#329 Charlie Munger (the NEW Poor Charlie's Almanack)
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There is a very, very special conversation with charlie monger that has been released for the very first time today. This conversation that charlie had with john hasson, the cofounder of stripe IT, is available on the invest. Like the best podcast feed, you can listen to the entire conversation for free.

I've already listen to you for four times. I've read the entire transcript. I thought IT was incredible. I will leave a link to the episode download, but you can just search to invest the best on whatever pocket player. Listen to this now and listen to that conversation.

In fact, I would listen to that conversation before even listen to this podcast, because I talk about a lot of the ideas that is in that conversation and how they relate to the ideas that are in the new updated version, the stripe of press version of poor choice inc, which is also available for the very first time today. I hope you listen to the conversation and order yourself a copy. The book links for both are down below, and I hope you enjoy this episode.

I first came across poor charlie omens in my choice when I was trying to learn everything I could about what made successful businesses tick. I found IT to be a refreshing rebuttal of conventional financial wisdom delivered with unusual simplicity and gender. Never before had I heard a venerated business person express such trenched insights about investing, finance and the world more broadly.

And with such hood per one, can't help but read a line like without numeracy fluency. You were like a one legged man in an askinson contest and come away not only chuckling, but also a little bit wiser. I had the privilege of meeting charlie at his home in los Angeles.

I was delighted to find that he is just as engaging and intellectually curious in person as he is on the page. He also, I discovered, had considerably more stampa than I do. More than four hours into our dinner, I was ready for bed while charlie showed no signs of flagging our conversation that I was wide ranging, touching on everything from the economics of ski resorts to raising children to the evolution of the news industry.

Witnessing charlie's prodigious intellectual breath and multi I disciplinary mode of reasoning first hand only reinforced my admiration both for the man himself and for this book. Poor charley's alec is a testament to the power of thinking across disciplines. It's not just a book about investing.

It's a guide to learning how to think for yourself and to understand the world around you. His insatiable appetite for learning, his uncanned ability to evaluate businesses using simple frameworks that produce more reliable, nosis and complex financial statements and his partnership with warn buffett have persisted for decades through boom times and bus. Although torley didn't invent the concept of compounding growth, his success in that a bircher half way is a testament to its existence.

The practical wisdom of porter is on this old to curiosity, generosity and virtue will similarly compound as successive generations of entrepreneur readers extend his lessons to their own sences. That is my favorite sentence in this forward, written by john Collins and the cofounder of strike. I'm going to do again the practical wisdom of poor charlie ic, this oed to curiosity, generosity and virtue, will similarly compound as successive generations of entrepreneur readers extend his lessons to their own circumstances.

That is a line worth double underlining, which I did I encourage due to reach early speeches and essays with an open, curious mind, is my second favorite, that line in this entry tire book. But this section as well, you will be rewarded with insights that stay with you for a lifetime. Ash charlie once said, there is no Better teacher than history.

In determining the future, there are answers with the billions of dollars in a thirty dollar history book. The same might be said of poor charley's onic. IT is the ultimate value investment, and that was an expert from the book and we talked about today, which is the brand new updated version coming out two day of poor Charles onic, the essential wit and wisdom of Charles t.

Monger, edited by charley's lang time friend Peter cowman, and republished and may be beautiful by strike press. So before I joined back into the book, I just want to update you on this project that charlie monger collaborated with stripe press on. They've working on to her last two years.

Sadly, as you know, charlie just passed away last week. I'm going to leave the link down below, but you have to check out the the new website that strike press made for this updated in a bridged version approach omand for the first time ever. First all, i'm going to heavily, heavily try to convince you to order a book.

I think it's an indefensible reference for anybody trying to get ahead in life and order the hard copy book I think pay like twenty two dollars reminder something of that. It's it's a no brain in my opinion. But also for the very first time ever, there is going to be a digital version and that aversion is going to be available for free.

There is also going to be they recorded an interview with john collison interviewing charly monger. The video of that of that interview is going to be available for free on their website. And in addition to the video, the audio of that interview is going to be published.

It's already available able today. By time you listen this on, my friend patric runs just like the best podcast, which as you are you know, it's on my fair cast. That audio of the conversation between junk elsin and charlie monger is available right now on the invest, like the best podcast feed.

Now I had early access to listen to that episode. I'm on my fourth listen. I took extensive notes. I will reference them throughout our conversation today.

In addition to that, my friend to marry winter runs straight press, and he actually gave need the very first copy of this book. So i've had several weeks to go through and reread poor choice omens. As you should probably know, first time of of the book was already in two thousand and nine was epo de ninety of founders.

And in the inner, I reread my highlights on the book. You know, dozens of times i'm going to start with. There's a forward written for the book by warned buffer t and IT is titled to buffer on monger and hush.

Just a few this just a few highlights from here. A few of made me laugh, but then he just warn, gives us some, uh, great advice. So he says, from seventeen and thirty three to seventeen fifty ban Frankland dispense useful and timeless advice to poor Richard dominic.

Among the virtues extol were thrifts duty hard work in simplicity. Subsequently, two centuries went by which band thoughts on these subjects were regarded as the last word. Then charlie monger stepped forth.

And then this is a paragraph that made me laughed. Charlie consistently practice what he preached, and, oh, how he preached. Then, in his will, created two small, filthy pic funds.

They were designed to teach the magic of compound interest. Early on, charly decided that this was a subject far too important to be taught through some post humorous project. Instead, he opted to become a living lesson in compounding is showing frivolous, which he defined as any expenditure that might sap the power of his example.

And this is the part, made me laugh. Consequently, the members are charley's family and learn the joyce of extended bush trips, while their wealthy friends imprisons in private jets missed these enriching experiences. I'd like to offer some advice on the choice of a business partner.

Look first for someone both smarter and wise than you are after locating him or her, asked him not to flag his superiority so that you may enjoy a claim for the many accomplishments that spring from his thoughts and advice. Seek a partner who will never second guess you, nor sok when you make expensive mistakes. IT is john colson is an excEllent job in the view with charlie that I hope you listen to.

Uh, where they talk about this is towards the end of the conversation he talks about like, okay, tell me about the disagreement you have and it's so remarkable 的 amicable how they handle this。 And charlie just was very adaptable and unbothered if they had different views on any subjects. Seek a partner who will never second guess you, or soak when you make expensive mistakes.

Look also for a generous soul who will put up his own money. Finally, join with someone who will constantly add to the fun as you travel a long road together. Again, that's the same thing Charles said over and over.

And we just had so much fun warn, and I just had so much fun back to warn profit. I set out in nineteen fifty nine to follow this advice slavishly. And there was only one partner who fit my bill of particulars in every way and that was charly.

So they were partners up until died that ah up until charly died so that would be uh sixty four years by my math. And so one of the great things about the spoke is eighty percent of IT is charly in his own work. It's probably the largest collection of just monger's own words.

I have any of the book that have ever found and definitely is the largest question that but what is also uh, really valuable I think is in addition to the the forward written by buffet who knew charly very well but really short. There's this introduction by Peter cowman who was actually like friends with charlie for decades, if i'm not mistaken. And so he she's going to give us an overview about some of the ideas that he thinks are very important.

And I think he gives a great overview, because eighty percent of the book is just transcripts, added transcripts of these talks, these eleven talks that truly gave throughout this lifetime. So this is going to give a great review. I would read this section before.

You don't have to read. You don't have to read this book in order. Really, I think of a more as a reference, in fact, in the podcast that john cAllen and charley did together, they mention the fact that bunch of people write into charley and say they reread the book every year.

I think that's a good idea. But you could also just reread certain sections that speak to every year. But this is the overview of so, says the quotes, talks and speeches presented here are rooted in the old fashion, mid western values from which charlie has become known.

So this is something that charlie held dear. Lifelong learning, intellectual curiosity, subpriority, avoidance of envy and resentment, reliability, learning from the mistakes of others, perseverance, objectivity and willingness to test one's own belief. And then what he says next, I think, really gets to why charlie is one of the greatest teachers that has ever lived.

He's taught and inspired millions of millions of millions of people interested business investing, how live a good life. And it's the fact is reminds me of one of the greatest quotes that i've ever heard, Steve jobs from the jobs he says a story teller. Is the most powerful person in the world.

Charlie employees historical and business case, that is to great effect. He makes his points with suddenly and texture, often using a story like context. Instead of abstract statements of theory, he regains his audience with his humorous anecdotes and pinion tails, rather than with a blizz of facts and figures.

People only member, they remember individual lines and they remember stories. We don't remember tables of data. He well knows and wisely exploited the traditional role of the story teller as a pervy of complex and detailed information.

As a result, his lessons hang together in a coherent latest work of knowledge available for recall and use when needed. That is such an important line in IT echoes what I, what I believe to be the most important sentence in a forward. Let me go back to that, the practical wish of poor rooming ic, this auto curiosity, generosity, virtue, will similarly compound as successive generations of entrepreneur readers extend his lessons to their own circumstances.

OK read that that line three times. Hopefully that's the last time I I read IT, but I really do think it's so important. And again, the important factor is that you we're gonna remember stories and that's that's when you're actually teaching somebody something because if they don't remember, they can apply IT when needed.

They are not highly like you are not to doing these ideas right now. Maybe not even today, maybe not next week. IT could be years from now and truly put his ideas and lessons into these memorable stories that you can recall when needed.

In fact, this was very fascine was on the phone of friend the yesterday and we were talking about some um like unusual traits stat a lot that a lot of history grays from share. And as I well, I really do believe there's a positive correlation between the storytelling ability and the overall business performance. And if you go back and this is something that other people have noticed your time, too in fact, on valentine, the founder of skoal, he mentioned this and I want to read something, uh, call from him, that was fascine.

He says the art of storytelling is critically important. Most entrepreneurs s can't tell a story. Learning to tell a story is incredibly important because that's how the money works.

Money flows as a function of stories. okay. So back to charlie. IT is clear throughout these talks and speeches that charlie places a premium on life decisions, over investment decisions. This really important.

And there's actually something from security that popped to my mind when I got to this section. So charlie place the premium of life decisions over investment decisions. Charlie once said I wanted to be rich so I could be independent.

Independence is the end that wealth serves for charly, not the other way around. I think a lot of entrepreneurs, uh, get that wrong and they went up having a lot, a lot more miserable life uh, then if they didn't. So when I got to this entire paragraph, those are only that paragraph is no longer but those the two lines I wanted to bring attention.

So there's a call from the buggy y of soccer ties that I read for episode fifty to those fascinating this is education is the process whereby the ability to lead a good life is acquired. It's important not to confuse to be because I really do believe that building a great business is in service of building a great life. The mistake that is made that you're seen a lot of buyer phy is the fact that you have that inner drive, right, that you're probably into a really Young and yet you sacrifice everything in service that on goal, not realize zing, that a great business is just part of a great life.

But the whole point of building a business is so you can have a great life, too. So I think truly would tell you that building a great business should be in service of building a great life. And then there's a special note to end this section.

This is something I talked about, I think, on all the other six podcast have made about charlie. Charlie, redundancy and expressions and examples is purposeful for the kind of deep fluency. He advocate tes, he knows that repetition is the heart of instruction.

I think that speaks to the wisdom of picking up this book and rereading IT, at least rereading sections every year. That repetition is the heart of instruction mean, you have talked to about this over over again. And repetition is persuasive as the maximum I used for that IT becomes very, very obvious.

If you study any of the great advertising agency founders, they talk about this over and over again. They were in the business of figuring out what makes people buy products, what makes what, how you can influence the people. And they say, over, never gone.

