RWH072: The Making of A Money Master w/ Rob Vinall

24:46Why was that first experience of Omaha and the Berkshire annual meeting such a life-changing, formative experience for you? Yeah, I mean, life-changing is probably a term that gets overused, but for me, it really was a life-changing experience. It was obviously May 2006 when I went I set up RV Capital in August 2006. I think it's fair to say that probably wouldn't have happened if I hadn't been to Omaha that year. I think at the time, I was in a job where I was learning a lot. I liked the people I work with, but it had the one drawback that I didn't really have any agency. Other people made the investment decisions.

25:27My job was to do the analysis to put them in a position where they could do that. By this time, I'd had a considerable amount of success managing my own money. I had achieved a degree of financial independence by this time. But what I above all wanted to do was to be the decision maker, the person who was the one deciding which stocks to buy, buy and sell. I couldn't do that where I was working at the time. What really gave me the nudge to set up my own company to be able to do that was going to Omaha, seeing the incredible role model that Charlie Munger and Warren Buffett have given to people, experiencing all these sort of like-minded people around the AGM who were also sort of passionate investors.

26:09So that really was what gave me the inspiration to go and do it. When you saw their emphasis, Warren and Charlie, on values and purpose and doing the right thing and all of that, and you had kind of come from this background where it was just like, I just want to make some money so I can live decently. Did it start to have a sort of slow burn effect on you? I mean, did you start to think, oh, actually, there's a different way of operating, which is kind of, I remember Nick Sleep in case Sicario, Zach said to me, that for him going for the first time with Nick to Omaha, he just was like, oh, this is unbelievable.

26:44This isn't a casino. Here are these guys who actually own like real businesses. They're not just, you know, charlatans trying to get you, you know, to pick your pocket and to scrape off lots of fees. And I'm wondering, did you start to see there was a different type of capitalism that you hadn't necessarily been aware of. Yeah, I think that was, you know, it was almost a religious type of revelation in that respect. I really loved the sense of purpose, which Buffett, you know, and Munger have built, Berkshire Hathaway, and the sense that it's not just about, you know, the financial returns, but, you know, helping people and, you know, creating a community.

27:20And, you know, for me, as financially motivated I was in the early years, it was really about independence, as opposed to building a huge nest egg. And so I think at some point, I would have achieved that independence and probably lost interest. And what I think opened my eyes in 2006 and what makes the investing challenge for me still interesting today is that sort of sense of there being a higher purpose to it than just simply sort of compounding capital. Let's take a quick break and hear from today's sponsors. For most of my 20s, my money story was simple. earn more, and the rest takes care of itself.

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31:06And so it was more of a club in a way than a big sort of swaggering hedge fund that the world was going to sort of stop and notice, oh, this guy, we're going to send him$5 billion for his startup hedge fund. And you were pretty much, I think, working out of your home with no Bloomberg terminal. And then almost immediately, I think, the market starts to implode. I mean, I think if I remember rightly, you set it up on September 30th, 2008. And so a couple of weeks later, Lehman goes bankrupt. And so I'm wondering what that experience was like as a young fund manager, suddenly seeing the global economy collapsing, suddenly seeing all these firms collapsing, and in some way being totally detached from it all because everyone else is sort of working in their big office buildings in New York and LA and the City of London and the like.

31:54And you're just like sitting there with your wife and kids. Yeah. I mean, you know, I set things up in a very unconventional way when I started RV Capital. So, you know, as you mentioned, there was sort of no employees, there was no office, there was no Bloomberg terminal. And that wasn't because of any kind of master plan. That was simply because, you know, I wanted to keep, you know, keep my outgoings to an absolute bare minimum. So it was really just a sort of a financial motivation. But a kind of interesting thing happened when the world imploded after the Lehman crisis in 2008. And I was just sort of sitting in our guest room, I think at the time, reading annual reports, comparing prices to value.

32:35And I very much imbued the thinking of Ben Graham and Warren Buffett. And Ben Graham's core idea is this idea of Mr. Market that sometimes Mr. Market gets very depressed and becomes very sort of irrational and then prices get very cheap. And when that happens, you buy. And I found it very easy to remain sort of an even keel in this sort of home environment where there was no one really around me apart from my sort of wife and kids who, of course, were oblivious to what was happening in the world and just sort of going about their sort of day to day. And so a lot of people were very phased in that environment.

33:09But to me, it sort of made total sense. It had been what Ben Graham had explained would happen every now and again. And so fast forward a few years later where the fund became bigger. You know, had I wanted to, I could have built more of a traditional infrastructure. But I kind of realized that it was an advantage being set up in that way. So what started more out of necessity became a sort of setup that which I sort of had really out of conviction that it was the right way to do things. Yeah, it's really interesting. In some way, you kind of lucked into a lot of great truths about what works, right?

33:43I mean, having a little bit of emotional detachment, having this intellectual background in understanding Graham and how the market works and, you know, that you needed to use the market instead of just being whipsawed by it. And, you know, having a good ecosystem, a good emotional ecosystem with a family that you loved. And it's interesting, right? Like there are so many ingredients that you somehow got right almost more through luck than judgment. Yeah. And there's another thing which was also really through luck in that period. So like, you know, when I started the fund, I thought, okay, well, now I'm a fund manager, I better go out and find some clients.

34:21And, you know, so for the first sort of, I don't know, half year or so, I would sort of call people asking if I could, you know, if they would, you know, give me a meeting so I could sort of present my fund to them. And, you know, the funny thing happened is that a lot of the time people actually said yes. And why wouldn't they? They found it entertaining to have a young, enthusiastic young man explain his best ideas to them. But invariably, or in fact, always after the meeting, I would say something along the lines of, oh, we can't invest because your track record is too short or the fund is too small.

34:52And I was like, did we really need to have a two-hour meeting to establish that my fund is only 10 million AUM or whatever? So really, like a small kid throwing their toys out of the pram, I was sort of like, okay, I'm not doing any more marketing. This makes no sense and it doesn't work anyway. And in hindsight, that was exactly the right thing to do anyway, because that allowed me to concentrate just on managing the fund and creating a great track record. And of course, that's ultimately not only the right thing to do, but also draws the right people into your ecosystem. But to your point, I sort of stumbled on that by luck as opposed to having a master plan.

35:30One thing that really struck me as I was going deep into my research, over the last few days. One of the few really in-depth interviews you've ever done was with Manual of Ideas run by the great John Hilcevich. And this is back in 2009. So very early on. And I was really struck that you said in that interview that your ambition from the start was to deliver a 15 % annual return over a very long time period. And here we are 18 years later and you've done exactly that, a little bit better than that. Should have aimed for 20. I know. What made you think that was possible as this young, slightly naive whippersnapper?

36:07Like, why did you think that 15 % was, I mean, partly this relates to hurdle rates and the like. So can you explain what actually was behind this idea? Yeah. So, I mean, I don't want to take any credit for this being my own original thinking, but I can explain how I thought about things back then. And when I first started, in that phase of the dot-com sort of companies, I was investing in a very mechanical way based off of price to book, price to earnings with quite a naive sort of thinking that the lower the PE or the lower the price to book, the better the value it is. I recognized quite quickly that there was actually very little predictive power whether a company trades at two times or five times earnings.

36:53In both cases, they're very, very cheap. The crucial thing is actually whether those earnings are real and how good of a business it is subsequently to when you're buying it. So I really wanted to incorporate that into my valuation framework and get away a little bit from this more traditional value thinking around PEs and price to books and that kind of stuff. And what I landed upon was this idea of what I call the owner return. And I targeted an owner return from investing in a company without there being any change in the multiple. So the thinking was, if I was to own 100 % of a company, how would I think about the return I get on a year-to-year basis?

