AI Avenger

education & money & growth

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

"I GOT RICH WHEN I UNDERSTOOD THIS" - WARREN BUFFETT

Warren Buffett spent 8 years charting stock prices before he found out he was doing it backwards.

1942. He was 11. $114.75 - every cent saved since age 6 - went into 3 shares of Cities Service preferred.

It fell from $38.25 to $27. His sister reminded him every morning on the walk to school. He sold at $40 for a $5 profit and felt clever. Cities Service later hit $202.

The loss isn't the lesson.

He kept charting for 8 more years. Edwards and Magee, hundreds of pages, read over and over. He thought the job was guessing what a stock would do next week.

At 19 he read Ben Graham and found out he had it exactly backwards.

"I never bought another stock. I bought businesses that happened to be publicly traded."

He had no idea what the market would do the next day, the next month, the next year. He didn't need one. He knew businesses.

The part almost nobody repeats:

He says the game takes about 120 IQ points, and 170 does worse than 120. Not brains. Orientation.

And he wants the price to fall. When stocks drop he says he gets happier, because the same money buys more of the same business. A farmer, he says, should want cheaper acres.

Since 1942 he has never held less than 80% of his money in American business. Not once.

84 years off one switch in how he looked at a ticker.

He didn't learn to read the market. He stopped reading it.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

12 years before the AI boom, Buffett sat in Omaha and named the technology that would gut his own $40B insurance machine.

Warren Buffett spent 57 minutes on Fox Business in 2014 and named the 1 technology that could gut GEICO.

May 5, 2014. Omaha. Liz Claman across from Buffett, Munger and Gates.

Nobody in that room says "AI." The word isn't worth money yet.

Then the driverless car question lands.

Buffett doesn't hedge. If they really work, accident rates fall. Death rates fall. Insurance gets cheaper. Good for society. Bad for GEICO.

Claman pushes: so would you sell GEICO?

"We won't sell GEICO. No. Never."

Same hour, he passes on LinkedIn, Twitter and Facebook. His reason is the whole philosophy in 1 line: you'd have to tell him which one is going to be where in 5 or 10 years, and he doesn't have a good fix on that.

BlackBerry or Bitcoin, gun to the head? He'd short them both. Munger compares it to ranking a louse against a flea.

Buffett had tweeted 5 times by then. Someone else pressed the button. He says the electric typewriter is already beyond him and asks what a phablet is.

Next to him, Gates explains that Bing is how Microsoft learned to build large scale data centers.

2014. The plumbing of the AI boom, described on daytime TV, worth nothing to anyone watching.

The man who couldn't work a phablet called it 12 years early.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

@triiiam About 20%. The other 80% is deciding which story you’re willing to bet on - growth, margins, risk, competitive advantage. The spreadsheet just does the arithmetic on the assumptions the story already forced on it

[AI Avenger @AI__Avenger]

NYU CHARGES $80,000 FOR THIS COURSE. HE PUTS IT ON YOUTUBE FOR FREE

Aswath Damodaran valued Twitter at $18 a share the week before the IPO, and it opened at $46.

Someone called and asked him to explain the $46.

"I don't have to. I didn't pay it."

He valued Uber twice. $800 million on one story. $95 billion on another. Same math both times. The number never came out of the spreadsheet - it came out of the story you decided to believe before you opened it.

Which is what the envelope trick is for.

Empty envelope. One crumpled $20. He asks the room what it's worth. Then he starts feeding in 3x5 cards he took from the NYU supply closet.

"Control." The banker goes to $24. Damodaran makes him pay it. "Synergy." $26. "Brand name." $32.
Two cards left in his hand. "Strategic." And "China."
He calls them weapons of mass distraction. He counts them when he reads analyst reports. The more of those words on the page, the less is underneath.

Strategic buyer, he says, is a synonym for stupid buyer. A man who decided to buy before he showed up at the table.

This is the same man who ran an unapproved class at NYU for 22 years. They handed him Security Analysis in 1986, Ben Graham's old course, the one Buffett sat in. He walked into the room and taught valuation instead. The dean's office found out in 2008.

Then he told a room full of Google engineers that hedge funds take 2% upfront, 20% of the upside, and land about 1% behind an index fund.

There is no smart money, he said. Only less stupid and more stupid money.

61 minutes. Free since the day it was filmed.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

@adelin02t Agree, one of my favorite lecture of all time

[AI Avenger @AI__Avenger]

The most iconic lecture MIT ever put online opens with a professor ranking your ideas third, behind speaking and writing.

He meant the order. He gave the same talk every January for 40 years in the same building. The 2018 recording is the only one that exists. He was gone by July 2019.

Patrick Winston. Director of MIT's Artificial Intelligence Laboratory from 1972 to 1997, handed the job by Marvin Minsky, author of the AI textbook that sat on desks in every CS department for 3 decades.