A repetition is persuasive. You see the same thing, which early monger to repeat a lot of the same ideas in usually different story, sometimes in the very same story, throughout the talks, even though the talks are given over multiple decades. And one person you'll know that charlie talks about and repeat his admiration for a lot is his grandfather.

And IT struck me that the role that day's grandfather played in his family inspired nearly charley's personal conduct, but it's the role that he wanted to play for his kids and grandkids as well. So i'm going to read a few lines here because this really tells you, like when you see who somebody admires, you can kind of tell like what's important to them. And I think truly will tell you that you should strive to be dependable and reliable for your tribe of loved ones.

So charlie grandfather was a respected federal judge. This is during the depression. This is, i'm only going to talk about this one paragraph, think it's really important.

So Charles immediate family, because of his grandfather, was not as a affected by the depression, but some members of charlie extended family were in. Judge monger was such a prune and prosperous person that he actually them, something they mentioned earlier that I did not understand. So I reread my, I went through, read this book, did on my delights set, on my notes.

Then I reread the highlights to note to model times and I didn't not understand this when I when I got to this part. But he says something later on that the higher networks, the more you can be of service to other people. IT was very fascine.

He going to see that happen here, uh, with judge monger. So he says the this error of the depression provided real learning experiences for Young charlie monger. He witnessed generosity and business acute of his grandfather as he helped rescue a small bank that was owned by charlie uncle tom.

So charlies uncle had to run, run this bank. He went up, loaning out a bunch of money, uh, there is a bunch of uncollectable notes. And obviously a torna banks failed during the depression. And so grand, he calls tom calls grandpa monger for support in the judge risks nearly half of his assets by exchanging his money for the bank's weak loans. This enable tom to open back up his doors.

Charley's grandfather eventually recovered most of his investment, but he took many, many years to do that, right? And then judge monger also was able to send his daughter's husband to pharmacy school, and then helped him by a well located pharmacy that had closed because of the depression, the business prosperous, and secured the future of charlie ants. Charlie learned that by supporting each other, the mongers weared the worst economic collapse in the nation's history.

And again, that line, he learned that by supporting each other, really, that support came from a single, formidable individual. And you can clearly see the way that charlie love this life. He was trying to emulate a lot of traits that he respected and admired in his grandfather.

And so this section gives us like this brief overview of charlie life like basically like a biographical outline and some of the try your pets ah later in life you talk about, you know, no matter what, life will have terrible unfair blows and you've got to be able to survive and not engage in self pity and pick yourself back up and what some of the things these references and yeah, businesses are gonna have all kinds of unpredictable problems. But there's a lot of problems are more important than business and they are outside your control. And it's the death of his Young son that he had to endure.

He's only twenty nine years old. When this happens, he's going to a divorce and his son is dying at the same time, despite award appearance, is always not Sunny charley's world. His marriage was in trouble in he, in his wife, we're getting divorce.

Charlie learned that the dodson teddy was terminally ill with lukie a and he was nine years old, if i'm not mistaken, in that era before bone marrow transplant. Ts, there was no hope. A friend remembers that charlie would visit his dying son in the hospital and then walk the streets of padda crying.

Charlie had to ensure the worst possible thing that can happen. Somebody, he's also remarried. They've got four kids.

He's got to support an entire family. This is when he's a lawyer. So says, with many new responsibility lies. Charly were tired at his law practice.

Even so, as earnings were unsatisfactory to him, he wanted more than what a senior law partner would be able to earn. He sought to be like his firms. Leading capital clients is not mentioned in this book, but has mentioned other programs that I read bottom.

So he doesn't really smart when he's a Young lawyer. Think now is in the studies at this point, he sold an hour of his own time back to himself and use that hour to learn things like investing in stocks and developing in investing real estate projects. So in his mid to late thirties, he searched doing a property development project for the first time.

This actually worked out really well. So he had, apart on the steal, the partners earn a profit of three hundred thousand dollars on one hundred thousand eight investment. This is a one thousand nine and sixty one h he left all of his profits in his real events.

Rer, so that bigger and bigger projects became possible when he stopped doing real estate in one thousand nine, or real state development, sixty sixty four, at least with his partner. He had a mistake of one point four million dollars from real estate alone. During this time.

He also started a new law firm. This law firm still exists this day. I read somewhere that this law firm, and I think is doing like five hundred million year in revenue right now.

I didn't verify that, but that's what I read. So he makes the one point four million dollars from the railway project, starts his new law for, remember his in his mitigate thirties. And then they did. And another, another important thing happens.

We, the most important, one of the the most important thing happens, I would say actually around the time is charley's father dies, had a good relation with his father, but he required him to go back to omaha. He's living a los Angeles this time. To administer his estate.

This is when he is going to meet warn buffer. T warn is going to be two thousand, nine years old this time. And charlie, thirty five years old.

This is when my favorite things suggest, do and think, said and think, cause you to you and I warm buff and charlie monger, are these elderly, really rich guys when you discover them today, ten years ago, maybe you discovered them. Thirty years ago, not many people knew them. But they even by time, there, there, sixties, seventies.

I think they are in their eighties when I came to to be introduced to them. And yet I am fascinated about the you know this because you about this heavily on the parking is who is the versions of them that actually built the foundation that their financial succeed in their empire rest upon? And it's this, it's this conversation.

Is this them trying to figure out more than twenty nine years old, years thirty five is working to get a ten years. They're still only forty five and thirty nine. So let me guess about IT.

I am obsessed with talking about this time, so says, I warn had heard of charly a few years earlier when he was raising investment capital in omaha. This is salaria, I think, was in the book snowball. Warn was watching this guy named doctor Davis and his wife, and he was explaining his investment philosophy.

And at the end is, I OK, i'll give you a hundred thousand hours and warns, like, what the hell? So you, I thought you were paying attention. Like, why would you dedicate such a large present your network to me? I didn't know you.

I thought, like, I was going to get kicked out here and doctor, so he asked me, like, why are you willing to give me a hundred thousand dollars and doctor Davis explained that warn reminded him of charlie e. monger. They yet warn did no charly, but already had at least one good to reason the like them, so they have the standard charly.

Warn realized that they shared many ideas that also became evidence, the others at the table that this is going to be a two way conversation. So they talk for hours. Everybody else got and left again.

This is so important to to think about to realize warning just twenty nine, he's just twenty nine years old and his meaning's partner is going to be partner with IT for sixty years. Charly study five warn was unenthusiastic about charley's continued practice of law. He believed that there was a far less promising business than what warn was doing.

Warn to logic helps charly decide to quit law practice at the earliest point he could afford to do so. That's an important line at the earliest point that he could ford to do so. Charlies got a gang, a kid, I think, between him and his wife, when they are also done anything, they have eighteen, maybe nine, children to support.

When charly return to los Angeles, the conversations continued on the telephone and do linking letters to conversation of the buffet. Obviously, he was evident to both. This is really, really cool.

IT was evident to both. They were meant to be in business together. There was no formal partnership or contractual relationship.

The bond was created by a hand ship. Again, I had read that word, that sentence, I don't know, three times before I just read to you. There was no formal partnership or contraction relationship. The bond was created by handshake.

Then i'm listening to the preview investigate best epo, des coming, john cAllen and charlie monger towards the end of the that this is the no, I lot of my pay on this page when I reviewing notes this this morning before I want to talk to you, he said, trust is one of the greatest economic forces on earth. Pay attention to that part of the conversation at the end that comes by its party, like a minute long. But I SAT there, and we rounded a few times, and trust is one of the greatest economic forces on earth.

He's talking about the trust inside of the company with your partners and all the people that work with you. And then the trust outside are your partners or customers, everybody else. But he summarized that was very faster and and really tied nicely to this.

What they are saying, there is no former partnership at the beginning. There was no contract. They shook hands in other ways. They trust each other. Try is one of the greatest economic forces on athletica.

Direct quote from charlie monger, so charly eventually winds up leaving the law firm and going into, he starts his own investment partnership, essentially investing other people's money. I did this as well. If to close his partnership will minute Charles to close them.

And they are going to team up and do cher, right? But this was facing, speaks to who he was as a person. So he leaves the law from.

He found him, and he did not take his share of the firm's capital. why? Instead, he directed that his share go to the state of a Young partner, feed water, who died of cancer and left behind a wife and children.

Charlie thought that he and the children needed the money more than he did so once. Are building this partnership with jack wheeler. They won this partnership for one thousand nine hundred sixty two two two, one thousand nine hundred seventy five.

So as charlie followed warn in concluding that he no longer wanted to manage funds directly for investors, warn had closed his own partnership in one hundred and sixty nine. Instead, they resolved to build equity through stock ownership in a holding company. Now what's fascinating is they end this sort section on charlie life, right, with advice to do exactly what you and I do together every week, learn from biography and become friends with the eminent dead.

Charlie affinity for benchland Franklin expensive career can be found in many speeches, and whenever he holds an audience, large or small, and this is which charly says about this, I may buy biography, not myself. And I think when you're trying to teach the great concepts that work, IT helps to tie them into the lives and personalities, the people who developed them. I think you aren't economics Better if you make atmos ith your friend, that sounds funny, making friends among the amended dead.

But if you go to life making friends with amit dead, who had the right ideas, I think I will work Better for you in life and work in education. IT is way Better than just giving the basic concepts again. That is something that I learned through experience that he again practice what he preached.

I got to see his library, and I ask them autonomy tions about books. So I in, I think you are, you know this. But when I finds a way, marry manger, and then he recommends a bunch of books to read, I go and read those books, and i've done a bunch of episodes.

I know people like Henry ka lesh wab, that charly monger would speak publicly in that you should really read this book. And what's crazy one, it's clearing that the areas I talked him like, he makes me look like a biography amateurs. There's nothing he just knew so much more than I did.

His collection was incredible, and his recall from those books was incredible. So I think that's another, again, he's giving the vice of the people say, hey, you should really be grapes on a bike. Phy, my self.

And it's clear when you when you see library and you ask some questions about this is a goal. This guy really reads his books and he rereading and retains everything was incredible. And so this is a section where there's a bunch of anecdotes and quotes from his children about who he was and what was important to.

And something that that that he talks about is the fact that having an unconventional way, looking at things in a strong work ethic, those two things combined really well together. And it's something that he lived because he talks about when they were children, like how this is his schedule. When he's trying, he's not yet successful.

He's desperately, desperately trying to get that financial independence that he craved. And so one of his sons is actually describing this. In those days, charlie worked so hard and so long during the work weeks, he was off before dawn and home about dinner time.

Then he studied and later would spend a couple hours on the phone with warn. And so charlies famous for saying that he's succeed because he has a long attention, which he definitely does, but he also isn't seeing ability to focus. And so they're, again, they are describing.

This is another one of his sons describing what I was like at their house at night, father night after a night with sydney's favorite chair, reading something all the death to the roughhousing Younger, Younger children. The blaring T. V in mom trying to summer him to dinner follows the ability to wall off the most intrusive distractions from whatever mental task he was engaging accounts as much as anything else for his success.

People said, same thing about warn buffer ts in one of his biography that might be snowball all might be making of american capitals, but talks about they are all going on like a family fiction. They get on a the private jet. I think the flights like four, five hours warn sits there with all the stuffy's reading people having conversations.

There's like kids everywhere and like just cannot penetrate when he is focused on what he's studying. When he's learning, he especially all himself off from any directions. okay.

