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    RWH033: Lessons From Buffett & Berkshire w/ Chris Bloomstran

    enSeptember 17, 2023

    Podcast Summary

    • Lessons from Berkshire Hathaway's exceptional capital allocation and ethical business practicesStudy Berkshire Hathaway for its unique focus on growing book value, ethical business practices, and prioritization of shareholder interests.

      Key takeaway from this conversation with Chris Blomstrand, an accomplished investor and Berkshire Hathaway expert, is the importance of studying Berkshire Hathaway for its exceptional capital allocation and ethical business practices. Berkshire's management team, led by Warren Buffett, has a unique focus on growing book value per share and avoiding harm to the business. This approach, combined with the treatment of shareholders as partners, has contributed to Berkshire's long-term success. CEOs and investors can learn valuable lessons from Berkshire about making rational asset allocation decisions, running companies ethically, and prioritizing shareholder interests. The casino side of Wall Street often overlooks these fundamentals, but they are crucial for long-term investment success. Berkshire's approach to capital allocation and shareholder treatment sets a high standard for other businesses to follow.

    • Prioritizing rational investment strategies and financial disciplineSuccessful companies like Berkshire Hathaway allocate capital effectively, avoid costly mistakes, and maintain a strong financial position, while some CEOs may prioritize short-term growth over long-term financial health.

      Successful companies like Berkshire Hathaway prioritize rational investment strategies and maintaining a strong financial position, avoiding costly mistakes and excessive debt. The lack of discipline in areas like share buybacks and short-term focus can lead many companies to operate like Ponzi schemes, masking their true financial situation. Berkshire Hathaway, under Warren Buffett's leadership, embodies a more logical and intelligent way of thinking about investments. They allocate capital effectively through various means such as cash flow, share buybacks, acquisitions, and debt. CEOs, on the other hand, often prioritize growing earnings before interest, taxes, depreciation, and amortization (EBITDA) and become less concerned with the capital structure below the line, potentially putting their businesses at risk.

    • Aligning CEO interests with shareholdersCEOs should focus on long-term growth through investment in R&D and capital expenditures, not just short-term earnings and share buybacks. A culture of return on capital-based compensation can help align CEO interests with shareholders.

      The alignment between CEOs and shareholders is crucial for a company's success. The speaker argues that many CEOs are focused on short-term earnings and share buybacks due to large compensation packages, but this may not be the best use of capital if the company has opportunities for growth through investment in R&D or capital expenditures. The speaker also mentions that some industries, such as insurance underwriting and banking, are inherently challenging and may not allow for a conservative approach, leading to write-offs and recapitalization at inopportune times. The speaker admires CEOs like Tom Linebarger at Cummins who have a culture of return on capital-based compensation and decision-making, as it aligns the CEO's interests with those of the shareholders. Ultimately, the goal is for a company to take care of all its constituents, including employees, customers, community, regulators, and shareholders.

    • Understanding the nuances of value investingFind disciplined management teams, research financials deeply, and join a community to learn and grow in value investing.

      Successful value investing requires a disciplined approach and a keen understanding of a company's financials. The discussion highlighted the importance of finding management teams that align with shareholders' interests and have a solid capital allocation strategy. However, this is not always easy, as it requires a significant amount of research and analysis to uncover the true profitability and intrinsic value of a business. Many investors may find this process overwhelming or too difficult, but for those with the proper mindset and willingness to challenge conventional wisdom, value investing can be a rewarding endeavor. The TIP Mastermind community, mentioned in the podcast, can help investors in their learning journey by providing a platform to connect with like-minded individuals and gain valuable insights. Ultimately, value investing requires patience, discipline, and a healthy dose of skepticism, but the potential rewards can be significant.

    • The importance of understanding accounting practices for successful investingInvesting requires a deep understanding of accounting practices and their impact on reported numbers, including write-offs and write-downs, to make informed investment decisions.

      Understanding accounting and the history of write-offs and write-downs is crucial for successful investing. It goes beyond just analyzing financial statements and requires a deep understanding of accounting practices and their impact on reported numbers. Companies with a history of taking write-offs, especially during recessions, can distort their equity and net income, making it essential to consider these factors when evaluating investments. Additionally, intangible assets, such as patents and customer lists, can lose value over time if overpaid for in acquisitions. The more time spent with great investors and studying their approaches can help investors learn valuable insights and improve their own analytical skills. Ultimately, investing requires a significant time commitment and a thorough understanding of accounting practices and their impact on financial statements.

