RWH070: Hunting For Hidden Treasures w/ Christopher Begg

27:45You have to focus that work so that when you have an opportunity that you can act with a sense of conviction and a sense of knowing that this is something that's actionable. So that's the process. And I saw that with Barry. I saw it with anyone that has done deep research, deep work, and then comes to the other side with a really high probability insight that's ideally probably non-consensus, but right. That's really the work. Let's take a quick break and hear from today's sponsors.

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30:03If your revenue is at least in the seven figures, go to netsuite.ai.tip. Built for every industry, ready for every boardroom, netsuite.ai slash tip. As investors, we spend all day studying great businesses, but some of the best returns come from building one yourself. If you've been sitting on a business idea, Shopify makes it easy to actually make it happen. Everything you need to start selling is included and ready from day one. Take the moment your first customer is ready to pay. Shopify checkout helps more of them finish the purchase. And when they come back, their details are already saved.

30:43One tap and they're done. And because Shopify handles the setup and the checkout, you get more time to focus on what actually grows the business, plus the tools to do it. If I were starting a business, I would absolutely use Shopify myself. It powers millions of businesses worldwide, from names like Mattel and Gymshark to founders just getting started at shopify.com slash TIP. With Shopify, nothing stands between your idea and a real business. So go make it one. Start your free trial at shopify.com slash TIP. Start your free trial at shopify.com slash TIP. Robert Leonard So as we've discussed on the podcast before, you have what you call your grove of titans, which is this small selection of exceptional businesses that have a rare combination of qualities that provide exceptional long-duration compounding.

31:43And so I wanted to talk a bit about some of these great businesses that you've identified in this very kind of painstaking way, often looking at what's, as you would put it, hidden conspicuously, not concealed, but unrecognized, and how these companies illustrate different principles of how you invest. And so, you know, I think it's helpful to tether ourselves to the companies themselves, because in some way, otherwise, the concepts can sound really theoretical and abstract, but they're actually really important underlying laws and principles. So I thought I would start by asking you about Alphabet.

32:21And you wrote at one point in your letter, the end of the year letter, Alphabet remains one of the most extraordinary businesses ever built. At its core, it is a graph, or as Americans would say, it is a graph designed to organize the world's information and make it universally accessible and useful. And so this gets at a really important theme for you, which is this idea of graph theory, of graphs, of edges and nodes, and you're focused on investing in graphs as they become stronger. Can you talk about that? Can you explain that way of looking at the world by telling us about Alphabet? Because I think you've noticed something that's so fundamentally important, and that as we go through this conversation, some of our listeners and viewers will start to realize, oh man, he's figured something out.

33:12Robert Leonard Yeah, there's three pillars. We look at the Grove of Titans, which is this universe of exceptional companies. Each one of them we feel has three pillars. And the three pillars is, do they have a moat and is it widening? And we deconstruct that. There's eight different layers of moat that we're looking for. And not that we want every company to have all eight, but we want layers of a competitive advantage that's identifiable and that we understand. And that as we're looking at that moat, we're like, is this something that's going to be still present 10 years from now in a different form?

33:50So these things, we want to make sure they have a long shelf life. The second pillar is really secular tailwinds. And secular meaning long-term secular tailwinds that's driving the top line growth of the business. We don't typically do a lot of things where they're facing secular headwinds, that they're being disrupted by something, even if we think that disruption may take some time. And we usually avoid those things. So, modes, secular tailwinds. And the last piece is the human element, right? We want to partner with great operators that ideally have a history of a pretty intelligent capital allocation.

34:25So, those three things give us kind of a quality score on the business that we would put in that grove of titans basket that we're just spending our time really understanding. Valuation, and we're looking at 10-year valuations, right? We want to find something that's going to earn 15 % rate of return from today's price over 10 years. We measure that on free cash flow growth. And so when you get the quality at a reasonable price, there's usually clouds, right? There's clouds around the business that give you this opportunity to invest when perhaps there's some ambiguity in what the business is.

35:04So this is a little bit of a backdrop to understand Google, because Google is probably one of the most extraordinary companies that's ever been built, as you noted that I said in the letter. In the search business, it was designed and built around graph theory. And graph theory is something that when you look at nodes and edges and how things scale, when nodes and edges are populating across a domain, we start to see increasing returns to scale. And I think that's one of the things that a lot of people have misunderstood about this period of technology is that as these businesses have gotten bigger, they haven't run into this law of diminishing returns.

35:49Their growth has accelerated. And so Brian Arthur did this work at Santa Fe Institute, and we started to understand that what is present that is allowing for this increasing returns to scale. And in our conclusion, it's this, there is a presence of a graph that's allowing for the information to grow and to grow exponentially through the nodes and edges that are available to it on the graph. And so when you look across and you start seeing things from a graph lens, you're like, oh, there's another graph. There's another graph. Amazon's a graph. Tesla. We could talk about other things where graphs are present and that they're in the part of the S-curve where that growth is now populating across the nodes and edges of what they've built.

36:38So yeah, Google search business is still a dominant business for connecting ads to consumers. And it's allowed them to build a number of other businesses. Google Cloud now is an extraordinary business and going to be a bigger, bigger piece of the overall Google valuation. We have YouTube, we have other businesses that have been built, you have Waymo. But at the core, when we got involved in Google, I think their AI advantage was not as understood as it is now. And Demis Tasabas, in what he's built, in DeepMind and and Google is still in our perception as the lead, really leading in AI. Leading in not necessarily what we hear about foundation labs and building LLMs.

37:30Yes, we do that and we do that very well, but there's a large AI effort that Demis has led, which is leading to all kinds of different applications we saw with AlphaFold, healthcare breakthroughs, AGI, ASI. So we think there's a lot of things that are misunderstood about their AI advantages and how broad it is. Yes, I'll stop there if you want to add anything. Yeah. Just to highlight a couple of points, there was a line you wrote, I think probably in your annual report where you said, much of our research effort is devoted to a simple question, are the clouds temporary or permanent? I think that gets at something really essential in your process, that you're finding these businesses that have some underlying structure, as we'll discuss increasingly in this conversation, that's enormously powerful, but you're buying them at a moment where there's a kind of misperception that's leading the market to misprice them typically.

38:30Is that a fair summary? Yeah. The internal conversation that we have with any company that we own is we say, what are the clouds? How many clouds are there? What is our most important questions around those clouds. And then that's where a lot of our work lives. There's one thing to understand the competitive advantage and all of these things, but it's the clouds that really, where we devote a lot of time and understanding, because that's where the misperception or the mispricing exists. So in the case of Google, over the last couple of years, there was this cloud around that blue links were going away.

39:07All of our search eyeballs are going to go to LLMs, and we're going to move those eyeballs off the Google platform, onto OpenAI, on Anthropic. And you had to understand that from first principles and to say, is that true? Is that perception going to be a reality? It's not yet. And that's usually where we see this gap between perception and reality. That's where the cloud lives. It's a perception that something might change versus evidence that it is. And so when we fast forward a year, what we realized is actually Google's, their search volumes were going up with AI, not down. And that they were able through those eyeballs to bring more of their customers to look at AI tools.

39:57Maybe the pioneers in looking at LLMs we're downloading OpenAI and using ChatGPT and so forth. But there's the whole middle of the bell curve that's experiencing AI for the first time through the Google search bar using different AI tools that are being shown to them and say, oh, okay, this is interesting. We're going to download Gemini and others. So that cloud has dissipated. And last year, it translated into a lot of alpha generation for us. The second cloud that was there was regulatory. Was antitrust FTC going to break up Google in a way that would be disruptive to us in our long-term, having this as one entity?

40:42So we had to look at that carefully and break down a probability array to understand that. We ended up getting an FTC ruling that was very much in our favor from the standpoint of taking that cloud away. It was almost like we woke up one day, and the cloud was gone. So again, that translated to a re-rating of the business. There was a point in time where we owned Google at 15 times earnings. And this thing is growing top line and all of these vectors of opportunity and asymmetry in what was possible. And we're getting the best business in the world at this incredible price. So now we own Google, still one of our largest Holdings.