So this is the last thing before we jump into the eleven different talks, this is just really overgraze a list of five things that charlie repeats and users over over games. So the first thing is that he's going to tell you, you need he calls the big ideas from the big disciplines such charlie. Big ideas from the big disciplines approach.

Charly combines big ideas from multiple disciplines to build a more accurate understanding of the world. He will explain a business problem, but he'll be using things from mathematics, from physics, from chemistry, from biology and from psychology. So that's what he means by multi I disciplinary, that the biggest criticism of of forms of form education is that they just stay like silos and their little domain.

And he's like, have no respect from that. Have no respect for I go wherever your curious, he say you what you need to earn the big ideas in the big disciplines. So and then the second thing is you have to develop your own personal curricular.

You have to develop your own personal curriculum. This is a self touch system. The self touch statement is no exaggeration.

Charlie once said to this day, i've never taken any course anywhere in chemistry, economics, psychology or business. The third thing, good ideas are rare. Bet heavily when you find one.

I think this is starting to get through to more people think this will actually more common. And IT was because how much charlie warn a talk about this, charlie will not deviate from these principles regardless of group dynamics, emotional itches or popular wisdom. And these trades result in one of the best, no monger characteristics, not buying or selling very often, monger believes a successful investment career bowls down.

To only a handful of decisions. When charlie likes a business, he makes a very large bet and typically holds that position for a long period. Charlies willing to commit uncommonly high percentage of his investment capital to individual opportunities.

Number four, this is something you I talk about over over again. You see in the books, this only works. If you trust your own judgment, you cannot be successful tremendious cannot be a successful stor.

If you cannot trust your own judgment, charlies content to swim against the tide of popular opinion indefinitely. Charlie simply content to trust his own judgment when he runs counter to the wisdom of the heard. This loan wolf aspect of charlie temperament is a rarely appreciated reason why he consistently out performs.

And number five, inversion, get what you want by avoiding what you do not want. Charlie generally focuses first on what to avoid. That is what not to do. He says that he's gotten a long term advantage just by being consistently not stupid.

Instead of trying to be a genius, trying to be very intelligent, I would actually reduce that down even further, that avoiding stupidity over a long period time is genius a no thing that genius? So I guess of six, charlie strives to reduce complex situations to the most basic unemotional fundamentals that the line have been reading over over again. Genius has the fewest moving parts.

Genius has the fewest moving parts. Thing that truly does that very different is he spends an unbelieving monotone. In fact, if you may, I have read the whole thing, but if you will only said, if you only had to read one thing, I would be the very last talk, the talk eleven, which is the psychology of human misjudgment.

Charly recognizes that even among the most component people, decisions are not always made on a purely rational basis. He considers the psychological of human misjudgment some of the most important mental model. So that is the largest talk by far, I think, is the one that he spent the most time on.

I think he said he spent fifty hours revising that talk just to publish IT in this book. My friend Andrew wok ers, in the sound of tiny actually made, he commissioned an animated video on this talk. I will leave a final link and leave a down below the shown notes.

And in the final thing, before we jump into the first talk, above all, he attempts to assess and understand competitive advantage in every respect, products, market, tradeMarks, employees, distribution, channel s, societal trends and someone, and the durability of that advantage holding on. I'm going to interpret myself because one of the, my favorite things that I read the first time, one of the favorite lines the first time I read this book, was something that one, a charly son said about what his father admires. And I the way I think about of my own life is aim for their ability.

The ability has always been a first rate virtue in my father's eyes. So go back to this. So he, a attempted assess and understand competitive energy, every respect, products, markets, trademark, employees.

This should be change, society translate and the the ability of that advantage. Charlie refers to a company's competitive as its mote, which is the barrier that IT presents against incursions. This is the note of myself on this page.

Charly only focuses on great businesses, and great businesses have motes. That was very fascinating. The conversation between john cAllen and charly mugger.

Yes, again, I think towards the end, maybe middle podcast, john S, O, K, if we came in, my brother patch came in and pitched you on strike, what would you want to know about strike? Essentially, one sentence is, again, what is the most important thing? Charly only focuses on great businesses, and great businesses have motes.

And so charlies answer to john was, is IT likely to remain forever as a money generator? In other other words, as I have a mote. okay. So we get to the first talk, which is a commencement address that he gave in one thousand eighty six.

In right away, we see charley's love of inversion, because most graduation speakers are going to say, hey, this is what you should do to get happy life. Charlie does not do that. He uses the inverse in principle, and he says, i'm going na make the opposite case by setting forth what you should do if you want to reach a state of measure y.

Now he is going to emulate a talk that john y. Carson gave at this school as well a few years before charging monger did and and Johnson carson and did the same thing. Where is like I want to tell you, like I going to have your speech on on the things to avoid.

And what was facing about that is carson said in that speech that he couldn't tell a graduating in class how to be happy, but you could tell them, for personal experience, how to guarantee misery. I read john carsons automotive phy actually biography. It's episode one, two, three.

I'm pretty sure that based on the reading that book, I don't think carson ever attained happiness, and I do think he was more miserable than he needed. So this is facing so the three things that carsons carson's prescription, for sure, misery he had, three and then mongers going to add for. So the first one is ingesting chemicals in an effort to alter mood or perception.

Obviously, drugs and alcohol. When you started relying on them, there's no way you going to have, like you're going to be have a miserable life if you rely on them. Number two, envy.

And number three, resentment. So envy is something that monger talks about over over again. He's like, you had to live a good life. You have to care yourself of this inherent part of our human nature, which is we like to be envy or not like to be. We are proud to be envious of others.

There's something he repeats over over again that he learned from more buffet warm would tell charlie over over again that it's not greed that drives the world, but envy env drives the world. And charly, later in life, talks about the fact that he is one of the best things everybody was, that he cared himself of envy. A third part of this is avoiding resentment.

And so he is going to give us advice. He's like, you know, you don't want to be to become a bitter person because that's always I dal is just going to make you Better. He's actually to quote, uh, the solution to this, that Benjamin disraeli was a he was a prime minister of the united kingdom back in the eighteen hundreds, and this is what he did.

So it's called the israeli compromise. And so one way disraeli learned to give up vengeance as a motivation for action was, but he needed some, some outlets for his resettle, right? He couldn't just quit to call turkey. So he would put the names of people who wrong him on pieces of paper in a raw. So what he, what choose describing cause is called the disraeli compromise.

By putting the names of people who run him on piece of paper in the joy, then from time to time, he reviewed these names and took pleasure in noting the way the world had taken his enemies down without his assistance. And so if you want a miserable life, make sure you just chemicals in an ever, to alter muto perception, to become addicted to that, to be envious of people, all the people around you, people doing Better than you. And three, hold on to resemble the fourth one, this where monger starts adding some thing on a miserable life, be unreliable if you like, being distressed and excluded from the best human contribution in company.

This prescription is for you. Make sure you are unreliable. The next prescription for a miserable, miserable life is learn everything you possibly can from your own experience.

Minimize what you learn vicariously from the good and bad experiences of others living and dead. This prescription is a sheer shot producer of misery and second rate achievement. And this is this is why I say he's got a great, uh, a bunch of maxims that absolutely love.

But maybe my favorite all time maximum of travel monger is just three words, wisdom is prevention. Wise people don't solve problems. They avoid them. Wisdom is prevention. One of the way you do that, you learn by carrick to the experiences of other people living in dead.

You can see the results of not learning from others mistakes by simply looking about you how little originality there is in common disasters of mankind saying a paid to human nature and human history. It's just one dumb person after another making the same dumb mistakes that if they just learn through other people's experience, they would avoid that mistake. He saying.

There's no even originality in the mistakes that you're making. These are well document. Why are you true? Avoiding them, drunk driving, reckless driving, incurable venerable diseases, conversion of bright college students into brainwash zombies as members of destructive courts.

The other aspect of avoiding vicarious wisdom is the rule of not absolutely, under no circumstances, learn from the best work done before use, before years seeing. And then he adds a great story here, if you want to be non miserable, right? Which is the opposite, he trying to teach you, hey, but this is a whole pressure ript for misery.

Obviously, he teaching us about a version, but somebody that was able to have a non miserable result. And so he gives us a historical account. There was once a man who who master the work of his best predecessors, despite a poor start in a very rough time.

Eventually, own work attracted wide attention. And he said of his work, if I have seen a little father than another man, IT is because I stood on the server of giants, the bones of that man library. Now, under an unusual inscription, he relied the remains of all that was model in serious newton charlie, third prescription, which seventh? The final one in this talk, go down and stay down when you get your first, second and third severe reverse in the battle of life.

There is so much university out there, even for the lucky and why. So we are not persevere. We are quitting.

Something that I used to remind myself on the importance of not giving up, and that I really do believe what program said. He was asked one time what plays a more important role in the success of entrepreneurs? H determination and intelligence.

And he said, determination by far. And he tells us fantastic story. Where is like gleg say, you take, uh, two people, they both start out one hundred with one hundred in both determination and intelligence. You started taking away, decreasing the amount of intelligence for keeping the determination.

And one hundred, that person still gonna wind up rich, I think he said, but they all like a bunch er, you'll figure out a way to make money the only like a bunch of trash hauling services or something like that. But they are super determined. Meanwhile, a if if you're in that, uh if you're in the same.

And you keep intelligence at one hundred and one hundred particular determination. You have a billion but ineffective person. And program is, said he, seeing a bunch people that their lives want have just like that, a brilliant but ineffectual person.

And I think that's related to what charlie monger saying here. It's like a yeah, you be miserable like you're going to knock down everybody is going to knockdown just later. Just don't get up. Don't try again.

And so I told you over and over again, I have the face, the the frozen, frost bitten, exhausted face, of earning a shackle in the famous polar as my lock screen on my phone. Could you please look at your phone at one hundred fifty times that, or something like that? And every time I see his face staring back at me.

And this reminds me of his model, by endless, we conquer. We're not gonna stop until we're dead. By enduring, we conquer. Go back to this, which is charlie advice to invert, always invert. Where son did was to approach the study of how to create x by turning the question backward.

The great algebraic jab had exactly the same approach as carson was known for, his concept, repetition of one phrase, invert, always invert. IT is the nature of things that many hard problems are best solved only when they addressed backwards. So therefore, if you want to be miserable, you should approach problems in a standard way, in only belief, information that agrees with your previous conclusions.

So I mentioned earlier that when I find somebody admire, and if they say, hey, I am ire this person, I will then read, like I read the book that they recommend. And so there's there's an entrepreneur engineer named coral Brown, and he started this company called CF Brown engineering company monger repeats stories about this guy over and over again. In fact, I didn't find any books on him.

I found this little like maybe sixty page book, which was like an internal company book for the C. F. Engineering company.

And I did a podcast on IT a long time ago. I don't have ever published the podcast. I can't find IT any anywhere ah. So I should go back and actually find that book and reread IT and see there's lessons in there for you and I to learn from.

But one idea that that monger repeats that one, the most important ideas that you learn from coral Brown is h some really speaks like this psychological tendency and human nature that you will get more compliant ts, and more, be more persuasive. You tell people why. If you tell your employees why you need them to do what you need, didn't to do this is so important to coral Brown that if you did, if you were inside the company, you didn't do this, the second time you did that, you would be fired.

So this is a lot about that. A very great businessman named coral Brown, design and build oil. Finally, that's what the business did. He had a rule from psychology, which, if you're interested in wisdom, ought to be part of your repeat r. His rule for all Brown company communications was called the five w.

You had to tell who, what was going, what was going to do, what, where, when and why, and if you wrote a letter in the Brown company telling somebody to do something and you didn't tell him why, you would get fired. In fact, you will get fired if you did a choice. That is a rule of psychology.

