Placeholder Image

字幕表 動画を再生する

  • MALE SPEAKER: Hello, and welcome everyone

  • to another episode of our Value investing Series.

  • We have a very special guest with us today.

  • So in thinking about introducing him,

  • I have to start off with a series of experiments,

  • a series of studies that were done

  • at Stanford by the professor Walter

  • Mischel in 1960s and '70s.

  • These are also most widely known as the Stanford Marshmallow

  • Experiment that you might have heard of.

  • Essentially, it was an experiment.

  • It was basically a bunch of studies in which children were

  • offered a choice between one small reward provided

  • immediately, or two small rewards if they waited

  • for a short period, which was about 15 minutes, during which

  • the tester would leave the room and then return.

  • The reward was sometimes a marshmallow, but often

  • a cookie or a pretzel.

  • In followup studies, what these researchers found

  • was very surprising.

  • These children who were able to wait longer for the preferred

  • rewards tended to have better life outcomes

  • as measured by SAT scores, educational attainment, body

  • mass index, and other life measures.

  • Now why am I mentioning this?

  • Our guest today is no psychology professor.

  • But he happens to be a Stanford alum.

  • And he happens to be a world famous value investor.

  • In speaking about his investing process and philosophy,

  • you will see parallels between delayed gratification.

  • Let me share a quote from his recent interview

  • with all of you.

  • He describes his process saying, "We

  • tend to benefit in life when we sacrifice something today

  • to gain something tomorrow.

  • That is true for companies.

  • That is true for individuals."

  • His focus, he says, is on businesses

  • that have the capacity to suffer, that is, they can

  • reinvest their capital at high rates of return

  • so that the wealth will continue to compound

  • into years into the future.

  • Thomas Russo, our guest, is a preeminent investor

  • of our times who began his investing journey in 1982

  • after an encounter that changed his life.

  • He was studying law and business as a graduate student

  • at Stanford when Warren Buffett came to address his investment

  • class.

  • As Mr. Russo explained in a recent interview,

  • he was dazzled by the speed of Buffett's mind,

  • his quirky delivery, and his beguiling

  • habit of courting everyone from Bertrand Russell to Yogi Berra

  • and the wisdom of his deeply thought ideas.

  • This inspired him to finding his own investment vehicle

  • and starting his value investing journey.

  • We are so glad that he's here in person

  • to share his experience and his journey

  • and his insights with all of us here.

  • Thank you for coming.

  • So without any further ado, ladies and gentlemen,

  • please join me in welcoming the one and only Thomas Russo.

  • [APPLAUSE]

  • THOMAS RUSSO: I'm so pleased to be here.

  • I actually thought the setting would

  • be a much different setting.

  • I thought we'd be underground in some catacombs with a group

  • of people worshipping an outlawed

  • faith in Silicon Valley, the faith of value investing.

  • But here we are, next to the free food,

  • the wonderfully lit room, great chairs.

  • So being a zealot in the investment business today

  • doesn't bear the marks that it did 2000 years ago

  • for religious zealots, I guess.

  • It's a great honor to be here, especially at this time.

  • It's a really good excuse to get away from the markets, which

  • is something that's welcome.

  • Even though I say that, we've had an unusual period of time

  • which reaffirms what [? Surapa ?] described

  • as this value investing preference for businesses that

  • have the capacity to suffer, because you think

  • about my last three years, we've certainly suffered when

  • compared to the S&P 500, which has been elevated by sort

  • of global capital flows.

  • And we've had businesses that, right through this,

  • have been investing in their strong global brands,

  • but showing a modest growth at the reporting level

  • because they often invest a portion of their net profits

  • against future business prospects.

  • Now recently, almost a third of our portfolios in beverages--

  • and the world is now quite reaffirmed about the value

  • of beverage brands through the noise about the AB InBev

  • acquisition of SABMiller-- we own both those shares,

  • and it's helped generate performance recently

  • in the face of a plunging market.

  • And then I was reminded of this again today, which

  • was the results of an announcement by JT Tobacco

  • to acquire American Spirit from Reynolds American Tobacco.

  • Well, quite extraordinarily, the price

  • was almost Silicon Valley-like.

  • It was 300 times operating income

  • for a business-- they paid $5 billion for a business

  • that I think had around $500 million in revenue,

  • much smaller base of profits because it's still

  • investing in its own growth.

  • But they saw something that they could take around the world.

  • And it reaffirms-- within a business like RJR,

  • where people often overlook the investment

  • because it lacks sizzle-- that the strength of the brand,

  • the predictability of cash flow, and the ability,

  • most importantly, to reinvest that cash flow going forward--

  • leaves it quite valuable.

  • I'm going to come over here so I can move some of these around.

  • I did, in fact, also welcome the chance

  • to come up because I'll talk tomorrow

  • to the students in Professor Jack McDonald's class, which

  • I've done for the past 25 years, having

  • graduated from his class.

  • And it was there that Buffettt came to our class

  • and provided some early insights.

  • I'll go through a couple of quick slides.

  • As an investor, you're always, at least in the value investing

  • world, encouraged to invest for the long term

  • and let market disruptions pass you by, hold on.

  • And I was reminded of this in June of 2008,

  • when I was in Africa with my family on a safari.

  • And every day we'd go out to visit the range

  • and look for animals.

  • Each one looks more ferocious than the next.

  • And every single time, the guide would say, look,

  • if you're ever separated from the group, and you're alone,

  • and you're being charged by a lion or anything

  • else-- a chameleon, anything that

  • might come at you-- freeze, and it'll ignore you,

  • run right past you.

  • But if you run, they'll chase you down.

  • That was the rule again and again and again.

  • Finally we came upon this guy.

  • And he said that, that's a Cape Buffalo.

  • If ever you're alone and you're separated from the group

  • and you see one coming charging at you, run like hell.

  • And so that happened in June of 2008,

  • when the market was just in free fall.

  • And at the time, I sort of felt like maybe we

  • should run like hell.

  • We didn't, and we haven't.

  • It's my belief, it's been my belief,

  • that equities are the preferred form

  • of investing for one capable of enduring short-term pain

  • for long-term gain.

  • Equities will be the best way to do that.

  • And along that line, I would just

  • want to make a point about this other Stanford experiment

  • that you referred to.

  • I do believe definitely in deferral in the investment

  • world-- as you can see, a little less as it

  • comes to marshmallows.

  • I tend to grab the big ones and eat them quickly.

  • But the principle's the same.

  • In fact, I incorporate the principle in one

  • of the early lessons that Buffett

  • gave at an annual meeting of Berkshire, where he said,

  • you know, really, investing is as simple as "Aesop's Fable."

  • It's about the bird in hand versus the bird in the bush.

  • The only thing you need to know-- because you know what

  • you have-- what you need to know, which is uncertain,

  • is what you'll end up with when.

  • And he says, it's as easy is that,

  • and then he says, it's as hard as that.

  • I'm in an audience at Google.

  • And I think I read that the minutes spent

  • on YouTube in the last second quarter versus the prior year

  • was up 60%, and that's on a million users.

  • And I can tell you that if you keep up that type of growth

  • rate, it won't take that long.

  • You'll know what you're going to have, which is a lot,