41:20And it's a different array of clouds. It's a different array of understanding. And every day, we're just testing that hypothesis. Sometimes we think about our thesis. I think everything we own, we think about as a hypothesis. And how do we test the hypothesis to see if it's still true? And some days we wake up, say, you know, that hypothesis doesn't feel to be true, this other information comes in. And that might be a point where you'd want to exit an investment, even one that you've had for a very long time. Robert Leonard There's a very timely example of these clouds arising in the markets that you look at in the addendum, which is unpublished to your 2025 year-end letter.

42:05And you describe as the biggest cloud of 2026, obviously, is software. And my sense is that in recent months, you've been able to buy Constellation Software, which is a stock that usually would be unbuyable for someone like you because of the price, the valuation. In a way, this gets at the core of what it is that you do. Can you talk about the cloud there? Because it seems like an incredibly difficult cloud to analyze, given the uncertainties about the future of AI and the impact that it's going to have on software. Tell us partly what you concluded about this stock in this sector, but also just how it illustrates your process of looking at clouds and trying to separate the perception from the reality.

42:55Yeah. You can always feel into where the clouds are. We even have a title for this, right? William, it's the software apocalypse. I mean, how perfect. It is the biggest cloud of 2026. And it's scary. We have transformational technology in the form of AI coming to us. Every day, there's a new model coming out. Every day, there's the potential for an existing platform to be disrupted. So what we try to do is we want to go where the clouds are thickest and understand there's something to do there that's intelligent. So Constellation Software, we've studied this business for over 10 years. I've known Mark Leonard, who's a legendary capital allocator, legendary operator.

43:38Had him in the classroom probably three times over the last 10 years since I've known him. And when we went and looked at software, we didn't own a lot of software assets leading into this. Software Constellation is trading off 50 % off highs in the first quarter of this year, and rolled up our sleeves again, re-underwrote this business from first principles, but we have to still get to the heart of the disruption, right? And we had to deconstruct what was a shallow moat in software and what was a deep moat. And it kind of developed a framework, which you read in that addendum. And the purpose of writing that, as we talked about earlier, was to really understand this and to write it up so that we as a team could think about this as we looked across the software investments and where we wanted to do the...

44:35What businesses we might want to own. And so we kind of looked at that. There's eight different layers that we deconstructed that we thought made something shallow or deep mode. The first is your interface layer. And that was the one that if you had a very shallow interface software company, AI could likely come in and you could kind of vibe code something up and create a better interface. And that made sense to us. That was a shallow mode. And so when we looked at horizontal software companies, we didn't want to own something that was horizontal on the interface level. We wanted to own something that was vertical and deep.

45:11So the second layer is the motion that software, so software as a service, how deeply is it embedded in the motion of the enterprise? The third was the memory, like how much institutional memory is involved in how the software is integrated into the business. The next one, next layer, again, we keep going deeper, is the orchestration layer. How deeply is it orchestrated among different partners, different APIs that are connected. The next is resilience layer, so security protocols, all the different, how deeply it's integrated into the data being safe and protected and stored. The trust layer, you have someone that's on the other side of the phone, if something goes wrong with your software, how capital is allocated across that software business.

46:03How has it been? What are they building? What are they improving? And then the learning layer just kind of integrated in the flywheel of learning and building software. So that was our deconstructed vertical into understanding from software asset to software asset who had these attributes. Robert Leonard And the people who are eagle-eyed or eagle-eared will note that those letters, it can all be summed up in this acronym, immortal, which is very, very typical of you. Explain what you're doing there because you've done this before where you talk about things like the Piper mindset, which is perpetual, persistent, incremental progress, eternally repeated.

46:45It's like a way of remembering, ordering information. It's another distillation, a synthesis of very complex information, a compression. Yeah, I always like to think of a memory tool that is helpful in bringing to bear this framework repeatedly on something. So our essence of moat is a seven-layer framework that happens to spell essence. Or I've helped create words to express a very important parts of those layers of moat. And the same with system of record vertical market software. As we deconstructed it, we're like, okay, this is a helpful way for us to kind of take this learning and apply it across the domain of software.

47:33I happened to just return from Egypt, and we were in the New Museum in Cairo, and the funeral apparatus of burying King Tut was fresh in my mind. And it was just, I was so shocked at how they thought about immortality. And immortality was something that they planned their entire life around. And King Tut, not only was he in these different mummy forms, but the number of different caskets that were there to protect the body, it made me think of like, that's what we're looking at in software, really. We're looking at all of these different layers to allow for these businesses to endure. We talked about earlier, endure.

48:20And Mark Leonard built a system that really spoke to endurance, and that hadn't changed. The cloud that is still resident around software is a perception that these assets could be disrupted versus any evidence that they are. If we were to see churn numbers accelerate in the individual businesses that Constellation owns, we'd start being concerned. They had their first investor day in Toronto, which I took my whole team to, got to know Mark Miller, who's now taking over the leadership role, met with a bunch of the different division heads. And so we've spent a lot of time over the last three and four months to deconstruct this and look for evidence where, is this a perception of a cloud or is this a real cloud?

49:06And the hypothesis is holding. We've bought two software assets this year. And as you know, these in a nine a company portfolio. And in the midst, William, of cloud, it's always like in meta in 22 or perimeter, like whatever the cloud of the year is, it always feels the same when you're in it. Like a year from now, two years from now, we'll have a conversation. Now I can say, okay, we were right on this or that, or maybe we misunderstood something, but we're in it right now. And this feels the patterns and feeling feels like this is going to be a very productive investment for us, but we'll see.

49:48Well, last time we spoke on the podcast, which I would encourage people to go back and listen to, I think it was literally on the day of the tariff tantrum announcements when the markets were melting down and you were, I guess, in the midst of buying Tesla and Amazon. Tesla much more detested than Amazon, which we'll get to in a few minutes. But I think the point I wanted to pause on and emphasize with Constellation Software is something you wrote in this addendum where you said, you need to slow down, look again, and recognize what has been built layer by layer over time. And so what we're talking about here is that there was a kind of moat that, as you explained in that addendum, relies on dense interdependencies, right?

50:32It's really difficult to rewire the whole. So maybe there's like a little bit that is very vulnerable, but to rewire the whole thing is unbelievably difficult. And so again, it's something where, as you put it in that piece of writing, perception outruns evidence. Does that raise any thoughts for you? Any comments on that? Yeah. As we talk to some of these vertical market software businesses that are system of record assets that have this deep layer of interdependency, the other thing I'll add is that what we're finding is AI isn't necessarily the threat, but actually that could be deployed on top of this in an ontological layer that improves their business proposition to their customers.

51:19And so we're seeing more evidence of that as we're talking to, say, Jan Moore of Chakper's group or Mark Miller and his team is that they're seeing more opportunities where AI can be deployed in a way to add more value. And maybe some of that value added could translate into additional revenue sources. So we'll see. We see more evidence that AI is actually helping them and hurting them at this point. But yeah. I think part of what's interesting also that's worth emphasizing is that you have this competitive advantage that comes from a network of people who become really valuable sources, some of it through teaching for, I guess, the last 15 years now, right, at Columbia.

52:06I remember when I sat in on Classios a few months back, I'm sure before the Constellation Software purchase, on the day that Nick Sleep came to speak, Alexis Fortune also came to speak, this Irish, I guess, if I remember rightly, Dublin-based investor who runs a firm called Black Sheep. He had an enormous position in Constellation Software. So, I'm sort of thinking, you've had Mark Leonard come through three times, who's sort of almost impossible to get an interview with. How does that work where you have this kind of mastermind group around a business or a sector that you're investigating? It's incredibly helpful and important.

52:49I've had a close, one of my best friends owns an extraordinary software business in Rufin. And so helping and being part of his leadership around that business over the last 10 years is also another... It gives you a different layer of insight versus maybe what you can glean as a public equity investor. But yeah, the network's really, really valuable. What we tend to do on a weekly basis is we have an understanding of what our questions are, what are our MIQs, what are our most important questions, and who can help us answer those. So every Monday, we create a hierarchy of those questions that we're seeking answers to, and we go find those people.