If you always tell people why they understand, the Better we'll consider IT more important. They'll be more likely is to comply. Even if they don't understand your reason, they'll be more likely to comply in community with other people about everything you want to include. why? why? why? Even if IT is obvious, IT is wise to stick in the why.

And so another idea that truly will repeat is that he thinks is useful to think of a free market economy as sort of the equivalent to an ecosystem. And so he says, just as animals fush in nitches, people who specialize in the business world and get very good because they specialized frequently find good, good economics that they wouldn't get any other way. And so he's talking about one way to describe this.

I've heard him say that really stuck in my head is he has a great line about the importance of going to extremes. And he says, in business, we often find that the winning system goes almost ridiculously, ridiculously far in maximizing and or minimize one or few variables. And so the example who uses for that is like the discount warehouses of costco.

And then immediately after, he starts talking about the advantages of scale, which seems almost like a contradiction, but he's gna wrap this up and how you special, you initially start specializing in dominating one niche, and that can lead to more scale. And then he says, the advantages of scale are unguardedly important. These next five or six pages are of my favorite parts of the entire book.

If you get your own copies on on page, i'm sorting on page ninety. So the first example about the advantage of the scale being ungodliness ant, he talks about the the invention of TV advertising and just how powerful he says there was an unbelievably powerful thing. why? Because there was only three networks.

And three, two networks had something like ninety percent of the entire audience. So if you were procter and gamble, you had unguided scale, and you were one of few people that could actually afford to use this new method of advertising and your smaller competitor. And then this is the first time he goes into G, G, L, about something he talked about over over again, about he never looks at anything in isolation, thinks about how one factor can combine with another factor, with another factor.

And he create these. He got some little polo effects. But essentially, you see you're stacking unfair vantage after on top of one, unfair vantage after top of one and very and they all greatly increase the efficacy of each one.

So he's talking about television Operating right, which is, thank you, advantage of scale that porter game will have. Now there's more advantages to that scale that start with hay being big to begin with in this new technology invented. Then I can partition that technology.

My smaller competitors camp. Then what happens is more people know about the the products in the brands that Parker game, uh, own. That leads to another psychological fact, which is social proof, social proof, because more people here about IT, they think, oh, other people are buying these brands.

I should just do the same thing. Social proof, proof leads to more sales. More sales than lead to more distribution.

More distribution leads to this like winner take all, our winner take most, fly will. And an as the company has more resources inside of the company, you can actually have greater specialization. It's incredible how he tied this all together.

So it's going to pull out a couple of things that the basic over do. So he's talking about the fact that you you have access to this unbelievable distribution channels, unbelievable to advertise your products and your as a result, you're becoming so much more well known. Why is important? Because being so well known has advantages, scale.

This is what you might call an informational advantage. IT increases social proof. We are all influenced subconsciously, into some extent, consciously, by what we see others do and approve.

Therefore, if everybody's buying something, we think it's Better. We don't like to be the one guy who's out of step. The social of phenomenon, which comes right out of psychology, gives huge advantages to scale. And then those huge advantages to scale continue to give you another benefit that other competition is to expand your mote that we think. So we started my like, who's also another company that did this, or coca cola.

And why is that so important to coca cola, to advances that cocoa a has is that is available almost everywhere in the world, that worldwide distribution, right? This one, takes a long time to develop, is really expensive, is only something that they possess. And so he calls us a huge advantage.

And then he follows up and why that's important. If you think about IT, once you get enough advantage of that type, IT can be very hard for anybody to dislodge you. And I can also uncover great investment opportunities, not available anybody else because they don't have the advantages.

I was wondering why I was this thing is a business breakdowns episode on coca cola, right? And I was wondering why I doesn't ter where i'm at when i'm traveling might be like in a small city or whatever. I'll go like go until like tiny shop and you'll see monster energy drinks, I don't drink them, but you see monster energy drinks.

Everyone like how the hell is that possible? These people are just everywhere, every single tiny spot, even if they don't have other energy drinks. So usually have monster.

And I found out I heard on this podcast that ah I think coco is able to invest. Uh I think that I had like an opportunity cm representations. I once a twenty percent of the company and the reason monster did as because they gave them access to coca cola worldwide distribution network.

So that is why i'm seeing monster energy drink anywhere, everywhere. And I found i'm mistaken monster, one of the highest performing stocks in the past six decade or two. Whatever the the case is so on is go back to this idea. Once you get enough events of the types can be very hard for anyway to disclose you.

There's another kind of initial scale and some businesses, the very nature of things is to sort of cascine towards the overwhelmed dominance of one firm, which is what we're just talking about here, coca cola, right? And then he gives another example that daily newspapers, which have enough made about romanian in their heyday, most obviously, is a daily newspapers. This is a scale thing.

Once I get most of the circulation, I get most of the advertising. And once I get most of the advertising and the circulation, why would anybody want a finner paper with less information in IT? So intensive cade, to a winner take all situation.

And that is a separate form of the managers of scale phenomenon. Did you see what he just did there? He started all these different factors that interacted each other and make this phenomenon even more powerful.

And then he tries IT back together with this conversation started with, hey, this kind of weird like think about a free market economy looks really looks a lot to charly monger like an ecosystem and there there's a bunch of animals for flushing in these weird nitches ah seems to be a lot of people businesses that do that too. So then flip says that well, what what is that due to like new startups are new entrance into a market, right? Well, there's disadvantage scale as well.

So I just did I think two weeks ago um I just did a the episode on on more about and charlie mongers, one of their favorite managers, uh, sky named tom morphy, who was running capital cities who wants a buying A B, C birch hot how was their largest shareholder? And so mugger had a front rose seat to a disadvantage of scale. So he says, we had trade publications at capital cities in A B, C.

They were getting murdered, our competitors repeating us. And the way they beat us was by going to a nearby specialization. So I always search out small and the expands that and never go expansion opens up for somebody else to nitch back down, right? And this exactly what happens, uh, the way that a beats was to go to a narrow specialization, like an ecosystem, you're getting narrow and narrow specialization.

So we uses this example of this magazine that was kicking eras called motor cross. And this is hilarious. This is why monger. So he's such a great teacher because he makes you a laugh.

And remember, the of motor ss is read by a bunch of nuts who like to participate in tnm ents, where they turn summer sault on their motorcycles, but they care about IT for them. IT is the principal purpose of life. A magazine called motor cross is a total necessity to these people, and its profit margins would make you celebrate.

So occasionally scaling down and intensifying. Scaling down and intensifying gives you the big advantage. Bigger is not always Better.

The great defective scale, another great defective scale is, of course, you as you get big, you get biocon tic again. This is grounded in human nature. And he talks about, uh, always focusing on what the incentives are.

The incentives in a bureaucracy are perverse. Incentives are no long or the company's mission. It's, hey, how do I protect this territory that I and so he said, so you get big, fat, dumb, unmotivated bureaucracies.

You get layers of management and associated costs that nobody needs and their too slow to mic decisions and the numbers. People run circles around them. So life is an ever lasting battle between those two forces to get these advantages of scale on one side and avoid bureaucracies who do very little work on another side.

And so he's going to give me an example of sam multon was facing. If you read sam multon data graphs, which are done, I think, have done two or three dcs on sam in in that book was facing. Now he starts out this number guy and builds a giant company, and he says, like, you always doesn't matter.

Like every year you have to be, like, bureaucratic creep is inevitable, and you have to beat IT across, beat IT back across the line. And that usually comes from like the leader, the founder, really paying attention, the stuff where they were. He he talks about one thing that he hated that his company was doing, uh, in the book, was that new merging ism will come into the store.

They would have to label like put the Prices on IT. And in many cases, they were putting wrong Prices on IT. So then somebody had this idea of, okay, we're going to hurt ch people they have like the scanner and then after when Price, they sand IT to make sure it's the right Price.

And IT seems like, what the hell why do we just do IT right? Like, this is another layer democracy, and says, like, why don't we just do IT right the first time? And so when this story charly does, something was brilliant. He adds another element to this story that he's been telling us now, going over six, seven pages.

And his, the main thing, some of my favorite has ever said, same one, one of my favor entrepreneurs, but said, same walton, this is my formation about what about you to same walton is an interesting example of how scale and fanaticism combined to be very, very powerful. It's quite interesting thing about walmart, starting from a single store in arkansas against seers, with its name, reputation and all of its billions. How does a guy in benvolio console with no money blow right by tears? And he does IT in his own lifetime, in fact, during his own late lifetime, because he was already pretty old by the time he started out with his one little store.

So he had had bunch of experience like retAiling, discount retAiling, let's say, I think was forty, if my memory serves me correct, when he started his first warmer. But he had been working retail like twenty players at the time, but truly is right that he starts out with one warmer t anything is forty four time. He played the chain store game harder and Better than anyone else.

Same multon invented practically nothing, but he copied everything anybody ever did. That was smart. And he did IT with more fanaticism. So he blew right by them all. He also had a very interesting competitive strategy.

In the early days, he was like a Price fighter who wanted a great record so he could be in the finals. So what did he do? He went out and thought, forty two pollute as so like, you know, forty two like media CoOperators.

And the result was knock out after knockout. After knockout forty two times, walton being assured, as he was basically broke other small town merchants in the early days, with his more efficient system, he might not have been able to tackle some, tighten head on at that time. But with his Better system, he could shares how, destroy those small town merchants.

And he ran around doing IT time after time after time. Then as he got bigger, he started destroying the big boys. Well, that was a very, very rude strategy.

Walton is an interesting model of how the scale of things and fanaticism combined to be very powerful. His competitors warn as lean and mean and shut and effective as sam. Walton was another one to role.

These idea is that I really love is he has a surfing model. Just read this. You there are huge advantages for the early birds. When you're an early bird, there's a model that I call surfing.

When the surfer gets up and catches the wave and just stays there, that's the most important phrase of the entire a paragraph, and just stays there, he can go for a long, long time. But if he gets off the wave, he becomes mired in the shallows. People get long runs when they're right on the edge of the wave.

And so we use the example of microsoft or intel. And then this company he loves, he talks about over over again national cash register, which kind of relates to microsoft and intel two, because the founder of IBM, Thomas Watson, actually worked for national cash. And obviously, microsoft and into were very important partners uh to IBM.

So the reason he thinks uh he gives an illustration why surfing is so very powerful and how uh the actual founder of national cash registered which scanning patterson did something very smart and this is fascine he says I have in my files and early national cash register company report in which patterson describes his methods and objectives and a well educated a rang atan could see that buying into a partnership with patterson in those early days, given his notions about the cash to your business, was a total one hundred percent since surfing a very powerful model. So what he's talking about is patterson IT was running like a small store, right? And before the invention, the cash register, it's really hard to make money because is so easy for the first for your employ to steal from you, right? You just don't know where the money is coming in.

And so the cash, a solution that is solved, was IT finally accounted foreign gani zed, all the cash falling in and out of the company. And patterson knew that IT this is so powerful because he buys this new piece equipment to catch her story. Me, they start making money and immediately close to the store and decides, forget this.

The bigger opportunity is to do provide the service that was provided to me. I should be selling the cash office. I should not be in the store.

And so we got there right on the very edge and then just stayed there for a very, very long time. So that's why a mugger uses powders in a national cash reata. As a illustration of this very important model to charge mugger, that surfing is a very powerful model.

And I think that is related to his next idea, because if you don't stay there, you're giving away your edge. And that's not smart. Most people are competing in domains where they don't have an edge, charlie says.

