[00:04:07] Intro: You are listening to the Richer Wiser Happier podcast, where your host, William Green, interviews the world’s greatest investors and explores how to win in markets and life.

[00:04:27] William Green: Hi folks. I’m really thrilled to welcome our guest, Bruce Berkowitz, a famously bold and concentrated investor who’s managed the Fairholme Fund for the last 24 years or so. It’s lovely to see you, Bruce. Thank you so much for joining us.

[00:04:41] Bruce Berkowitz: Nice to be talking with you.

[00:04:44] William Green: I wanted to start by asking you a little bit about your early years. I know that you grew up in a fairly gritty working class suburb of Boston called Chelsea, where your father owned a corner convenience store. I. I’m wondering if you could describe the store and the neighborhood, and then give us a sense of what you learned about business from spending so much of your early life in this corner store.

[00:05:07] Bruce Berkowitz: The store was your typical corner grocery store where, as you would call it a bodega. People would, you know, working class people, blue collar people would come in the morning, buy some cigarettes, cup of coffee, newspaper, and this was before the days of the lottery tickets. So they would play a number or they would gamble some, a small amount of money.

[00:05:33] Bruce Berkowitz: And then they’d go on to the bus or the train and get to work and they would work their jobs and they’d dream all day about maybe winning a few hundred dollars and they’d reverse the process. Coming back, they’d see you in the afternoon, they’d find out whether or not they won, get another pack of cigarettes, maybe diet Coke, whatever.

[00:05:54] Bruce Berkowitz: And that in those days, the afternoon newspaper, then off to home and repeat the process. It was very interesting, the characters and people were working hard to make a living and enjoyed that store lot growing up from getting up at you know, 4 35 in the morning, picking up the donuts, that was still hot.

[00:06:12] Bruce Berkowitz: I used to always remember a couple of fresh donuts right out of the vat with a cup of coffee and I enjoyed it and people, you learned a lot about people.

[00:06:22] William Green: You wrote an essay many years later. That was, it was actually the introduction to part four of securities analysis the famous book by Ben Graham and David Dodd.

[00:06:32] William Green: And you started the essay, which was called Go with the Flow, by talking about really the lessons in cash flow for people who understood a store like that. And you ended the essay with a sentence where you said, one way or another, if there’s enough money in the cash register, somebody will find a way to get it out, referring to activists and dividends and share buybacks.

[00:06:51] William Green: And they’re like, could you talk about what actually, in a very tangible, physical, visceral way you learned about cash and free cash flow is the lifeblood of a business just from actually being there watching the till. And I assume sometimes manning the till yourself.

[00:07:08] Bruce Berkowitz: Well, the cash register that’s all accounted with the cash sale.

[00:07:12] Bruce Berkowitz: Cash goes in, cash goes out to pay for your inventory. To pay your employees to pay the taxes, your rent cash comes in on the products you’re selling. And really, at the end of the day was judged by what was left in the cash register, what the difference was from the beginning of the day to the end of the day.

[00:07:32] Bruce Berkowitz: And I’ve always used that analogy to look at businesses, to follow the cash count. The cash. I mean, the cash did not lie. I mean, no matter what, you may have put into a ledger what was in cash register counted.

[00:07:47] William Green: There was a lovely line from an interview that you did with the late and beloved Outstanding Investor’s Digest, which is a wonderful publication. There’s an interview you did back in 2009. Where you said, I’ve always acted based upon the free cashflow of companies relative to their price in the marketplace. And that seemed to me such an essential understanding of how the stock market works. Can you talk about that a little bit? That simple observation?

[00:08:14] Bruce Berkowitz: Yes, my best decisions you know, a lot of the very good decisions I made were based upon the figuring out the distributable cash a company had, how much cash they were generating after spending what they had to maintain the steady state of the operation. Sticking to those numbers were quite important, especially in you know, analyzing the banks and financial services companies and all else.

[00:08:42] Bruce Berkowitz: cause at the end of the day, all you can spend is cash. And the cash is what is going to determine your liquidity and your balance sheet. And there are so many accounting tricks. Gap doesn’t does not at all times portray the reality of a business, especially when it comes to depreciation, amortization or very, all the non-cash, non-recurring charges, non-cash and non-recurring charges.

[00:09:10] William Green: And your father, whose name I believe was Barney Berkowitz, ran a bookmaking outfit out of the corner of the store. If I’m right in thinking, and I had read a story that he had a heart attack when you were maybe 15 or 16, and you actually quit high school for a couple of months and took over the bookmaking operation. Can you confirm what actually happened and what you learned from the experience?

[00:09:35] Bruce Berkowitz: Well, I don’t know where you dug that one out, but pretty good. It was a fabulous experience. I learned more during those couple of months. I remember. Five in the morning, I turned into an adult, and, you know, five in the afternoon, I became a kid again.

[00:09:51] Bruce Berkowitz: I remember it was an all cash business. I, to this day, I remember having the twenties in one pocket, the tens in another fives. The ones went into a cigar box. But it was a great business. I ended up making about $2,000 a week. It was took about I think 10 years after that for me to make that kind of money.

[00:10:12] Bruce Berkowitz: But it was amazing how the love for people to gamble and how it destroyed so many people. I always thought that in psychology was, it was quite perverse where you have someone who would easily lose money gambling but would be outraged to pay 25 cents for a cup of coffee.

[00:10:31] William Green: And this was horse racing baseball games. What were you doing? You were making odds on these things?

[00:10:37] Bruce Berkowitz: It was a horse racing dog tracks football cards. The number lottery system was based upon, I believe, the paramutual system at a horse racetrack. And that’s what would determine the supposed called, supposedly a random process.

[00:10:53] Bruce Berkowitz: But it was you know, it was a tough town with some tough places but not the I think a few crooked racetracks and so on. So it was always interesting. But yeah, people were betting all sorts. That was the Daily Race forum was a publication most people read as opposed to the Herald or the Boston Globe.

[00:11:11] William Green: And I mean, in my in my book, I wrote in the introduction about how I’d come basically to think of the most skillful investors as consummate game players. And I was pointing out that it was no coincidence that many of these top-notch money managers would play cards for pleasure and profit. So I was mentioning the fact that John Templeton told me how he paid for his college during the Great Depression with his poker winnings.