The talk is called How to Speak. It runs 62 minutes and it isn't a pep talk. It's a spec sheet for the human listener.

Open with a promise: name what the room walks out knowing. Never a joke first, because nobody has tuned to your voice yet.

Cycle the same idea 3 times, because 20% of any audience is fogged out at any given second.

Fence your idea off from the one it gets confused with, or somebody else takes the credit.

Ask a question and hold the silence. 7 seconds is the standard. It feels like a year.

Lights all the way up. His line: it's extremely hard to see slides through closed eyelids.

Slides are for exposing ideas, chalk is for teaching them. His theory is mirror neurons. Watch a hand write and yours writes along.

The section almost nobody keeps is the last one, on being remembered.

People don't recall your results. They recall the handle you gave them. So build 5 things into the work: a symbol you can draw, a slogan you can repeat, a surprise, 1 idea that sticks out above the rest, and a story about how it runs.

His own thesis got famous and he didn't understand why for decades. It had all 5 by accident.

And on finishing: never say thank you. It tells the room they stayed out of politeness.

An hour of this costs nothing. Rehearsing it before Monday is the part nobody does.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

16 men with 2 Nobel Prizes and 400 years of combined experience went broke in 1998.

Warren Buffett spent 85 minutes at the University of Florida explaining why.

He had just tried to buy them. The call came while he was on a boat in Alaska with Bill Gates. The captain offered to steer toward the bears and whales. Buffett told him to steer toward the satellite signal.

The bid went in a little before 10 AM New York time. $250 million for the net assets, $3.75 billion behind it, $3 billion of that from Berkshire. The bankers took the other deal.

Then he told the room what actually killed Long-Term Capital.

"To make money they didn't have and didn't need, they risked what they did have and did need."

All 16 had most of their net worth inside the fund. High IQ. Their own field. Their own money on the line. Gone anyway.

His version of that trade: a revolver with a million chambers and 1 bullet. Name any price. He won't pull it.

The rest of the hour was that same idea aimed at business.

Coca-Cola went public in 1919 at $40 a share. A year later it was $19. Then the Depression, then a world war, then sugar rationing. That one share, dividends reinvested, was worth about $5 million by 1998.

He bought his first 6 bottles of it for a quarter in 1936.

He also put $2,000 of his first $10,000 into a Sinclair gas station and lost it. He prices that one at $6 billion.

45,000 employees. 12 people at headquarters. 3,500 square feet.

Asked if he'd live it all again, he said yes. Minus the airline.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

A man who compounded 50% a year for 10 years handed Columbia students the exact trade for free.

Joel Greenblatt opened Gotham Capital in 1985 with a $7M check from Michael Milken. He ran it at 50% a year for a decade. In January 1995 he handed roughly $500M back to his outside partners, closed the fund to everyone but himself, and kept teaching.

The case is Sears, 1993. Stock at $54.

Sears owned Allstate and Dean Witter, sold 20% of each to the public, then handed the rest to shareholders. So you subtract. Allstate: $28. Dean Witter: $15. Canada and Mexico: $3. Coldwell Banker: $2.

That leaves $5 a share for the retailer. $27B of sales, no debt. J.C. Penney was trading at 55% of sales. This was 5.5%.

Then he turns it on himself.

September 1992, the announcement. Missed it. April 1993, the offering. Missed it. June 1993, the board approves. Missed it. Wall Street Journal front page every time, and he was 12 years into the job.

July 5, 1993. Michael Price lays out the whole sum of the parts in a Barron's interview. That is when he finally moves. Buys Sears, shorts the pieces he doesn't want, puts up $5 for the stub. Roughly $30 two months later.

He gives away the tells too. Why a parent sells exactly 20% and never 21%. Why "no intention of disposing of this interest" means they are about to dispose of it.

Then he asks the room how a front-page trade sat open for 2 weeks.

Nobody answers. He says he still can't explain it either.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

@valueover_hype Yes, I described this in the post too. And yet even after this Warren Buffett remained and remains one of the most successful investors in the world

[AI Avenger @AI__Avenger]

WARREN BUFFETT "DUMBEST STOCK I EVER BOUGHT"

In 1964 Seabury Stanton chiseled Warren Buffett out of 1/8 of a dollar per share. That eighth cost Buffett $200 billion.

Buffett was 33, running a $7 million partnership out of Omaha.

Berkshire Hathaway was a dying textile mill. Cheap on working capital. Nothing else.

The pattern was simple. Every time management closed a mill, they used the cash to buy back stock. Buffett would buy in, tender, take a small profit. Do it again.

Stanton asked him for a price. Buffett said 11.50. Gave his word on it.

The tender offer arrived in the mail at 11 and three eighths.

An eighth of a dollar.

He didn't sell. He bought control of the company, fired Stanton, and won.