53:38And oftentimes, those contacts are in our network, and we can reach out, have a conversation, that leads to another conversation, and you just keep doing it. And then you understand, okay, let's prioritize what are the MIQs now with this investment or this new thing we're looking at, and the network becomes invaluable. And 15 years of doing the class, as you noted, it's been transformational in having a deeper connection with a group of investors and operators that you've kind of done this thing together with the students, you've built some trust, and it allows for those conversations just to come naturally.

54:17I think that whole idea of trust is really, really interesting. And when you came to talk in Omaha, I was hosting a Celebrating Charlie Munger event, I guess on May 1st, probably, I guess it was the night before the annual meeting, the Q &A. And you and I chatted at some length on stage about the seamless web of deserved trust, this idea of Charlie's. And I think it's worth pausing and dwelling on it a bit, because I reread a chunk of your essay, on it. It's such an important idea. Charlie famously had said that the highest and best culture is a seamless web of deserved trust. He talked about the Mayo Clinic as an example of this, and he just said, there's not much procedure, it's just totally reliable people correctly trusting one another.

55:03Can you talk about this idea that you drew from Charlie, I think, that trust is a long duration asset and that its full value appears only over time, as you put it. Yeah, I think one of the most important Insights from physics is understanding entropy or where friction lives. And when you reduce friction or reduce entropy in any system, you allow more information to flow through that system. And when more information is flowing, value is being created. So a seamless web of deserved trust allows for more information to flow easier, more fluid. And it was like this, you see it at Berkshire. And 20 ,000 to 40 ,000 people show up.

55:55And that collective feeling that they've created over 50 years is a feeling of trust. It's deserved trust. It's doing the right thing when no one else is looking. And that allows for other emergent things to happen. I'll sell my company to Berkshire and not this other company because I trust them. I trust that they're going to honor this relationship I've built with my employees. They're going to honor or act honorably for a long period of time. And so I think it's the most important thing a young person can do is to operate with such a level of you want to get to that point to be trustworthy, to deserve trust of your friends, your family, whoever you're interacting with.

56:47And because you've shown up, you've done the right thing countless times. You've done it when no one else is looking. And then I think the emergent things that happen after you've lived a long time doing that is pretty remarkable. And it's hard to point to it linearly, but you have this exponential outcome that is... It's hard to point to, oh yeah, this led to this, led to this. And it creates these moments of just really amazing luck that follows you. Yeah, it's an overwhelming benefit. And I think I wrote about it in Richer, Wiser, Happier is what I call the mensch effect. Like if you're a mensch, if you're just a kind, decent person, it has this kind of compounding effect.

57:34And there was a paragraph from your essay on trust, about the compounding of trust, that I think is such a beautiful insight that I'm going to read it. Because I think if people really deeply internalize this idea, it's one of those things where, as Charlie said to Nick Sleep, I can only teach people what they already almost know. This is something we already almost know, but it's like, oh, it's a deep truth. So I'm going to read this paragraph that you wrote, which I really love, where you said, the trustworthy person does not simply become more liked, they become more usable by the world, more people can rely on them, more responsibilities can flow through them, more opportunities gather around them.

58:12They become, in effect, a stronger node in the graph of human relation. Where deserved trust compounds long enough, something like a super node emerges, a person or institution through which extraordinary amounts of coordination, goodwill, capital, truth, and responsibility can move because the surrounding network has learned that the flow will not be casually corrupted. Then you said something really beautiful that I really love where you said the deepest question we can ask in any enduring bond is, quote, can I safely place part of my life in your hands? I think that's such a profound question to ask when you're investing with someone.

58:54I've placed part of my retirement with you. That's literally me looking at you and saying, can I safely place part of my life in your hands. And so I think you're getting at something hugely important. And when I first read that essay after you sent it to me, I remember texting you back and saying that I think being trustworthy in some way is an expression of unconditional love, because it's sort of dropping one's own agenda and caring for others and putting their interests first. And maybe it's so unusual in the business and investing world that when you see it, you're like, oh man, that's powerful.

59:31And it's everything. And we certainly ask that question of every company that we're invested in. And when you own less than 10 companies, you can't make a mistake. Every investment has to be asymmetrical. And you're ultimately making a decision. You're making a discernment of the operator to act in a trustworthy way that you respect their judgment. The last essay that I've written is called Keystone. And Keystone, just thinking about an arch, right? If you look at an arch, there's something in the arch that's doing a lot of... It's the keystone in it. And the keystone for me is judgment. And as we have some of these tools available to us where we're allowing AI, maybe an LLM to contextualize something, there's a chance to lose the connection with the source material.

1:00:30And when you're removed from the source material, it's very hard to discern judgment. And it was something that we've purposely built a small team, a three-member investment team. And the design of the architecture of that is so that we can share in the learning together of the source material. I'm not outsourcing a reading to a sector analyst. I want to be part of the reading so that we can all come to conclusions about quality, about valuation by touching source material. The minute you give an LLM or an agent or some analyst sector over here to read that source material and interpret it, I think you lose that connection with something that's really valuable.

1:01:16And so judgment and trust kind of come together. Ultimately, I think if you're allocating capital with someone, you're trusting that that judgment is going to continue to be well-founded. You mentioned the word source, and you talk about architecture a lot. You often talk about this word that you've coined, source-built. You wrote in one of your essays about the Sagrada Familia Cathedral in Barcelona, and also about St. Paul's Cathedral in London, about how there are these timeless buildings that sort of survive because in some sense, they're source built and that there are rare businesses that are also source built.

1:01:59And you said one question that's been central to you is, quote, why do some things keep gathering force as time passes through them, while others begin to die almost as soon as the novelty wears off? Can you talk about this concept of things being source built? Because it's hugely important. And it's not, I mean, in a sense, it's not self-evident, it requires some unpacking, but I think it runs through all of these things you're discussing. Yeah. And I think for a long time, the working title of some of the essays was called Edge Node, where I was applying graph theory to the understanding of different laws and observations.

1:02:39It's morphed to the working title is called Source Build. When I think about that, which is built from first principles or aligned with nature, aligned with how the world works. It's aligned with source. It's aligned with that foundational structure, that architecture. I had known that there was purpose-built, right? We talk about things that are purpose-built. Source-built felt something that was much more foundational. It came from a different grounding. It was aligned with a very, very long thread that went through human history and biology and chemistry and physics. And you could trace that thread all the way back to the beginning, 13.7 billion years of data, right?

1:03:28And that's what I'm referring to as source belt. And I think if you're following that source belt thread, yes, you can follow it into investing. You can follow it into your relationships. You can follow it into teaching. So, the word though, William, which I may have shared this with you, I discovered it when I was working with my favorite philosopher named Heraclitus. And so, I was reading a lot of Heraclitus' fragments at the time. It was one of my quarterly deep dives. I had a couple deep dives going at the time, I was thinking about arches and I was thinking about Heraclitus. And I was reading these fragments, different sources, different translations.

1:04:07And Heraclitus was known as Heraclitus the Obscure. And he was known as the Obscure because he would often work with paradoxes, where there'd be multiple truths that you were holding at the same time. And he understood this as being really important philosophical underpinning of the world. And as I'm looking at Heraclitus the Obscure, literally the letters, I'm like, oh, am I seeing something? I see arches. I was like, that's interesting. Arches is in Heraclitus the Obscure. I'm like, what else is there. I'm like, the, the arches. Well, that's cool. And then all of a sudden, I see the word built.

1:04:42I'm like, oh, this is starting to get a little weird. And then I'm like, oh, what's left? And I rearrange the letters and it's source. The source built arches is an anagram of Heraclitus the Obscure. I literally fell off my seat. And I was like, oh, is source built a word? It's kind of like purpose-built. And so that was my first relationship with the word source-built. And it was such a beautiful discovery, and it stayed with me. So it gets a sense of an underlying structure. I mean, I was trying to put this together from your various essays, and there's a line where you're describing source-built, and you say, it's aligned with a prior order, with the way reality bears weight, carries life, transmits force, joins weakness into strength and allows more to pass through than the builder alone could have planned.