[00:11:32] William Green: In part, Buffett and Munger obviously played bridge. Peter Lynch told me that he played poker and I remember him telling me actually that it was, when I asked him to recommend books, he said, no, it’s much more helpful to play poker if you want to learn about investing. cause it teaches you all about probabilities.

[00:11:48] William Green: And likewise, Ed Thorpe talked to me about winning at Blackjack and then even at Roulette. And so I came to think about investing really as this way to stack the odds very consciously and consistently in your favor. I. And so one of the reasons I’m so fascinated by your experience there is that I think you had this very early up close lesson in probabilities and odds and the way people screw up these things. Can you talk a little bit about that?

[00:12:17] Bruce Berkowitz: Well, I mean, the whole process behind gambling is it would start in Las Vegas with, I believe it was Nick the Greek, if I remember correctly, who was the most famous of odd makers who would have the starting odds for a game. And then based upon the flow of money, who was betting on what that, those odds would change and all sorts of arbitrage.

[00:12:41] Bruce Berkowitz: And the odds would be different in Austin and it wouldn’t be in New York if Boston was playing New York and so on. And my only job was to try and balance the book, try and get it equally weighted so that no matter who won or lost. I made something and I always had a 50% partner above me who sort of unknown partner.

[00:13:04] Bruce Berkowitz: There was always a telephone voice away and I was a minor. So I knew that I, you know, it was something that, this was not something I wanted to do as an adult because I thought it’s, there were no second chances here. But I do remember one good story. Someone came into the grocery shop, never saw the person before any better, a very large amount of money on a broken down nag of a horse and suffered downs that had huge odds against winning.

[00:13:37] Bruce Berkowitz: And I took the bet and I said, there’s something wrong here. Says this is not the person who comes in with a dollar, $2. I mean, this person is putting a large amount on crazy with at crazy odds. So, you know, you have your option in that business. You can call upstairs. You can give it away to the person above you.

[00:13:56] Bruce Berkowitz: So I said, I don’t want to have anything to do with this bet. So I made a phone call. I said I’ve taken this bet. Do you want it to this unknown person on the other line? And person took it, and of course the horse won. And mysterious person comes in with two sharp bags of money. The person comes and collects their winnings.

[00:14:16] Bruce Berkowitz: And that mysterious voice calls me and says, kid, never give me a bet like this again. So now something made me say no. There’s something wrong. This bet is out. It just doesn’t make sense. The risk is way too high. This is, this can come back and bite you. So I, that always stuck out to me. That, and the fact that how people were so willing to lose their money.

[00:14:40] William Green: Why do you think they were so willing to lose their money? I mean, cause they approached the stock market in the same sort of way, right? Like I, I remember a few years ago, some friends of mine, I mean, I knew them.

[00:14:50] William Green: I knew them when they first had a kid at the same time as I first had a kid. And I saw them working so hard for their money. And then a couple years ago they were calling me and they were like, yeah, we are thinking we should just buy like Tesla and this and this, and like, just roll the dice.

[00:15:05] William Green: And I was like, what’s the money for, is it for like five years away, 10 years away? And they’re like, no, it’s our son’s college fees for next semester. And you’re like, really? And it, you know, I don’t know. It was just terrible. Like the instinct to gamble. Like my wife is always saying, really? You think the stock market’s that different than the betting shop?

[00:15:25] Bruce Berkowitz: Oh, it’s greed and envy. It’s as simple as that. You just see everyone around you making money on Tesla. You go out, you listen to people who you’re sharing a dinner with, telling you how much money you’ve made. And you, on tv, you hear about all of these positive outcomes.

[00:15:42] Bruce Berkowitz: You, you never hear about the losers and the people that are wiped out their college savings or whatever. You just, you hear the good stories and no one tells you really about their losses. They want to tell you about how good they are and their wins, and it gets to be too much for you. It’s just it’s too, it’s head it.

[00:16:01] Bruce Berkowitz: Why am I not part of this? I remember it happened to me and I was living in New Jersey. I told my wife at the time that, you know, I can’t, we can’t go out for dinner anymore. I listened to another person. Tell me about how much money they’re making, day trading. In the stock market. I just can’t, I can’t take it. We can’t go out anymore until there’s a crash and people become sensible again.

[00:16:23] William Green: And do you think those early years when you were working in, the bookmaking business, like did you see disaster that made you think, that made you so averse to loss? I mean, was there something visceral about seeing people losing blood money?

[00:16:39] Bruce Berkowitz: Oh, well, in the early days I wasn’t an adverse to loss because I had nothing to lose. And nobody did my family, I mean, the whole neighborhood, I mean, that was my world. You know, when you grow up in a certain neighborhood some people never leave that neighborhood don’t, until they’re an adult, until they have to get on a bus to take a job.

[00:17:00] Bruce Berkowitz: So, I was I was very much interested in how to make money. And Corner Shop was interesting, very hard work. The bookmaking was much easier but was much riskier. You had to deal with people that I didn’t think it was that healthy to deal with. I knew I was going to have a very short career in the bookmaking business.

[00:17:23] Bruce Berkowitz: It wasn’t as if I was in London or England, or I was at Stanley, Leisure and so on and or Ladbrokes at the time. But and I once looked at investing in the business, but in the end I couldn’t because I saw the people that the Friday comes around, you take your check to the corner store or to the bookmaking shop in Birmingham, you cash it.

[00:17:47] Bruce Berkowitz: And by the time Friday evening comes rolling around, you already lost most of the money and your family isn’t going to eat, and now your family needs a loan. I just, I don’t think it was a very honorable way to make money.

[00:17:59] William Green: Yeah, it’s interesting. I remember interviewing a famous investor for my book who I won’t name, and he had made a lot of money investing in casinos at one point, and I said to him, do you gamble yourself?

[00:18:11] William Green: He’s like, no, never. It’s moronic. I would never do that. And I sort of pointed out that there was something slightly tawdry in that, right. That he was sort of exploiting the worst in human nature. And he was sort of slightly taken aback, I think that I said that. And he was like, yeah maybe that’s right. But there does seem something unseemly about it.

[00:18:30] Bruce Berkowitz: You know, I can understand if someone has to feed their family and they don’t have any savings and they’re making a living the best way they know how and they’re not hurting anyone physically, hurting anyone. But, you know, once you start to make some money and you know, you have enough hamburgers to eat enough pizza. I just don’t see the point of it. It’s not beneficial to society.