    • Finding Perspective Outside the Office: Gibbs' Long Walks and Carlasare's Flexible ScheduleSuccessful investors prioritize independent thinking and finding unique methods to gain perspective, such as meditation through long walks or maintaining a flexible schedule.

      Successful investors like Whit Gibbs and Joe Carlasare prioritize independent thinking and finding perspective outside of the office. Gibbs shares his unique form of meditation through long walks, allowing him to disconnect and think deeply about his portfolio and competition. Carlasare, on the other hand, values an open calendar and a flexible approach to structuring his day, enabling him to focus on research and analysis without being bogged down by the noise and mayhem of the investment world. Both investors emphasize the importance of finding personal channels to gain perspective and maintain calm in their busy lives.

    • Surround yourself with good peopleFind a career you love, build a network of supportive friends, and eliminate toxic relationships for a happier, healthier life.

      It's important to surround yourself with good and kind people in both your personal and professional life. The speaker shares his experience of growing up with unpleasant influences and how he made a conscious effort to distance himself from such individuals. He emphasizes the importance of finding a profession that you enjoy and building a network of like-minded friends. Additionally, he advises against keeping toxic people in your life and encourages seeking out moral exemplars. The speaker's past experiences, including the loss of his mother to smoking-related illness and witnessing an unpleasant relationship, have shaped his perspective on the importance of positive influences.

    • Values instilled in Joe: Honesty, fairness, and strong relationshipsJoe prioritizes honesty, fairness, and strong relationships in raising his children and honors his mother's memory by emphasizing their importance.

      The importance of honesty, fairness, and strong relationships, especially with family, was instilled in Joe Carlasare from a young age by his mother and various coaches. Despite facing adversity and dishonesty in his own life, he made a conscious effort to be a different father and prioritize these values in raising his children. He also emphasized the significance of working on relationships with loved ones and expressing love and appreciation frequently. The loss of his mother, who dedicated her life to her children and endured a difficult relationship, left a profound impact on him, and he honored her memory by encouraging the importance of strong relationships and standing by loved ones through thick and thin.

    • Rising above adversityOvercoming challenging childhood experiences and difficult relationships can shape an individual's character and drive them towards success. Learning to trust and maintaining a strong work ethic are key to rising above adversity and achieving remarkable achievements.

      Overcoming challenging childhood experiences and enduring difficult relationships can shape an individual's character and drive them towards success. Joe Carlasare, despite a difficult upbringing, became a successful investor and functional human being by learning to trust those who deserved it and maintaining a strong work ethic. His intense drive, fueled by a need to prove himself, was evident in his football career, academic pursuits, and investment approach. This chip on his shoulder and relentless work ethic served him well, allowing him to excel in various aspects of his life. The ability to rise above adversity and channel energy towards personal growth is a powerful tool that can lead to remarkable achievements.

    • Determination and focus led the speaker to success in business despite a football injuryDetermination and focus can lead to success in various areas of life, even after setbacks. Financial planning and earning a good return on savings are essential.

      Work ethic and a strong drive to succeed played a crucial role in the speaker's life, even when his football career was cut short by injury. After his football days ended, he channeled his energy into investing and became deeply focused on it. Although he had the potential to become a professional football player, he acknowledges that there were others who excelled at a higher level. Instead, he found success in the business world, demonstrating that determination and focus can lead to achievement in various areas of life. Additionally, the speaker emphasizes the importance of financial planning and earning a good return on savings, as shown by his endorsement of Public.com's high-yield cash account.

    • Dedication and interaction in football and financeStay dedicated to the process, practice hard, build strong relationships, treat others with kindness, and overcome adversity through resilience and determination.

      Dedication and interaction are key to success, both on the football field and in finance. The speaker shared how his football coaches' teachings carried over into his investment career, emphasizing the importance of being dedicated to the process and practicing hard. Additionally, the value of building strong relationships and treating others with kindness was highlighted as a crucial lesson learned from his coaches. These experiences shaped him into the person he is today and inspired him to give back by mentoring others. When faced with adversity, such as losing a game or encountering unscrupulous individuals in the investment world, the speaker's resilience and determination to do the right thing have served him well. By staying focused on the process and treating others with kindness, one can overcome challenges and find success.