Then he looked at what he owned. A terrible business, and a major amount of his money inside it.

Everything after that got built on the wrong chassis. When he found a good insurance company in 1967, he bought it for Berkshire instead of a clean entity. Every good asset came in dragging the textile anchor behind it. Net worth of $20 million, earning nothing, year after year after year.

He fought the mills for 20 years before quitting. He knew early. He just refused to give up. His managers kept sending him proposals - buy this machine, save 14 people, buy that one, save 12. He bought them all. On paper the mill should have been running with zero people.

He bought a second textile company in New Hampshire while he was at it.

Buffett's own math: start with the insurance company instead, and Berkshire is worth twice what it is today.

Ben Graham taught him to buy cheap. Berkshire taught him the other thing.

When a manager with a reputation for brilliance meets a business with a reputation for bad economics, the business keeps its reputation.

He was 33 and right about the price. That was the problem.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

@cartmanx404 Most people are not ready to get rich

[AI Avenger @AI__Avenger]

WARREN BUFFETT - THIS IS WHY MOST PEOPLE WILL NEVER BE RICH

Warren Buffett turned $10,000 into $15 million and said anyone could do it starting today.

Adam Smith's Money World. No computer on the desk. No Quotron screen. Net worth past $1 billion, none of it inherited.

$10,000 into the partnership in 1956. Disbanded in 1969. Proceeds rolled into Berkshire. A little over $15 million by the time of the taping.

Asked if a normal person could repeat it now, he said yes. On one condition: don't try to do too much in the first week.

Then the interviewer asks the real question. The philosophy is public. It has been public for years. Why doesn't everybody do it?

"It requires patience, which a lot of people don't have. People would much rather be promised that they're going to win a lottery ticket next week than that they're going to get rich slowly."

Mid-70s. The whole Washington Post Company traded at $80 million. The properties were worth at least $400 million. Nobody argued about the $400 million. The price sat there in the open for everyone to see.

People just didn't feel enthusiastic about the world that year.

He turns it into a poker test. 30 minutes at the table and you can't spot the patsy, you're the patsy. Your stock drops 10% and it upsets you. That means you think the market knows your business better than you do.

Same 10% drop. He buys more.

Asked what the billion means to him, he calls it a byproduct. 99% goes back to society. He still files his own tax return.

The formula was free. The waiting was the price.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

THE FACEBOOK - MARK ZUCKERBERG FIRST INTERVIEW

Mark Zuckerberg went on CNBC in 2004 and said he was hoping for 500 users.

He was 20. The anchor asked how big he thought the thing would get.

"It's impossible to tell."

Then the numbers. At launch they were aiming for 400 or 500 people. Harvard didn't have a facebook, so that was the gap they were filling. By the time the cameras rolled, 100,000 had signed up.

The plan for fall: 100 or 200 more universities. Then some side applications to keep people coming back.

"Maybe it could be something cool."

The part nobody clips is the last 30 seconds. He describes the product like a phone book. Concentration, major, phone number, screen name, books, movies.

Then he lands it.

"And most importantly, who your friends are."

That line is the entire company. Not the profiles. The connections between them. He had the whole thesis at 20, on a local business segment, in a striped shirt, sitting next to a guy nobody remembers.

3,000,000,000 people use it now.

He called it an online directory.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

WARREN BUFFETT’S FIRST EVER INTERVIEW

A 31-year-old Omaha money manager broke down the 1962 crash on camera 51 years before anyone found the tape.

The Dow had fallen from 731 to 535. Down 21.7% in 6 months. On May 28 alone it dropped 34.95 points, or 5.7%, the second-worst point loss on record at that time.

The reporter wants a villain. Kennedy had gone after the steel companies in April. Everyone blamed the White House.

Buffett won't take it. He says the steel fight moved the timing of the decline, not the size of it.

Then he gives the real answer in 3 numbers. Corporate profits flat for 5 years. Dividends flat. Stock prices up roughly 50%.

So maybe the market isn't forecasting anything, he says. Maybe it's correcting a forecast it already got wrong.

Then the mechanism. Margin calls from brokers. Bank loans that were never properly secured. Forced sellers dumping into a market already down 6% on the week. He calls it "a self generating mechanism on the downside."

Asked where it goes next, he refuses to answer. We may have seen the last of it. We may not.

He was managing $7.2 million. He ended 1962 up 13.9% while the Dow lost 7.6%.

In December he bought his first 2,000 shares of Berkshire Hathaway at $7.50.

The reporter wanted a villain. Buffett gave him arithmetic.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

THE WOLF OF WALL STREET'S SUCCESS FORMULA

Jordan Belfort made $50 million in 1 year selling $5 stocks to the richest 1% of Americans

Penny stocks were built for broke people chasing a miracle.

He flipped the buyer. Same $5 stock. Now pitched to the top 1%.