[00:18:56] William Green: Yeah, and I feel bad being sounding moralistic about it, so I apologize in advance to anyone who’s offended.

[00:19:01] Bruce Berkowitz: Well, you know, I you put yourself in the other person’s shoes, right? I would not want to lose all my money playing roulette knowing that you’re going to lose all of your money.

[00:19:14] William Green: I remember Ed Thorpe saying to me when I asked him if he gambled and Ed, I always regarded as probably the greatest game player of all investors. He said, as far as gambling is concerned, if I don’t have an edge, I don’t play. And that seems to me such a smart and fundamental insight.

[00:19:32] Bruce Berkowitz: Right. A loss of the house. , [Crosstalk] I mean, I just had a, I have a friend in London who owned Crockford’s, same person who owned Stanley Leisure, huh and I would go to the casino and I would just watch, you know, these individuals, mysterious individuals come in with a cashier’s check for 5 million pounds, and they’d go from one roulette wheel to another.

[00:19:55] Bruce Berkowitz: I mean, they did not even wait for the number to see which number the ball landed on. They would just depend upon the copier, whoever it is, to tell them. And they couldn’t spend it fast enough. And my friend had one recurring nightmare that they would win, but then they would lose it somewhere else.

[00:20:13] Bruce Berkowitz: He was very happy for people to win. It was the greatest marketing in the world. He just hoped. He just always hoped that they would come back and lose it place in which, where they wanted.

[00:20:23] William Green: Back in my youth, I was obsessed with gambling, but also with the history of gambling. And I studied the guy that Crockford’s was based on.

[00:20:31] William Green: There was a history book about him and he was this, if I remember rightly, this sort of working class guy who basically ruined a generation of the richest, dumbest English aristocrats. And I remember they would go in there and they would literally, they would bet on whether one raindrop or the other would reach the bottom of the windowpane first.

[00:20:50] William Green: And you would have these moronic guys from schools like I went to like Eaton, who would literally lose their entire country estate because, you know, one raindrop hit, you know, got to the bottom slower. So you really see the insanity of it.

[00:21:06] Bruce Berkowitz: Well, and in its most extreme form, it’s a sickness. Because the, it’s a sickness to the point where would prefer gambling and losing than not gambling at all [Crosstalk].

[00:21:18] William Green: Did you ever gamble yourself after that or did you started the… [Crosstalk]

[00:21:21] Bruce Berkowitz: No. Never gambled.

[00:21:22] William Green: Really?

[00:21:23] Bruce Berkowitz: Never gambled. I used to, a couple of times I went to the casino with someone who did gamble and I immensely enjoyed just watching the action and he gave me a lesson on how to get comped in every major casino in Vegas without spending any money.

[00:21:38] Bruce Berkowitz: I did enjoy that, but for a day or two. But I never went back and never gambled. I don’t have the, I don’t have the memory for gambling and gambling done well. Is tedious, but I don’t, no, I don’t see how it helps anyone. And a lot of people have built a lot of beautiful casinos.

[00:21:58] William Green: Yeah. So you also, your dad, his other job, I guess, was driving a taxi part-time. And I remember you once saying the part of your motivation in getting ahead in life was that you didn’t want to end up driving taxis like your dad. Like, why not? I mean, what was he like and what did you learn from looking at his life and how tough it was?

[00:22:19] Bruce Berkowitz: Well, it’s a tough life driving a taxi, but, you know, by nature, my father was a gambler and he wasn’t a very good gambler. So, you know, you know, no matter what he earned it disappeared. So I learned a lot from the failures of the gambler. Huh. Taught me a lot of what not to do. And it, you know, and it, it didn’t bother me much.

[00:22:41] Bruce Berkowitz: So I felt as if I was having an out of body experience growing up.

[00:22:46] William Green: What was he like?

[00:22:48] Bruce Berkowitz: Worked very hard, worked from five in the morning to nine at night and worked like a mule. Never got ahead and always figured couldn’t figure it out, couldn’t figure out the formula.

[00:23:02] William Green: So in a way, [Crosstalk] your life has been a, so in some ways your life has been a reaction to that. You know, you’ve solved the puzzle better than your dad.

[00:23:11] Bruce Berkowitz: Oh, absolutely. Yes. Yes. I just thought, why would it, why would anyone want to have that kind of misery? Huh? And what was your mom like? I was the first generation to, I think to graduate from high school, let alone to go to college. So she was a typical stay at home mom who together with my father dreamt the dream, the great American success.

[00:23:36] Bruce Berkowitz: They never kind of figured out how to do it, but the strategy was mostly one of hope. They must’ve been pretty awed by your success. I know. I know. They lived to see a good deal of it. Right?

[00:23:48] Bruce Berkowitz: Yes. They got to see, they got to see the beginning. My father died. Young mother made it. Yep. They were my father died knowing he didn’t have to worry about anything and so did my mother.

[00:23:58] Bruce Berkowitz: So, I think in the end they felt they accomplished their mission. Taking care of their children.

[00:24:03] William Green: Nice. So you, to go back to the chronology of your story, you studied at the University of Massachusetts, Amherst, and I think you’ve were the first in your family to attend college. You got a BA in economics.

[00:24:16] William Green: You graduated, I think in 1980, and I remember seeing that in one week. You turned 21, graduated and got married to your college sweetheart, Tracy who’re, still married to all these years later. And then you went off to Manchester in England where my mom is from in about 1981 to join the firm Strategic Planning Institute.

[00:24:35] William Green: Am I right in thinking that it’s around that time that you started trading stocks, that you would go into the Merrill Lynch office in Manchester and would trade? Is that where you started?

[00:24:46] Bruce Berkowitz: I started that with a friend during high school where I wasn’t old enough to have an account. So I open up, I use his accounts. And then when I was at university, instead of taking normal courses, I would just take independent studies to help professors publish finance papers on how to beat the stock market or management consulting or, you know, you know, to growth share matrices do regression analysis, which I really didn’t understand at all, but whatever they needed.