37:32I think if you own 100 % of a company, there's no market for that company because you own 100 % of it. But the way you would think about its value is, A, obviously, how much cash does that business return to you each year? If it returns 5%, then at the end of the year, you're obviously 5 % richer. How much do the earnings power increase every year, increasing longer term sort of cash return potential. And so I thought of the sum of those two as being the owner return. And what I targeted was always a 15 % return. That could have been a 15 % dividend yield, that could have been 15 % earnings growth, or more typically some kind of mixture of the two.

38:11A, I thought that would be a very respectable return if I could achieve it. But B, it also got me a little bit out of this sort of idea of thinking too rigidly about sort the multiples and that kind of stuff. You've written in the past about your evolution as an investor and how you went roughly through three big phases. And so the first phase is said was looking for great prices. And the second was looking for great businesses. And then I think what's really interesting, which I want to kind of home in on a lot in this conversation is the third stage, which is the great manager stage where you've started to focus really intensively on managers you could trust and who you admire, who are talented and have integrity.

38:54And I wanted to read a quote that I think is just really valuable that comes, I think, from one of your Q &A sessions at your annual meeting, but I may have stolen it from somewhere else. I'm not sure. And I think this is a really valuable insight. So you said, I've discovered for myself a niche of managers where I think the odds are just massively stacked in my favor. And that's managers who've turned the business into their life work. So oftentimes, they're the founder, but sometimes they're just people that have spent their whole career there. Sometimes they might even be someone that arrived a little bit later, but clearly buys into the culture in a very powerful way.

39:29And that is the kind of pool that I fish in. I think it's a very, very rich pool, especially for a concentrated fund like me. And I just think this is a hugely important insight. I wonder if you could unpack it for us, because I think this sort of lies at the heart of what it is you do? Yeah. Yeah. Well, thank you for that quotation. I think the deeper point of that is people often will ask, how do you judge a manager? They're such good salespeople who are very well-practiced in meeting with investors like us. How on earth could you separate the good from the bad from the average? And I would argue you can't.

40:08If you were to put 100 managers in front of me and divide them into the best versus the worst, I would be no better than average and quite possibly worse. But I do think there is a small cohort of managers who do make the business, their life work, completely aligned, completely dedicated. And when you do find those, the odds are just massively, massively stacked in your favor. So I do think I've occasionally been able to spot that type of manager. And when I do, I would tend to bet on them. You gave a really interesting series of talks at the Value Investor Conference in Omaha, three different talks probably from 2014, 2017, and then probably 2024, I think.

40:52And so I've been going through these quite carefully over the last few days. One thing that really struck me was you quoted something from Snowball, the biography of Buffett, that I thought was really interesting, where you said you quoted... The book saying Buffett saw himself in Ajit Jain, who quickly rose in his esteem to share Mrs. B's pinnacle. And you mentioned in that speech that Ajit had no background in insurance and that Warren said, I just liked the guy. Talk to us about the significance of that, because I think there's actually something really quite profound going on there. Yeah, I do think it's an incredibly profound idea, obviously, because it's true.

41:37But more importantly, when you're trying to beat the market is because it's overlooked. A lot of investors are very reluctant to place any weight on something which isn't based off of hard facts and quantifiable. Obviously, if you work in a large organization, that's essential because how else can you communicate your ideas to everybody else? But I do think certain emotional responses you have to certain situations can also be incredibly powerful indicators. And if you're working on your own in a very small team, I think you can lean into those insights, but obviously you can't if you're in a larger organization.

42:13And one of those is simply that sort of visceral reaction of liking someone. It might sound a bit sort of hairy-fairy, but to the extent you've spent your whole life sort of thinking about business, meeting with people, talking with people, having good experiences, having bad experiences, That immediate reaction of liking someone obviously is based off of patterns that have developed over decades. It has to be an incredibly powerful, powerful indicator. And, you know, I thought it was very interesting that, you know, Buffett said the main reason that he hired Ajit Jain was simply because he liked him.

42:49At the one level, you could say, well, that's a very superficial reason to hire someone. But I think at a deeper level, it is probably an incredibly powerful indicator that he saw in Ajit the same values and qualities that he knows he himself has. it's it's so interesting to me because here i am covering this investing business that's supposed to be incredibly rational and full of objectivity and the like when i think of the people who i invest with they're people like chris bagg who i just really really like i mean i think he's incredibly smart and thoughtful but i also just really like him and josh tarasoff a close friend of yours who i just really like as a human being i you know they're both people i want in my life And, you know, I interviewed Nima Shaye on the podcast recently, and I'm just like, I spend so much time thinking, how am I going to rustle up cash from here for my wife and me to invest with Nima?

43:40Because again, I just like, I really like him. And so it's interesting. I can echo all three are wonderful people and dear friends of mine as well. Yeah, they're quite special. And look, if I had more money, I would want to invest with you too. And so I think in some weird way, I feel like I'm almost collecting people as much as investments. And then I think about this, there's a wonderful guy in the Rich, Wise, Happier Masterclass, very talented French investor based in London, who I had dinner with recently. And he said to me that he would never invest with a friend. Like, it's just too dangerous because what if it goes wrong?

44:18And he's a really, really smart, successful property investor. And so I sort of wonder about this. And then Chris Davis talked to me at one point where he said he had some rule where he said, You should never do business with a friend before the age of 40. And after the age of 40, you should only do business with friends, you know, once you had enough pattern recognition. How do you unpack this? Because there is something about it that feels very soft and not objective in a business that's supposed to be objective. And yet we were given these tools of intuition and instinct. And I don't know, unpack it for me because I can't really unpack it.

44:54Well, there's one really kind of crucial thing, and that is that you tend to like people who are similar to yourself. So it means you need to cultivate in yourself the qualities you're looking for in other people. And, you know, you see that the whole time. So, you know, some people, and don't mean to undervalue it or anything, but, you know, some people might think the coolest thing in the world if someone drives a Ferrari. So if they see someone show up in a shabby car, they're like, who is this idiot? And they see someone else show up in a nice, bright, red, shining Ferrari, like, wow, that's the guy.

45:29And so if you're the person that does deep down value more superficial things, whether you like it or not, you're probably going to be drawn to those people that exhibit those qualities. And if you're someone like Warren Buffett, who, you know, values integrity and, you know, obviously rationality and investing acumen, you're naturally going to be drawn to people like Ajit Jain. And so, you know, the big lesson that the people like us should take away from that is we really need to cultivate the values in ourselves that we're hoping to find in other people, because we're automatically going to be drawn to them, whether we want it or not.

46:07Yeah, I think that's a really valuable insight. Right. I, you know, my sort of scoring system before I interview someone, you know, there are things where I have things in italics, I have things in bold, I have things underlined. And then the trifecta is if it's in italics, bolded and underlined, which is the case with this quote from your speech in 2024, where you were talking about your 2017 talk. And you said exactly that. You said, if you want to find managers that have the values which you think are important, you better live by those values. because if you don't, you won't be able to spot them.

46:41And I just wrote next to it, huge insight, discuss. Sound like one of my university professors now. But I think once in a while, you know, I stumble upon something and I'm like, oh, this person's figured out something that's actually deeply true and important and not necessarily obvious. And I think it's a curious thing that instead of just looking for, you know, people who are honorable and have integrity and the like who you're going to invest with you like well i better actually i better actually work on that in myself it's very interesting insight and of course there's no there's no there's no ban on then doing sort of analysis afterwards to make sure your your initial impressions are correct you know you mentioned the journey though there's one one other sort of little anecdote i'd love to tell about how i sort of came to to the focus on on the management so you know there were three stages to my investing you know the first was very much as sort of, you know, very mechanical, rigid, quantitative focus.