    • Holding People Accountable in the Investment IndustryInvestors must be cautious, not take things on trust, and prioritize integrity when making investment decisions to avoid deception and misaligned interests.

      The investment industry can be full of deception and misaligned interests, making it essential for investors to be diligent and vigilant. Chris, a guest on the podcast, is commended for his ability to call out inconsistencies and hold people accountable, especially in cases where individuals or firms make unethical comparisons or misrepresent their returns. It's crucial for investors to be cautious and not take things on trust, as even seemingly impressive figures may have hidden agendas. Warren Buffett, a respected industry veteran, has emphasized the importance of trust but acknowledges the difficulty for investors to distinguish between charlatans and legitimate investors. Ultimately, it's up to investors to educate themselves, assess people's records, and prioritize integrity when making investment decisions.

    • Default Option for Average Investors: S&P 500 IndexFor average investors, the S&P 500 index offers diversification and low fees, making it a suitable default investment option. However, for those with substantial resources, finding superior active managers or individual undervalued stocks can be challenging, and requires significant time and expertise.

      For average investors without the expertise to analyze investments or allocate capital effectively, the S&P 500 index is a suitable default option due to its diversification and elimination of high fees. However, for those with substantial resources, finding superior active managers or individual undervalued stocks can be challenging, especially in today's market with high-priced, overvalued stocks. Great investors, including Warren Buffett, spend a significant amount of time considering potential risks and managing them. Berkshire Hathaway, a large part of Buffett's portfolio, has seen Apple grow to 50% of its holdings, making it a potential candidate for trimming or selling, depending on the price and tax implications. Regular, consistent saving over a lifetime is a sound strategy for individual investors, even if initial purchases are overpriced. Ultimately, the game of investing requires constant thought, risk management, and a significant time commitment.

    • Berkshire Hathaway's Diverse Income Streams and Attractive Investment QualitiesBerkshire Hathaway's diverse income streams, conservative approach, durability, predictability, emphasis on survival, and strong management team make it an attractive investment in the current low-interest-rate environment, despite its premium to book value.

      Berkshire Hathaway's diverse income streams, including earnings from railroad, manufacturing, service retail, underwriting, and equity portfolio, have contributed to its significant growth, making it a valuable investment despite its current premium to book value. The speaker believes that Berkshire's conservative approach, durability, and predictability make it an attractive investment in the current low-interest-rate environment, with potential inflation protections built into some of its larger businesses. Additionally, Berkshire's emphasis on survival and its strong management team make it a desirable long-term investment. However, it's important to note that while Berkshire may not achieve the same returns as it did in its first 35 years, it still has the potential to outperform other investments in a climate of subpar returns. The speaker also acknowledges the high corporate leverage in the system but sees Berkshire as a bond-like investment due to its earning potential and net unlevered position.

    • Importance of financial integrity and hard work in golf and businessMaintaining financial integrity and working hard can lead to success in golf and business, even during economic challenges with high interest rates and potential recession.

      In an economic environment with persistently high interest rates and potential recession, corporations with high levels of short-term and intermediate-term debt could face significant profit margin hits due to increased interest burdens. This could be particularly problematic for companies operating below the EBITDA line. A story about golfer Ellen Port illustrates the importance of integrity, hard work, and perseverance, which can lead to success even in the face of challenges. In the world of golf, as in business, adhering to ethical standards and maintaining a solid financial position are crucial for survival and growth. Ellen Port, a former amateur golfer, rose to the top ranks of the game despite starting late and facing financial constraints. Her story underscores the importance of hard work, dedication, and maintaining a strong moral compass. In the context of the economic discussion, this means being mindful of debt levels and maintaining a solid financial position, especially in an environment of rising interest rates.

    • The importance of introspection and honesty in golf and lifeReflect on actions, consider consequences, and strive for honesty, even when difficult. Integrity matters in golf and life.