[00:25:17] Bruce Berkowitz: So I really went four years at university of, you know, working for young professors who were looking for tenure. So I ended up as you know, as economics courses much of which I don’t have the slightest idea about to this day in terms of Lagrangian multipliers and linear algebra. I, no idea, but got it done.

[00:25:37] Bruce Berkowitz: They needed work done. So I did the research forum, which ended up getting a job with a management consulting firm in Cambridge, the Strategic Planning Institute, which was a cross between General Electric and the Harvard Business School. So about how you can, using statistical analysis, you can sort of drill down to the basic characteristics of successful business and then you.

[00:26:06] Bruce Berkowitz: Have a bunch of people with no experience, then go to business managers and explain to them how their businesses worked. And yeah, eventually went over to London, started an office in London because there was a professor at the Manchester Business School who was a consultant for the firm.

[00:26:23] Bruce Berkowitz: So we went to the Booth School, I believe it was Booth School of Business in Manchester just in time for the moss side riots.

[00:26:31] William Green: And then you started to invest at Merrill and then got hired at Merrill. Like what happened there?

[00:26:38] Bruce Berkowitz: I started to make money in the management consulting, and it was it was a 24 7 job, so moved down to London, living out of a hotel.

[00:26:47] Bruce Berkowitz: So it was great. It’s like a hotel was paid for. Four meals a day. It was paid for, learned all about afternoon tea and how to quickly gain 20 pounds and you were able to take your salary check and just bank it. And that’s yes. And I opened up an account at Barrow Lynch and started to invest and realized that this is just another form of bookmaking, but this is a legal form of bookmaking.

[00:27:14] Bruce Berkowitz: This is great. No matter what I do, the broker wins. There’s something to this. So I like learned about at that time London was considered part of the Middle East. It was London in the Middle East and it was in an old bond trade on the time life building. Yeah,

[00:27:34] Bruce Berkowitz: that’s right. I went, I worked there. I was at, I edited the European Middle Eastern African edition of time.

[00:27:39] Bruce Berkowitz: But by that, but that, by that time we had moved, we moved south of the river. But yeah, that was in the grand old day. That was a beautiful building as well, where you were. Oh, just building, right? It was right. It was no, it’s fabulous building. And you know, I, so I told the managing director there, what he wanted to know, and ended up with a job.

[00:27:58] Bruce Berkowitz: He said you know, why should we hire you? You don’t come from any money. You’re not from England. I said, yeah, but I think I’m going to make you a lot of money. And some reason he appreciated that. And he hired me as a young broker, and I was very lucky.

[00:28:13] William Green: And why do you think he was so good at it? What was it about you that made you good as a salesman and good at picking stocks? Or were you not yet good at picking stocks?

[00:28:23] Bruce Berkowitz: Well, I, you didn’t have to be good because we were in that period from Molker. Ultra-high interest rates starting to head down from 1980. So if you were involved in fixed income and you were bullish, I mean, you couldn’t help but make money.

[00:28:42] Bruce Berkowitz: And those were the days of zero coupons at 30 year strip securities and tigers and cats and warrants on strips. And it, it was an amazing area and did very well, and it was a did very well. And every time I wanted a bonus, I ended up with a membership to a club. Huh? Mark’s Club. Harry’s Bar. It, there, it was great, but it went on and on and I started to make some reasonably good money.

[00:29:09] Bruce Berkowitz: Then I was approached by Lehman Brothers. I wanted to do more Merrill Lynch. They were very happy with what I was doing, where I wanted to go into the asset management side. cause I thought that you know, I need, now I’ve made enough, now I want to start to do, you know, I want to start to invest my own money and I want to develop a rule where I’ll only invest other people’s money, the way in which I will invest my money.

[00:29:33] Bruce Berkowitz: So we’ll, and that didn’t really go over very well in the brokerage world, that was considered a conflict of interest. So I ended up opening up the Lehman Brothers office in the West End.

[00:29:44] William Green: Yeah. So you were Lehman for a few years, right? And then went to New Jersey for them as well, I believe as a senior portfolio manager.

[00:29:51] Bruce Berkowitz: Yeah. Went, yeah, went to Manhattan, started a portfolio management program, and then I was the only employee that left Lehman Brothers to go to Smith Barney Asset Management. At the time when Lehman Brothers was being set was, that was being separated out.

[00:30:08] William Green: When you look back on those years, you obviously saw a lot of regular investors doing dumb things and failing, and so I mean, you could see the rubbish they were being sold by other unscrupulous brokers or people who didn’t know what they were doing.

[00:30:23] William Green: You could see high expenses and the like. You, I assume you could see all of the emotions running high. Like what did you see sort of from the belly of the beast that enabled you to understand, okay, that’s the type of investor I don’t want to be.

[00:30:37] Bruce Berkowitz: Well, in its purest form, it’s a bucket shop. There were people, you know, just figuring out ways to take money from people who had it in the form of commissions and hidden fees. It was shocking. I had a friend absolutely shocking.

[00:30:52] William Green: A friend of mine in London got me to open a brokerage account back. I mean, I must’ve been about 21, right?

[00:30:57] William Green: I mean, I had about $3. And he was like, yeah, no, it’ll be great because you’ll be able to you can cancel it in a few weeks, but I’m going to get the points for you. You know, the incentive for you opening it. And so he just had sort of rigged the whole system. None of it really was to do with the client at all.

[00:31:17] Bruce Berkowitz: Right? And yes, and you could see the behavior of the people there, they knew deep down inside they knew what they were doing was wrong, and they were very self-destructive. But I remember, and as before going back to the United States when I joined Lehman Brothers, I started you know, again, resting, the fixed income markets were doing unbelievably well.

[00:31:38] Bruce Berkowitz: But I decided there’s a better way to invest and. As most people by accident, you find out about Benjamin Graham and Warren Buffett or Peter Lynch or Bill Fischer. You read and you say, all right, this makes sense. This makes a lot more sense than what you’re hearing from the, from brokerage firms.

[00:31:57] Bruce Berkowitz: And then you try and do it in your own way. But that is a different way to invest and it’s not as profitable for the brokerage firm or for the broker. So there was a process that you have to go through where you’re literally taking 2, 3, 4, 5 steps back in order to go forward. You know, the idea of buying something and holding it, it’s not very profitable.

[00:32:21] William Green: And you came very early to this almost defining feature of your investment career, which is a tremendous amount of concentration in a very small number of stocks.

