest with. You could do it backwards.

figure out who the people are you really want to invest with, and then look to see if you can justify the stock as being cheap enough to invest with them. And I think the lesson that you need both

is something that still drives Harris Associates, Oakmark's investment philosophy today. It's not enough to have a cheap stock. It's not enough to have great management. You really want that combination of a company that's undervalued and an exceptional management team that's focused on maximizing long-term per share value. And in practical terms, what can you do to kind of

poke holes in the argument of these very slick salesmen, right? When you meet them and they're always telling you what they've told a million people and they do it very eloquently and charismatically, what do you do to try to knock them off script or to test whether the execution actually lives up to the charisma?

So by the time I'd become director of research, which I think was around 1990, so after seven years at Harris, my role in most of the management meetings was to try to get them off script. And I didn't want our analysts to be the ones doing that because sometimes that could harm the relationship.

They could kind of apologize for the crazy uncle who is taking them down this other path. But I remember a chemical company coming in here, large cap company, very highly thought of. And they take out their pitch book. And one of the first things they started talking about was how they needed to make an acquisition because they needed to complete their three-legged stool.

And I said, what's so great about a three-legged stool? And the guy just looked at me like it was the most nonsense question he'd ever heard. I said, well, my grandma has one of those and I don't even like it because it's not stable. If you put weight on any of the sides, it'll tip over. I can't imagine why anyone wants a three-legged stool. And getting him to defend something that no one had ever second-guessed

basically got him to close the presentation book and talk to us like just a one-on-one discussion.

And we find we learn so much more about why people think they're successful, what motivates them, what their goals are. If we can get them to close the pitch book and just talk to us. And, you know, that continues to be a goal in any management presentation that we're part or management meeting that we're a part of today is let, let's, let's just talk to each other. You know, you,

We don't want you making a presentation to us. Talk about what matters to you. Talk about how you're going to judge success or failure. Talk about how you motivate people and all the numbers that you use to fill in your models. And we can get that from investor relations or maybe somebody in the finance department. We don't need to waste the CEO's time with that.

It seems like one of the most important aspects of the success of Harris, in a sense, is that you came up with these core principles. Really, I think three core principles pretty early on that have become kind of guiding principles. And I wondered, A, if you could sum them up, but B, give us a sense of why it's such an important thing to have this very well-defined

investment strategy. Because I see this again and again with the great investors, right? And talking of three-legged stools, I remember Chuck Ackray talking to me about his three-legged stool, right? Where there were three core principles that he used all of the time. Tom Gayner has these four filters that he comes back to again and again. And so it seems really important in a sense, the ability to distill things down to these essential principles that you can apply to almost every investment.

So tell us, A, what those principles are and B, why that's so valuable, that process of distillation. Well, I think one of the reasons it's valuable is there is just so much information out there. And this is an even bigger issue today than it was in the 80s when I started my career.

If you wanted to, you could spend months and months learning everything there is to know about a company, and you probably still wouldn't get everything that's available. So somehow you have to be able to filter down all that information to what's really going to matter to your investment decision. And when I started here in 1983, Peter Foreman said to me, you

When you buy a company, you get two things. You get the balance sheet and the guy who's running it, and you better be happy with both of them. And the three things that we look at today aren't all that different than what Peter had Harris looking at more than 40 years ago. We say the three things we want, we want a large discount to underlying business value,

So we try to make a guess based on what we think the company could be worth seven years from now, discounted back to today. We'd like to buy at something in the 60s cents on the dollar what we think the business is actually worth. And to us, worth means what's the maximum price an all-cash buyer could pay to own the whole business and still earn an adequate return on investment?

And if we can get it at 60% of that, we're very, very happy. The second thing is we want the combination of dividend income and expected per share value growth to at least match what we expect for the S&P 500. So if you say the S&P yield a little less than 2%, probably is expected to grow earnings at 6% or 7%.

We'd like companies where that combination is 8% or 9% at a minimum. So it could be an Altria that pays out a yield that's about 9% and isn't expected to grow earnings.

Or it could be an alphabet that doesn't pay much of a dividend, but is expected to grow faster than that. We don't care which form the return comes in. But the reason we want that is value investing can sometimes lead you to these structurally disadvantaged companies whose best days are in the rearview mirror. And you're kind of fighting a battle of will the business value decline dramatically?

rapidly enough that

That's the way you'll get to fair value, or will investors mark the value up quickly enough that you can sell at a profit? We don't want to be buying those kinds of value traps because we want to take a very long-term time horizon and believe the more time that elapses from our purchase to our eventual sale, the greater the business value will be over that time period. And then thirdly, we want...

Like everybody, we want exceptional management. But to us, that exceptional largely means that they are aligned with outside shareholders in having a goal of maximizing intermediate to long-term per share business value.

And we want to avoid the companies that don't use a denominator and just are trying to grow their size. The reason that's important to us, our average holding period tends to be five to seven years. And if you think about that time frame, the important decisions a management team has that you really have no concept of how to model today.

But it might be the opportunity to sell a division, buy a new division, maybe even sell the entire company, repurchase shares or make acquisitions. Those decisions are going to have a very, very meaningful impact on what our return is as an investor. And we want to make sure that management is aligned with us.

in at least what they're trying to accomplish. And that to us should be maximizing long-term per share business value.

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All right, back to the show. It's striking to me that in some ways you've had this very rigorous, consistent, replicable process with this emphasis on these three pillars. And on the other hand, you have the opposite virtue, which is this kind of flexible, non-purist approach to value investing, where like someone like Bill Miller, who I know you admire a lot, you were able to buy things like Amazon and Google and Netflix and the like. Can you talk about

just how your view of investing evolved over the years so that you were able to start thinking about things like intangibles and the like? Right. I don't like the description that it's less pure. I think what we do is very pure value investing.