      Introspection and honesty are crucial in both golf and life. Ellen, a talented golfer, disqualified herself from a championship after recording an improper scorecard. She spent her nights replaying her rounds in her mind, trying to improve, but this led her to make a mistake. Her honesty in acknowledging her error and removing herself from the tournament, despite the potential consequences, showcased her integrity and commitment to doing what is right. This story serves as a reminder for us all to reflect on our actions, consider the potential consequences, and strive for honesty, even when it may be difficult. Jason Zweig's advice to consider whether we would sell our actions to our mothers also emphasizes the importance of introspection and honesty. Overall, this conversation with Chris Blomstrand highlights the value of integrity and introspection in both golf and life.

    • Learning from Bitcoin experts and billionairesStay informed and educated in Bitcoin, listen to The Investors Podcast Network for insights, consult professionals, and respect intellectual property.

      Through the discussions on TIP, we learn about the importance of staying informed and educated in the world of Bitcoin and studying the financial strategies of billionaires. Every Wednesday and Saturday, The Investors Podcast Network provides valuable insights on these topics. Remember, it's essential to consult professionals before making any financial decisions. Access their show notes, transcripts, and courses at investorspodcast.com. Lastly, respect their intellectual property by obtaining written permission before syndicating or rebroadcasting their content.

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    BTC188: Claude Shannon and Information Theory with Jimmy Soni (Bitcoin Podcast)

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    In this episode of the Bitcoin Fundamentals Podcast, Jimmy Soni, author of "A Mind at Play" and "The Founders," joins us to discuss the life and work of Claude Shannon. We explore Shannon's groundbreaking contributions to information theory, including the concept of entropy and its importance in data transmission. Jimmy explains how Shannon's work laid the foundation for many of the technologies we take for granted today, including Bitcoin and blockchain technology. We also touch on stories from "The Founders," highlighting the tech pioneers and their innovative contributions. Join us for an in-depth discussion on information theory, Bitcoin, and the history of technology. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 02:06 - The life and work of Claude Shannon, the father of information theory. 07:10 - The foundational role of Shannon's work in modern technology. 20:31 - The relevance of information theory to Bitcoin and blockchain. 20:52 - Stories from Jimmy Soni's book "The Founders" about tech pioneers. 28:58 - How Shannon's concept of entropy relates to data transmission. 32:52 - Insights into the problem-solving approaches of early tech innovators. 40:42 - How Bitcoin investors can apply Shannon's principles to their strategies. 55:16 - The impact of Shannon's interdisciplinary approach on his innovations. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Jimmy’s book, A Mind at Play. Jimmy’s Book, The Founders. Jimmy's X (Twitter Account) Check out all the books mentioned and discussed in our podcast episodes here. Enjoy ad-free episodes when you subscribe to our Premium Feed. NEW TO THE SHOW? Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members. Follow our official social media accounts: X (Twitter) | LinkedIn | | Instagram | Facebook | TikTok. Check out our Bitcoin Fundamentals Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: River Toyota Sun Life The Bitcoin Way Meyka Sound Advisory Industrious Range Rover iFlex Stretch Studios Briggs & Riley Public American Express USPS Shopify Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

    RWH046: A New Golden Age w/ Bob Robotti

    RWH046: A New Golden Age w/ Bob Robotti
    In this episode, William Green chats with Bob Robotti, a great investor who’s crushed the S&P 500 over the last 40 years. Bob, the President & Chief Investment Officer of Robotti & Co, explains why he believes we’re in a “new golden age” for active, value-oriented investors (not index funds); why he expects persistently high inflation; why he’s betting heavily on the resurgence of Old Economy businesses; & how he’s positioned to profit from “the first truly global energy crisis.” IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 12:18 - How Bob Robotti lucked into the ideal job for an aspiring investor.  33:19 - How working for Mario Gabelli was like a one-on-one MBA. 40:22 - Why Bob thinks we’re in a new golden age for savvy stockpickers.  40:48 - Why he’s betting heavily on a “metamorphosis of the Old Economy.” 46:16 - How globalization is evolving as China loses its edge. 50:49 - Why energy-intensive US companies have a long-term advantage. 57:33 - Why owning the “Magnificent Seven” looks like a risky bet. 58:23 - What an era of persistently high inflation means for investors. 1:03:35 - How value investing has changed. 1:19:01 - How Bob is positioned for “the first truly global energy crisis.” 1:38:06 - How his life has been enriched by helping young people. 1:43:45 - What he learned from his wife and father about facing adversity. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Bob Robotti’s investment firm, Robotti & Co. Bob Robotti’s writings. Check out MedShadow.org, a health-related site founded by Bob Robotti’s wife, Suzanne. William Green’s podcast with John Spears: Winning the Long Game | YouTube Video. William Green’s book, “Richer, Wiser, Happier” – read the reviews of this book. Follow William Green on X. Check out all the books mentioned and discussed in our podcast episodes here. Enjoy ad-free episodes when you subscribe to our Premium Feed. NEW TO THE SHOW? Follow our official social media accounts: X (Twitter) | LinkedIn | | Instagram | Facebook | TikTok. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts.  SPONSORS Support our free podcast by supporting our sponsors: River Toyota CI Financial Sun Life AFR The Bitcoin Way Industrious Briggs & Riley Meyka Public Vacasa American Express iFlex Stretch Studios Range Rover Fundrise USPS Shopify HELP US OUT! Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