1:05:35It's interesting. It reminds me in some ways of Nick Sleep, who's a mutual friend of ours, would often talk about when the world is working the way it should. I'm slightly misquoting him, the world working right. There's a sense of a sort of underlying structure of things. It's like Charlie always talking about win-win relationships, which you talk about as well. Or companies like Costco making enormous amounts of money and then sharing those benefits with their customers and creating a flywheel by having this pattern of scale economy shared, as Nick and Zach figured out. You feel as if you've connected with some underlying principle of life.

1:06:21Yeah, that's it. That idea of the general law. So if you think of an arch, right? An arch is, this is da Vinci's definition of an arch is two weaknesses brought together to create a strength. And so, if you think of an arch, well, what's the utility of an arch? Well, a lot of things can move through an arch. It could be a portal. You could create a door, a portal. You could build a bridge. You could build a dome. And so, you mentioned Sagrada Familia, and Gaudi, and Christopher Wren of St. Paul's Cathedral. At the highest application of an arch, this dome-like quality can be built. And that to me is source-built.

1:07:02It's what can we do when these win-win structures come together and align with these principles of how things grow and grow better. And so, it's been kind of a guiding principle to kind of find these dome-like qualities in business and in systems. And then when I find them, they're first built by nature. Let's take a quick break and hear from today's sponsors. They say every day your business is late to AI, you fall two days behind in the competition. They're only moving faster. Fortunately, there's NetSuite next. You probably already know NetSuite, the AI-powered business suite that securely connects all your data, financials, inventory, e-commerce, HR, and CRM all in one source of truth, trusted by over 43 ,000 customers.

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1:09:26Whether you're a fast-growing startup or a global enterprise, Vanta is here to help you automate your security and compliance and earn, improve, trust. Get started today at vanta.com slash tip. That's V-A-N-T-A dot com slash tip. So I think as people are starting to sense, part of what you're up to is you're looking for these underlying structures that are emerging, that are sort of the world working as it should. And one of the most controversial investments, possibly the most controversial investment you've made was a new investment you made in 2025 that you've been researching since the fall of 2023, which was Tesla.

1:10:08When we spoke, I think our last interview was on April 2nd, 2025, our last interview on the podcast at least, it was at the absolute height of the controversy. People should go back and listen to that because we talked about it in some depth. But can you talk about how Tesla is this perfect example of something emerging, some structure emerging, or a series of structures, emergent graphs, or graphs, as you would say, or as I would say, these emerging graphs that others aren't necessarily recognizing in all of these different businesses. Because I think this is such a beautiful example of separating the signal from the noise and kind of looking to see beyond all the controversy about Elon and all of the controversy about the valuation, that there's some structure emerging that we would do well to recognize and linger on.

1:11:07Yeah. I remember we were getting ready for the interview in April of 25, and you were like, I'm going to ask you about Tesla. And I was like, oh, William, please don't ask me about Tesla. And then I think just before we went on, I'm like, ask me about that. That'll be fine. And And we were able to unpack it in a way I think that was also... It was at a time where I think a lot of people were feeling the tension that was what was happening politically in the country and more broadly. And it was hard. And I had put a circle around Tesla. I had put a circle around Elon and found that he was uninvestable.

1:11:45I had an opinion about that for a long time. And And I think I shared in the podcast that I had gone on a retreat with a group of investors to Zermatt, and we go every year to long walk retreat, and we spend time just talking through things. And I was asked to moderate a panel. And I left that experience saying, I had to go back and do my own work to understand this because a couple of people that I respect a lot had come to a very different conclusion. And if they were right, this would be very, very important. And it actually would click a lot of the things that we look for in our Grove of Titans type business, and it was misunderstood.

1:12:22So I left that experience, spent a couple of years. It took me a lot of unpacking to get to a place where I thought it became investable, or at least my understanding of it did. And certainly the sell-off in that April 25 period gave us a window. And it continues to this day. It's a very important and material position in portfolio. I think about it in terms of five, there's really five businesses that are really important to understand for Tesla alone. And that's their core EV business, which is a means to an end. And that's been something that's building for well over a decade that is enabling technology to do something else.

1:13:07And that something else is full self-drive. Basically, they've created a platform and built software that will allow for autonomy to scale globally. And whether through personal transportation, you could own a Tesla and full self-drive as software as a service can drive you around, that's available today. The next extension of this is going to be RoboTaxi. And RoboTaxi today is rolling out in cities across the country, eventually across the world, Austin first, San Francisco, Miami recently announced the last couple of weeks, we're at a point where the software has solved autonomy. I think 1 % of the world actually understands this exists.

1:13:55It's solving autonomy translates into... If you look at the data, I think it's going to be about 10 times safer than a human driver. So, there's a safety backed by data incentive to have this technology regulatory-wise. Maybe even as a personal car driver, you may choose safety. I was thinking about this today about at what point did we start wearing helmets when we went biking? And if this is a 10x safer technology than a human driver, perhaps there's even a greater incentive to have a larger amount of driving that's done autonomously. One of the questions that we had asked in class last year, and I asked every guest because it was interesting how the answers changed over the course of the semester.

1:14:48I said, what percent of total miles driven globally will be autonomous in 10 years? I think the student group answered that about 5 % or 10%. A lot of our guests, including James Anderson, formerly with Bailey Gifford, and Deval Shroff at Tesla's autonomy division, their answers were over 80%. And if you think of that end-state question, and you work backwards, win or take, technology tends to be win or take most. If Tesla is the only general solution for autonomy versus say Waymo, which is a different set of how they've solved it, this is a general intelligence. What does that mean for cheaper, better, faster, safer robotaxi?

1:15:32So that's one component of the hypothesis that as that rolls out will be much clearer to investors and to the profitability of the business. The last piece, we won't have to talk about Tesla energy, but that's another - No, we should talk about that too, because it's another beautiful example of an emergent graph, right? Yeah. Yeah. The Tesla energy is basically a grid 2.0 emergent, and that's thinking about how do we store and smooth out our energy usage. So more and more of our energy will be generated through solar, and we need batteries. We need large-scale batteries. And Tesla is purpose-built to deliver large-scale battery storage.

1:16:15And they've been very, very successful at building capacity and rolling this out globally. And that'll continue to be a very important piece of Tesla. And this is actually built by J.B. Straubel as a skunkworks project. And we got to meet JB together. And Elon's like, JB, what are you doing? You got to shut that down. Let's focus. We got a lot of things we got to work on. And JB kept building that business. And now it's going to be a very important, not just important business for Tesla, but it's important business for the world to have that type of storage capability. And Tesla can do it at scale better than anyone.

1:16:50The fifth business, which is the humanoid robot, is going into production this year. And we have a V production level product ready to come out. So you have two legs of the stool of the five that are probably going to drive 80 % of the value creation, just moving into the sweet spot of the beginning of their S-curves. And that's happening this year into next year. So Tesla is a very exciting business. I look at these technologies as is inevitable, not VC. I wonder if they can build this. No, they've done it. I wonder if they could build Optimus. They've done it. We have a V production ready. With Optimus, there's three things you have to get right.

1:17:35You have to build a Dexterous hand that has 22 or more degrees of freedom. They've done that. You need to have the capability to produce at scale. Tesla has proven they can build factories better than anyone. And then the third piece is the intelligence. And they have the intelligent capability built from their autonomy AI that they can deploy into Optimus. So we think they're very well positioned for this next move into robotics, which will be very important for them. You and I had a conversation in Goodwood a couple of years ago with our mutual friend Frederick Blackford, who I'm grateful to you for introducing me to, who's a really lovely, lovely human being, and the wonderful James Anderson, who's this great investor from Bailey Gifford originally, although now Lingotto, is it?