But we acknowledge that gap accounting was really constructed for a tangible world. Accounting is the world I come out of. And the basic principle of accounting is if you can't touch or feel something, it doesn't belong on the balance sheet. So if this desk got purchased,

The accounting for it would be you estimate that it's going to last for 10 years. It's not going to be worth anything at the end of a decade. So you take the cost of this desk and 10% of it goes through the income statement as an expense item every year. That worked pretty well for a world that was primarily industrial.

And if you go back to the start of my career, the correlation of stock prices to book value per share was pretty high. Today, that correlation is almost zero. And I don't think it's because investors have gone crazy or that the market today, you know, prices bear no resemblance to business value. I think it's what Buffett was one of the first people to recognize in the very early 80s when he bought Coca-Cola.

And it was one of his first purchases that was above a market multiple and lots of value investors. There's all this discussion back and forth of what in the world is going on. How can he justify this investment? And one of Warren's lines when he talked about it was to say that Coca-Cola's most valuable asset wasn't even on the balance sheet. It was its brand name.

And that had been built up through years and years of advertising, customer experience. The accounting world viewed it as worth zero. So we started thinking about that and how that might apply to other businesses and other expenses like R&D for pharmaceutical companies, advertising for consumer products companies.

sales expenses for companies that were kind of at an emerging stage, like the cable TV business.

So way back in my early days, cable TV companies were routinely getting taken private at something like 10 times EBITDA. And yet they had negative book value, negative earnings. None of them paid a dividend. The value investing community generally shunned cable TV providers. And we went through the income statement and said, where's the disconnect? Why is private equity seeing value here?

when you can't see any of it reflected in net income. And we looked at a depreciation schedule for plant equipment that cable in the ground that was probably going to last 50 years was getting depreciated over five. Customer acquisition cost, as you were trying to grow your customer base, immediately expensed, even though the average cable TV customer would be a customer for more than seven years.

And we changed the accounting on those to more

replicate real world decay of those assets. And when you did that, the earnings looked more consistent with the cash flows that the private equity firms and other cable companies were using to say a cable sub tended to be worth about a thousand dollars because they were generating a hundred dollars of EBITDA. And we were able to utilize those metrics with public equities to

to make some pretty significant cable TV investments at a time where that was viewed as unusual for a value investor.

We owned Amgen, one of the largest biotech companies in the early 80s, when we looked at what's the enterprise value divided by pre-R&D cash flow. And it was cheaper than the traditional pharmaceutical companies on that metric, even though the patent life for its products was multiples the length of what it was for Merck, Bristol-Myers, Pfizer.

So we've been doing the same thing for the 40 years that I've been here. It's just as the economy has changed and we've moved to more of an information economy where intangibles are so much more valuable, it's getting to be a higher and higher percentage of our companies that we need to recast the income statement and balance sheet to better reflect real world economics.

One of the companies that we had looked at and owned for some time, Netflix, it struck us that on a per subscriber basis, it was selling at less than half of what HBO was. HBO was declining in subs and Netflix was growing subs rapidly. And our conclusion was, I remember when our analyst presented it,

He said, if Netflix charged the same monthly price to subscribers that Spotify charged, it would sell at less than a market multiple.

And surveys that we had done of employees and friends, I mean, nothing super scientific, but anecdotal, said people valued their Netflix subscription way more than any of their other monthly subscriptions. So they were effectively investing via price to grow, using that price as a customer acquisition weapon to grow much more rapidly than any of the other streamers.

And we bought it on the belief that their subs should be valued more like cable TV subs. And one of the ways we looked at it was we said they grew subs 25 million in one year. We thought those subs could be worth close to $1,000 a piece. That's the equivalent of $25 billion of income.

And the stock at the time, I don't think it was even making a gap net income, had a market cap of something like $150 billion. Most value investors thought that was ridiculous. We were looking at it saying it sells at about six times the annual increment of value that they're adding to their base business value. So to us, it was like a low PE stock.

It feels to me like there's some kind of conflict or schism within the value investing community in a way that there's a relatively new generation over recent years that decided we should just be buying great businesses and holding them for many years in the way that Buffett did with Coke or Bill Miller did with Amazon or Nick Sleep and Kay Sakaria did with Amazon. And in a sense,

When I look at you or someone like Joe Greenblatt, who are very valuation-oriented, it feels like you're sort of in between, right? Where you bought something like Amazon, say, in the 200s many years ago, and you held it, I think, into the 600s and then sold. So part of your strength is that you've remained very much tethered to valuation. You've always kept this valuation discipline. And then on the other hand, there's this downside, which is

that you don't get to write these companies, these really great companies for many years. And I've heard you object to the term compounders. And Joe Greenblatt said to me at one point when I asked him about Moody's that Buffett had held forever, Joe was like, yeah, I've always sold too soon. Everything, this is part of the problem being cheapskate, I've always sold too soon. Can you talk about that sense of tension between the desire to write a great business that's truly great

and the tension of not wanting to get caught out overpaying for something. Sure. When our analysts make a recommendation that they want us to buy something, they make their best estimate of what the company can earn over the next seven years. And then we discount that back and we're looking to buy at a discount and we'll set a sell target

that depending on the riskiness of the business, the balance sheet, et cetera, be somewhere between 85 and 95% of our guess of what the true business value of the company is today. And during the time we own the stock, the analyst's job is to respond to all new information and make sure their estimate of business value reflects everything we know up till that moment, not just what we knew at the time when they recommended the stock.

So again, I said our typical holding period is about five years. We would expect most of the companies we own to be growing business value something like 8% to 10% a year. You're somewhere 50% or so higher on the sell target by the time you sell than you were at the time you bought it. One of the other things I think most value investors pride their self on conservatism. We try to discourage that and we prize accuracy.

And the whole path of when we start buying a stock until we sell it is trying to squeeze out any conservatism in our numbers and make sure we're selling on our true best guess, most accurate estimate of value.

And our belief is if a stock attains that, to continue owning that stock rather than recycling that capital into another that's at 60% of what we think it's worth would be hurting our expected return.