47:38And I realized very quickly that there was more to investing in that. So the sort of understanding that it wasn't just about whether something was on a sort of two times P, it was also whether it was a good business. That realization came about very quickly as, you know, some of the businesses I invested in those very early years, most did very well, but some, you know, went to zero because they were kind of frauds or the business didn't work or whatever it might be. So that was a quick burn, but it was a much slower burn to realize the importance of the people. I think initially the insight was, well, people can really damage a business in a negative way if it's a fraud or if they're incompetent or whatever it might be.

48:19So I realized early on in the journey that it should be something I should look at and I should try and avoid the bad people. But really recognizing that it's not just that you have to avoid the bad people. It's not even that you should be trying to find the good people. It's that the biggest priority should be the people. And what led to that was the realization that we all have this conceit that we're great analysts and we do more diligent work than everybody else and understand business better than everybody else. But the reality is when you analyze a company, no matter how diligent you are, you really see the tip of the iceberg, that bit of the company which is poking its head above the water.

49:00But what really determines the investment success is what's going on beneath the surface. My experience was where you had good people at the top, everything beneath the surface was at the very least not terrible and oftentimes a lot better than you expected. And where the people weren't great, the surprises were always negative. So I came to realize that I better be betting on the right people rather than the wrong ones. And I think the reason it took a bit of time to come to that realization was because I had to get rid of the conceit that I could achieve everything just through sort of intellect and analysis.

49:40You're often asked how you identify these outliers with these exceptional qualities, and it's actually an incredibly difficult thing to answer in certain ways. I remember Chris Davis saying to me at one point that Charlie said to him, yeah, never invest in a company where the CEO has good hair, which reminded me of my experiences as a young journalist interviewing Jean-Marie Messier, I think it was, from Vivendi, who had incredible hair, and Vivendi did not do well. What are you looking for that gives you a sense that the manager loves the business deeply? When you look back at, say, the founder of TruePanion or Mark Zuckerberg or so many of these CEOs that you admire, what are the sort of tells that they're giving you a sense that they're all in?

50:32Yeah. I mean, I think that you can narrow the universe down pretty quickly just through the kind of mechanical method of, you know, just sort of basically rejecting all the companies where the management is a revolving door of MBAs, which is, you know, the rule rather than the exception. So I think that kind of whittles the universe down pretty quickly. But then once you get to the kind of the businesses, you know, which have either, which are either run by the founders or very tenured managers, often connected to the original founding team, you know, that's when of gets tricky because sometimes you see these sort of funds that will just say, oh, we just invest in founders or whatever, as if that solves the problem.

51:13But not all founders are great. Some lose interest in the business or they sell their stock, but still feel like they're entitled to the economics or the world moves on and what made them successful originally is no longer what makes the company successful today. So I think you can whittle the universe down pretty quickly, just through mechanical sort of methods. But then there's no sort of substitute for sort of thought and analysis once you sort of get down to that sort of short list. I was really struck. I was listening to your Q &A session back in 2022 at your annual meeting. And Dennis Hong is a very good fund manager in his own right and very smart guy asked you about your interactions with management and what you hope to get out of meeting with them.

51:58Because obviously there are lots of fund managers who don't believe in meeting CEOs because they're such a good salesman and you disagree strongly with that. And there's this lovely quote where you said, what I really want to do when I sit down with a CEO is try to figure out how they tick, what motivates them, how they think about the business, what their long-term plans are, what the story of the company is, how it came to be the way it is, because understanding the past is often the best way to understand what the future will look like. And then you said, but often it would be going for a walk with them or meeting them at your home.

52:30So often in these non-business settings. And then you said, and the single most important thing I look for is whether I like the person. And you mentioned that you actually like it when they're a little bit scruffy and introverted, you're not really looking for charisma. I thought that was really interesting that it's not necessarily the guy driving a Ferrari and wearing the$6 ,000 bespoke suit. Yeah. I think some investors get frustrated that they don't get a whole lot out of a meeting with a CEO because they kind of ask about the market opportunity and the entry barriers and all that kind of stuff.

53:06And they probably get the same answers that have been given a million times before to that and none the wiser at the end of the meeting. What I try and do is just sort of take a manager a little bit off piste and try and hear about how they think about the world and above all, what really their motivation is. And I do think people generally reveal themselves, not necessarily in a negative way, but sometimes just they have completely different interests in the business. Their biggest dream is to go off and do something else or whatever it might be. There's absolutely nothing wrong with that. But I do think if you are fortunate enough to get to spend the time with the CEO of a company, the time is better spent just rambling a little bit and maybe going out of the meeting room and talking about completely unrelated topics to the company itself just to get a sense of their values and how they think about the world.

53:59One thing that really interested me is your major investment in Carvana, which has been kind of a roller coaster, I think, over the last eight years or so. And this is such an interesting example of a sort of divergence between what most people say about the management, or at least not most people, but there's always been kind of controversy around the management and short sellers who were maligning management and the like. And you actually, you know, you're pretty close to Ernie Garcia, the co-founder and CEO. And I was watching yesterday an interview that you did with him and was just really struck by his character and his intensity and his drive and sort of fierceness.

54:42And, you know, can you talk a little bit about that? Because in some ways, I think your relationship with him kind of is revealing about what it is you're looking for and also your independence of mind, the fact that you were able to see something in him that maybe the market and conventional opinion wasn't seeing. Yeah. I mean, to my dying day, I will never understand why Ernie Garcia is the polarizing figure he is. I mean, he is just so, to me at any rate, so obviously the absolute epitome of the kind of founder building a business into his life's work that I just can't for life me understand how anyone could could reach a different conclusion.

55:25I understand you might not like the company, you might not think the business model works, although I think that that particular bug bed has been put to bed by now, but bugbear rather, but that you could question his sort of his motivation and his integrity. That is just a complete and utter mystery to me. It was also a really interesting revealing story about a chin-up contest that you'd which I, you know, as a journalist, I'm always looking for these little anecdotes. Can you talk about that story? Well, my dear friend Cliff Sosen should be the one to tell the story because it's really his story.

56:01But the way he told it to me, and maybe I'm embellishing the details a little bit, is that, you know, Cliff is someone who takes very good care of himself, as indeed is Ernie. And they both being competitive types, they challenged each other to a chin-up competition. And, you know, Cliff did however many it was he did. Let's call it 15. It may have been a different number. And the way he told me the story was Ernie started strong, but by about the sort of number five or six, he was clearly sort of struggling. And Cliff thought he had this very clearly in the bag, but Ernie somehow managed to dig out another 10 chin-ups just to avoid losing.

56:36There was something lovely in your conversation that I wrote down where, as you retold this story and he said, I'm not going to lose to Cliff. And I think that gets at something, that sense that you're looking for people. Who are all in, right? Who have like fierce commitment. And you told another story once, I think, about the growth rate at Carvana and whether it would just be like 20 % or more or whatever. And what did he say about that? Well, that's a story which I'm the protagonist in contrast to the other one. So that's maybe a better one to tell. So I remember, obviously, Kavana went through a huge crisis in 2022.

57:21And then going into 2023, it was clear that the business had sort of managed to turn a corner. But the question then on everyone's mind was, when was it going to start growing at a meaningful rate again? What would that growth rate be? And so the various analyst calls and investor meeting, everyone peppering Ernie with questions about when it was going to start growing again. And he's very disciplined, sticking to the script of, we're going to wait until the economics are nailed down and then we're thinking about growing again. And I wasn't trying to be particularly clever or catch him out, but I, in good faith, told him a story I once heard from a CEO who explain to me that there's a right rate to grow.