[00:32:32] William Green: Am I right in thinking that there was a point when you were at Smith Barney Investment Advisors, where basically your portfolio was like two stocks, one of which was Berkshire.

[00:32:40] Bruce Berkowitz: Berkshire? Yes. Berkshire, Hathaway, Berkshire, Hathaway Fireman’s Fund at the time Fund, American Enterprises, or at one point it was a huge position in Wells Fargo when the banks were getting hit.

[00:32:53] Bruce Berkowitz: Yes. I always enjoyed getting into the minutiae and trying to understand the business as opposed to sort of roughly understanding a lot of things I wanted to try and better understand or fewer industries.

[00:33:09] William Green: Was there a lot of sort of kickback from your bosses? I mean, were they appalled at the idea that you would have so much money and so few stocks, or would did it not really matter?

[00:33:20] Bruce Berkowitz: Oh, it did matter in the in the asset management area. I mean, they, there was no way I was going to manage one of their funds. I had my clients were fine with my style, but it was totally against what. Every portfolio manager was doing with the money. It’s just the, their closet indexers who need to be in a lemming like group so that no matter what happens, no one gets blamed.

[00:33:47] William Green: Why do you think you could handle it emotionally and psychologically? The, this tremendous concentration? cause now as we’ll get to later, I mean, when I looked at your most recent for the Fairholme Fund, you had about eighty-two percent in one stock, which is St. Joe, which we’ll talk about more the tiny stake in enterprise, well not tiny, but not big in enterprise products partners.

[00:34:10] William Green: And then sort of rounding errors in things like Berkshire and Imperial Metals and like, so it’s really like a two-stock portfolio and almost like a one-stock portfolio, which a lot of people would look at and be like, that’s insane. And I’m wondering like what it is in your personality. And in your intellectual understanding about how to win the game of investing, that led you to this real ultra concentration.

[00:34:38] Bruce Berkowitz: Well, to have 82% in one company is very unusual. And you have to you have to understand how that developed. I mean, when I bought St. Joe, it was a two 3% position in the Fair Palm Fund. And then over the years, the position grew and the huge success that I had in the fund was followed by huge declines and the shareholders of fund.

[00:35:06] Bruce Berkowitz: So it became a bigger and bigger position as there was less money in the fund and as the position and appreciated. So as you know, if someone’s selling the fund, remaining shareholders are buying more of what’s left in the fund. Unless you decide to sell it on a pro rata basis, which I did not.

[00:35:29] Bruce Berkowitz: I, you know, I’ve been involved in the company for a long time. I’m a chairman of the company in the last 10, 15 years, I’ve been trying to figure out a way in which I can make certain investments that potentially can stand the test of time. That’s something that I’ll feel comfortable with my children and their children owning to the extent that is possible.

[00:35:54] Bruce Berkowitz: So one study, when you look at wealth in the United States and around the world, it does fascinate me to the extent that wealth is built upon real estate income producing income producing real estate. And I tried to understand why I ended up moving to Florida. I. I learned about St. Joe Company, which is developed by a DuPont around the Great Depression, who at one point was the largest landowner in Florida.

[00:36:20] Bruce Berkowitz: And I saw everything that was going on in Miami and up and down the East coast and in Naples, the West Coast. And I thought it was just a matter of time that such events would happen in Northwest, Florida, which is very reminiscent of the Hamptons with the East west beaches, except the dunes are much nicer in Northwest Florida than they are in the Hamptons.

[00:36:45] William Green: And you have a house in Hamptons as well, right? So you…

[00:36:47] Bruce Berkowitz: Yes. My wife has a house in the Hamptons referred her bribe to move to Florida. She was worried about not enjoying Florida. So, the house in the Hamptons was her a 50th birthday present to say, let’s give Florida a shot in where comfortable. Where she, you can move to the Hamptons.

[00:37:04] William Green: Ah, nice. So, so you started buying back in, I think 2008 and then 2009, and then you stopped buying around 2010. And then this is a long and winding road with St. Joe, right? Like you pushed out the CEO more or less in 2011 and ended up only about 30% of the company’s shares in going on the board and selecting other members of the board.

[00:37:26] William Green: So you really took control of your destiny in a way. Can you talk about the importance in a way of, I mean, I guess this is partly the lesson of your misadventures with Sears, which we can talk about as well. The learning, the importance of having control over your own destiny, if you’re going to have a really big bet like this.

[00:37:45] Bruce Berkowitz: Yes. And you have to be responsible to all shareholders. I mean, my, my fight with the Joe people that they were wasting the shareholders money they really did not know what they were doing. You have to, how St. Joe started. The ownership of St. Joe was basically St. Joe, I should say, was basically owned by two trusts, the DuPont Trust and the Noyes Trust.

[00:38:09] Bruce Berkowitz: So it was from a DuPont who passed away. His brother-in-law took over a couple more executives, but it was really a charitable trust, which were the owners of St. Joe and the trustees the trustees, the directors of St. Joe they treated as at their own personal playgrounds. So I made a concerted effort to ask them to leave, and I thought that this company had such wonderful assets and still does, but, and that they were slowly given away or burned up when it was cold out that that they had to go and that the company could be run for much less and needed to focus on their shareholders.

[00:38:54] Bruce Berkowitz: They were owners and everyone had to be treated well. So I ended up putting myself in that position, so I thought I might as well carry on. And St. Joe today is doing more in a year than they’ve done in 10, 15 years. And we’re witnessing the great migration south now where Florida’s the place to be.

[00:39:15] Bruce Berkowitz: Texas. The, you know, the migration trends are quite amazing. Property values, the ability to get work done, all important issues, safety, it’s all coming across. And St. Joe is a major beneficiary of those trends.

[00:39:32] William Green: You were saying it’s now the third most populous state in the US and has the largest population growth rate.

[00:39:38] William Green: And I think you were saying that Northwest Florida, where this is based is growing even faster than the rest of the Florida. Of Florida. So in some ways, yeah, you’re aligning yourself with what you’ve called a multi-decade wave to surf. Is that fair to say?

[00:39:52] Bruce Berkowitz: Yes. Yes. Man, I’m building a home there. I don’t know if I can convince my wife to move there, but I’m going to give it a shot.