1:18:23Lingotto, yeah. And we talked about Tesla, among other things, as an example of what you and they have started to call value 3.0, this sort of shift, this great leap from Ben Graham, who was value 1.0 to Warren and Charlie value 2.0 and now value 3.0. Can you talk about Tesla as kind of an example of this? because old-fashioned people like me, the sort of purists, were always asking you, well, so where's the margin of safety? Where's the margin of safety? And in some ways, you're the torchbearer for Ben Graham as the person running his class. And yet, you're looking at Tesla in a way that requires a different set of skills, I think, to look at it this way.

1:19:10Tell us how it embodies Value 3.0. Robert Leonard Everything that a value investor does and thinks about has to be asymmetric. And so, asymmetry is at the heart of value one, two, and three. What is my margin of safety? What is the floor? How do I lose? How can I have permanent loss of capital? You buy something that's too expensive, you can result in a permanent loss of capital. Now, value one, Ben was just saying, okay, I have a collection of assets. They're worth a dollar and I can buy them at 50 cents on the dollar, maybe less. Buffett, Munger, let's buy a great business at a reasonable price.

1:19:53But that reasonable price might be, I can buy it at 10 times earnings or 12 times earnings for Apple. And I can own that for a long period of time. I don't have to buy, sell, and reinvest. That's smarter than one. It's an extension of value investing, we can look to these levels of value and they're optically there. Value three, and I think Nick was one of the torchbearers here, Nick Sleep, when he was looking at Amazon real time in his nomad letters was, okay, optically, Amazon didn't look cheap. You had to do some things, you had to add back some of the investments that they were making and understand what the margin potential of the business is to understand the true nature of the valuation.

1:20:38In hindsight, Amazon was one of the cheapest companies in the world. It was compounding at 47 % from that point. So we know that the toolkit that we had available value two and value one wasn't the full toolkit we needed to do this other type of investing that value three became. And then when we look at Google, and we look at Meta, and we looked at all these technology companies that just required a different lens of analysis. Tesla meets that, right? I think you have to understand at the inevitability of the core technologies with which that they're building. And this isn't a coin flip, if this works, then what?

1:21:21That's not what we do. That's why Tesla in its early days, I don't regret not investing at a time where James Anderson did, because that doesn't meet our criteria of inevitability. He may have seen it, we wouldn't have. But there was a point where escape velocity was met in a business like Tesla, where the technology, the platform, the foundation was built. And then there were vectors of asymmetry that emerged from that point. I don't like vectors of symmetry, I want vectors of asymmetry. And that passed in 25, probably into 24, those asymmetries became very clear. And I think we're in the early stages of those asymmetries playing out.

1:22:02And the future is pretty exciting. I would say to underwrite Tesla today, you have to underwrite SpaceX as well. I think there's likely a merger within the next 12 months between Tesla and SpaceX. So we've spent a fair amount of our resources over the last year, and understanding SpaceX from first principles, underwriting it, and thinking about what does this look like as one entity. And you had a backdoor investment in SpaceX through Echostar, which I think had sold its something like$11 billion worth of spectrum assets to SpaceX. So you sort of had figured out there was a way to get access to SpaceX privately.

1:22:48in one of your pieces of writing, you said SpaceX is one of the most extraordinary businesses we have ever examined. You said Starlink in particular represents one of the most powerful emergent graphs built in the past two decades. Can you talk about that again? Because again, it's like a beautiful example, I think, of once you start to see the world in terms of these underlying structures, these graphs and nodes, you kind of can't unsee it. So talk to us about But SpaceX also is kind of an example of an emergent structure, an emergent system. And also, maybe you could talk a little bit more about this idea of edge nodes, which I think are very relevant both to SpaceX and to Tesla, right?

1:23:31And explain to us what the concept is. Because again, you need to repeat it a few times to me before I start to understand it. It's a complicated idea. Yeah. Yeah. SpaceX is a very special business, and it's becoming more well-known now that it's in the public markets now and being covered by lots of sell-side firms and so forth. But there's still a lot of misinformation, I think, out there. But at its core, you have a business that has built a launch capability in the form of a reusable rocket. And that was a novel idea when they started that process. And it's revolutionized the ability to put payload to space.

1:24:10So prior to SpaceX, it would cost around$50 ,000 plus to put a kilogram to low Earth orbit. What Falcon 9 allowed for was a kilogram to go into LEO for about$2 ,400. And what did that do? It allowed for them over the last six years to build Starlink. Starlink is a constellation now of 10 ,000 plus satellites producing really high bandwidth connectivity to the world. David Gardner You could argue that this is kind of internet 2.0, nodes and edges, but now built in a mesh around Earth that's cheaper, better, faster, safer. When you think of the, if we were to rebuild the internet 1.0 and you had the opportunity to do 2.0, would you dig up all the roads and put all the fiber optics?

1:25:03As you continue to densify the network of a constellation with laser link connectivity between it, what we're seeing is speeds are getting faster and faster and faster. And so more customers that may have been fringe customers are maybe saying, yes, I'm going to opt for Starlink versus some other service that is available terrestrial to me. And so Starlink has been this really fabulous graph that's emerged from this launch capability. And what we have now is you have the next iteration of launch, which is Starship. Starship has the capability given size and both stages of reusability, first and second, to reach a go from$2 ,400 a kilogram to LEO to$100, and potentially as low as$10.

1:25:53This cost curve, we study cost curves very carefully. When you look at this kind of cost curve, what happens when you see big changes in cost curves is you have a phase transition. And we're in the midst of a phase transition where things that were possible in space are now possible with Starship. And so you have to have a view on, is Starship solved? Is V3 Raptor engines, V3 Starship, the unlock capability to get to this$100 a kilogram to low-Earth orbit? We believe it is. We believe the heat shield and other things are solved. And now we have an exclusive launch vehicle for an emergent space, which is everything off Earth, which allows for the next iteration of Starlink, which is going to include direct-to-cell communications, maybe our phones.

1:26:45So all these nodes are now emergent for Starlink to form customers. We also have robo-taxis coming online, Internet of Things. And so the more and more nodes that need to connect seamlessly to this graph will be business for SpaceX as we move forward. The other business that is being talked about now with SpaceX is it's in the business of compute. So they have a real capability to build terrestrial compute faster than anyone else. And we saw this leading up to the IPO, they were able to sell some of their terrestrials compute to Anthropic and Google, big headline contracts. But the big win for them is going to be to move some of that compute from Earth to low Earth orbit, and in the form of their AI-1 satellite, which will be an orbital data center.

1:27:37And so the same graph, remember, William, I always say, when there's an emergent graph, I pause and reflect. This is going to be one of the most important emergent graphs over the next five years is orbital data centers. And this isn't necessarily a hard problem. I'd say the satellite constellation is a harder problem than I think orbital data centers is, even though it sounds crazy that, wait, we can put data centers in space? So the path to that we think is a highly probable path, and it could be transformational to the point where I think it'll be 75 % cheaper to do an orbital data center than it would be a terrestrial data set.

1:28:17Again, a cost curve driving down, you're going to be the low cost producer of intelligence to the planet, and that will be very valuable for SpaceX. When you encounter skeptics who just sort of look at you like you've drunk the Kool-Aid and you're buying into Elon's capacity for hype and the capacity of Wall Street to hype IPOs and all of that stuff. I mean, you must have a lot of cognitive dissonance that you have to deal with with this stuff. How do you respond to that stuff? Because there's something really complex here going on, right? Which is important in the trajectory of value investing, which is that you're shifting from identifying mispriced assets to really focusing on value creation, but you're doing it in quite an uncomfortably idiosyncratic way where people, venture capitalists could understand what you're doing, but the sort of people who you and I traditionally have hung out with would look at you and be like, what the hell is he drinking?