58:02It shouldn't be too fast because then it puts too much strain on the organization. But of course, it shouldn't also be too slow because that creates an opportunity for competitors. And the right growth rate, in his opinion, was 20%. The Goldilocks growth rate, not too fast, not too slow. So I told this to Ernie and he looked at me with a complete look of contempt and said, the reason that guy only grew a 20 % pattern was because he wanted to be home by six o 'clock. That's great. So he gave away that it wasn't going to be 20%. There was a moment, I think, in a chapter that I wrote on high performance habits in my book, Richer, Wiser, Happier, where I said something like really, really simple after spending a lot of time interviewing people like Jeff Vinnick and Peter Lynch and Will Danoff, these fiercely driven stars from that generation at Fidelity.

58:54And I said something like, sometimes the secret of success is nothing more mysterious than the fervency of a person's desire. And I think it's one of those things that's so simple that it's really easy to overlook the importance of it. Like just, you know, if you have someone who just has such fervent desire, you know, and if you combine that with talent, obviously you need the talent, but it's very hard to stop those people. Yeah. Although what I've come to realize is you can't sort of create some kind of theoretical laundry list of what it you know the qualities needed for a sort of a great a great leader you know it tends to be the case that you know founders sort of form the companies and then the companies are form you know form the founder so what tends to make the company successful by definition at least for those that are successful is is the qualities the the ceo exhibits and then unnecessarily uniform across all ceos so you know you might have a you One extreme, you might have someone like Steve Jobs, who by all accounts treated people pretty shabbily, but where I guess deep down people must have realized it was coming from a place of passion rather than just wanting to hurt people.

1:00:06And at the other end of the extreme, you have these sort of leaders who themselves are more or less without ego, but have this tremendous ability to kind of bring people together. So it can work at both extremes. The key thing is the leader is sort of suited to the organization and vice versa. Mark Zuckerberg has been a controversial figure and you've always been a huge admirer of his. And people are also always very critical of meta about, you know, the social ills that it's causing and the like. And I'm just curious how you view it, because a lot of what you do seems to me about exploiting misperception.

1:00:46you know, looking at the facts in a somewhat dispassionate way and trying to exploit misperception. How do you view the world as having got Mark Zuckerberg and Meta wrong? Yeah, I mean, they're also, to me, I mean, that's a rabbit hole. We probably shouldn't go down in the interest of time, but there too, it's a kind of mystery to me why, you know, someone like Mark Zuckerberg, who so obviously has almost an impossible job balancing, all these sort of competing interests. And clearly, from a wealth perspective, doesn't need to do it, but still does, I would argue, from a place of passion. It's kind of a mystery to me why he is the controversial figure he is, but I realize a lot of people would disagree with that.

1:01:32So no need to go down that rabbit hole. But the one observation I would make is I think generally people are quite negative about business in general and the bigger the business is the more negative they are about it you know so i remember when i was a kid and you know the big sort of bugbear at that time was nestle of all companies and um you know nestle i suppose at the time was one of the largest and successful companies still is pretty successful today and people convinced that the reason they were only sort of starving children in in in ethiopia and Africa was because Nestle was sending powder milk there and the kids were losing the ability to...

1:02:12They're being weaned off their mother and then Nestle was withdrawing the milk or whatever the conspiracy theory was at the time in order to then make a profit. It's absolutely ridiculous. Even today, Nestle doesn't make a meaningful amount of its revenue from Africa, certainly wouldn't have done back then. To the extent it sent powdered milk, I'm sure it was with the best intentions. But there seems to be a readiness then for people to think the worst of the largest companies. And that is still the case today and probably always will be. You've spent a lot of time thinking about and talking about moats and the nature of moats and what types of moats are best and worst.

1:02:52And when you think about your big holdings like a Carvana, which at one point you wrote down 98 % and then it's kind of good in the end, and you think about meta, what they embody in terms of moats. What are the things that sort of a little bit iconoclastic in your view of what makes for a good moat? Yeah, I think my thinking around moat has evolved also over time. So I think if you'd asked me sort of 10 years ago, I would have said, you know, moats are good, and the bigger the moat, the better. And today I have a more of a kind of a nuanced thought of that. I think moats are not always good. They can create complacency, and especially in industries where there's rapid change, that could be an active disadvantage rather than an advantage.

1:03:37And also, moats sort of prevent you from sort of adapting and changing as the world evolves. And so what I've sort of come down on is, I'd rather actually a company maybe has a slightly narrower moat, but where it sort of keeps them on their toes and forces them to continue adapting. adapting. And more importantly, that moat should be expanding and moving in the right direction rather than narrowing. So I would much rather see a company with a smaller moat, which is, we're getting wider as opposed to a sort of a larger moat that's getting smaller. Another really kind of controversial move of yours in recent years has been, I guess, since 2024, this massive investment in China, where there's been a little bit of churn in the companies that you've owned.

1:04:23But when I looked the other day, I think about four of your top 10 holdings are Chinese. Yeah, it's about a third of the portfolio. Can you talk again about the misperception there and the opportunity and also something that's very distinctive about your approach, which is that you travel a lot. So you're going to these places and you're kind of seeing with your own eyes what these places are like. What have you seen in China that makes you think, just people have got this wrong. Yeah. I mean, as you point out, William, I've always been a passion about traveling. And the great thing about managing a global fund like I do is that I have an excuse to combine my passion for traveling with my passion for investing.

1:05:08And I've tried to get the most large international economies over the last 20 odd years, but the place that I went back to more than any other was China. I just find it an absolutely fascinating place like anywhere with its good sides and its bad sides. But above all, it's a country where I feel it's moving very rapidly in the right direction. And from an investing perspective, what makes it interesting is that the perception for most of those last 20 years, perhaps even still today, has been very negative. So as an investor, if you see whether it's a company economy, whatever it might be, if you're positive about it and the rest of the world is negative, then that's an exciting setup.

1:05:53You know, so I have been traveling to China every year for the last probably 15 or so years. But of course, there was a hiatus during COVID where you couldn't travel there for a few years because of the restrictions. And so I think I was one of the first investors to go back there pretty much as soon as the travel restrictions were lifted. I went there and wrote a postcard actually about the visit. And what really sort of blew me away was just how rapidly that economy had developed. I think there was a sort of perception that it was a good place to produce commodities cheaply, but sort of devoid of creativity, devoid of innovation, devoid of world-beating companies.

1:06:33And when I went back there in 2023, it was completely clear to me that the complete opposite was the case. There was a lot of innovation. The society had moved along very quickly. The cities had become much more beautiful than they had beforehand. And it was also producing a lot of world-class companies, not just in manufacturing, but in the consumer internet, in e-commerce, and really pretty much across the board. And so that was what really got me interested in it. Let's take a quick break and hear from today's sponsors. One part of being an investor that I don't think gets enough attention is how hard it can be to continue to improve as an investment researcher.

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1:10:19The guide is free to you at netsuite.com slash tip. netsuite.com slash tip. All right, back to the show. And why of all of the things that you've played with that, all of the things you've explored over the years, have you ended up with Luckin Coffee, which is a pretty new position, I think, and Tencent Holdings. I think you used to own Process as well, which is a way to invest in Tencent at a discount and i think h world group and yum china holdings like why why are those four you know what's the what's the common denominator that makes those four so appealing to you because i know you also sold dd global i think at some point in the last in the last few months uh no i still i still i still have that but it might have slipped out of the top 10 so maybe okay yeah you're thinking that but um no you know so i'm very conscious when i invest in china that i don't speak the language.