Nobody had done it in an organized fashion. That was the entire edge.

Then the second half, which he ranks first.

He hired nobody from what he calls the Lucky Sperm Club. No pedigree. No degree. No connections. Regardless of age, race, creed, color, background, education.

They walked in with one asset: desire.

He amplified it, handed them a system, and within 6 months they were rich.

That is the whole formula. A niche nobody had organized, plus a script anyone could run.

He also says he was reluctant at first. Same limiting beliefs as everyone else in the room.

Anyone can find a $5 stock. Almost nobody builds the room around it.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

THE WOLF OF WALL STREET "SELL ME THIS PEN"

Jordan Belfort owed $110M to his victims when CNN handed him a pen and asked him to sell it.

He refused.

The movie version takes 4 seconds. Grab the pen, tell the other guy to write his name down, watch him reach for a pen that isn't there. Manufactured need. Applause.

On live TV, Belfort called that a trap.

No context. No history. Nothing known about the buyer. So the salesman starts talking, and every word is a guess.

Then he ran the real version on Piers Morgan.

How long have you been in the market for a pen?

3 months, Morgan said.

What kind of pen do you use?

Easy ballpoint, Morgan said.

2 questions. That's the whole method. Belfort now knows the price band, the grip, the use case, and that a buyer exists at all.

The amateur does the opposite. Leads with the feature. This is the best pen in the world, it writes upside down.

Belfort's word for that: you sound like a moron.

And here's the part nobody clips. He said if Morgan had answered no, he'd have killed the pitch on the spot. Have a nice day. Go find someone who wants a pen.

The man who paid $110M in restitution and served 22 months of a 4-year sentence built his entire method on walking away from people who don't want the thing.

Anything else, in his words, is jamming a pen down someone's throat.

The pen was never the product. The 2 questions were.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

THE WOLF OF OF WALL STREET SELLING LIVE

Jordan Belfort gets 20 minutes with a $27M dairy owner who has never heard of him.

The ask doesn't come until minute 10.

Before that he just asks questions. The brothers. The father with the minority stake. What keeps him up at night.

The owner hands it over: China. 15% domestic share, an organic accreditation no other Australian company holds, and not one facility on the ground.

That's the wound. Belfort never sells into it.

Instead he shrinks the ask until saying no looks strange.

Not the whole account. Not fire your current broker. "I don't need to be the guy that takes you from 0 to 50. I want to be the guy that takes you from 50 to 500 million."

Then he does the risk math out loud. One small hedge. 30 days. Worst case you lose 1 basis point and fire him. Best case 25% and $27,000 saved on money already sitting there.

"Is that going to put you in the poor house?"

The owner says probably not. He just argued himself out of his own objection.

The real block comes anyway. Farming runs on trust. The banking relationship is 3 generations deep.

Belfort doesn't fight it. He loops back and rebuilds from scratch. Merchant bank since 1886. 3,500 employees he'll comb through by hand. Referrals only, never cold calls.

Then the same 6 words, over and over, all 22 minutes. Sound fair enough?

Near the end he says the ugly objection before the owner can: "If I asked for all your business right now, you'd say get out of here."

22 minutes of tape. Zero product detail. He never explains a single hedging instrument.

He wasn't selling a bank. He was selling 30 days.

[AI Avenger @AI__Avenger]

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[AI Avenger @AI__Avenger]

@quroolarc So true

[AI Avenger @AI__Avenger]

WARREN BUFFETT’S MOST ICONIC INTERVIEW EVER

$10,000 put into Berkshire Hathaway in 1965 was worth $1,000,000 by the time Warren Buffett sat down for his first TV interview.

1985. Omaha. Corn growing minutes from downtown. Net worth past $500 million. He had never been on television in his life.

He gave the whole method in 2 rules. Rule 1: don't lose. Rule 2: don't forget rule 1.

Asked what matters most in a money manager, he didn't say intelligence. He said temperament. You need enough IQ to get from his office to downtown Omaha, and not one point more. What you actually need is a personality that feels nothing about standing with the crowd or against it.

His test for real value investing: would you care if the stock market shut for 5 years? If yes, you're not investing. You're watching a price.

He values the business first, then looks at the quote. That order matters. The number can't infect the math if the math came first.

Then the part everyone skips. 30 years in, he had never owned a technology company. Never a share of IBM. Called it a marvelous company anyway. "It's gone right past me." He was fine with it.

His frame was baseball. In the market there are no called strikes. They throw US Steel at 25. They throw General Motors at 68. You can watch thousands of pitches and swing at none of them, for 6 months, for 2 years, and nobody rings you up.

That's why professionals can't run it. Their clients start yelling swing from the stands.

Wall Street sold him 50 people whispering. Omaha gave him the mail and the facts.

The market throws pitches all day. Nobody can call a strike on you.

[Superior @andreysuperior]

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