1:29:18Yeah. If you look at the combined entity of Tesla and SpaceX, you're paying$3.2 trillion for a collection of 10 businesses, five we mentioned for Tesla, five for SpaceX. And you have to think about all of those 10 vectors and say, in 10 years, what's the inevitability for that profitability? What's the range of that? And we've spent a lot of time in understanding that. What's the low end? What's the vector on the high end? And where's that range look like? We could literally fly a starship through that range right now. Like our internal models are almost comical because you're like, what? I've never seen a range this wide.

1:30:03The midpoint of that range is very satisfactory. I think penciling out a 26 IRR in this investment is not hard to do. A 10X over 10 years, based on what we think the inevitability of those 10 business units are, we think is a very highly probable outcome because we've done the work. It's not something that if someone told me that, I'd be like, that sounds crazy. But if you actually step back, you actually did the work and understand it, you might arrive at a similar, that's a reasonable assumption, but it took a while to get there. Robert Leonard I think there's something really profound going on here.

1:30:40I remember having a conversation, I've interviewed Bill Miller, as you know, many, many times over many years, starting with a profile that I wrote of him for Fortune when he had bought 15 % of Amazon and the stock was at$6 a share. So we've been discussing these issues for a long time. And a few years ago, there was an event for Patient Capital, I guess it was, or maybe it was the company before that that he was running for, it became Samantha Macklemore's company, Patient Capital. And I was interviewing him there. And I was trying to understand sort of the evolution of value investing sort of through his career.

1:31:16And I said to him, so you had all these friends of yours like Chris Davis and the like buying stuff at a huge discount to what it was worth. And is that sort of what you were doing? Is that the essence of what you were doing? And this is his exact answer. He said to me, no, no. He said, for me, it's about buying them at a huge discount to what you believe they will be worth. And that seemed to me like a huge breakthrough in a way and kind of a controversial one, but that's what enabled him to buy 15 % of Amazon, I think, among other things. Bill is an investor that I think has the best balance of right brain creativity and understanding where we're going, seeing holes with connecting it to left brain analytical.

1:31:59One of such a brilliant investor, and I've learned so much from him just over the years in what he's shared. So I love that answer because it's so true. It is so true. And it's how we think. Every single investment that we make, I think about what's the 10-year value on this? If I'm buying something in a billion, in 10 years, is this a$10 billion company? One to 10, 10X over 10 years is 26. Not everything we own is a 26 IRR. A 4X is 15. So 15 is our threshold. We want to own things that are going to have between 4 and 10X. But I'm thinking about that end state inevitability is that what does it look like?

1:32:45Can this business look like a 10x over 10 years? And then working backwards and connecting and looking at probabilities. So yeah, that's how we think about it. I think you get at something really interesting also when you talk about right brain thinking and Bill Miller. And Tezzer is such a beautiful example in a way of right brain thinking because you can't just model it. I was curious how in some ways it grows out of having had the great Ian McGilchrist come into your class, who's obviously an expert on the brain and how to think and the idea that the left brain has come to dominate society and that we're paying a price for it.

1:33:26Can you unpack that a little bit? Because I think it It gets us something really important about investing where there is the very rigorous sort of model building, left brain kind of logical stuff, and then there's this sort of slightly wilder, more creative side. Yeah. So Ian McGilchrist, in his work with The Matter With Things and The Master and His Emissary, has really unpacked an understanding of the brain and how the brain works. And our brain isn't symmetrical, where the left is doing the same work as the right. The left has actually a languaging brain. It's our analytical brain. It's the thing that can focus on something and look at it.

1:34:04We know this through stroke victims, right? They've studied stroke victims, and a left brain stroke leaves the patient unable to talk. A right brain is creativity. It's context. A right brain stroke, you have inability to actually interact with the world. You become disoriented. You really have no context and understanding, and it's a much more severe stroke. Civilization has become much more left brain. And we think that has happened because of our language. As we've developed more human language and interacting with language, is that our left brain muscle gets activated more than our right brain.

1:34:43And so, we see this in handedness, right? Right-handedness is more left brain and more people are right-handed than left-handed. And so, I always say to try to balance your weak spot. If you happen to be more left brain, how do you nurture your more creative side, your ability to think more broadly and more context to see the whole? But sometimes you can't. And I think as an industry, analytical people are drawn to investing. And I'd say over 70 % of the students that come through the security analysis class that I'm stewarding our left brain. And that's normal, right? We can build spreadsheets, we can model.

1:35:27The best investors, William, as you know, are the Bill Millers of the world, the Nick Sleeps of the world. They're the ones that are thinking very creatively about the whole. And that, I think, is a real superpower in building a long-term track record that's going to outperform and add alpha. And I think I've observed that Charlie was a right-brain thinker. And so even though Warren was more left-brain oriented, he partnered with the most incredible right-brain person I've ever encountered. And the combination was a Lollapalooza. And so it's pretty brilliant. Sometimes you get your complimentary person.

1:36:09It can be sometimes hard because you have these frictions of not being able to disagree and commit. But Warren and Charlie kind of developed a great partnership where they could disagree and commit. And Charlie was just like, okay, you do what you want, Warren. But he would have his input. I don't know if I can articulate this question properly, but in some ways, I keep thinking of you as a connoisseur of these underlying structures, these systems, these graphs that you've identified, not just in the companies that we've discussed so far, but also in all of the other companies that we could have discussed, whether it's perimeter solutions or Transdime or Amazon, there's always some underlying structure that you're identifying.

1:36:52It might be a company that's just unbelievable at delivering stuff incredibly effectively or incredible at persistent incremental improvement over time. You're always looking for these systems. I'm kind of wondering when you look at your own life, or your life as an investor, but your life beyond investing, if you think about how to structure it as a sort of system that creates long-term value. Because I'm sure in some way, even though you don't talk about it publicly, you're applying the same way of thinking, the same perspective, the same ability to look at systems and structures that create value.

1:37:35I'm sure you're thinking of your life in that way. Yeah, everything should be a fractal of the optimal system. Yeah, you had asked earlier about edge nodes as well. And Persig's work on thinking about dynamic quality is about that leading edge of the train, right? That leading edge is the leading edge of quality that's emergent in front of you. That's how I think about the edge node, right? The edge node is also this emergent intelligence that is increasingly becoming Robotaxi, Optimist. These aren't just passive nodes, they're edge nodes, they have intelligence, they're working on the edge, and they're giving that learning back to the swarm, the way like you might see in a beehive.

1:38:20So systems, edge node systems, dynamic quality on the edge, or definitely like we're trying to find them everywhere. And we're trying to design a life that also has these qualities, right? That you're constantly learning, you're sharing the learning, you're applying these in different domains, whether it be a hobby, or whether it be the classroom, or whether it be in the craft of studying companies. And that word dynamic is the moving one, right? It's the every day, you have to assume that everything's changing. And that's the thing that Persig tried to point out is if you think you know the answer, that answer is going to be stale, like tomorrow.

1:39:08It's the testing, it's the moving it forward, it's that scientific inquiry to continue to get more data, more information. And that's that persistent incremental progress, eternally repeated, is the edge note in practice. It's the practice that you're bringing to your life, into your partnerships, to your friends. And that's fun. And I think that's what all of your listeners are trying to do the same thing. They're listening to these conversations to try to pick up little things that they can do to improve and to add value to their lives and to their life design. I think in some way, the paradox is something shifts when you switch from just focusing on yourself and getting ahead yourself and you start to be like, how do I bring back this good knowledge and understanding to the system to help the network improve?

1:40:01And in a way, there's something, I'm not articulating it properly, and you can help me explain it properly, but there's something in the way that you think about a Tesla car with its eight cameras or whatever it is reporting back to the system, to the network, to improve the network. individual is also in some ways subservient to this larger network, this larger system. And when the world works properly, you're not just thinking of yourself, you're coming back and you're kind of using it to help the swarm. Yeah. And the strangest thing my wife or someone might observe our industry, and William, you see it real time, is like, wait, those are your competitors and you're sharing all your information with your competitors?