[00:40:00] Bruce Berkowitz: It’s very pleasant. People like to work. There’s a sort of libertarian freedom and there’s respect for law and order. Weather is fantastic. That cost of living is quite reasonable. The school systems are all developing nicely, the infrastructure’s being laid in and it’s working. And the company is making very nice progress on a, that yearly basis and has a 50 year road ahead of it where as long as people keep moving south, the company has a huge amount of land and resources to take advantage of that migration.

[00:40:36] William Green: In a way, it’s about as far philosophically from what you were doing or what your peers were doing back in those days at Merrill and Lehman and the like. Right. I mean, this is, it’s about as far from speculation, much closer to viewing, investing as running a business.

[00:40:55] Bruce Berkowitz: Yes. I mean to, you know, to keep going, I am my pursuit is towards running the running businesses and to better understand the dynamics.

[00:41:04] Bruce Berkowitz: I think investing is best done what it’s most, business like that doesn’t mean I haven’t made mistakes and clearly, I have. But St. Joe is a very good example about, you know, defense. Not losing, protecting against inflation, you know, making time, a valuable asset and population growth. And there, there’s a lot of elements to it.

[00:41:28] Bruce Berkowitz: And I feel comfortable being the chairman of saying, I think that we have a great management team who, you know, really doing quite well, continuing to progress. And it’s showing in the, you know, the area is a blank canvas. It’s showing now in hotels and apartments, which were never done, residential communities going up everywhere.

[00:41:50] Bruce Berkowitz: It’s the development of a town sort of reminds me a little bit remember the game SimCity where you had a blank canvas and all sudden you had to lay, you have to lay in all the infrastructure.

[00:42:01] William Green: It’s interesting because in some ways it seems, from my understanding, from my reading about it, that your de-risk the investment in various ways, right?

[00:42:09] William Green: It was a money-losing business. So you changed the management, you restructured the business there. At a certain point, there was a buyback of stock. There was.

[00:42:17] Bruce Berkowitz: So we bought a third of the company, thirty-seven percent of the company back at a very good price. There’s no, you know, they’re net debt-free at the corporate level you know, plenty of liquidity, very conservatively leveraged.

[00:42:32] Bruce Berkowitz: And you know, building up, going from a hundred homes a year to approaching, you know, 2000 homes and home sites a year from zero apartments to, you know, over a thousand apartments, to one small hotel, to over 10 hotels, you know, a club you know, thousands of members. There’s golf. Speech. It’s the whole ecosystem.

[00:42:55] Bruce Berkowitz: And St. Joe does a very good job of helping the community, donating land for whether it was the international airport or for school systems or for medical campus. It’s nice to see it working. It’s nice to see the cash flows too.

[00:43:12] William Green: I mean, it’s interesting to me because in some ways it gets at this broader theme in your whole career of trying to be a durable investor, right.

[00:43:20] William Green: Trying to survive. And it’s interesting when we look back at things like Merrill and Lehman, both of ’em went under. Right. So, I mean, in a way, when you think about survival and the lessons of Lehman’s demise, Merrill’s rescue, and how you’ve tried to set up St. Joe’s so that it survives. What does this tell us about how to actually survive as a long-term investor?

[00:43:45] Bruce Berkowitz: Maybe if I’m a masochist, I’m constantly taking five steps backwards in order to hopefully advance much further. But you know, this but yeah, this now is about my remaining investors, my family and trying to lay in some durable investments that I don’t have to, that I won’t have to worry about.

[00:44:05] Bruce Berkowitz: I mean, you always have to study situations and the only constant is change. But there have been multiple generations of success with real estate, and it’s a, it’s been an initially a slow game, and it’s a little hard to understand because of the end values Most people really can’t see beyond a few years.

[00:44:27] Bruce Berkowitz: And then after five, 10 years, everything’s discounted to zero. But, you know, you go through 10 years and you know, caught quadruple quintuple earnings. And you do it with using very little, a small percentage of the land, you start to get a sense of what’s possible in the future. It’s no more than the history of what happened in Miami or Florida Dale or Sarasota or Naples or any community that’s developed.

[00:44:55] Bruce Berkowitz: I’ll give you an example of about Orlando. You know, years and years ago, a gentleman comes into the St. Joe office way before my time, decades before my time, and wants to talk with the ed ball, the CEO of St. Joe Ed Ball’s a busy, important man in Florida. He keeps him waiting. And then eventually gentleman has passed a note, a med ball, and he opens the note and he reads it, says, dear Mr. Disney, I’m sorry, but we don’t do business with carnival people. Ha. Disney wanted to create Disney World. On St. Joe’s land, it had every, it had the ocean, the beaches, the freshwater lakes. It had the elevation. A lot of people don’t understand that St. Joe’s land. The average elevation is, you know, 20, 30 feet up.

[00:45:46] Bruce Berkowitz: You have the beach, then you have a bluff except on the bays, and then it slowly rises to about 70 to a hundred feet. The highest elevation in the Florida’s in Walton County, which is one of St. Joe’s counties. So Walt, Disney figured it out. This was the place for Disney World, and Ed Ball said no. So then he quietly started to buy up farmland and Orlando rest. You know the story.

[00:46:14] William Green: So let’s say you are right long term and you, this is just a time arbitrage and you just have a hell of a lot more patience than most investors. How even so do you respond to people who cop that it’s irresponsible and reckless, have eighty-two percent of your portfolio in one stock, which is a very, it’s a not unreasonable point to make, right?

[00:46:35] Bruce Berkowitz: No, not at all. I mean, I keep selling St. Joe. I’ve been selling St. Joe for years and years. I sell it, it’s growing. People have taken money out of the fund. I am now I am, my affiliates on about thirty-eight percent of the fund. So between thirty-eight percent plus cash in the fund. I mean, I don’t find it unreasonable.

[00:46:55] Bruce Berkowitz: The worst case may be that I’m the only shareholder left and owning St. Joe. But it’s not as if I bought more or I’ve been holding it. I mean, I’ve been selling St. Joe to try and get that down. But St. Joe had a very good year last year. Sorry, it’s back to 80. It’s back to 80% at a certain point.