If you play games or other people are the attitudes and you don't, you're going to lose. And that as close as certain as any prediction you can make, you have to fear out where you get, where you ve got an edge. And ah there's a up this is skinning ed thorpe, who I talk about a nosey a dorp is really my blueprint for life.

He's one of maybe a handful of people I feel master life out of all the people we study in the pocket together. The two twenty two, if you don't know, talk mout. He's a venture of the first quantity hedge fd.

He was the first L P. In the city. del.

He invented the first a hand held uh, computer with code shine. And the guy was just flight out. genius.

He still alive to this day, took her of his health. incredible. But in ads, unbelievable.

Automotive phy, which are heavily recommend you reads called a man for all markets episode to twenty two. Again, he says something. You know, he's writing that book.

I think he's in his seventies or eighties. I think he in his eighties when he's writing that book. And so let me read a quote from that book that sounds a lot like the advice charly mongers gave us. I also believe that as I do not now, after more than fifty years as a money manager, that the shares way to get rich is to own, is to play.

Only those games are make those investments where I have an edge as exactly if two, the smartest st people ever come across charly monger and at dog, no doubt if you talk charly monger, you red is you here speak you think he's genius? I think if you study at door p, you would arrive at the same conclusion. In fact, the first time I did at dorp was like a long time ago, up, so maybe eighty or nine or something like that.

And I got this A, I get this email or message from somebody, listed the podcast and then bought the book after and and read IT and say, hey, he left out the fact in the podcast that the guys are genius. Like, well, it's pretty obvious in the way they relive his life. There is a genius.

But that's fine from now on that that message stuck my mind. So every time I bring up, I have to bring up the fact that he's obviously genius. And so let's go back to this great story that ah he tells about warn buffett and this is a great illustration that is really stop praying at the altered diversification if you could trust to your own judgement you know the good opportunity to go on in bt heavily.

You're not going to have many such cases, many such examples in your life. When warn buffer lectures at business schools, he says, I can improve your ultimate financial weare welfare by giving your ticket with only choice slots in IT. So you had only twenty punches representing all the investments that you ve got to make in a lifetime.

And once you'd punched through the card, you couldn't make any more investments at all under those rules. This is still warrant speaking the whole time, right? Under those rules, you would really think carefully about what you did, and you'd be forced to load up on what you'd really thought about.

So you do much Better. Again, this is not charly speaking. This is a concept that seems perfectly obvious to me.

And to warn IT seems perfectly obvious. IT just isn't conventional wisdom. And so this is charlie explicit advice to you.

And I the wise bet heavily when the world offers them that opportunity. They bet big when they have the odds and the rest of the time they don't. It's just that simple.

That is a very simple concept to me. It's obviously right. Practically nobody Operate that way. How many insights do you need? Well, argue that you don't need many in a lifetime. If you look at burkha half way and all of its accumulated billions, the top ten insights account for most of IT. Most of the money came from ten insights.

And if you go back, I always think about this because people like you know, I think the main lesson unit learning or against the importance of focus, I think betting heavily being concentrated in the business that you have an engine you know well is an element of focus to. I only focus on founders. I really, you know, I don't do any investing.

I don't really care about IT. I just care about what i'm doing. Only we completely obsess with that. So that's not a new idea. And I just told that idea, like, if you can read a bunch of rockfeller, right? Rocket fella made all money in senate oil, and then he would make some really weird investment decisions and lost a bunch of money outside a standard oil for the most part.

But the way, look at as I, okay, if if rocker only had standard oil, never made another investment, anything fab ously wealthy carnegy Andrew carney. I think if he just had carnegie, still, in fact, I think he's the one that really put this idea in, planned this idea in the first part in my mind, because you look at carnegie early life, he's doing all kinds of stuff, making investments, building bridges. He's looking for like the best opportunity he's already, you know, pretty rich, not nearly as well he's he's going to be.

But once he is faster, once he realized, oh shit, steal as byford, the highest like the best opportunity. I am never gonna have known. He sells off all the businesses.

He sells off all his stocks because he didn't want to be distracted. He didn't want to wake up in the morning and read the newspaper and want to know what his stocks for doing the day. So he saw that all off and only, uh, focus on county still.

What happens? He sells county still to jp moria at the time, and he as a for cash, stray cash at the time that he gets. He sells after cells of the jb Morgan.

He has the largest liquid fortune in the world at that time. So again, only in one business, wolton. In the autobots, he says, I didn't do much investing outside of walmart.

Again, if you only own walmart, is that all he needs? So you just see is over and over and over and over again, it's obvious and history entrepreneurship, but it's not to charge point. It's not definitely not conventional wisdom and it's definitely not practice and taught.

And then I love this observation about disney from charlie monger. So he he's constantly tly again thinking about, hey, you have to have a multi disciplinary view and approach the world. And so we talk about this this term from chemistry that I had look up.

So it's pronounced auto cosas. And so what that means is a reaction where a product itself act as a catalyst for the reaction. So this is on the uni talk over over again.

You see example, for example, bike phy and the way I described and passes like you really should try to stay in the game long enough to get lucky. And he talks about disney and and coca cola, and he's given this talk. He's a question in disney.

And he says they had all these movies in the cans, movies they owe for decades, right? The value of those movies could not be collected until many, many decades in the future where there is an invention of a technology not made by disney that greatly appreciates the assets IT has. This is incredible.

So he says they had all these movies in the can. And then he used the same example that there was another a auto catholic. I I found that auto catholic reaction with coca cola two, coca cola greatly prosper because coke cola was invented and they could prosper even, uh, to a greater when refrigerator became widespread.

In this this case, they had all these videos, the, uh these movies in the can and then the video cash was invented. And then obviously, then you have the DVD and then you have streaming. So it's just this keeps happening.

So he says when the video concept was invented, disney didn't have to invent anything or do anything except take the thing out of the can and stick IT on the cassette. So disney got this enormous tail in from life, and IT was billions and billions of dollars worth of tAiling. In other words, they say, in the game long enough to get lucky, all you have to do is sit there while the world Carry issue forward.

And so uses the example, the movie the lion king. The lion king alone mean this. This reaction is going to continue on many decades in the future, because highly likely that twenty years or now, thirty years now, people are stuck to watching movies like the ranking.

The lion king alone is going to do plural billions. And by the way, when I say when it's done, mean when the line is done, I mean fifty years from now or something, but plural billions from one movie. So that idea of auto catesby, there's another example in the conversation that charlie and john carlson have where john asm about why for many, many decades the roles were terrible, terrible investments.

And talking about when they first were created, he was really hard to make a profitable like that. There's a lot of people like stealing money from roads. If you should go back and in study that time period.

But IT was very hard to invest in them and and have a reliable source of, you know, profits for a long period time. And yet that all changed with the invention of the shipping container. And the shipping container was invented by malcom mclean and the one thousand. Nine fifties, so one hundred years after the invention of this transcontinental railroad that was taking place in america.

And now all the sun charly talks about in this conversation was like, well, once you could stack to shaving containers on top each other and put on a railway, IT makes IT way more efficient than anybody else or than anything else, rather than any way to move goods and supply across the country. The combination of rural and the shipping containers of another example of this auto catholic, uh reaction, just like the invention of the video access, the D V D and streaming has been for disney. And then there's a meta lesson from charley is really how to teach a lesson.

And then he learned this lesson by reading between the lines of a lesson that his father was trained to a teach him. But I think he would argue against being, I think try the manger would argue against being overly prescriptive. And this also tied together with another thing, which is charlie clear preelection to go for great to like just being around great people and great businesses.

They just produce a lot less problems. And so his father was, he is a law practice in omaha. And charlies got to know some of his father clients and got to know essentially be, have these conversations with his father, learn a laughing's father.

And so this is something he learned. And again, metal lesson is how to teach a lesson and why you want to go for great. Here's another model for my father's law practice.

When I was very Young, one of his best friends was his guiding grand mic fatton. Uh, he owned a bunch of four dealerships. He was a perfectly marvelous man.

He was self made, and he made his own way in the world. He was a brilliant man of enormous charm and integrity. Just a wonderful, wonderful men.

In contrast, my father had another client who was a blow hard and overreaching, unfair, pompous, difficult man. And I must have been fourteen years old when I asked my dad, why do you do so much work for mr. x.

This overreaching blow hard, instead of working more for a wonderful man like your friend? Grammar fadin, my father said, grammar fat and treats his employees right, his customers right and his problems right. And if he gets involved with a psychotic, he quickly walks away and works out in exit as fast as he can.

Therefore, grammar fag doesn't have enough law business to keep you going. Wish prevention, he prevents the problems the lawyers are hired to fix the problem. But mr.

X is a walking minefield of wonderful legal business. This case demonstrates one of the troubles with practicing law. This is now charlie speaking.

To considerable extent, you're going to be dealing with grossly defective people. They create an enormous amount of law business. And even when your own client is a paragon on a virtue, you're often be dealing with growth defective.

On the other side, like ben Frankland observed, it's hard from empty sac to stand Operate. I'd argue that my father's model, when I asked him about the two clients, was totally correct. He told me the right lesson, the lesson, run your own life.

Like grant mcfadden, that was a great lesson. And he taught IT in a very clever way, because I set up just pounding IT in. He told IT to me in a way that required a slight mental reach, I had to make the reach myself in order to get the idea that I should behave like grant mcfadden.

And because I had to reach for IT, I held IT Better. And indeed, i've held IT all the way through until today, through all of these decades. That is a very, very clever teaching method.

Warn in chartly, they talk about IT over and over again that their teachers, in the conversation with john coulson, he talks about the benefit of their teaching. He says the fact that him and warn have enjoyed the public life that they had, we've enjoy the educational and educational sideshow. The educational side show that that we do is he says it's constructive.

And he feels that learning all this self in in turning them and immediately teaching other people, people, they win, win. And I love the adversity, gives them that conversations, and very well, make yourself very useful, charlie warn, and have made themselves unbelievable useful to generations of entrepreneurs. He talks about why this is important.

first. Well, charlie said, one of the best things to ever sides that the best thing of human being can do is helps another human being no more. So he asked the question, like, are you fulfilling your responsibility? Lies share the wisdom that you've required over the years.

And if you pay attention, what is about to say? It's like, oh, this this desire to do this is one it's it's a like a positive for the world is like a moral duty to do this. It's good for other people, but it's like built in to the foundation of their business.

He goes, sure, look at, look at bucher hathaway, I called the ultimate didactic enterprise. Warn is never going to spend any of his money. He's onna give IT all back to society.

He's just building a platform. So people will listen to his notions needed to say they are very good notions. And the platforms, not so bad either you could argue that warn and eye academics in our own way.

He continues the team. I'm passionate about wisdom. Perhaps I have some streak of generative in my nature and r and desire to serve values that transcend my brief life. That sentence is even harder because he just passed away, but maybe i'm here just to show off.

Who knows? I believe in the discipline of measuring the best at other people have figured out I don't believe just sitting down and trying to dreaming up all yourself. Nobody's that smart.

I O, A lot to these long dead predecessors. What is he saying? I have benefit so much that somebody that engaged in lifetime learning and then catalogue what they learned and send IT down to the next generations.

Why am I not doing the same thing? I should do the same thing. I am doing the same thing, is what he telling us. I know a lot to these long get predecessors, and if you like poor Charles oman ic, so do you. And I want to tie that idea together with something else that is discuss in the book.