And yes, it's true. There are companies that have continued to grow at supernormal rates much longer than we had anticipated they would. But there are also companies that stopped growing sooner than we thought they would. And I think it's really easy in hindsight to have some seller's remorse, those small handful of names that would have really continued to do well, as opposed to

doing a deep dive into all the names you sold and looking at all the ones that you actually got out of on a pretty timely basis. Using cell targets didn't prevent us from owning Apple for 12 years. Now, we first bought it, I think, in 2009. We sold it shortly into the pandemic around 2021.

Almost that entire time period, Apple was selling beneath a market multiple. We made 30 times our money on the stock, but it was the analyst diligently updating every quarter, making sure that the new sell target reflected all the growth that had exceeded our expectations. Now, we didn't buy the stock thinking we'd make tens of times our capital on it. We bought it thinking it was selling at two-thirds of value.

So, I mean, to me, the idea that you buy these high quality businesses and never, ever reassess and just hold them kind of turns you into a momentum investor. That once something passes an estimate of business value, then either you haven't properly accounted for everything in that business value or you're playing somewhat of a greater fool game.

I want to talk in some depth about your processes and in particular about how you avoid thinking errors and predictable behavioral errors, because I think this has been one of the most important aspects of Harris's success. And one of the things that really struck me last time we spoke back in, I think, 2015, we talked a lot because you had just given a speech, I think, about what you could learn from non-value investors.

and we talked a lot about Michael Steinhardt. There were some really interesting and important ways in which he influenced you in terms of challenging the habit that most investors have of seeking confirming evidence. Can you talk about Steinhardt? Because I think a lot of our listeners don't really even know who he is at this point. I mean, obviously, he's retired. He's in his 80s. In some ways,

In some ways, I think his reputation has been tarnished because he got me too'd and he got in trouble for accusations about looted antiquities and the like in his collection. But he's clearly one of the great hedge fund managers. And he was friends with Peter Foreman, right? So you got to meet him. Can you talk about how he influenced your way of investing for the good? Peter Foreman

Right. And also back when I had first joined Harris Associates in the 1980s, we were also a brokerage firm. So we didn't have nearly enough capital to fully utilize the ideas that our analyst team was generating. So we would get opportunities occasionally to pitch Michael on ideas. And you think our stock selection group might be a challenging or intimidating environment where you've got

20 people sitting around the table trying to poke holes in your ideas because we want to identify our mistakes before we actually lose client money on them. One-on-one pitching an idea to Michael, that really taught me what I didn't know about ideas that I thought I had become an expert on. I think one of the things that made Michael great and his hedge fund record had like a mid-20s percent compound rate of return.

Throughout its entire existence. I think it lasted maybe 20 years growing at 20 plus percent a year I I think it was 25 percent a year for 28 years something like that huge unbelievable really an unmatched record and might Michael was not not only someone who had an incredible feel for the markets and

But he would always challenge his own thinking. One of the things that he frequently did is if somebody was coming to him with an idea, he would invite that person for lunch and then find the most bearish person on that same stock who was a Wall Street analyst and invite that person to lunch. And the three of you would just sit and talk during a lunch. That was an intimidating environment.

I had an opportunity to do that once. And again, I learned how much opportunity there was for me to grow as an analyst. Really? Tell me about the experience. I've never heard of it. I'd love to hear what it was actually like to be in that situation with him.

So he ordered sandwiches for lunch. It's like Bill thinks I should buy American Airlines because it's got so much cash on the balance sheet. All of its debt is is lined up specifically against aircraft. There'd be an ability to dividend a lot of this to shareholders.

And then there's an airline analyst from one of the big Wall Street firms at the same table also eating lunch. I'm a generalist analyst. So it's not that I know so much about airlines. One day I was looking at a steel company, one day an airline, another day a cable TV stock. And I'm sitting at the table with somebody who's spent 30 years studying only airlines saying, here are the things I think are missing from this analysis.

And I felt, Michael felt, I'm sure the analyst felt that it was pretty clear I hadn't won the debate that day. But Michael called it variant perception. He wanted to know any position he had, long or short, how he differed from the strongest voice on the other side of that position.

So he would seek this out for anything in his portfolio. Any long he had, he wanted somebody to come sit down and have lunch with him, tell him why he was wrong. Any short he had, he'd get the long to come in and say why he thinks he shouldn't be short the position.

And I think the ability to take in all of that information, process it, and come to an investment conclusion was something he was unusually capable of. Michael's use of variant perception is why Harris Associates adopted a devil's advocate review. Whenever we have an analyst presenting a new idea to us, somebody else takes the challenge of

spending a couple days on that stock, reading the best short reports that they can find on it, and presenting to us why we shouldn't buy the stock. And we try to mimic that presentation of both sides of the equation in our meetings the same way Michael did. We also do that with names that have been on our approved list for multiple years.

We're a very data-driven organization, and we found out one of the areas over time we tended to get sloppy in was the names that had sat on our approved list for four or five years, not quite achieving what we had hoped they would, but not performing poorly enough as businesses to make us think we didn't know that our thesis was wrong.

And by the way, I listened to your podcast with Chris Begg, and I loved his statement that he likes hypothesis better than thesis. Because thesis just sounds like we have way too much certainty. But we try to challenge that argument.

by requiring a devil's advocate review after something's been on our approved list for more than a year, that somebody comes to the table basically presenting a short argument on that same security. And it helps us understand how we differ from the market in our expectations and helps us know what the signposts are to tell if we're right or the other side of the argument is right.

I think sometimes we underestimate how wrong we can be in this business and still be successful. If you think about our basic approach, buying at 60 cents on the dollar, selling at 90 cents, and the business growing the same as the S&P during the five years we hold it, well, that 60 to 90 should give us like an incremental 50 percentage points over five years.

If we were exactly right on our forecast, we should be beating the market by 1,000 basis points a year. But the reality has been more like 200 to 300 basis points after you add back the cost to the expense ratio for the fund. So our correct ratio is something like 25%, 30%.