1:11:14I only go there once or twice a year. And so there's one and a half billion people on the planet who are better positioned to invest in China than I am. And the way I compensate for that is really just trying to keep it very simple. I'm not trying to find any under the radar companies doing complicated things. I just applied the same criteria I applied to any investment. I'm looking for passionate founders and all of those companies are still run by their founder. I'm looking for wide moats. I think all those companies very obviously have wide moats, and I'm looking for attractive valuations. That's the reason above any other why I feel confident investing in China today is that it's still a market which is very much out of favor.

1:11:58You can get very obviously good companies growing nicely and incredibly attractive valuations. So all of those companies you mentioned, I would expect the earnings growth to be at the very least 10 % in the coming years, in many cases, much more than that. And most of them are returning at least sort of 5%, if not more, of their capital in terms of dividends and share buybacks per year. So I get very comfortably to the 15 % owner return that I target. I wonder if we could talk a bit about your business partner, Andreas Lechner, if I'm pronouncing this right, who's not a China fan, which I think gets us something really interesting that a few years ago, I think for regulatory reasons, because of FINRA, the regulators in Switzerland, you decided you needed two people.

1:12:45And so you have this really interesting relationship with this co-managing director of RV Capital, this German guy, Andreas. And I've been watching with great fascination your conversations with him over the last few days, because he's really brilliant and really profoundly eccentric and your relationship is very unusual and very central to you can you just start by telling us a little bit about him because i mean he's just a hugely impressive guy i feel like i feel like he's like this big brain that just happens to be sitting on top of a body but he doesn't really need the body at all yeah yeah well uh you know rv has his own uh llm you know anthropic calls theirs claude and we we call ours andreas and uh no andreas is a is a dear friend you know we we met actually in omaha probably in in 2006 that first time i went there and really hit it off and have you know remained in constant contact ever since then regularly you know as guys do probably talking mainly about uh you know business and stocks and that kind of stuff as opposed to maybe more touchy touchy feely topics but that's you know that's the level we we really sort of connect on and um you know as you mentioned, in 2022, there was a change in the law in Switzerland, and as a result of which, we had to apply for a license.

1:14:03And the advice was RV Capital had a much better chance of getting a license if it was two people rather than one. And so really, we just formalized what was happening in any case, which was, you know, we always collaborated and he joined RV Capital as a co-managing director. But it really wasn't that much of a change. You know, we'd always worked together prior to that. I think what makes our relationship or probably any relationship incredibly productive is that there's enough overlap that we have plenty to talk about. We have the same priors when we start a conversation, we agree broadly on what a good investment looks like and the type of things we want to do, the type of things we would avoid.

1:14:44But within that, there's enough difference that we can constructively disagree on stuff. And, you know, China is one area where, you know, Andreas is certainly more negative than I am. Although I do think if you were to ask him, he's potentially coming more around to my point of view rather than vice versa. It's kind of curious. There was a conversation you had with him where you were kind of interviewing him about his background. And I mean, he's clearly a brilliant guy, right? Who's a brilliant mathematician very early and published a book at some absurd little guy. And basically only manages his own money.

1:15:18and from what I could understand at one point he had two-thirds of his money in one stock and later had like 28 % in Facebook and so he's never worked for anyone and makes all his own decisions and has most of his money in like six stocks and I thought one thing that was really interesting was that you guys were using each other as a sounding board over the last 20 years and yet actually you would buy stuff for the fund without telling him what you were buying and he would buy stuff without telling you. And so it's a really unusual relationship where you're collaborators and sounding boards, but you actually have total independence.

1:15:55So you're sort of nominally co-managing directors, but actually you're sort of super independent. It's a very unusual relationship. And I wonder if you could talk about what that reflects about how important it is to maintain independence, but why it's useful to have a partner. Yeah. So we are the co-managing directors of RV Capital. And from an operational standpoint, we take care of the more administrative side together. But when it comes to investing, I have the business owner fund, which is my sole responsibility. And then he manages his own money and in the meantime has some external clients as well.

1:16:37And there, it's entirely his responsibility. And in terms of how that relationship works in practice, I always viewed it as there being two stages or two parts to making an investment or coming to an investment decision. The one is the research stroke brainstorming phase. And there you just want as much input influence as you can possibly get. If you have an idea, you want to run it by as many different people as possible, try and surface as much disconfirming information you can. And in that respect, Andreas is an incredible person to riff about a company with. But when it comes to actually making the investment decision, I think it's super important to make that by myself.

1:17:24And it's not because I don't trust Andreas or value his feedback. It's more that I actually, in some respects, don't trust myself. I don't want to be making a decision because I think other people think it's a good idea. I want it to be very clear in my mind that I'm making that decision because it makes sense in my own mind. And so by, you know, very deliberately not asking Andreas or anyone else for that matter, whether they think it's a good or bad idea beforehand, it allows me to be, you know, very disciplined in making sure that it comes from an inner conviction rather than a sort of an outer one.

1:17:58There was a very interesting observation that he made in that Q &A that you did with him, where I'll call you a couple of lines from him that I just saw were a really helpful kind of revelation, where he said, what I've increasingly flocked to was companies where I just admire what they're doing. Excellent companies usually are excellent from all perspectives. It's rare that I find a company is excellent from reading the reports, looking at the products, and so on, talking to potential customers, and then meet management, and I'm disappointed by them. That's almost never happened. I can hardly think of any instance where this happened.

1:18:32I just thought it was a really interesting observation that when a business is high quality, you sort of see that quality in every part of it. What do you think? I mean, that's presumably something you've discussed a great deal with him over the years. Yeah. I mean, I would see that comment in the kind of the same spirit as the conversation we had a few moments ago about some management and liking managers. Andreas is someone who's been investing primarily his own money for 30 plus years. And when you do that, obviously, you see these patterns that resonate very strongly. And for him, one of those patterns is when he sees excellence in a product or an aspect of the service for the company, then that sort of sets alarm bells ringing in his head or positive alarm bells that probably resonates with prior investments he made, which have done very well.

1:19:23And so I put that under the heading of where that intuition is an incredibly powerful indicator of a sort of a deeper truth. When we spoke back in June, you said to me, this is the weirdest market I think I've ever seen, apart from maybe the late 90s. And you said, because the S &P 500 makes a new high every day, and yet most of the things I look at are sort of 50 % below their highs, in many cases trading at very low valuations. And it's really just one small corner of the market with semiconductor hardware, which seems to be driving all of the gains. It feels like actually quite a good market for me in places like software and internet space, places where you've traditionally been strong.

1:20:03And this is also something you wrote about in your half year letter that just came out this morning. Can you talk about this? Because I think it gets at something really, really important about this kind of, as you frame it in your shareholder letter, this debate about value versus momentum and this odd current reality of, as you put it in the letter, a momentum-driven market that's hyper-focused on short-term sentiment. Yeah, maybe it was a little bit hyperbolic of me in June to describe it as the weirdest ever. I mean, after COVID or after the Lehman Brothers, they were also pretty weird as well.

1:20:39So maybe temper that a little bit. But yeah, but the underlying message I would definitely stand by, it's kind of the weirdest market in the sense that most markets are up a little bit, not hugely, but it looks like a very sort of normal type of sort of stock market year, decent gains. But you kind of poke under the surface and you have like just a handful of stocks that have just gone to the moon and then everything else, which almost feels like we've had some kind of financial crisis or something that the share prices are down so much. So it is a strange one, but as a long-term owner of businesses trying to buy great businesses when they're cheap, it's an ideal market where sometimes you're really scratching around for an idea.