It's like not only sharing everything that you learn that you know is good, but also the importance of removing what you feels an onus or bad idea from the heads of other people. And in some cases, in business cases, like you can create a ton of real financial value for other people. This story he's about to tell us is how warn buffer crea billion dollars of value for the washington post shareholders.

And IT was the spreading that warm buffet and charly monger. If you read the short le letters to hit him talk, they rail against this thing that got spread your academic institutions in the business schools all over the world. It's sufficient market theory.

And so his point was that adopted uh, the hard form of efficient market theory, then you logically derived he saying you got a bad idea in your head and then if that if you believe that bad idea to be true, then its logical what comes next. So his points like we're trying to remove that bad idea so you don't do that. You don't think it's true and then logically keep just in your behavior based on that false conclusion.

So is like going, if you believed, if you adopted the hard form of fishing marketa, then you would think that share buybacks are a stupid est thing ever. Okay, i'm going to get into that. So you would logically derive consequences from this wrong theory.

You would get conclusions such as he can never be correct for any corporation to buy its own stock, because the stock Price, by definition, is totally efficient. There could never been advantage. And they taught this theory to some partner and machines.

I, when he was at some school of business, and he adopted this crazy line of reason, this is a real story, by the way, and he adopted this crazy land of reading from economics. And the partner, this guy, became a paid consultant for the washington post. And the washington post stock was selling at a fifth of what in a rang atten could figure out was the plain value per share by just counting up the values into.

But he so believed what he'd been taught in graduate school that he advised the washington post who was paying him for this advice as grazy that IT shunt bites on stock. Well, fortunately, they put warm buffer on the board, and he convinced them to buy back more than half of the outstanding stock, which enrich ed, the remaining shareholder, by much more than a billion dollars. And that's one of the great things about what you and I doing.

This isn't yet fun learning these things. I'm obsess with these stories. You probably are too, but there is real economic benefit to doing this.

It's like this. It's unbelievable. IT could be fun and enrich yourself and your loved ones and your partners and your friends. Another story that I love that Charlene has is about something a harvard business school professor did many, many decades ago. And he tells us the story to illustrate the need for more multiple disciplinary education and training.

And that if you just focus on business, you're just gonna every with the person with the hammer, everything, uh, looks, I can know. And so you're only going to use business student, business school to solve business problems. He's like you're gna lose to people that are more multi disciplinary.

And this is a great illustration of how measuring the big ideas and other domains can actually benefit the way you think about this business opportunity. So this professor from harper business school, this happened a couple decades before he's talking story, gave a test involving two unworldly. That's really important.

There's two words I want you to remember here. This professor gave a test involving two unworldly old ladies who had just inherited a new england shoe factory that made shoes and was beset with serious business problems that were described in great detail on this test. Okay, the two words in no sentences in the first sentence is important.

Is there unworldly and they just inherit the shoe factory. They did not build IT. They did not manage IT.

They were unworkable, and they inherit the professor then gave the students ample time to answer with written advice to the old ladies. In response to the answers, the professor gave every student an undesirable grade. Except for one student who was greeted at the top by a wide margin.

What was the winning answer? IT was very short and roughly as follows. This business field, in this particular business, in its particular occasion, present crucial problems that are so difficult that unworldly old ladies cannot wisely try to solve them.

Do hired help. Given the difficulties an unavoidable agency costs, the old ladies should promptly sell the shoe factory, probably to the competitor who will enjoy the greatest marginal utility advantage. That is the end of the answer.

This is charly describing why that was right. Thus, the winning answer relied not on what the students had most recently been taught in business school, but instead on more fundamental concepts like agency costs and marginal utility lifted from undergraduate psychology and economics. One of my favourite tes i've ever heard comes from the founder, polaroid, Steve jobs hero in the patron saint of founders podcast, which is our beloved Edwin land.

And he said, the optimism is a moral duty. And charly gave this commencement address at usc back in two thousand seven. I think, uh the full talk like almost forty minutes long, it's on youtube.

Obviously edited transcript is in the book as well. Well, and Charles is going to add something to edmonton in the sense of what else is a moral duty. And he believes that the acquisition of wisdom is a moral duty.

And then once you acquire IT, you always, he passed IT on, and we started to talk like, why am I this old man appear lecturing you? Are are trying to tell you something on the day with your graduation. He says, the sacrifices and the wisdom and the value transfer that come from one generation to the next should always be appreciated.

He's constantly quoting and crediting confucious with teaching him that because he was very uh central ten to confucius teachings so there is a bunch of ideas in this talk that he wants to pass on to the next generation. Just want to pull a couple of them out. First is this idea that he learned when he was really Young.

And he says it's a very simple but powerful idea that the safest way to try to get what you want is to be deserving of what you want in his personal life is a world you want a good spouse, then be the kind of person that could attract a good shows, be worried of a good spouse, and then you will get a good spouse. spouse. He says the same thing in business.

You want to deliver to the world what you would buy if you were on the other end. By and large, the people who have this ethos rise in life, the other people who rise in life are learning machines, says that's where he goes into the expression. Wisdom is a moral duty.

It's not just something you do to advancing life. You requires that you're hooked on lifetime learning. Without lifetime learning, you people are not going to do very well. You're not going to get very foreign place on, you already know. And he uses more.

And buffet is an example is that was a burchell put up the greatest long term investment record in history simulation, right? The skill that got birch through one decade would not have survived to get IT through the next decade with comparable levels of achievement. Warm buffet had to be a continuous learning machine.

And the people that are learning machines, they go to bed every night a little wise than they were that morning. They are the ones that rise in life and especially be talking to, you know, maybe i'll say these people, I think gradually, little students, right, maybe twenty four years old, some are twenty five. And his points, like, if you do this habit, i've just cum a little bit more knowledge and adJusting your behavior accordingly, tiny bit every day.

Uh, that makes a big difference because you have a long road ahead of you. Consider warm buffet again if you watch them with a time clock, you'd find that about half of his waking time is spent reading, then a big chunk e of the rest of time is spent talking one on one, either on the telephone or in person with highly gifted people whom he trust and who trust him. And you want to do this practice as much as you can for as long peer to time.

So he gives the example that he learned from SHE the famous baseball coach, john wooden. When john wooden was the coach of U. C, L, A, he was right.

The number one baseball coach in the world. And so he what he does, he causes us maxims ing, which is I don't even know that's a really memorable way to put IT. But I like I remember the story.

I didn't remember that that line. But the story I think I remember able. And so what he did was destroy people, the baseball team, he says to the bottom five players, hey, you're not going to play games.

You're practice partners. And he did this because he wanted to maximize the amount of game playing time and practice for his top seven players. The top seven players did almost all of the plane.

well. The top seven learn more because they were doing all the plane. And when he adopted this, nonnegotiable an system, wooden one more games, and he'd won before. This is a takeaway, I think the game of competitive life often works, maximizing the experience of the people who have the most attitude and the most determination as learning machines. If you want the very highest reaches of human achievement, that is where you have to go.

You want to provide a lot of playing time for your best players and something that your best players and you will have in common is that they're usually doing something, someone that kind of drive, and I could do a for a one perier time. They've aligned there, what they are doing professional, what are doing for work with their natural, intense interests, are one of my favorite things. We think about charlie.

What he taught me is that ask yourself, what are you intensely interested in and then just do that for a living. I know thing that I found is that intensely interest in any subject is indefensible. If you're going to excel IT, you need to maneuvre yourself and to doing something which you have an intense interest.

And you want to combine that with working only, working only with people that you like, admire and trust, people that you want to be like, uh, that you trust, that you admire, do not. He says, do not. People do not just quit.

Quit your job. Whenever yourself actually begin nuclear, try to work underneath. Now he's talk king about partners, but also the supplies to her advice, try to work on these people to actually admire and trust.

And you want to be like, hope your partners like that too. And if they are, and you have this trust, adjust again. What did he say that was such a surprising statement? Trust is one of the greatest economic forces on earth.

He's going apply this to what uh inside of the partnership that he had uh with worn and so he talks about the highest one of the highly forms of civilization that one can reach. H is a seamless, non bureaucratic web of deserve trust. Not much fancy procedure, just totally reliable people correctly trusting one another in your own life.

You want what you want to maximize is a seamless web of deserved trust. Charlie also has a great story, I think actually embedded in story's really great advice. And he calls the story the person messenger syndrome. And its very common. He's observed in multiple times that leaders of companies, as they get more successful, they tend to dislike hearing bad news and you should actually do the opposite and he talks about a berkshire that hey um tell us the bad news because the good news takes care of itself and this is a again uh well known like psychological tendency that you see in human nature through our history.

The person messenger syndrome, ancient versions, actually killed the messengers who's so far was that they brought home truthful bad news, like a beat, like they just lost a Better or something, that he was actually safer for the messengers to run away and hide, instead of doing his job as a wiser boss, would have wanted IT done. Person messenger syndrome is alive and well in modern life. He talks about when capital cities, such H, A, B, C, was competing against C, B S.

C B S was run by the founder bill paling. Over time, bill paley became hostile to people who brought him bad news. And so I was like, well, over time with you, you're on a living in a cocoon, and you're in a cocoon of unreality.

Is what I call that, a cocoon of unreality. And so he says, I bircher the way they counteracts. They have a habit of welcoming bad news.

There is a common and junction at buta. H, Q. Always tell us the bad news promptly. IT is only the good news that can wait.

I notice when I said this action, I thought of something that learned when I was reading, uh, the biography of the founder of U. P. S. Skin me gm casey.

I covered this book a long time ago, way back on episode one and two, and jim casey notices his walls like, well, he's running the companies got all these executives with these executives, the only people that have contact with them um they they tend to give like a distortion of like a more favorable distortion of the reality on the ground is like, well, jim case, like how do I how do I counteract this? And so what jim would do is any time he he's driving his car, he would see A U. P.

S. truck. He would stop, pull over and talk to the driver. He knew the drivers would tell them what they were experiencing, and many times what they would, what he would learn from drivers would be very different from what his executives, because he tell, because his executives were likely were more likely to tell him more positive, but less accurate news.

And so charlie, advice to uni as you want to avoid the person messenger syndrome. And then when you analyze why is this syndrome appear over over again, it's like, well, what is the incentive? The person messengers that ran away instead of delivering bad news because they saw previous messages deliver bad news and get killed or their hands shopped off, they were responding to incentives.

And so one of the main things that charlie repeats over over again is he calls IT a reward and punishment super response tendency. And I think IT could be summarized in one sentence. The most important role in management is get the incentives right.

And this is why, uh, this is what he says. Almost everyone thinks that they fully recognize how important senses and these tips are for changing behavior. But this is not often so.

I ve been in the top five percent of my age cohered in my entire life and understand the power incentives, yet have always underestimated that power. Never a year part is insane sentence. Never a year passes that.

I don't get some surprise. That pushes a little further my appreciation of incentive. Super paris, and i'm in the top.

And every year i'm still underestimate this thing. What do you think the the other people learn in the the bottom ninety five percent day? One of my favorite cases about the power of incentives is that happened at federal express.

Federal express system requires that all packages be shifted rapidly among airplanes in one central airport each night. I go into more detail on this on the episode. I didn't the founder fx for smith, and I think it's episode fifty one.

The system has no integrity for the customers. If the network shift cannot accomplish this assignment fast, federal express had one hell of a time getting the night shift to do the right thing. They tried everything in the world without luck. And finally, somebody had the happy thought that was foolish to pay the night shift by the hour when what the employer wanted was not maximized billable hours of employee service vitug, but fault free, rapid performance of a particular task. If they paid the employees per shift, this is what they decided to.