And it makes it so important that we figure out as fast as we can the names that we're wrong on and get those out of the portfolio and get the capital recycled into the names where there's a better probability that we are successful, that our hypothesis is correct. And our devil's advocate reviews, again, modeled after Michael's variant perception, is one of the ways that we have helped

I guess, lessen our patience with companies that aren't fundamentally performing the way we had expected to. Value investing is this tension between having eternal patience, which you need to be able to have if the business is performing well and the stock isn't, versus the other end of that spectrum where you become stubborn.

And you won't react to new information. We want to be very patient when the stock market isn't acting right and very impatient when the business isn't performing the way we expect it to.

You were unusually process-driven, I would say, at Harris Associates. It's a very consistent process. And I think this is part of the great strength of the firm. Can you talk about the process for pitching a new idea and then it getting into the portfolio, like from guiding us through from the written pitch that's given on a Monday morning to the vetting process at the Tuesday investment meetings?

to it getting on the approved list and to the vote by the portfolio managers, because it's very unusual and quite systematic, the approach. Jim Collins : Yeah. So this packet just came to me today right before we started our call. In it is any new ideas that analysts are recommending, any devil's advocate reviews,

reviews on all of our existing holdings, where analysts are expected to review them at least annually, but to target those reviews toward points in time that are action-oriented. They either like us to be adding or trimming, or where there's been a significant change in our hypothesis. So

We will all spend this afternoon and this evening reading through this, checking some of the things with sell-side reports on these same companies. And then that forms the basis for our discussion tomorrow. So new ideas, we get probably about one a week on average. Typical analyst here will maybe do four or five of those over the course of a year. They'll do a write-up that...

Basically, we've got a bunch of standardized statistical sheets, but the written part, we want the analyst to show why we believe the stock is cheap, why we're comfortable the value is going to grow, and why this is a management team we're comfortable investing with. And at the meeting tomorrow...

We'll spend half an hour to 45 minutes on each new idea. The analyst will give a couple minutes summary and then all the arrows come out. I mean, everyone at the meeting is trying to present an argument why the analyst might be wrong. And at the end of that discussion,

three of our investment leaders who form our stock selection group will vote on whether or not that stock should be on the approved list. And a majority vote controls whether or not it's on the list. People sometimes assume that

People like Clyde McGregor or myself, Tony Canaris, that have been long-term investors here, that we can just buy whatever we want in the portfolios we manage. That's not true. We're all constrained by this approved list of stocks.

We can recommend a stock if we want to. We can ask an analyst to work on it if we want to. But it has to go through the process, be approved by the committee, and then put on the list before we can consider adding it to a portfolio.

Our list has about 100 names on it that would be eligible for the Oakmark fund. That means a big business in the 250 largest sales net income or shareholders equity. We don't do large cap because we don't want to be exposed in times that smaller companies get pushed up into the large cap space by excessive valuations. And we don't want to be limited to the big businesses

that are getting pushed out of the large-cap universe, we don't want those to be off-limits.

So anyway, we've got about 100 names on the list. Mike Nicholas, Bobby Bierig, and I will sit down and talk about all the new ideas as well as the existing portfolio. We probably average twice a month in times where the markets are hectic like they've been so far this quarter. We might be meeting every week. And at times when the market is more stable, it might be monthly.

And we'll talk about, does this name add something to our portfolio? Is it cheaper? Is it a diversifier? Why somebody thinks that it should be added to the portfolio? And any of us can recommend that a stock gets added and a two out of three vote in that group determines if it goes into the portfolio or not.

So effectively, my role, as well as theirs, is sort of a tiebreaker. If two people agree, it doesn't matter what the third person thinks. And if two people disagree, then the third person is the controlling decision maker. And we have been using that approach because we want to make sure that whenever personnel transitions occur,

that we aren't throwing somebody who's brand new into decision-making into a role where they're a sole decision-maker. I think that's one of the reasons we focus so much on process. And I think something a lot of investment firms struggle with

You have this leadership group that's used to getting their way and being able to implement whatever decisions about the business they want to. And they maintain that total decision making control right up to the day they walk out the door. And then it's kind of good luck, guys. And you turn it over to people that haven't been in a position of their opinion driving a decision making.

And we've intentionally tried to avoid that by doing team-oriented decision-making. We don't want the loss of any one person to ruin the ability to continue making decisions in the same manner Harris has always made them. How do you guard, Bill, against the various potential downsides here, right, to this process? Because clearly it's worked really well, but there are dangers of...

whether it could get less than collegial, the sort of things people complain about at Bridgewater, right, under Ray Dalio, who I had on the podcast a couple of times. And I asked him about the dangers of sort of unkindness in this kind of radical transparency, radically truthful approach. So there's that. Then there's the danger on the other side of kind of groupthink when there are so many people involved in decisions instead of the kind of lone wolf approach at some funds.

How do you manage to avoid those pitfalls? Well, kind of like the question before where you said it looks like we kind of straddle between a traditional value camp and buy great business, doesn't don't ever sell them. I think we're kind of in between here as well, where we think the group is small enough and we all have an ability to like challenge any decisions that

It's not overwhelming to try to get one other person out of two people to agree with you. It's not like it's a group of a dozen decision makers and you need to get eight or nine to agree, where I think there is a risk when you get that large that groupthink is a problem and

Kind of the best ideas sometimes aren't obvious to everyone. And to convince the majority of a partnership group that it's a good idea, I think would keep you out of some of our more successful ideas. So I think we're small enough that anything that somebody has tremendous conviction on, they've usually got the ability to convince somebody else. But the other thing you don't want is somebody making decisions that

And maybe having goals that aren't in the client's long-term interest. This is an easy business to pursue a gambler's ruin kind of outcome where you make a bad decision on one company and you think you can kind of make up for it by double-weighting the next decision. And you're taking your shareholders down a path that is not in their interest when you do that.

That's a very hard place to get to when you need to convince a group of people to do something. It's also tough. Like if I've got a buddy that says NVIDIA is a great stock, but I can't put it into a value framework,

It's virtually impossible for me to get that into our portfolio here. So the risk of us doing something different than what we tell clients we're doing is also diminished by having this small team approach. We don't even like the word group. Group makes it sound like it's too many people.