1:21:27Whereas, especially in March of this year in the software space, the question wasn't, can I find a software company I want to own? It was like, which of the 20 or 30 which are down 60, 70 % from their previous hires should I be buying now? And what was it that led you to Constellation Software, which also, as I discussed with Chris on the podcast recently, was also the thing that he bought in the SaaS-pocalypse, if I'm pronouncing that correctly. You, I think, bought it in early March. How does that embody what it is that you try to do? Yeah, I mean, you know, where to start? I think a theme that's run through our conversation today is really sort of trying to bet on people who are making a business, their lives work.

1:22:16And, you know, I really feel that that's very much the case at Constellation Software. Now, obviously, the founder, Mark Leonard, you know, was forced to step down for health reasons. But from what I understand, it's still very much a presence at the company. But above all, I think within the company, it's filled with leaders and in many respects filled with founders. So the new CEO, Mark Miller, he actually started the company, which was the first company that Mark Leonard bought when he started Constellation Software. So you could almost make the case that the current CEO is more of a founder than the actual founder.

1:22:56That would be an exaggeration because obviously, what makes Constellation the company it is, is the acquisition engine that Mark Leonard built and all the other stuff. But I think the point is a valid one, that it's really a company which is sort of full of owners and full of people that deeply believe in what the company is doing. And that's exactly what I look for. And, you know, for the benefit, all that makes software great, one of the drawbacks of it is, is a lot of the companies tend to have very egregious stock option programs, way too much stock-based compensation, way too little owner earnings.

1:23:31So that was also something that's made me lean towards Constellation Software as opposed to maybe some of the alternatives. I was very struck in reading your latest shareholder letter, where you were also talking about, I mean, it's very much related to this. You were saying it's never been my goal to hunt for outsized winners. If the odds of picking one have lengthened from 100 to 1 to 200 to 1, so what? That was never the game I was playing. Instead, I aimed to find a small number of durable businesses that can grow their intrinsic value by 15 % or more per year through earnings growth, capital returns or a combination of both and buy them when they're cheap due to a temporary setback.

1:24:10I thought that was a really interesting kind of distillation of what it is you're trying to do and why actually in a weird way, a momentum driven market like we have at the moment may actually make life better for you. Can you unpack that a little? Because it seems kind of counterintuitive. It seems like a terrible time to be doing what you do. And yet, if you have the time horizon, maybe it's a great time. Yeah. I mean, I think I wrote in that letter when I started investing, I thought you had to outthink and outweigh everyone else. Outthink because a lot of smart people out there are all trying to find those great, great companies and outweigh because to the extent a mispricing comes along, it would be pretty infrequent.

1:24:56And if you look at the market today, I think both of those things are inverted. Most obviously, companies, share prices go down 25 % in a day in a heartbeat. Earnings are a little bit less than the market expects or some other sort of obviously temporary thing goes wrong. But things are so momentum driven that everyone sort of figures, oh, everyone's going to sell because this thing has happened. So I'd better try and get ahead of the crowd. And then everyone else is thinking that sort of spirals downwards. So I think that sort of idea of out-waiting is no longer the case. And then also on the out-thinking, you can get up to speed much more quickly than you can in the past on companies, thanks to artificial intelligence and chatbots.

1:25:40And in theory, that should be making it more difficult to do good fundamental research because these tools are available to everyone. But in practice, I almost get the sense that because it's sort of become a commodity, people are just sort of ignoring it because they think, well, what's the point if everyone else has the same access? And the focus instead seems to be on trying to find those sort of those small number of companies, which are going to be the next sort of Nvidia or the next, you know, Google or the next Micron to take a more kind of current example. And, you know, of course, there will be a handful of companies if we were to speak in five or 10 years time, which will have been the sort of, you know, the outsized winners.

1:26:18And I'm pretty sure that I won't have owned any of those. But there are an awful lot of companies which don't have the potential to be a huge winner, but will still provide very satisfactory returns in the next five or 10 years. And those are the companies I'm focused on. And those are the ones which I think paradoxically, it's getting a little bit easier to buy. How difficult is it actually to maintain that kind of valuation discipline at a time like this? I mean, you see people like Terry Smith, right, who I interviewed on the podcast at one point, who has been much derided for suddenly embracing momentum and the like.

1:26:59And, you know, I kind of, it's a quandary I often wrestle with, right? Because as you pointed out in the past, the market changes. And so what's worked for the last 10 years is not necessarily going to work for the next 10 years. So you're kind of having to adapt. And then, you know, as the game changes, and at the same time, sort of decide, well, actually, you know, is the value of a company always going to be the sum of its discounted future cash flows? You know, is that like a law of physics that you can live by? Or has something fundamentally changed? How do you think about that? Yeah, I mean, I think about things in a slightly different way.

1:27:36I'm not sort of trying to observe the market and derive what I think will work based off sort of an empirical observation and then sort of adjust accordingly. I work more from a kind of first principles basis. And that first principle is, I deeply believe that a company is worth the cash it's going to produce over its lifetime. Obviously, it's not easy to predict what that cash is going to be, and that's where it becomes more of an art than a science. But as a basic rule, I think that's about as close as a law to physics as investing will ever come. So I think that is sort of the lodestar, irrespective of whether people are into ESG or not into ESG or into growth stocks or not into growth stocks, whatever, all that stuff.

1:28:19I leave that to other people to kind of do their thing in that respect. So it seems like in some ways, obviously you need this intellectual framework to be a successful long-term investor. but you also need a very good temperament. And at the same time, you kind of need an ecosystem that's going to support you operating in this slightly counter-cultural way. Can you talk a little bit about how you've set up your ecosystem, whether it's with the type of shareholders you have, having your family around, having your friends, being part of a community, but not so much a part of the community that you get swept along by everyone else's use?

1:29:01How do you set up an ecosystem that actually supports this kind of rational, long-term patient approach? Yeah, I think that really goes back to the environment you sort of work in. And as we talked about what seems like quite a long time ago towards the beginning of this conversation, you know, I sort of stumbled into it rather than really by design. When I started working, I was working from home and it really brought it home to me. after the Lehman crisis, I went to this conference, it must have been around January, February 2009, so really at the height of the crisis. And I noticed people were actually really going up the wall with sort of fear.

1:29:40I was sitting around this table over dinner with a bunch of other investors. And as is normally the case when a bunch of investors sit down together, normally you sort of throw stock ideas back and forth. So I sort of threw out a few ideas and then people just sort of stopped me in my tracks and said, you know, and I'd not seen the memo that the world is sort of about to end. Why on earth do I want to talk stocks when, you know, we should be talking about sort of filling up the larder with food and, you know, preparing for sort of economic breakdown. So the reason I think I kept a cool head in that period wasn't because I have a particularly stronger constitution than other people.

1:30:15It was just, I just wasn't exposed to all of the kind of insanity out there. And, you know, today I'm not as sort of insulated as I probably was then as I have a larger network, probably a little bit better known than I was then. But fundamentally, it's still the same. You could see where I'm doing this call now today. It's the office I have at the top of our house. Once this call finishes, I'll be going to have dinner with my family. So no one's going to be beating me up this evening over whether I should be owning more momentum stocks or anything like that. And I think that's the kind of secret.

1:30:50You You have to work from first principles as opposed to an empirical observation on what's working. And you have to create an environment where you're not being permanently harried by people to do things differently or in a way that doesn't make sense to you. In a way, I think the greatest trial by FI you've had in your years as a fund manager has been in 2022 when the fund was down 47.6 % and Carvana was down about 98 % was a big holding and people were saying it was going to go bankrupt and the like. And then on top of it, you had this medical emergency that July. And I'd love to talk a bit about that, about if you could take us through what happened, but also give us a sense of what you learned from the experience, because it was such a sort of surreal experience.