They want to paying employees per shift, and told them that once that you go home, once all the plains were loaded, and so before this, they could never hit the the successful completion, the task on time, and suddenly, because the incentive structure change, hey, do the job and go home. You can just pay by the job up, by the hour. They want to doing the way, fast.

And this the first time that they actually got fault free, rapid performance of this particular test that was central to their business performance. This pops up again and again. He talks about the history of ziogoon.

One of the zero x founders is anning j. Wilson. He had a similar experience. He couldn't understand why its new machine was selling so poorly in relation to its older and inference machine. So then he goes and looks and he finds out that the commissions arrangement with the sales people, zero ox, gave large and perverse incentive to push the infair machine on customers.

So of course, the sales person say, hey, I get one hundred dollars if I sell the old machine, or I get fifty dollars if I sell the new machine, you're just going to what do you do is logical. It's the the person of fault is the person is designing incentive structure. And so this is charly solution.

Never, ever think about something else when you should be thinking about the power of incentives. One thing you'll notice, if you listen to charlie talk, you read on your books about him. Buffet does this in shareholders letters as well.

actually. Let me read this from a buffer shareholder water buff. This is the behavior of peer companies. Whether they are expanding, acquiring, setting, executive competition, composition, whatever, will be mindlessly imitated. So we saying the behavior of peer companies will be mindlessly imitated.

And what their both shocked at, buffet also says that IT always amazes him how high I Q people mindlessly immuno IT touch with the benefit of social proof, exactly. Usually social proof, uh, being enhanced by larger scale, and then a lot of brand and, uh, advertising, marketing, but a former social proof where is actually negative? That's obvious positive to a company.

The negative part is that the social proof that also leads to executives and C E, O and founders, companies mindlessly imitating other people around them. So he talks about in the highest reaches of business, it's not in common to find leaders who display followership a kin to that of teenagers. That is, charly mongers online.

They're acting like teenager, just following anybody around them. And he talks about that this psychological tendency is very observer able. And you see IT a usually started and like an industry, if one idea starts with one company industry with its a good idea, bad idea that we spread other industry.

So using an example on the oil story of one oil company forced buys a mind, other oil companies often quickly joined in buying minds. These oil company buying fats actually bloomed with terrible results, and he does a great job to stealing down his main point here. If only one lesson is to be chosen from a package lessons involving social proof tendency and used in self improvement.

My favorite be as follows. Learn how to ignore the example from others when they are wrong, because few skills are more worth having. Learn how to ignore the examples from others when they are wrong, because few skills are more worth having.

He's got a great anecdote about this. This is how I really have remembered this story more than anything. And so monger says, one of my favorite stories is about the little boy in texas.

The teacher asked the class if there are nine sheep in the pen and one jumps out, how many are left? And everybody got the answer right, except the little boy who said, none of them are left. And the teacher said, you don't understand a arithmetic.

And he said, no teacher, you don't understand sheep. And i'll close here with a great anecdo about the importance of practice. Skills of a very high order can be maintained only with daily practice.

A famous piece once said that if he failed to practice for a single day, he could notice his performance determination, and that after week's gap in Price, this the audience could notice IT, as well as a great way of illustrating that the public praises people for what they practice in private. The public praises people for what they practice in private. Keep reading, keep learning is what early would have wanted.

It's good for you. It's good for your family, is good for your customers, is good for your business. And IT is good for the world.

That is where I will leave IT. There is a million more ideas in this book. I believe IT to be an in dispensable part of your library, I think an absolute nobody.

Or to buy IT if you buy the book using the link that's in the show notes on your pocket, where you will be supporting the pockets at the same time, I also leave a links down below for the book, but also for the website that straight bresser, you can get a copy of the digital version for free. I will also leave a link down below for the conversation. The incredible conversation you do not want to miss with john cAllen and charly mongers, one to last.

Can we want to last? A unheard of interviews that is released that will be available if you, if you're hear these words. Now that is already available, I will leave in down below, but you can just go and searching your pockets.

Payer for investig the best. And you will see the conversation with charlie monger and john collison that is three hundred and twenty nine books down one thousand ago. And i'll talking again soon OK.

So what you're about to hear is this question was asked a few months ago, actually recorded a few months ago. They asked, how did histories, grade experience think about hiring at all? The answers, people think I A Better memory than I then actually do.

You know, if people say David have a great memory, my wife would laugh at that. I forget things all the time. It's not to have a good memories. I reread things over and over over again. Every single answer, every single references about to hear in this ti minute media episode came from me searching all of my notes and highlights.

That option is now available to you if you like what you hear, if you think it's valuable, if you're already running a successful company and you want an easy way to reference the ideas of history. S great entrepreneurs in a search able database that you can go through at your conventional anytime you want. They go to founders notes dot com and sign up.

I want to start out first with why this is so important. There's actually this book that came out in like ninety ninety seven. It's called in the company giants.

I think it's up to two or eight of founders. It's two state for M, B, A students, remember correctly, and their interviewing a bunch of technology company founders and in the sea jobs is one of them. This is know, right?

I think even before he came back to apple and they were talking about, well, yeah, we know it's important higher. But in a typical startup, P, A manager or founder may not always have time to spend recruiting other people. And I I first read this this, Steve, the answer to this, you know I don't know, two years ago and I never forgot IT.

I think it's excelling. I think that sets up why, uh, this question so important and you should really be spending excess, the early basic phase of IT all your time doing this in a typical sort of commander me may not always have the time to spend recruiting other people then Steve jumping, I disagree totally, I think is the most important job. Assume you by yourself in a startup and you want a partner, you take a lot time finding a partner, right? He would be half of your company.

I would a pose there. This idea of looking at each new higher as a percentage of the company is genius. Why should you take any less time finding a third or fourth of your company or a fifth of your company? When your N A start up, the first ten people will determine whether the company succeeds or not.

Each is ten percent of the company. So why would you take as much time as necessary to find all a players if three three other ten um we're not so great. Why would you start a company where thirty percent of your people or not so great a small company depends on great people much more than a big company does okay.

So to answer this question, the advantage that um that I have making founders and that you have a big part of listening founders is not only that I did you know three hundred thousand biography of entrepreneurs, but I have all of my notes and highlights stored in my read wise APP and that means I can search for any topic. I can look at the past highlights books, I can search for keywords so what I did first of all, like what I started, do these may um questions as I read them, decide which once i'm going to do next and then think about IT for a few days. I don't put me that just literally that that I know that the next question, just let my brain work on IT in the background for a few days and then i'll go through in searching all minutes.

And so that's what I did here. And so there's a bunch of unit on up. I may have like ten or fifteen different founders talking about hiring. The first idea is the most obvious, but I think probably works best when you're already established. So Steve jobs talking about, hey, you know, the great wait of to higher is just find great work and find the people that did that and then try to hire them when your Steve jobs, that's a lot easier right then if you're just somebody, there's a reputation.

Maybe you have resources made your companies rather new or notice well, no, David ogly, I just did confessions of an advertising man couple episode three o six times like that through and he did the same thing but he's David og vy at that point so he would find he'd go through magazines, find great advertising, great copywriting. And he write a personal letter and then set up a home call and he says he went he was so well known and you know is one of the best in his field that he couldn't even have to offer a job. Just the conversation then the person would the he'd want to hire the person never mention IT and the person would apply to him.

Um and so again, I think if you can do that, then of course state ford find for somebody is great work usually can do this. I actually have a friend. I can't say who IT is. He's doing the story now actually um every friend that's really good at doing this he's finding people that do great stuff unit and then just called called diving them and then getting convinced to welcome things and that usually work success of people like Younger people earlier. There's a bunch of different ways to think about this in a bunch of different ways to priority.

So the first thing that that that came to mind, but I found surprising, is you read any biography on and he had a couple ideas where he felt the optimization, you know, tables, stakes at your intelligent, in your drive and in your heart, working like living to this, you know that. But he prioritized hiring people with social skills. And so this is what he said.

The ability to deal with people is as purchase for a commodity as sugar or coffee. And I pay for I pay more for that ability than any other under the sun. There's the two.

The second part of this though, and this is also what what you have access resources. He he rockfalls would hire people as he found, as he found out to people, not as he needed them. It's not like, okay, standard oil has six open spots.

Let's go find six canada, right? He's come across what he considered a counter person. He didn't even matter if he didn't know what they're going to do. He like i'm just going to stack his team.

And if you really think about the his partner of senate oil, he essentially built a company an executive team of founders, of course, because he was buying a baller company is very rare. But um there's line from technical ery to taking for granted the growth of his empire. He highe thousand of people as found, not as needed.

And then I found another idea in the hiring like the actual interview process. So there's this kind of any verbum I did two opposite don't know I think it's two seventy and two seventy one. He is the most important american ever um in history of in in terms of connecting the scientific field, private improves and the government the most important person to keep alive for the american war effort was F D.

R. The second one was vana bush. Van va. Bush is like the forrest gump of this historical. He is involved in everything from the man hand project to discovering like a Young clock shanon to building a mechanical computer like this guy literally has done just he pops up in these box over over again.

If you reading about american business history during war, war two and post world war two, you are going to come across the name beneath bush, over and over again. I read his fantastic autograph called pieces of the action, and I came across this weird highlight. And so this is his brilliant and unusual job interview process.

And so he talked about the orange ation he's running called amma at ammirati harried, a Young physicist from texas named cg smith. The way I hire him is interesting. An interview of that sort is always likely to be on on an artificial basis in somewhat embarrassing.

So I discussed with him a technical point on which I was then genuinely puzzled. The next day, he came in with a they need solution, and I hired him at once. Here's another idea.

This is from no ambition, no ambition. S the founder of a tory, founder of trucker. She's and Steve jobs mentor. He hired Steve jobs when Steve jobs was like one thousand, and he would ask people, they're reading habits in interviews. This is why one of the best ways his whole thing was he wanted to build all of his companies, laid on the foundation of creative people. So that's what he's looking for.

He's like, I knew creative people, one of the best ways to find creative people, to ask a simple question, what books do you like? I've never met a creative person in my life that didn't respond with enthusiasm to a question about reading habits. Actually, which books people read is not as important as a simple fact that they read at all.

I've known many talent engineers who hate the science fiction but loved, say, books on bird watching, a blind but often accurate generalization, people who are curious and passionate read, people who are apathetic in a different, don't I remember what that? That's such a great line. And I have Green IT.

I remember one. I'm going to read again, a blind, but often accurate generalization. People who are curious impassionate read. People who are apathetic and and different.

Don't I remember one particular woman who, during an interview, told me that he had read every book that I had read? So I started watching books I hadn't read, and SHE had read those two. I didn't know how someone in her late one is found that this much time to read so much.

But I was impressed. I was so impressed that I hire her right there and assign her to international marketing, which was having problems. This is why, this is why i'm reading.

So second to you, a job with a lot of moving parts benefits from a brain that has a lot of moving parts. IT wouldn't be possible to have read that many books without such a brain. So do you see what I mean?

Like we start with.

see jobs. This is the most important thing that you, your roles, that leader, the company, the founder to do, right, and you are in, is so important to study this one.

Glad this this question exists, and why i'm glad that have I took the time and I had, like the four side OK, I should really organized my thoughts and notes, because there's no way I would have remembred all this without being being able to touch my read wise, right? But you have rockfish ing. This is what's important to me.

You have bush saying, this is how I have and I you have known bush saying, well, here's another weird thing that I learned um let me go through what warm buffer is about this so this is about the quality. One thing that is consistent, where is jobs buffet bassos a Peter tio, there's just possible for over gan. They talk about the importance of trying to find people that are Better than you.