But these three-person teams, we find a very manageable size and kind of keeps us in the middle of the problems at either extreme.

What's the process like when a stock starts to underperform or the business diverges from expectations? Because I've heard you talk in the past about your mistake management protocol, which sounded like a very grandiose and impressive term for when things start to screw up. So take us through that process, because I know there are even processes at a certain point where you'll shift coverage to a different analyst to prevent anchoring and the like.

The use of the term protocol was intentional to make it sound as important as it is to our process. We think rapid identification of mistakes and getting capital redeployed into something where we have a higher probability of success is one of the keys to our long-term success.

So first thing is we think about mistakes as direction neutral. A mistake is when you don't get a forecast right. It's just as much a mistake if the company comes in way above your forecast as if it comes in way below. And we consider either a mistake and as worthy of extra attention when a mistake happens.

The second thing is we define mistakes in terms of company fundamentals, not stock price. So to us, a mistake is we didn't project company fundamentals correctly either direction. And when that happens, regardless of if the stock has been a decent stock for us or not, we increase the attention. And the goal of this is...

We want the path of least resistance to be our mistakes exit the portfolio rather than mistakes linger. I think an error a lot of us make is we tend to think sometimes ignorance is a defense of the status quo. I don't really know enough to sell this stock. We would like to say, if I don't know enough to buy it,

then I don't know enough for it to stay in the portfolio. So at the first sign of a mistake, and think of that as fundamentals deviating 10% to 15% from what the analyst had projected, we asked for an immediate review in front of the stock selection group to give us an understanding of what went wrong, why it doesn't violate our hypothesis, and why we shouldn't expect there to be a second error.

And one of the reasons we do this, again, that said we're very data driven, we've looked at companies where we've made one mistake, two mistakes, three mistakes, and the likelihood of an additional mistake is always higher after first mistakes. You find a lot of value investors who their knee jerk reaction to a shortfall in company performance is to say, "Well,

Well, the stock's down 20%, but my value estimate's only down 10%, so it's actually a better buy today than it was yesterday.

We've checked that on our own data, and at least for us, that's rarely true. Usually, that mistake is a signal that future mistakes are more likely. So after the analyst does this the first time, if anyone on the stock selection group wants to recommend the name get removed from the list, they can recommend that, and there'll be a vote. If one of the other two people on the committee agrees with them, the stock's off the list. If there's a follow-up mistake,

The typical process is to immediately require a devil's advocate review. An analyst will get assigned that if nobody volunteers, and we ask them to rush that presentation and in the next one to two weeks, present it to the group. If the stock stays on at that point in time, we will generally then go and kind of

kind of start at square one and meet with the management team again, preferably in their offices, and get us to recommit to a hypothesis that we think is strong enough that if we didn't own the stock, we'd be buying it today. If there's a third shortfall, the typical process is to say, let's shift analyst coverage. And there are two reasons to do that. First being,

The initial analyst is probably too anchored on their original forecast, and they aren't being as reactive to new information as a fresh set of eyes might be. But the second reason, and equally important, is that the first analyst has probably lost their voice.

If somebody comes to you and the third time says, I know I've been wrong on this three times, but I still really want you to buy this. It's kind of like just noise in your ear where a fresh analyst who has no reason to come out on either side, pro or con, a fresh analyst saying, you know what? I started with a clean sheet of paper here.

I really like this and I want it purchased in accounts is much more likely to successfully get that name into client accounts than the original analyst would have been. So for us, it is an important process.

We encourage analysts to challenge us on ideas. I mean, analysts learn very early on that my door is open and I reward people for coming in and saying, I think you might be wrong on XYZ because of these reasons. It's very horizontal. We all challenge each other. And I think in some organizations,

Analysts think they can't succeed unless another analyst fails. I think our concept of the team succeeds or the team fails is also very important to our long-term success.

And that applies from the time an analyst is working on an idea. They don't have to be secretive about it. It's a collaborative process. The same is true in trying to identify mistakes. I think that collaborative process is one of the reasons we were one of the fastest groups back from COVID. The six or eight weeks that we spent out of the office was painful to us because we're so used to

Being able to walk to the next door office and have somebody who's willing to challenge you on an opinion, maybe has a contact that would be helpful. And we just weren't making those check-ins with each other via Zoom. A lot of times it happens as a follow-up to a conversation that had nothing to do about a stock. You're talking about how great the Cubs game was last night. And then you say, oh, by the way, do you

Have you ever talked to this person at Netflix or Liberty Media or whatever, and the casual conversation turns into a business conversation, and those weren't happening as frequently as we're used to when we were all trying to work out of our homes? I know some of this depends on just being really skillful about hiring team players. And you've talked in the past about liking people who were not very good at sports, but were very competitive in the way in loving sports.

Is some of it also about the way you incentivize people so that they actually collaborate? How do you structure it, given your understanding and appreciation of incentives within businesses? How do you structure it so they behave properly?

So at the end of the year, the people who are on our compensation committee will talk to all of the research partners about who's been most helpful to them over the course of the year. So it isn't just evaluating that this person recommended these five stocks and they either outperformed or underperformed or how many dollars got put into client portfolios. It's who do other people...

think their work is worth looking up to? Who helped them the most throughout the course of the year to develop the way they were thinking on the companies that they were following? And alarm bells go off to us if at the end of the year, somebody's name doesn't come up in that process, because we think the way the team has been constructed

Everyone here should be able to help other people in a way that elevates the quality of everyone's work. So it's explicitly part of our compensation process, how other analysts rank order the rest of the team in terms of how helpful they've been. How have you dealt with the psychological pressure of these very intense periods where

you're out of sync with the market or the market is doing terribly in general. I mean, I remember you went through difficult periods in 2000, in 2007, then during the financial crisis. Then again, I was looking the other day, I think the worst three-month return you had for one of the funds was something like 32.5%. You were down at the start of 2020 when the market was getting clobbered.