1:31:40Yeah, it was a traumatic year in many respects. And initially, it was a traumatic year from an investing perspective. So I always knew there would be years where there'd be a big drawdown. The fun started in the wake of the Lehman crisis. So I've seen firsthand multiple times actually in my investing career how sometimes markets go completely haywire. So I wasn't shocked that the fun went down 50%. But what I was shocked by was that the market overall, it was a bad market, but it wasn't a terrible market. And that drawdown was largely, well, in large part due to missteps that I'd made. And that was tough to realize.

1:32:24I knew it wasn't entirely the reason. I knew some of the stocks was really just the market going a little bit sort of haywire, but in others, I knew I'd kind of messed up. So that made it, that was something I hadn't prepared mentally for. And that was something that I certainly didn't enjoy. But then in July of that year, I had a medical emergency where, you know, unfortunately, I broke down, started throwing up blood, apologies for the gory details for the listeners, and, you know, rushed into hospital and, you know, received that information nobody ever wants to hear that they found a sort of a tumor in your stomach.

1:32:59When I heard that, you know, I assumed it was sort of more or less game over. Now, thankfully, it turned out it was a tumor that, whilst cancerous, was very treatable. So happy to report it was less serious than what I initially thought, and I've made a full recovery since then. But nevertheless, for a period of a week or so, I really did think it was game over. And intuitively, you would think, oh my goodness, not only having a bad year investing, and that comes on top, the one crisis must have compounded the other. But actually, the one crisis really helped to put the other one in perspective.

1:33:38As important as investing is, and as important as building a great track record is, life and family and friendships are much more important. And so, when faced with the prospect of losing those, it really helped to put the disappointing business development into perspective. Do you think it's changed you in an enduring way? No, I don't. And you might be surprised to hear that. But in that week where I did think it was game over and I had the chance to obviously reflect on things from the perspective of them coming to an end, I realized how deeply I, obviously, above all, loved my family and friends.

1:34:22But I really deeply enjoyed investing, the companies I was investing in. And I had in my mind an idea of how they were going to develop over the years. In the case of Carvana, I thought the market was wrong. I thought it was a great company which had great, great, great things ahead of it. And the biggest sense was one of sadness that I wasn't going to see how that played out. So what I kind of realized during those days was that I was sort of like in the middle of a movie and actually really enjoyed that movie. And I was like sad that I had to leave the theater just when it was sort of getting interesting.

1:34:58So when I did get a sort of second lease of life, there were a few things that I changed, obviously, with maybe a greater consciousness that time is not infinite. There was certain annoying things I tried to get rid of in my life. But the broad strokes, I realized that I was actually really enjoying the movie. I had the privilege to be the starring actor in and was hoping that I could sort of get on with playing my role as the star of the Rob Vinal life, as opposed to that being sort of confined to the archives of Hollywood, you know, older movies, which were the actors long since passed. What did you get rid of?

1:35:34Just silly things. I mean, you know, for example, you know, it's a very trivial thing, but as you ask, you know, my email inbox would always be filled with hundreds of completely pointless emails at the beginning of every day. And it would take me about 10 minutes just to delete them all. So 10 minutes of deleting pointless emails, if you times that times 30 years, that's an awful lot of man days or even man months that you lose. And so one thing I did was create all these filters in Gmail that most emails don't land in my inbox anymore. They get immediately poked into a folder. So it was silly things like that, as opposed to really big sort of radical changes in my life.

1:36:16I was quite happy with the big stuff. Did it change your perspective at all on what relationships to go big on and which to kind of filter out? Because you have a big circle. I mean, it's very interesting because there is a part of you that's super independent and kind of a loner and another part that's really, really sociable. And I wonder how it sort of clarified your sense of who you wanted in your life, how sociable to be, how available to other people you should be yeah funnily enough i had a different reaction in that respect to to to to what i what i read or hear from from other people so i think a lot of people after after an experience like that say okay there's this sort of core of family and core friends that's where i want to put all of my focus and everything else is a distraction i want to sort of get rid of it for me that was not not the reaction you know clearly i value my my family and my closest friends more than anything else.

1:37:11But what I found was also I really enjoy actually some of these sort of looser connections, people that I perhaps only see once a year, but always enjoy it. Or sometimes just a sort of, you know, like someone providing service, a gardener or whatever. You know, I enjoy those friendships and those interactions as well. We always ask each other how everyone's doing it. It's probably not the deepest conversation in the world but it's it's all part of the tapestry that makes life rich for me and for me the you know the conclusion was was to to also to you know not to go into a shell and just close off those sort of maybe more peripheral relationships but also to lean into those as well because they also make life rich it's interesting to me that such a central part of your life in a way is this annual meeting this gathering that you have every january in engelberg in in switzerland where obviously all of your shareholders, the limited partners will come, but then also a couple of hundred other people will come up and the tickets sell out within seconds.

1:38:12Not that there's a sale price, but they just get it. Well, yeah, I was going to say sell out is a slight exaggeration when it costs zero, but I appreciate the sentiment. And I'm curious because you mentioned on your website, even you describe RV Capital as a purpose-driven company and you say it aims to make its investors, companies, and fellow investment managers more successful by being a thoughtful and engaged partner. And you say, RV hosts all three constituencies at its annual gathering. Why is this gathering that you've done now for more than a decade, such a profoundly important thing to you?

1:38:50Yeah. So, you know, I do work on my own, or I did at least until Andreas joined, but we still work in separate offices. But sometimes people perhaps assume I'm a hermit or a misanthrope. The opposite is really the case. I love friendships. I love interacting people. I love the close friends, but I also love some of the looser friends, as we just discussed. The reason I set things up the way I do is because I realized that I couldn't be successful as an investor if I was surrounded by a bunch of other people. I'm a strong character, but not an alpha character. I describe myself as beta plus rather than alpha.

1:39:26So if I'm surrounded by a bunch of other people who've got very strong ideas of what should be in the portfolio, I would probably let them overrule me. So to the extent I am a good investor, that would probably not be a particularly good outcome. But at the same time, I do think it is valuable to have a wide network, and especially when you're in more of that kind of sparring phase of either generating new ideas or running existing ideas by people. So I have always had a very wide network and I am a very sociable person. And parallel to this, I wrote a memo about 15 years ago, just providing advice to young investment managers on how I set up RV Capital and some of the lessons I learned and some of the traps I think they should attempt to avoid.

1:40:11And because of that combination of writing that memo, which meant a lot of young folks started reaching out to me about advice on starting a fund, plus the wider network as a whole. What I found 15 odd years ago was I was sort of getting almost overwhelmed by the amount of people reaching out to me, you know, wanting to meet and hear my story and, you know, talk and get advice and all this kind of stuff. And so a good friend of mine, Michael Beertle, gave me some advice at that time, why don't you just do a meeting and get everyone together in one place? And it was incredible advice because I love the meeting.

1:40:46It's become a great event in our family calendar. All the family participate, as we don't have a whole lot of employees, as you probably gathered at this point. And I love meeting with people. I get to tell my story once rather than individually to everyone. But more importantly, I think the connections people make there are probably more valuable than whatever they hear from me. So it really has become, or really is, I think, a win-win type event where the people that go there are just incredibly passionate about it. And there's an amazing energy about the event. And yeah, I wouldn't miss it for the world.