[00:47:16] Bruce Berkowitz: I’ll sell some more and we’ll see. Shareholders don’t like it. I’ll end up being the only shareholder, but aid, but I’ll continue to I will continue to lighten the load in St. Joe. And when I find other investments, I will start to make them. But as you know, St. Joe has been a lot of hard work and just seeing the beginnings of progress.

[00:47:38] William Green: The other significant investment at least when I saw your last filing that’s still in the fund, is this company Enterprise Product Partners, which, I gather supplies, hydrocarbons and their derivatives and the like. So it’s got something like 50,000 miles of pipelines and 260 million barrels of liquid storage and 14 billion cubic feet of gas storage.

[00:47:59] William Green: So obviously it’s got this very important infrastructure for the hydrocarbon business. Can you talk about how that embodies what you look for in a business?

[00:48:09] Bruce Berkowitz: Now enterprise has a heck of a toll booth. It started 50 odd years ago. Duncan family, Mr. Duncan with I believe it was two gas trucks and he’s turned it into A, well, well, he’s passed away now, but the company’s a $75 billion enterprise.

[00:48:26] Bruce Berkowitz: They basically have a critical highway system of getting hydrocarbons from point A to point B. It’s gigantic logistics company. They take it. Separate. They upgrade, they store, they get it to where it needs to be, and they do it for a fee for a very small fee. And they, they do it quite honestly and efficiently.

[00:48:55] Bruce Berkowitz: They will help to lead to a cleaner environment. They’re very much involved with the company’s processes. And enterprise isn’t the only one. But in the substitution of natural gas for coal and wood products, I mean, we burn more coal than we’ve ever burned. We burn more wood than we’ve ever burned.

[00:49:14] Bruce Berkowitz: I mean, just substituting natural gas, a much cleaner energy source would be a huge element in cleaning up the environment. And especially when the world is growing and everybody around the world, they want what we have. They want a high quality of life. And there’s a direct correlation between energy usage and quality of life.

[00:49:37] William Green: When you research a company, what you’re basically trying to do is kill the business. You are going through this process of asking these relentless questions about what could destroy the business. So when you look at a business like Enterprise or like St. Joe, what are the sort of questions that you are asking that our listeners when, whether they’re looking at these companies or at other companies, the sort of questions that are really helpful in a process of trying to decide whether a company can survive that process of death by a thousand Bruce Berkowitz cuts?

[00:50:13] Bruce Berkowitz: Well, in the case of Enterprise they have a very large distributable cash flow, about three and a half dollars per share. They pay out seven and a half percent dividend distribution, but over $2 per share. So they’ve averaged, 12, 13 to 15% per annum on the investment. Over the past twenty-five years, they’ve increased their dividend every year and they behave in a way that allows them to make money at all price environments.

[00:50:43] Bruce Berkowitz: When you go, you look back, it does, it didn’t matter the price of oil, natural gas for enterprise, they’re on their fee basis allows them to make a good profit. So it’s a, that’s why I call it, it’s a toll booth where you want to call it an annuity with upside. And they’re going to be in the, they’re going to be in the lead with now carbon sequestration.

[00:51:04] Bruce Berkowitz: That is carbon capturing of carbon from the flu stack and getting it underground or eventually turns into rock, or whether it’s going to be the, you know, the ammonia, hydrogen value chain hydrocarbons are not going anywhere. We need them for a. 97% of all products. If you take a look at medications, Tylenol, aspirin, and ibuprofen you name it Advil, all the names, they’re all petroleum based.

[00:51:33] Bruce Berkowitz: Most drugs are so the product is needed. It needs to be delivered in a cleaner form. If it’s going to be used for energy transportation, it’s happening. The US is already reducing its emissions. It’s just the rest of the world that, that wants a higher quality that’s catching up. And enterprise and others have done a very good job in efficiently getting there, helping the United States to become energy independent, especially what’s going on with Russia, you Ukraine, whether it’s Iran, it’s good that the United States is energy independent.

[00:52:10] Bruce Berkowitz: It’s good that the United States is able to help their friends when it comes to energy. Throughout history, energy seems to have been the ultimate form of wealth of currency. So the product’s not going anywhere. It’s absolutely essential. We’re going to use more of it, we’re going to use it in a cleaner way, and enterprise is going to continue to grow.

[00:52:33] Bruce Berkowitz: And, you know, seven and a half percent distribution. Now it’s a master limited partnership. So there’s some attributes to MLPs that investor has to think about, but it’s a great cash flow. The money comes in up markets, down markets, sideways markets, at least over the last twenty-five years. And the next twenty-five years look pretty good.

[00:52:56] Bruce Berkowitz: It’s the, it’s an easier story than St. Joe. And I wish I understood the nature of midstream companies sooner. But I’m sorry. It’s a bit of a random process sometimes how you get from one place to another. But I’m very impressed with the company and you can count the cash easily, and the cash is quite significant.

[00:53:20] Bruce Berkowitz: And you’re starting off with a 10%, roughly about a 10% cash yield, distributable cash flow. And it’s been, and it’s going to grow every year. And that should that’s all you need in this life to do very well. I think the richest man in the world in days gone by me think 9% was all he needed.

[00:53:40] Bruce Berkowitz: And I tell my kids, you don’t need to do much better than eight, 9% as long as you don’t lose.

[00:53:45] William Green: Does the fact that you haven’t been able to find many other businesses or any really to include in your portfolio at scale, say something about the environment that we are in at the moment? Does it reflect the fact that.

[00:54:00] William Green: Valuations are relatively high and there are few opportunities, or is it just that you’ve changed the way you invest and you want to just bet on these two things that are incredibly long running investments? What’s going on here?

[00:54:12] Bruce Berkowitz: Well, I’ve been forced to change the way I invest. I mean, if you look at my history, it was Wells Fargo.

[00:54:20] Bruce Berkowitz: It was Goldman Sachs. It was a Bank of America coming back. It was AIG and then it was Fannie Mae and Freddie Mac. And, but Fannie Mae and Freddie Mac were in, are in, still in conservatorship after generating hundreds of billions of dollars. And after I lost nine zero in the Supreme Court of the United States, on the issue of can the government continue to keep all the money that Freddie and Fannie earns, and you have to come to the conclusion.