How do you actually handle emotionally the intensity and the pressure? Well, you know, one of my favorite hobbies is wine. So that's one way.

That's a joke. Semi-joke. I do enjoy studying wine, collecting wine, also drinking wine, but that's no way to deal with stress. I think a big part of it is our belief that eventually stock prices and business values have to come together.

And that we are invested with management teams that will be proactive about making that happen. So if we're right on our forecast, if we're right in our belief of what a business is worth and what it's going to be worth at some point in time, the swings up and down in the interim are

if anything, or an opportunity for the management, maybe to repurchase shares more cheaply, maybe to make acquisitions at prices they couldn't otherwise have thought about making them. I think it was helpful to me when I joined Harris to have older partners who had been through cycles many times. And

Them saying, you know, don't worry about this. We've been through this before. This, in fact, is a time where we usually add value. That was really important to me. And one of my roles as the longest tenured employee here is to instill that confidence in our younger analysts.

It's something like 20% of our team only was here at the dot-com bubble and maybe another 15 or 20 for the great financial crisis. Half the employees weren't here when COVID hit in 2020.

So I can't just say to them, well, you remember when the GFC hit and how dark it looked for a few months and what a great opportunity that created for us to restructure portfolios. So the day, a couple of days after liberation day, I had sent out an email to not just the investment team, but all the employees saying like, this is our time to shine. These are the periods we tend to add value in.

And that's on the investment side. That's on client contact, proactively reaching out to tell the clients, this isn't a time to panic. Here's what we're doing. If clients get comfortable that we're not asleep at the wheel and that we're trying to proactively take advantage of the chaos, they sleep a lot better at night.

And I think those of us who've been here a long time, it's our job as culture warriors to instill that confidence in the younger analysts and not just the analysts. We don't want the operations people worried that they're going to lose their jobs or we want everybody performing at the peak of their ability during these difficult times. You can't do that if you're worried if the business is going to exist. Do I have a job?

And those of us who have been through it multiple times before have the challenge of helping the younger people get through that, just like I was on the other side of that 40 years ago. When you and I last spoke, we talked about what you described as the weird blurring of work time and personal time and how challenging it is just to learn to manage that as an investor. It's such an all-consuming game that, as you put it, it becomes you.

And I was wondering if you give advice to the younger analysts and fund managers at Harris about how to handle this conflict between needing to work unbelievably hard so that you can be competitive in a super competitive business, and yet somehow manage to have some sort of life so that it's sustainable and you don't wreck your family and ruin your health and the like. Yeah, I think there are a few things there.

One is there are lots of times like the past six weeks where this is an all consuming job and we're trying to accomplish the amount of work that might normally take six months in six weeks at a time. And we do ask a lot of everybody on the team during those time periods where we think the opportunity set is unusually large.

But in normal markets that are functioning well, that aren't as volatile, if somebody wants to take an extra day or two off and take a long weekend, we encourage that. We don't aggressively track vacation hours or days on nice days. If the markets are quiet, I might take people out to the Cubs game or something like that. So you try to make sure that you are getting that downtime

in the times where you don't have an opportunity to be unusually productive. I think part of it is also hiring people that love this business. I wouldn't last at a job if doing landscaping for 10 hours a day or something like that. But I truly love this and am very happy to

listen to podcasts or books or whatever while I'm taking a walk, riding a bicycle, on vacation, walking on the beach, listening to investment podcasts or books. To me, that is relaxing. And I get emails lots of times from people saying they're considering whether or not they want to have an investment career. Maybe it's a career change. And I always discourage them from doing it.

It's like, if you don't feel compelled to do it, you probably shouldn't because it is an all-consuming job. It will completely erase the lines between private and personal time and work time. And if you don't truly love this business, I think you're destined to fail.

because you either won't be willing to put in the hours that you need to succeed or you won't you won't be loving the time that you do spend on it so you know i i think if you love this work then kind of everything you do in your life becomes part of the game of of beating beating the market it's

You go out shopping and you see which clothes are on the sales rack or overstocked rack. After the riots here in Chicago five years ago, I was walking down Michigan Avenue and couldn't help but notice Under Armour was the only store that still had most of the merchandise left in the store. All the windows were broken, but the merchandise was there. I think that said something about the strength of the brand at that point in time. So...

Like everything you do from stories your kids tell you to grocery shopping to reading the newspaper, you're always thinking about, is there an investment angle for something that I'm learning about today?

I remember listening to an interview you did where you talked about your typical day and you said how you would get up at 5:30 and you'd read the Wall Street Journal and the New York Times and the Chicago Tribune and you'd get to work at 7:30 and you'd get home at 4:30 with this big briefcase full of reading. And you've obviously been doing this now for more than four decades. And I was very struck by something that you said, which was, you really do have to sacrifice to achieve greatness. And

And I was just wondering, like when you, A, what drives you with that intensity still at this stage in the, I guess it's now the latter half of your 60s, mid 60s, the latter half, but also what it is you feel you've sacrificed along the way? Well, I think a big part of it is free time. I don't think you can do this job successfully as an eight to five job.

When there's an opportunity that you think is out there, it's all consuming. And then, you know, you get back a little of the free time after that, but it's never as much as the amount of time that you invested in it. I think the challenge of doing something that academics say you aren't supposed to be able to do

The scoreboard nature of the business of how is your fund performed relative to other people that are trying to do the same thing? There are parts of it that are like playing a game that I find very enjoyable. There's also the part where.

our decisions have a very real impact on the financial lives of our shareholders. And to get letters from shareholders who've been invested with us for 20 or 30 years saying our performance helped them help aging parents in their final years, helped send kids to school, allowed a family to take a nicer vacation than they otherwise would have. To me, that really brings home

the real social value of the job. And to me is so rewarding that if I can do this somewhat effectively, I can't imagine spending the day at a country club instead of doing that. It's,

It's just, it's something that I want to do. But time is one of the big sacrifices. You can't say, I'm going to do this full 40 hours a week. I've had friends who retired after they had as much money as they thought they would need for retirement. And the pattern is always the same, you know, one or two months into retirement,

They're saying, this is the best thing ever. You should be doing this. You can't believe how much more I'm sleeping. I'm spending more time working out, traveling more. And then it's usually like six months to a year after that, that you get the call. Like, have you ever thought about hiring somebody part-time for some role in your company?

