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September 4, 2024 • 1hr 21min
The Guy Who Studied Buffett for 25 Years
My First Million
In this episode, Shaan Puri interviews Guy Spier, a value investor who has studied and emulated Warren Buffett's approach for over 25 years. Guy shares lessons learned from studying great investors, attending Berkshire Hathaway meetings, and developing his own investment philosophy and approach to life.
The Guy Who Studied Buffett for 25 Years
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Key Takeaways
- Study successful investors but don't try to copy lottery winners - Focus on understanding principles and processes rather than trying to replicate exact outcomes
- Build "engines" in your business to scale up repeatable processes and create leverage
- Get around the right people who embody the traits and success you want to emulate
- Focus on compounding over beating benchmarks - Consistent growth is more important than short-term outperformance
- Play the "infinite game" of investing rather than trying to "win" in the short-term
- Be a "promiscuous reader" and quickly iterate to find material that resonates, rather than forcing yourself to read things that don't
- Small acts of kindness and relationship-building (like handwritten notes) can have outsized impacts
- Ask yourself "If I did this every time in similar circumstances, what would the result be?" to make better decisions
Introduction
In this episode, Shaan Puri interviews Guy Spier, a value investor who has studied and emulated Warren Buffett's approach for over 25 years. Guy shares lessons learned from studying great investors, attending Berkshire Hathaway meetings, and developing his own investment philosophy and approach to life.
Topics Discussed
The "Posse" Investment Group (1:22)
Guy describes an informal investment group he was part of in New York City in the 1990s:
- Met regularly to discuss investment ideas and present stock pitches
- Included other value investors like Whitney Tilson and Bill Ackman
- Provided a forum to debate ideas and learn from each other
- "We'd meet, I think it was sometimes we'd meet even once a week. And in one of our members offices, there was a member that had an office in Midtown, and we'd present ideas."
The Farmer Mac Story (6:36)
Guy shares a formative experience where he pitched Farmer Mac as an investment idea to the group:
- Thought it could be "the next Freddie Mac and Fannie Mae" but at a much smaller market cap
- Bill Ackman later called to say he was taking a large short position in Farmer Mac
- Ackman's deep research revealed flaws in Farmer Mac's business model that Guy had missed
- Taught Guy the importance of thorough analysis and not taking things at face value
"I hadn't downloaded one. I took them at their word, and he kind of said, look, when you look at the entities that are created by Freddie and Fanny, each one of these mortgage backed securities has hundreds, not even hundreds, thousands of different individual mortgages...He said, I've downloaded, I don't know. He downloaded a number of the pharma Mac ones. He said, like, there's three mortgages inside."
Lessons from Tony Robbins Seminars (17:30)
Guy discusses attending multiple Tony Robbins seminars and the impact it had:
- Initially skeptical but was won over after doing the firewalk
- Helped him break out of limiting beliefs and patterns
- Taught him the power of physiology and state management
- Led him to explore other self-help and personal development resources
"Anthony Robbins did that for me. And so after that firealk, I was really quite enthusiastic about everything that came out after that. And I couldn't stop talking about Anthony Rollins. When I got back to New York and started reading NLP and started neuro linguistic programming and started really diving into the self help bookshelf to find more material that would help me in that way."
Studying Warren Buffett (47:30)
Guy describes his obsessive study of Warren Buffett and Berkshire Hathaway:
- Ordered old annual reports of companies Buffett invested in to study them
- Tried to put himself in Buffett's shoes and think like him
- Made annual pilgrimages to the Berkshire Hathaway meetings
- Focused on emulating Buffett's principles rather than exact methods
"Doing that goes to the very, very core of our humanity as a species, because that's what we do. We learn from generation to generation. By modeling, I mean, this matching and modeling, matching and mirroring...is a very, very human thing to do. That's what we do. That's how girls daughters learn from their mothers, hunters learn from their elders."
The Power of Handwritten Notes (28:57)
Guy shares how he implemented the practice of writing daily thank you notes:
- Got the idea from reading about a successful car salesman in Cialdini's Influence
- Committed to writing 3 notes per day before leaving the office
- Found it changed his mindset to be more caring and appreciative
- Led to building stronger relationships and goodwill
"I realized that actually often, whatever I'm sending them, I really didn't care genuinely about the people I was writing to. I was doing it because I was going through the motions. In a way, I was faking it. So then I'm writing not to Xyz Parson, and I actually take the time to think about them a little bit. And I realized that the act of writing the note changed my insides, made me care about them a little more."
Don't Study Lottery Winners (42:00)
Guy cautions against trying to copy the exact methods of extremely successful people:
- Many successful people and companies are "lottery winners" who got lucky
- Focus on understanding principles rather than exact tactics
- Be wary of survivorship bias when studying success stories
"We spend a lot of time being impressed with success, impressed with people who seem to have succeeded, whether it's companies like Google, whether it's individuals like Jeff Bezos and a large enough number of others. And this is this fooled by randomness idea of Nassim Talebbs, that many of those people are lottery winners. They were in the right place at the right time, and yes, they were working hard, and yes, they had all the attributes, but also, so they were lottery winners."
Berkshire Hathaway vs Index Funds (59:22)
Guy discusses why he still invests heavily in Berkshire Hathaway stock:
- Owning Berkshire shares creates a stronger psychological commitment than an index fund
- Attending meetings and following the company closely improves investor behavior
- The culture and principles of Berkshire are valuable beyond just financial returns
"I think that many people, if they buy Berkshire shares and they attend the Berkshire meeting, and they really kind of become closely connected to the company. They're more likely to be in for the long haul and be in for the ride."
Finite vs Infinite Games (1:05:13)
Guy explains the concept of finite vs infinite games and how it applies to investing:
- Finite games have clear rules, time limits, and winners/losers (e.g. chess, football)
- Infinite games have no set end point or clear "victory" (e.g. business, life)
- Investing is an infinite game - focus on staying in the game rather than "winning"
- Many investors fail by treating investing like a finite game
"Life is an infinite game. Investing is an infinite game. So how many people, I would tell you out of I don't know, how many funds that were around at the time that I started, how many around today? And it's like less than 2% now."
Be a Promiscuous Reader (1:13:26)
Guy shares his approach to reading and learning:
- Don't force yourself to read things that aren't resonating
- Sample widely and quickly iterate to find material that clicks
- Treat your library like a cocktail party - mix, mingle, and move on if bored
"Life is too short and our reading time is too short to force ourselves to read things that aren't giving us win after win after win. And so if you go to the buffet letters and it's not speaking to you, put it down quick. Don't waste your time."
Conclusion
Guy Spier provides a thoughtful perspective on value investing, personal development, and crafting a meaningful life and career. His emphasis on understanding principles rather than copying tactics, building "engines" to scale processes, getting around the right people, and playing the infinite game of investing offers valuable wisdom. Guy's journey of studying great investors while developing his own approach demonstrates how to learn from mentors while staying true to one's own path. His focus on small acts of kindness, relationship-building, and asking powerful questions to guide decision-making provides a model for conducting oneself with integrity in business and life.