The hiring bar constant has to increase, and obviously, the large of the company gets that impossible. Uh, Steve jobs has a great quote, where is like a pixar was the first time I see I saw an entire team, entire company of a players. But they had four hundred players.

They had four hundred eight members. He's like at the time, apple three thousand, that is impossible to have three thousand a player. So there is some number that your company may grow to or just you're just not you're not going to have thousands of a players in my argument.

I know know if you get a four hundred of issue. I mean, i'll take steeves word for IT on there. And picks are definitely produce great products, but it's probably a lot lower mats. Well, so warm buffet will tell you to use David ogle is hiring physical y and so warn that, charlie, I know that the right players will make almost any team manager look good again.

That is why it's the most important function of the founder maybe directly next to the product, right about the product, that because those of people, your product, we subscribe to the philosophy of orgasm mothers founding genius David ogle, this, what organ y said, if each of us higher people who are small, smaller than we are, we should become a company of jars. But if each of us harsh people who are bigger than we are, we shall become a company of giants. David, are jeff bassos rather use the variation of organise idea too? Jeff used to say in amazon, every time we hire someone, he or SHE should raise the bar for the next higher so that the overall talent pool is always improving.

And talk about the amazon where the the future harses we do should be so good that if you had applied for the job already, have an amazon, you win, get in. That's a very interesting idea. Take your time with recruiting.

Take your time with hiring. This is great book on the history of paypal to actually I recently become friends with the author is name to me SONY um and this is in his book. The the most fascinating thing that I found was that paypal priorities speed.

So from the time they they're founded to the time they sell to ebay, like four years, Jimmy spent more time researching the book for he spent six years researching book and I was teasing because like you didn't took a long on a book and they took to start and selling company IT just speaks select the quality he's trying to do, but that as a by product of that, like obviously they were fast, but they, prior to a speed over everything else except in one area, recruiting max ledger h, and kept the bar for talent succeeding in the high. Even if that came at the expensive of speedy staffing, max kept repeating a higher A, B S, higher C S. So the first b you hire takes the whole company down.

Let's read that again, a players hire a players, b players, hye, S, C players. So the first b player you hire takes the whole company down. Uh, additionally, the team, the company leaders Mandated that all prospects is another idea for you.

All prospects must meet every single number of the team. Now the next one is the most bizarre. Makes sense if you study. I did the three part of my elson report seriously realism actually, to read those books again, because the park is like fifty times bigger than when I A publish this episode. And he's just.

it's crazy. So he would hire based on the confident, the self confidence level .

of the canada. Listen to this. I have to mize. I don't like laughing. Okay.

this is just okay because this is .

you read about Larry ellison and his one of these people like a really easy interface with because you you just know exactly who you think what's important to. That's why I think it's so funny. Ellison insisted that his recruiters hire only the finest and cautious new college graduates when they were recruiting from universities, they asked people, are you the smartest st person, you know? And if they said yes, they would compare them.

If they said no, they would say, who is and they would go higher. That guy and said, I don't know if you got to smart the people that way, but you definitely got the most arrogant Allison. And this is why, what the personality the founder is, largely the culture of the company.

Apple is Steve jobs. Apple is, see jobs in ten thousand lives, right? Or just texting. A founder friend of mine, he was is the podcast I actually made to the podcast and he's going to dislike uh, process of ourself discovery like he's already start a bunch of for companies are really cessile.

But he like I think i'm more of this type of founder than the other type of founder, and that's good that he's doing that because he he's hopefully his next mission is like his life mission, you know, and you can get realized mission, should you to figure who you are. Ellison knew who he was. Ellison, swinging combat of style, became a part of the company's identity.

This argan culture had a lot to do with oracle success. Here's another odd idea for you is he shark, the founder four seasons actually could figure out that in his business, which was hotels, right? That hiring could hiring my person could actually be a form of distribution for his hotel.

He gave me the idea because of what? What do we know? What do you? I know in our bones that history's greatest founders, all red biography, they all read biography of people that came before them, took ideas from.

Is he sharp was trying to build four seasons. What do you think he did? He picked up biology phy of seizure ritts, the guy that risk called his, named after the argus hotel year of all time.

And when he realized, oh, shit, ritz. He he says, remembering that these are ritz, made his who's world famous by hiring some of the formal chefs, we decided do something similar. So what is he talking about? These are rit.

When now important with August F. A, what C. R. Rich was to to building hotels, August coffy was to french cooking and to what happened is important with world famous ships. People come into your restaurant that's in the hotel because the world famous shift, and now they know about your hotel.

That leads to more get that, that leads to more activity, your restaurant that you own, but also leads to more brand recognition of your hotel and then as a byproduct, that more people staying at. So hiring as a form of distribution. This is fascinating as a fascinating idea.

Okay, here's a problem. You can identify great people, right? Maybe they even want to come work like you identify them.

You've sold them. Hey, um this is what this is our mission. This is what we we're doing.

And yet humans have complicated lives. They have spouses, they have kids. They have our reason.

Maybe they can move across the country to work for you even though they want you. So there is a problem solving element that you see these books on. You have to solve like you already identify the person, you've recruit them.

They can go for some other reason. okay. Well, the great founders are not going to take no for answer. I read in um in this book called lift off, which is about the first six years of spaces. This is what elon mustard they had anticipated.

Ted, his friends issue, having convinced must they need to bring this, bring Young engineer from turkey on board, IT became a matter of solving the problem. His wife had a job in sanford. Cisco SHE would need one in los Angeles, right? As for space sexes at the time, these are solvable problems.

And island's Better solving problems than almost anyone else must therefore came into his job interview prepared about halfway through, mus told the guy that he wants to hear. So I heard you don't want to move to L. A.

And one of the reasons is that your wife force for google. Well, I just talked to Larry, and you're gona transfer your wife down to L. A.

So what are you you going to do now to solve this problem? Must could called his friendly ry page, the cofounder of google, the engineer sats stunned silence for moba. But then he replied, given all that, he would come to work at space sex.

That's really smart. There is another idea when you're promoting or you're gona promote when with inner from without, you know that's depending on you, depending on what what's going on. I do think this is interesting though this is gaining lesh.

Wab who built this is really a valuable chain of uh, like higher companies in the acidic northwest actually found out about because charlie mongers. K, you should read the biography. He said he didn't say to me personally.

He said IT to in like one of the birch chair meetings. That to study lesh rop had one of the both uh one of the motive uh financial incentive structures and any company that that try mugger come across. So this is what lesh wab did.

He did not want to hire from. He did want to hire other people from other companies because they might come with bad habits. He liked to train his own executives.

And so he says, in our thirty four years of business, we have never hired a manager from the outside. Every single one of our more than two hundred and fifty managers and assistant managers started at the bottom changing tires. They have all earned their management job by working up.

And then another thing, if you're going to hire the best of the best in a players there, a players don't link to be amErica manage um and so this came in Larry Miller automotive phy called driven. He owns like he owned like ninety three companies, although utah cordial er ships movie, there's all kinds of crazy. He also owned the the the abt nut.

And what was fascinating, he's trying to recruit Jerry sloan as a coach at at the point. And Jerry sloan only take the job on one condition. And I really like IT.

I really like this idea. If you hire me, let me run the team and business, right? That's what your hard.

One of the best things we had ever done was higher. Jerry song is coach at the time. He said, i'm only going to ask you for one thing.

If I get fired, let me get fired from my own decisions. If you hire me, let me run the team slash business. There's another idea from Thomas Edison that I think is faster, really.

I the way I think about the founders, like you're developing skills that you can hire for you, you're going to hire for everything else, but you shouldn't be horrible and Edison wasn't Edison expressing his views on the preliminary role of applied scientists, which is what he considered himself, calling the expression, I can hire mathematicians, but they can't hire me. And so when I read that paragraph, the first time I know I left myself was developed skills that you can hire for capitalism rewards things that are both rare and valuable. S A lauter will give you advice that you would need to hire people online with your thinking and values.

Hire the best people, this is vital. Hire people who think as you do and treat them well in our business, they are top priority. So this, that seems kind of weird, like hire people who think like you.

There's obviously one right way to build a business. I think that your business should be an expression, your person out in who as a person at the core. And so I think there is an art to the building of your business.

And the reason to use the word art, I don't mean like a hot toy, no potential manner. That's me at all I don't give me care about. I are at all really. I mean that you're making decisions not just based on economics, like there are non economic important decisions based on how you're building your business.

Like you could probably make more money doing a decision a but decision aid goes against who you are as a person or you just don't like IT or it's just not as elegant or beautiful and so therefore, you don't do IT. So that's what I mean about you. You know hire people who think you you do and what for whatever reason.

When I read S A lot say that I was OK that there's like this art to what she's doing. One thing that's going to be helpful recruiting ah this comes peared. T O.

I think this is the book zero to one understand that most companies don't even differentiate their pitches to potential recruits and to hiring. So therefore, they're just going to buy as a byproduct that you're going to wind up with a lower overall taliban. And so he says, what's wrong with valuable stocks, smart people or pressing problems? nothing.

But every company makes us these claims, so they won't hope you stand out. General and undifferentiated pitches to join your company. Don't see anything about why your crush join your company instead of money, instead of many others.

So that idea, like your pitch, you're actual, he will tell you, you you ouldn't be building on difference in the commodity business, but even above and beyond, like you're the the mission that you're trying to engage everybody to join you in that pitch, that sail you're trying to make the potential recruit should be differentiated, should not if that person's playing to five other other jobs, there should not be like, like, they may not like your mission. They may not like your peach, but there shouldn't be able to compare anything else. Another quote from no one bushel higher for passion and intensity.

That's what he would do, or that's what he did when he found Steve jobs. If there was a single characteristic to separate Steve jobs from the massive employees, IT was his passionate enthusiasm. Steve had one four, one speed, four blast.

This was the primary reason we hire him. And one thing all these stone have a common is that you know how important hiring is. And when somethings important, you do IT yourself this again.

Elon moscon hiring. He interviewed the first three thousand employees at spaces that important was one of musk's most valuable skills, with his ability determined whether someone would fit his mold. His people had to be brilliant.

They had to be hardworking. And there could be no nonsense. There are a tono phonies out there and not money, who are the real deal? Must set of his approach to interviewer engineers.

I can usually within fifteen minutes, and I can sure, I can for sure to, within a few days of working with them, must made hiring a party. He personally met with every single person the company hired through the first three thousand employees. He required late nights and weekends, but he felt he was important to get the right people for his company.

And then the close on this, we started with Steve jobs telling us why IT was so important and why should be a large part of how you find time and now will close with what you do after what you do after you hire the person. This what he says, it's not just recruiting. After recruiting is building environment that makes people feel they're surrounded by equally talented people and their work is bigger than they are, the feeling that their work will have a tremendous influence and is part of a strong, clear vision.

So that is the end to that twenty minute many episode. I just relist n to the holding and IT IT really does. I think it's a perfect explanation and illustration of why I think founders notice so valuable because some of those books I have read in five, six years, and just the really to have a hertug database of all these, these ideas like this, collected knowledge of some of peace's greatest entrepreneurs to reference and then contextually apply to our own businesses.

It's nothing short of like it's magic. It's a really the way. Think about IT.

I think it's a massive super power, gives me a massive superpower. I couldn't make the podcasts out. I also think if you have access to IT to make your business butter. And so if you are running a successful business, I highly recommend you invest in description. And you can do that by going to founders notes that com.