Because I don't want to be back feeling like I have to be all in. I just like to do a little bit of something to kind of stay in the game, give me something to do. And I'm always like, you know, it's not that kind of job. You can't do it that way. And I always say it's an on-off switch, not a dimmer switch. You're either in or you're out. And it's something I enjoy doing. I've been effective at it. And as long as...

As long as I can do that and help give the environment at Harris Oakmark to help the younger generation be set up for success, it's something I want to keep doing. It's interesting that when you started out,

I guess you really did approach it as this game, right? At this lucrative game where if you got an edge, you'd make lots of money. And it wasn't that much different than counting cards. And then over the years, you've sort of seen this kind of nobler purpose to it, as you were saying, this sense that you're helping clients and the like.

But it's also helped you to do a lot in terms of philanthropy. And I was struck last time we talked, you had set up this Bell-Nigram Foundation many years ago, I think maybe 30 years or so ago, that was very focused on education and children and youth and social services and the like. So sort of disadvantaged kids and giving them opportunities.

Can you talk a bit about that? Like why that in particular resonates for you as a, um, as a place to invest your time and money and energy from this very lucrative game? Well, I mean, I, I think I've been fortunate enough in my life that to not give back something would, it would do it in some ways it would, uh, devalue what I've accomplished in my career.

I had advantages that a lot of kids don't have. Even though I grew up in a middle-class family, it was a family that

cared that their kids had incredibly strong work ethic. It was parents that wanted to teach at home. I went through public schools, but kind of like learning didn't stop when I walked in the door after school. And my grandparents on both sides, one of them immigrated. So it's not like sixth generation or something.

My dad was the first one in his family to go through a four year college. So I kind of have a special spot for kids that are growing up in families that are more economically challenged, that are finding ways to overcome that and still achieving a lot academically. I would say the favorite foundation activity

that I have right now is something we call New Futures Scholarship. I live in Southwest Michigan, commute back and forth to Chicago for work Monday through Thursday. But in the Southwest Michigan community, you've got a lot of first generation families largely working in the agriculture business.

And we set up scholarship funds for kids in the county that we live in who have achieved academic excellence despite the challenges that they've had to overcome. Because you look at an underprivileged kid today, first generation, they might get to within $10,000 or so of education.

non-academic scholarships and other loans or gifts. But to tell somebody in that position that you're going to have to pay $10,000 more than what can be provided for you, you might as well be telling them a million dollars because the idea that they could actually get the extra $10,000 is impossible. So we do what we call a first-generation last-dollar scholarship

where these academically successful students get all of the other scholarship money that they can get. And then we top that off to a level that makes the collegiate dream achievable for them. And of all the things that I've worked on, that's the one that I'm most proud of. My partner, Maggie, has started a charity in Chicago called Strides for Peace.

that tries to work, what I would say at a venture capital level with community organizations that are doing things to reduce gun violence. That's been another important aspect of our foundation.

And a lot of those activities involve putting the kids on a path toward education, valuing education, and making sure the doors are open to them as they climb their way through elementary school, eventually high school, and on to college if that's what they want to do.

Before I let you go, I was very struck as I thought about your career over the last few days by how a series of individuals have made a huge difference to you, whether it was Steve Hawke or Mr. Foreman who you worked with in your early days, Harris Associates or your parents or your uncle, so many people.

And I had heard you at one point talk about how one of the secrets of success was to align yourself with as many top decile people as possible. And I wonder if you could just talk about that a little bit, about the importance of building relationships with really remarkable people as a kind of key to a successful and

and happy work life. I was thinking also one of them that we haven't talked about at all was Bob Levy, who is the chairman and CIO of Harris Associates and a director of your charitable foundation who retired, I think in 2016 from Harris as chairman of the firm after 30 years. So

You had told me years ago that he was easily the best investor at Harris, whose name wasn't known outside the firm. Can you just talk a little bit about this idea of the importance of these relationships with extraordinary people and any advice you have for us about how to go about doing this in our own lives? I don't think it's different than the advice you would get that Charlie Munger gave throughout his life, that Warren Buffett gives.

Part of it's just good luck that I've been very privileged that people who knew a ton more about investing than I did were willing to give their time to help teach me at ages in my life where that was important. But I think part of it is also, it's your decision of who you want to partner with, what firm you're going to work at.

I'm the longest tenured person at Harris now, so there is no one here that was here when I joined Harris. But through always trying to hire people that are ethical and hardworking and smarter than we are, we're able to perpetuate that through the various age groups at Harris, where I've got an environment now where...

There are people from 60 years old to 25 years old that I'm anxious to talk to because they're smart on topics that I'm not nearly as smart as they are.

I think that's one of the reasons that I still enjoy coming into work so much and why I hated those weeks during the pandemic was I really enjoy being surrounded by high performing, really bright people. And it's not just the discussions that we have about the investment portfolio, the stock market today.

But when you're around smart people, they've got interesting ideas on nutrition or how different sports teams have succeeded, what's going on in politics. I think one of the mistakes that you often see value investors making is because Warren Buffett is such a good mentor and role model, even to those of us who've never met him,

You just read every book about Warren Buffett that you possibly can. And people are on their 10th or 12th Buffett book, and they know what he eats for breakfast. All these aspects of his life that have nothing to do with his success. I love reading about...

people who succeeded in the investment world who weren't value investors. Takes me a little out of my comfort zone, but every once in a while you read about something they did, like what Michael Steinhardt did, that you say, wait a minute, that's something we could incorporate in our process. Or what made athletic teams or certain athletes so successful? What did they do that the rest of

the highly performing players didn't do? What allowed them to get to that next level? Same thing with people who started businesses. So yes, it's great to have the relationships with individuals, but I think you could also learn a lot from podcasts. I love the series that How Leaders Lead, David Novak, the ex-CEO from Yum Brands.