1:40:44I'm like, yeah, that's what we do. It's such a fun expression to share and to be part of the journey together with others. And there's a beautiful tradition. And I think Warren was one that was always sharing almost all of his insights. And you could take them, you can copy, you could build another Berkshire if you wanted. And Ben Graham was unbelievably generous. Warren always talks about Ben Graham's generosity and sharing his insight. So the tradition is long and it's a beautiful craft. Some of your listeners are some of the best at this craft. And to know you can do this for a very long time and to give back.

1:41:29And what has always driven me is the puzzles, right? Like solving the puzzles is really enjoyable. It's not necessarily for some financial reward or even some mark of, but just going about this and trying to solve it is one of the most intellectually stimulating things I've encountered in my life. One of the things I've really been enjoying over the last few days is listening more concertedly to your music. I don't really understand how it comes about, like what role AI plays and what, you know, like I'm sort of assuming that you're writing all the lyrics and you've written like over 150 songs, I think, and probably way more now.

1:42:08And I don't know what's happening, but some of it is really, really good. And in many ways, you were contributing to me not being able to sleep one night because I had one of your songs going through my head a lot, which is probably my favorite of your songs, which is called The Great Work. And it gets at a lot of these issues of a sort of greater purpose. And it's important in a number of ways. And you wrote about it in the addendum, this sense of the great work. And you said, the great work is not scale for its own sake. It's not speed. It's not optimization. It is purpose carried patiently across time.

1:42:43It is the act of building something meant to last longer than the builder, something that survives not because it is protected, but because it is true. Can you talk a little bit about that song and also your experience of playing it in Egypt on your trip? Because I think it gets at something essential about how you view your career, how you view your work, what it is you're trying to do, the type of companies that you're investing in, trying to identify things that are true and durable. Yeah. The songwriting has come over the last couple of years. And as we talked about earlier, you know, writing is a compression of ideas and experiences that you can put and learn from as you're writing.

1:43:30And poetry was an extension of this. And I've always played with poetry and And not something I publish, but just something I enjoy doing and just playing with the words and how they make you feel. And I love music. I've always loved music, but I've never considered myself a musician. Someone introduced me to the idea that one of the AI platforms, you can actually put lyrics in and you get this output of hearing a song. And the minute I did that, I was like, oh my goodness, this is wild. And because the songwriting was just an extension of poetry. It was an extension of kind of compressions of words and feelings and experiences that then you could take with you.

1:44:10You can listen to them. So it's been one of the most creative parts of my life because of playing with making these songs. And The Great Work was a song that came in my preparations for going to Egypt. And I was thinking about these places that we were going to visit. And the first place we were going to visit was the Great Pyramid of Giza. And we were having an opportunity to walk into the King's Chamber. And I was thinking about the Great Pyramids. And what ended up happening is I wrote an album that became called The Great Work, but it was a song for every place that we were going to visit.

1:44:49So every temple and tomb, I was trying to get to the underlying essence of what that, why was that place built? What did it mean? What was the essence of it? And these songs emerged, and it was such a fun project because it became part of my pre-travel. And I didn't even publish the album until I got back. And I'm listening to these songs, and the first place we visited, we went to the Great Pyramid. And I'm in the King's Chamber and I'm like, it kind of came to me. I'm like, I think I'm supposed to listen to the song in the Great Pyramid. And quietly, kind of in the corner of the King's Chamber, which is pretty difficult, if any of your listeners have been in there, very claustrophobic experience getting into the center of the pyramid.

1:45:32And I'm listening to this in the corner and I just started to like, tears start coming down my eyes. It was such a moment. Then I realized, oh, I'm supposed to listen to all these songs in situ in the place I wrote them for. And it was such a cool experience. But the great work is... I was thinking about why were these pyramids built? Like what was being said there? What was the enduring objective of it? And it kind of made me realize like, everything that we're doing here, you, the writing of your books and the podcast and investing and teaching, it's just all part of our expressions of doing this great work.

1:46:10Yeah, I found myself kind of, because I'm obsessed when fall down rabbit holes when I'm preparing for these interviews, I found myself using Otter to transcribe your lyrics. So, I was struck when you were saying, we're here for the great work, not the small self and put your heart in the flame. You said we were never meant to stand alone. And so there's this sense that I think of, in some ways, you can take the investing process and make it a very solitary, kind of rapacious business where it's all just sitting and trying to maximize your returns at everyone else's expense. And I think what's kind of interesting is you found this way to make it sort of more of a team sport where it's not really a zero-sum game.

1:46:52And what's also curious, when I was reading the addendum of your year-end letter, and you were writing about the great work. There's a lovely line related to this, where you said, we are students of endurance, amateur archaeologists in a way studying what has survived and asking why, searching for patterns of permanence, trying to recognize the structures, systems, and builders that are oriented towards something beyond immediacy. That search is our research. The internal discipline it requires is our own great work. I just thought that was really interesting. There's a thread that runs through so much of what you do, that you're really interested in buildings that have endured, you're interested in boats that have endured, you're interested in pyramids where people have been buried properly so there were layers of defenses so that they wouldn't just get robbed.

1:47:44Do you have thoughts about that? Just comments on my observation of this thread that kind of runs through everything. I mean, the type of companies that you're investing in. No, I think that duration has just been this thread that has kind of run through everything. And it doesn't feel like it's, I want to leave a legacy for some egoic reason, but what is the extension of, I think it's such a deeply embedded trait of ours, right? When you look at DNA or any other method with which we encapsulate something and then hand it on to the next generation, it feels like, I don't know, there's a certain sense of joy in it, isn't there?

1:48:32It's like you're part of what you're supposed to do here. You're supposed to make the world a little better and then to hand on what you've learned to others and allow that thread to continue. And that feels good. Every person I've ever invited into the classroom, and these are fortune 100 ceos or doesn't matter how they look like a kid to me when we're sitting before our conversation on a fireside chat they want to have a great experience they want the students to have a great experience and there's no ego in that moment it's just it's kind of feels very like a free verse principle so yeah i think it's i think it all connects to this idea of longevity and duration yeah and david hawkins terminology it kind of makes you go strong Exactly.

1:49:18Exactly. I think one of my favorite essays of yours that I read this week is one on scarcity, which sort of starts with you talking about the oddity of being in Essex, Massachusetts and seeing these two amazing Ferrari 250 GTOs, which I think are now worth about$60 million each and only like 36 of them exist. And so this led you to sort of think about the rarity of things and what makes something sort of precious. And there's a line I wanted to read because I think it gets at something very different that you're up to here, where you talked about how scarcity in its instinctive form sees every interaction as zero-sum.

1:49:58Someone wins, someone loses. And then you said, but the game I want to play in markets and in life is different. I want to play with people and businesses capable of durable mutual benefit, of operating on a horizon long enough for trust, curiosity, generosity, and real alignment to compound. In a world still dominated by extraction, that orientation may itself become one of the rarest assets. Can you talk about that? Because I think it's actually a really important idea. And I feel like part of what happened to me is as I grew up, I sort of saw there was one way of doing things. And you're like, whoa, it's just all this really Darwinian stuff, and I'm just going to lose if I'm not really sharp-elbowed.

1:50:38And then, you know, I think what's kind of heartening is sort of to see, oh no, actually, there's this other approach that's not extractive and that's not about, you know, dominate and kill. Your listeners are going to be like, how did he see 250 GTOs in his time? Yeah. But just to cure the curiosity, one of the most important restoration shops in the world for these vintage cars is Paul Russell. And he happens to have his shop about five minutes from our office. So once in a while, I just see these incredible vehicles drive by. And it was one day, they were prepping two of the most valuable cars in the world to go out for an event in California.

1:51:24So I did see two Ferrari GTOs go by. And even Nick Sleep's written about these in his Nomad letters. So, it was like seeing two unicorns in the same day, two different unicorns. But yeah, scarcity, I'm so happy you're reading these things, by the way, because they're... It's hard to articulate when they've been in real time. Yeah, that does sum it up. You know, it's these relationships that we're building there. When you were reading that, I was thinking of the Mendelsons of Heiko. It's a family I've had into the classroom every year for probably the last 12 years. Larry Mendelson just passed away.