    TIP639: Buffett's Favorite Business Book w/ David Fagan

    TIP639: Buffett's Favorite Business Book w/ David Fagan
    On today’s episode, Clay is joined by David Fagan to discuss Don Keough’s book, The Ten Commandments of Business Failure.  Don Keough was the President and COO of Coca-Cola. During Keough’s and Roberto Goizueta’s leadership, Coca-Cola’s stock compounded at 27% per annum from 1981 through 1997.  David Fagan serves as the managing partner at MBF Chartered Professional Accountants, a firm dedicated to supporting small and medium-sized owner-managed businesses across Canada. David was an early member of our TIP Mastermind Community, and he enjoys utilizing it to meet interesting people and learn more about stock investing. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 05:17 - Why the best businesses never quit taking risks. 18:37 - Why being inflexible is a recipe for failure. 20:53 - Why perception is everything and we shouldn’t assume infallibility. 24:24 - What makes trust the foundation of any successful business. 35:19 - How business leaders can balance outside expertise with their own intuition. 39:38 - How we can utilize optimism to win in business. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members. Don Keough’s book: The Ten Commandments of Business Failure. Related Episode: Same as Ever w/ Morgan Housel | YouTube Video. Follow Clay on Twitter. Check out all the books mentioned and discussed in our podcast episodes here. Enjoy ad-free episodes when you subscribe to our Premium Feed. NEW TO THE SHOW? Follow our official social media accounts: X (Twitter) | LinkedIn | Instagram | Facebook | TikTok. Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: River Toyota CI Financial Sun Life AFR The Bitcoin Way Industrious Briggs & Riley Meyka Public Vacasa American Express iFlex Stretch Studios Range Rover Fundrise USPS Shopify HELP US OUT! Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

    BTC187: Home Heating and Bitcoin Mining w/ Alex Busarov (Bitcoin Podcast)

    BTC187: Home Heating and Bitcoin Mining w/ Alex Busarov (Bitcoin Podcast)
    Join us as Alex Busarov, founder of Heatbit, discusses combining Bitcoin mining with home heating and air purification. Learn about the challenges, the innovative "heating-by-computing" principle, and the future of decentralized mining. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 01:21 - The journey of creating the world's first Bitcoin-mining heater. 02:00 - The challenges faced in developing Heatbit One and Heatbit Trio. 05:03 - How the "heating-by-computing" principle works. 08:58 -The environmental impact of traditional Bitcoin mining. 09:27 - How Heatbit addresses these environmental issues. 25:19 - The future of decentralized Bitcoin mining. 29:40 - The vision for placing a Bitcoin-mining device in every home. 34:06 - Insights into the intersection of Bitcoin mining, home heating, and air purification. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Check out Heatbit’s website. Heatbit's X (Twitter) account. Check out all the books mentioned and discussed in our podcast episodes here. Enjoy ad-free episodes when you subscribe to our Premium Feed. NEW TO THE SHOW? Follow our official social media accounts: X (Twitter) | LinkedIn | | Instagram | Facebook | TikTok. Check out our Bitcoin Fundamentals Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: River Toyota CI Financial Sun Life AFR The Bitcoin Way Industrious Briggs & Riley Meyka Public Vacasa American Express iFlex Stretch Studios Range Rover Fundrise USPS Shopify Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

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