Yung had been a very successful holding of ours for a number of years, got to know David really well. I think he does an amazing job of interviewing these high-performing CEOs and getting them to talk about things like we discussed earlier, get away from the presentation book and just have a conversation about what motivates them, what's helped them to succeed.

So I think those are some of the things that people can do to try to learn from others that have been successful in their field or other fields. When you look back at this amazing run that you've had over the last 42 or so years at Harris Associates,

as a case study or a laboratory to show what works long-term in investing and in team building and beating the market. It's an extraordinary example. What do you think is replicable in what you've done? If you were looking from the outside, looking at it as a case study, and you wanted to do what I'm doing of reverse engineering and saying, oh, that's what they figured out, what would you conclude is really the key lessons?

Having a discipline that everyone on the team buys into and having everyone on the team believe that if the team is successful, that's their personal path to how it will be most economically beneficial to them as an individual.

I think the other thing you look at that has made Harris Oakmark successful is you look at how we've evolved over the 40 years. 40 years ago, we used to have a mad rush toward

the monthly S&P stock guides that would come into the office, or once a month we paid to have a value line screen come in that would rank order the 1,500 value line companies based on their P/E ratio. I mean, you take it for granted today that that information is very, very easy to access. But what happens is as information becomes easy to access and is therefore ubiquitous,

is it stops having its ability to add value. So our approach has had to evolve kind of to stay ahead of

what you could computerize. When I started just buying low PE stocks or low price to book stocks and being patient was a winning formula. There are some value managers that still try to do that and the results haven't been pretty. First, you can replicate them at almost no cost with a value factor fund. But second, it's not that effective anymore. So I think trying to make sure that your process is staying ahead

of what can be done passively is also a very important part of our success. And just being around people that know the learning journey didn't end the day they graduated from school. And that if you're going to stay successful at this business next year, you have to be smarter than you were this year. And just that pursuit of knowledge, knowing that

It's a necessary but not sufficient part of success in the business is also really, really important. And as you look, anybody could do it who wanted to. And as you look forward, it feels like one of the things you've been writing a lot about in recent months and years is this sense that value is not by any means dead, that if anything, it feels like after a decade of it being gone,

out of favor in a sense you feel like there's a high likelihood that these kind of timeless principles that you've lived by are likely to become more and more powerful? Yeah, I think, you know, early in my career, we talked about like a three year growth value cycle that got to five.

The idea that value would be out of favor for a decade is something that was never something we envisioned back in the 80s or 90s. But when you look at why it's been out of favor, the one thing that most value investors will cite very quickly is how much more important momentum is to so many investors'

processes today. And I think that's true, but equally important has been the acceleration of growth that we've seen in very, very large companies. Part of what value investing depends on is that the most successful companies today, because they have such high returns on capital, are going to invite competition. And as they get bigger and bigger, it's harder and harder for them to maintain

the abnormally high growth rates that they've had. I don't think we've ever seen a time in history where companies the size of Amazon, Meta, basically the Mag7 stocks, reaccelerated growth as they got larger. And in a sense, to believe that growth investing is going to succeed at the expense of value investing for the next decade

You have to believe that continues. And we're starting at a level where we've never seen such issue-specific or industry-specific concentration in the S&P 500. It's effectively become a concentrated mega cap growth fund. And for that fund to succeed,

more than value investors succeed, you not only have to believe it maintains this unprecedented level of concentration, but that it grows. And to me, that's almost a bet against capitalism. Capitalism says high returns will draw competition and it will force companies and industries back to fair levels of pricing.

And to make a bet that a tiny handful of companies that have grown incredibly well for the past 25 years are going to continue that kind of growth for the next 25 years, it's kind of a bet that capitalism didn't work. And I'm not going to make that bet.

Well, I hope I'm going to get to check in with you quicker than I did last time. I shouldn't have waited a decade to interview you again. And it's just been a real pleasure. And one of the things that really struck me was everyone always makes out that it's so impossible to sort of sustain great performance. And it's always striking to me that actually there are some of these great investors like yourself who

It's no surprise when you come back a decade later and they've continued to do well. It's like you had a really smart process and you've done so much right. It's been a great process that lots of people have worked on tweaking so that it continues to be great. And I can't stress enough, this wouldn't have been possible

without the team around me. You know I'm a baseball fan. One of my favorite quotes is a Casey Stengel quote that says, managers get paid for home runs other people hit. That's just as true of portfolio managers as it is of baseball managers, that it's very difficult to be a one-man show and be successful for any extended period of time. I think you see that in a lot of the people

who have kind of picked one environment that they've done really well in, and then you go back and revisit, and the arc of their career has not been as successful as that one time period would have suggested. This isn't a job to do as a one-person operation. Even Warren Buffett needed help. On that note, thank you so much, Bill. You've been incredibly generous in sharing these hard-earned insights. I've really enjoyed chatting with you.

Thank you, William. It's been a lot of fun. Nice to talk to you again. Thank you. All right, folks. Thanks so much for joining me for this conversation with Bill Nygren. I'll be back very soon with some more terrific guests, including the author Robert Hagstrom. But for my next episode, I'm planning something that I've never actually tried before. It's going to be an Ask Me Anything episode in which I'll try to answer whatever questions you may have for me about investing, life, books, or whatever else might interest you.

You're welcome to submit your questions to me by email using my work address, which is william at theinvestorspodcast.com, or you can send me a direct message on X at williamgreens72, or message me on LinkedIn, or send a carrier pigeon, or whatever. And come to think of it, I think for this episode, I should reinstate an old tradition. So I'm going to send a signed copy of my book, Richer, Wiser, Happier, to one listener who's

question I end up answering on the episode. So anyway, until next time, take good care of yourself and stay well. Thanks for listening. Thank you for listening to TIP. Make sure to follow Richer, Wiser, Happier on your favorite podcast app and never miss out on episodes.

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