1:41:21It's also lovely that you make it available on YouTube. So you have quite a lot of groupies who you don't even know personally, I think you are just quietly learning from you. So there's a generosity of spirit, I think, that infuses it. But I think also what really strikes me, I really enjoyed watching the videos because I think if people watch them, there's a kindness that you exude and there's a sort of, you know, you're very inclusive. You're very humble in the way that you take the questions and sort of open, but very inclusive when people ask a stupid question, you sort of say, you know, I'm probably not understanding this correctly.

1:41:57There's a real generosity of spirit that infuses the whole thing. It's lovely to watch. Well, I appreciate you saying that. I think part of the reason that is the case is I've always viewed investing as a journey of trying to learn. That might sound like a bit of a cliche, but if you think about the first five or six years, I wasn't managing an external fund. I wasn't managing external money. I was managing the little amount of savings I had and doing my absolute best to find good investments and avoid bad ones. And in that kind of situation, why on earth would you not want to learn? It's like, there was absolutely zero ego at that point.

1:42:38If I thought I'd made a mistake, I wanted to hear it immediately, not a month later after I've lost money on it. And so that sort of spirit very much is carried forward to today. And I don't think it's because I'm a particularly or an unusually humble person or anything like that. It's simply because the spirit the fund is run at is just trying to learn and avoid doing dumb stuff. And so I'm just really acting in my own best interest. When you looked back over the last few days, as you started to jot down notes for your upcoming letter that you'll write about what you've learned over the last 20 years, since you're now coming up to that anniversary or just past that anniversary, since you founded the company in 2006.

1:43:21Is there any particular lesson that has sort of hit you with some force that we haven't discussed that you'd like to give a sneak preview here? Oh, you put a lot of pressure on me now. Be profound right now, Rob. No, to the extent it exists, maybe I'll, if you don't mind, hold it back for the 20-year letter. Really? All right. So you're playing hard to get. I mean, it's interesting to me that, you know, in terms of your own trajectory, right, this has been a journey of discovery of you, as you've described it, and you're now, I think, 53, right? And so you've come a long way since those early days that we started off by discussing, you know, when you were in this sort of small town on the coast of England.

1:44:09When you look forward, you know, to the next, hopefully, 20 years of the fund, like, what's your sense of what the vision is now for the future? because you've never really been maximizing for assets under management. That wasn't your measure of success. You wanted independence. You wanted to be wealthy. You got wealthy. You got independent. Like, you know, you're following all of these entrepreneurs and managers who make their business, their life's work. And this sort of is your life's work in many ways. Like, how does that apply to you? How do you see your life's work and the future of it and what it is you're trying to build and create?

1:44:45Yeah, I mean, I view it in sort of two ways. the performance side and what it may be termed more the purpose side. From a performance perspective, I feel like I'm in an incredibly privileged seat. I'm sort of reminded of the early Olympics a century ago. The person that won the 100-meter dash or whatever it was called then probably won not because they were particularly fast, but because 99.999 % of the population weren't financially in a situation where they could be an amateur and train for athletics and that kind of stuff. So they won more because of the position they're in as opposed to their ability without wanting to take anything away from their achievements.

1:45:28You can only beat what's in front of you. But I do see a strong analogy to the situation I'm in today where, you know, how many people get to run, you know, a fund of my size and, you know, have an opportunity to put down a long-term track record. It's maybe hundreds, but it's probably not thousands. So, you know, to the extent, you know, I'm given this opportunity to put together something really exceptional. I'm sort of conscious that it's an incredible privilege and, you know, I don't want to blow it. You know, so that would be the part on the sort of the, I would say, the performance side of things.

1:46:02But then there's a sort of the purpose side of things. And what I've realized is there's this sort of incredible opportunity to help people. And that's what kind of, you know, makes it, I would say, more meaningful. Because if it was just about, you know, being the one with the best performance, that would be a very sort of egotistical sort of thing of, oh, look how great I am and how much better I am than everybody else. And, you know, that's definitely not the way I want to live my life. And, you know, where I see the purpose is the three constituencies I mentioned on the website. I have a lot of young people that reach out to me that want to become investment managers.

1:46:37I love helping them and giving some pointers on the way to go down. I have a lot of investors who, unlike you, William, you know lots of great investors. If you weren't invested with me or Josh or anybody else, you would have 10 other good options. For most people, that isn't the case. If they weren't with me, they would be in the clutches of some private banker trying to sell them structured products. And so what I love about the relationships, especially with my less sophisticated investors, is not only have they had a great performance, but they've also had peace of mind that their money is sort of working for them and they're not going to sort of wake up one day and find that all of their money has landed in the bonus of some private banker.

1:47:20And the third constituency is the companies. I don't want to overstate my influence at the companies. I'm certainly not an activist, but what I would view myself as a fan, and I'm a fan of the way they do things, which obviously I consider to be the right way of doing things. Otherwise, I wouldn't be invested. And so I actively encourage them to stay the way they are, to continue doing things the way they do. And I like to think that on the margins, that also moves them in the right direction. and rob one final question i know you've thought a lot about this question of how how not to let the money bend your kids out of shape you have i think two two daughters and a and a slightly younger son and i know this is something you discussed with charlie munger at one point and my sense is that you didn't really agree with charlie's perception uh charlie's view of this can can you just talk a little bit about what what he said when you had dinner with him about the issue of money and children and how you think of it yourself.

1:48:21Yeah, well, actually, it wasn't at the dinner. I think it was at the shareholder meeting. So, I'd encourage people to look up the clip as I think it's online now. But there's this sort of, you know, Indian gentleman who sort of stands up, you know, in front of 20 ,000 people and in Berkshire Hathaway and sort of explains how, you know, when he came to the US, he had nothing and even a study during the day and clean dishes in the evening. And then he does the spirit of the story. And then, you know, he sort of managed to get enough money together to start a company and this company became successful.

1:48:49And now, you know, he's this wealthy, wealthy entrepreneur. And then the question, you know, how do I instill the same hunger I had in my kids? And that's sort of the audience collectively holds its breath. You know, this is an impossible question. What possible wisdom can Charlie have to share? And in his classically deadpan way, Charlie says, you're just going to have to learn to fail gracefully. That's great. And what are you planning to do? How do you not screw up your kids? Well, my postscript to that story is, you know, well, let's see how my kids turn out. It's still a little bit early for that.

1:49:26But what I have observed at other families is that you can be in a very wealthy family and still have incredibly driven and balanced kids. And, you know, the two examples I would draw to that, you know, Ernie Garcia at Carvana, his family was already, you wealthy before he set up Carvana. As we discussed, you couldn't imagine a more driven person than him. Then also, I've had the privilege to meet Will Lundin, the Lundin family. It's an under radar family, one of the wealthiest in the world. They have lots of publicly listed holdings, so it's a secret hiding in plain sight in various commodity and energy companies around the world.

1:50:05Yet Will too, he's a younger guy, probably early 30s, but you couldn't imagine a more humble, but at the same time a more driven person. So I dearly love Charlie, but I would respectfully disagree with his assessment that you have to fail gracefully. On that note, Rob, it's been such a great pleasure. And I have to apologize also because I mispronounced your surname at the very start. And so as I said to you before we started, I always leave in my mistakes and haplessness, displays of haplessness. But I should have said Rob Vinal, not Vinal, right? Yes, but you're entirely forgiven. Ever since I've lived in Germany, I tended to pronounce it myself, Vinal, as it's much easier phonetically for people to understand it here.

1:50:45But yeah, the correct pronunciation is Vinal, so thank you for that. All right. Well, it's been a great pleasure. And one of these days, I hope to convince you guys to let me into your annual meeting. It sounds like great fun, but come see me in New York. It'd be lovely to chat soon. You're very, very welcome. All right. Take care. Great pleasure. Okay. Thank you, William. Bye-bye. Thanks for listening to TIP. 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.

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