1:52:06We dedicated our semester to him. But here's this aerospace company, but it's every member of the families involved, the way they treat their employees, the way they interact with the world. And for that, they get this premium evaluation, this premium experience. They're just doing the right thing, and they're doing it consistently. And it's one of my favorite examples to show the students, because they're just like, wow, look at how success can look when you behave well, and you act with that kind of integrity over a long period of time. So you realize that success can be... You can win without this extractive short-termism that might seem like it's the fastest way.

1:52:53And that's one of the principles that we really try to just show by example versus by words. Yeah. Before I let you go, Chris, I wanted to ask you, if I may, I know I'm exhausting your patience, but I wanted to ask you about two more things, one of which may be a little downbeat, but which I think is important, and one less is also important, but more cheering. I wanted to ask you a little bit, if I may, about your first wife, Lynn Begg, who passed away in February at the age of 53. And you and I had talked about it, and you very kindly sent me her obituary. And it's such an amazing story. And she's the mother of your daughter, Caroline.

1:53:31And so even though you had divorced, she was such an important part of your life because you were both very actively involved in raising a kid together, and you had married young. I wonder if you could just talk a little bit about what you learned from her, partly because she had this extraordinary story that I read about in the obituary of three different people had given her kidneys over the years, starting, I think, when she was at the University of New Hampshire. There's something so amazing about human nature, and also about the fact that she had to live with this life-threatening disease for almost half a century.

1:54:11And so I'm wondering when, you know, you must have thought a lot about her life and your time together and what, you know, what we can learn from her and how she handled what she went through. He was just extraordinary in her life and her example of dealing with hardship and disease, kidney disease her whole life. But to do it in a way that was such composure and never wanted sympathy at all. So, yeah, we miss her a lot. Yeah, I was really struck. There was a line in the obituary where it said, Lynn was a warrior battling kidney disease since the age of five, and yet living a vibrant full life filled with love and laughter.

1:54:57I'm always so impressed with that because I have such a capacity for whining when things are good. And when you look at someone, I always think about how I snatched defeat from the jaws of victory by complaining about things. And when you look at someone who, she could be so active in terms of her interests, her sports, you know, sailing all of these things while having that condition. There's something kind of stunning about it, right? Yeah. No, she's a wonderful example of all the things that we've talked about today and just resilience and just living, doing the great work, really. Yeah. I also thought there was something really lovely.

1:55:38I'm sure you would have noticed this, and I'm sorry to put you through talking about this, but when you were writing to me about going to the burial and i was looking back and i'm like wait it was at a church called our lady of good voyage church i such a beautiful i mean like giving you a love of of boats and surfing and sailing you know and her love of sailing such an amazing thing that just the name of that our lady of good voyage church such a beautiful church and it's in the great town of gloucester massachusetts which is a place that she lived in for the last 10 years. And it's a beautiful church because it was the church that a lot of these fishermen would, you know, when they passed away, the services would be there.

1:56:21And just how much of the ocean is surrounded by that town and both the highs and lows of living in Gloucester. So, it was a beautiful service, very fitting celebration of her life. Yeah. Anyway, I hope you don't mind. I wanted to mention that because I think it's always good to sort of honor the memory of people who've played an important, albeit complicated, role in our lives. And on a sort of more cheering note, I wanted to ask you about another experience with your son with the beautiful name River, because we had been texting back earlier in the year and you texted me and you said, I went to surf today.

1:57:05It was a full moon and I get to the beach and it was darker than expected. Then I realized I was experiencing a full lunar eclipse in totality at that very moment, 4.30 a.m. or 3.33 a.m. Eastern Standard Time. And I wonder if you could talk about that experience because it sounds like such an unbelievable experience and such an amazing thing to share with a young kid. It was so cool. Yeah, one of the things that we said our monthly calendars around is surfing the full moon. And the morning of the full moon, you get out there at 4.30 and usually have 45 minutes prior to the sun surfacing. You get this moment that the ocean texture feels like silk.

1:57:51There's some so alive to surfing with the moon coming into the ocean just at the time that the sun is lifting up. and you get these both experiences at the same time. And my son, who's finally just emerged into going from seven years old, surfing whitewater to now being out the back, surfing real waves. And it was his first full moon surf. And we get down to the beach and we're like, did I miscalculate? I could have sworn this is supposed to be a full moon. Where's the moon? and it was like the universe like laughing at us in such a beautiful way and i'm like oh my goodness this is this is the lunar eclipse and it wasn't just oh it's it was at the exact moment of the eclipse it was completely blocked out it was it was so extraordinary and i got to experience it with the river and uh we still paddled out and uh and got to surf it was much darker than we normally would have had it.

1:58:50It's really lovely. You said to me that you went back to get River so he could see it. We sat there on the beach together until the sun rose. I texted you back and said, I wonder if River will remember sitting with you on that beach till sunrise for the rest of his life. I said, that's an A1 piece of parenting. You wrote back, thank you. I know I will. For me, it was very powerful because it was like this thought of like, here we are sort of in my case, writing about it and in your case, practicing this craft that's all about building wealth. And it's like that, you know, in a way, like, what greater sense of wealth could you have at that than that moment with your boy on the beach, you know, watching that?

1:59:31It's been such a gift to see him experience nature at this level, I having learned how important it is, and him experiencing it as part of the texture of his life. These experiences with being here in Costa Rica and having that connection, it's really cool to see. It's really cool to see. We have our youngest, who's now one and a half, 17 months now, starting to wake up to the same newness of life. And as I think we discussed last time, named Piper. Piper. Yeah, after that acronym of persistent incremental progress eternally repeated, if I remember rightly. You got it. You got it. So, I also loved your idea that kids, in a sense, are edge nodes.

2:00:23Can you just explain that to sort of dot the I's and cross the T's? Because in a way, it completes this picture of everything being a He does. Yeah. I think having close contact with where learning happens is very special. And with a child and seeing learning through the eyes of a child, the proximity to the contact of their experience with novelty. Learning, I dropped my son off at skateboard Kemp today. And he's trying to figure this new thing out. And the proximity to learning is that edge note experience, right? It's like, I guess that's what gets me excited about going in the classroom every year or seeing it through the eyes of a 17-month-old.

2:01:16And the way that a 17-month learns is by crying, right? His idea of reality has just been completely obliterated and he breaks out in tears and that's a learning experience, right? Maybe some of us, we continue to learn through tears. And it's a... Yeah, so that proximity to the... We're reality and learning interface is a gift and we see it through our children, we see it through students. I just had a... My good friend Paul Buser was here for a week with his daughter Lily, and she's 17. And she did an internship this week with us. It was so fun because she's in this threshold moment of writing her college essays.

2:01:56And so, we're introducing her to some of these investments. And you could see her eyes are just like, I didn't know this world prior. It was such a kind of like a moment to see it, you know. And so, I think each stage in life, we have these. And the more we have them, the better life is, I think. Yeah. You always leave me with a sense of everything being kind of an adventure, and I should be optimistic because there's cool stuff coming. So thank you, Chris. It's always such a delight chatting with you. And I always just feel like after we talk, I'm like, I'm really glad you're in my life. I really am.

2:02:34And so I'm grateful to have you as a friend. And I've learned a lot from you over the years. And I should really give credit to Josh Tarasov, who introduced us and knew that this would be a relationship worth forging. And I think from the moment I met you. I was like, this is someone I want in my life. So thank you, Chris. Well, William, you've given so much to my life and I've loved spending time with you and you're such a student. I love everything you're doing and a little shout out to Josh too. Josh is a dear, dear friend. I'm so happy he introduced us. A lovely man. All right. Well, thanks so much and hopefully I'll see you again very soon.

2:03:14Sounds great. Thanks, William. Thanks. VIP. Follow richer, wiser, happier on your favorite podcast app and visit theinvestorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk, including possible loss of principle and past performance is not a guarantee of future results. Listeners should do their own research and consult a qualified professional before making any financial decisions.

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