[00:54:55] Bruce Berkowitz: That in highly regulated industries, there’s a possibility that ownership is an illusion. In other words, if one bureaucrat can decide that two companies with five, $6 trillion of assets can be taken in the name of national security or whatever you want to come up with, then what does that have to say about your ownership position in those companies where the owners had no say, no vote, and where companies don’t even talk to the owners.

[00:55:35] Bruce Berkowitz: It’s so normally I would be a very heavy investor in banks today. Given the rising interest rates, it was pretty obvious what was going to happen. With interest rates going up and the fair market value of banks assets and liabilities dramatically changing. But how do you invest in a business where, again, one regulator on one panicky day can take your assets away from you really?

[00:56:05] William Green: So there’s been a very marked shift in your approach to investing because of your experience with Fannie and Freddie where just to fill in our listeners, my sense is you’d bought preferred stock for something like a fifth of liquidation value, and then the government put them both in conservatorship in 2008 and basically took something like 80% of the companies I’m probably getting this wrong and then promised to inject tens of billions of dollars and then basically change the plan around 2011 and 2012 and said no, actually we’ll just keep the dividends as profits for ourselves is that basically what happened?

[00:56:42] Bruce Berkowitz: The government two government agencies did a deal with themselves, with each other as to how to keep all the money and push out all the owners for an undetermined amount of time. Yes, that’s basically what happened. They under conservatorship, a conservator, or in the case of Fannie and Freddie, a federal conservator can do whatever’s in the best interest of not just the estates, but for what’s best for the country, which is a, turns out to be a slightly different definition of what it means to be in conservatorship.

[00:57:16] Bruce Berkowitz: And if that’s the end you saw it recently with the bank takeovers high flying one day gone tomorrow. The owners did not have a chance to put more money in. They did not have a say in the matter. They were just told you are wiped out. So if you know, given how interest rates. Frozen from zero to where they are today.

[00:57:38] Bruce Berkowitz: If banks truly marked all of their assets to market, not just their investments, but their loans. For example, if Bank of America gives me a whole mortgage a 30 year mortgage for 3%, you know, what is that mortgage that they’re holding worth today? It’s not a hundred cents on the dollar, but the, that loan, that mortgage will be on their books at a hundred cents on the dollar.

[00:58:10] Bruce Berkowitz: And if a regulator ever decides that we are going, we are entering a new period of regulatory accounting where all assets must be marked to what they can be sold for both loans and investments, then a lot of major players would be significant equity deficits. Then it would be up to one or two individuals decide who wins, who loses, who lives, who dies.

[00:58:40] Bruce Berkowitz: It surely will not be up to the owners of the company.

[00:58:43] William Green: So you in a way rose to stardom by going into these fairly murky situations where most people fear to tread. Whether it was AIG where you became the second largest shareholder after the government or Bank of America, I think back in about 2009, 2010, something like that.

[00:59:00] William Green: So you were going into these companies that were very ugly or general growth properties when it was in going into bankruptcy. So the way that you were investing back then was very different than what you are doing now, it sounds like.

[00:59:15] Bruce Berkowitz: Yeah, I was literally counting the cash flows of the companies.

[00:59:20] Bruce Berkowitz: In the case of the banks, when you looked at their earnings, you know, pre-tax, pre-provisioning. You saw a huge cash flows and that those cash flows were going to be needed to resolve bad loans that they may have put on the books, like the proverbial pig going through the Python, but there would be a limited amount of time.

[00:59:45] Bruce Berkowitz: At the same time, banks put on the very best loans during the most difficult times. They tighten up their standards, they charge more, they ask for more. They want more equity. Tough times. Banks put on money. Good loans, the safest of loans. So you could easily see how this was all going to end and it was going to end fairly well.

[01:00:09] Bruce Berkowitz: There’s more than enough earnings power from the company. And yeah, that, and that’s when I wrote the piece on Wells Fargo many moons ago. And you looked at their pre-per you, you looked at their pre-provision, pre-tax, and they had more than enough wherewithal to get through their problems and they were going to come out and they were going to hit spectacular earnings.

[01:00:31] Bruce Berkowitz: Now, the saying should be true of the banks today, unless the, unless the rules change or, but there is this problem with their equity to assets. And if they’re required to keep you know, 10, 12, 15% equity assets and there was really accounted for properly they would not have it.

[01:00:55] Bruce Berkowitz: I mean, you would see significant nationalizations across the board. So I if I understood, you know, if I didn’t. If I thought the rules would not change and they probably will not change, then there are potentially some very good investments out there. And I am looking at a few banks but the situation is a lot worse than portrayed in the quarterly reports of financial institutions.

[01:01:26] William Green: I’m thinking in a way about the old days when you were a bookmaker and there was a sort of predictability in some ways, but then there were these moments of wildness where the guy upstairs could say, don’t ever do that again. Or someone could decide you know, they wanted to beat someone up or whatever.

[01:01:41] William Green: You, you know, it’s a sort of unpredictable game. It feels like, in a way. What’s happened here again, is that with Fannie and Freddie. Banks getting taken over. You started to realize the game’s not as reliable and dependable. The rules, the rule, the rules are so unreliable that I can’t be sure that I have an edge anymore. Is that a fair analogy?

[01:02:02] Bruce Berkowitz: I think the government is less reliable than the guy upstairs. I can’t handicap it anymore. I thought that it was, that it, if you told me that I would lose nine to zero in the Supreme Court of the United States over an issue of ownership and whether or not preferred share owners had a say on 34, 30 $6 billion of investments, you would think you’d have some say it’s a very country’s going down a very slippery slope.

[01:02:34] Bruce Berkowitz: Now, I understand some people thought this had to be done, but come on, they’ve made hundreds of billions of dollars and now they’re just a piggy bank for social programs. It’s, I mean, it’s Chad’s crack cocaine for the government now. I mean, how do you how are you going to give up that kind of monthly income when you want to make, you know, when you want to expand this social services net or you have an election coming up, or you want to show the deficits not as bad or whatever you want to use tens of billions of dollars a year for.

[01:03:09] William Green: Talk, talk to me a little about Sears, which was, I guess the other really ugly thing that you went through in recent years where you had started buying back in 2005 and you became the second largest owner after Eddie Lampert. And at one point you were on the board, and then you stepped down from the board and I think 2017, and then eventually Sears filed for chapter 11 bankruptcy in 2018.

[01:03:30] William Green: And I’m wondering like what the what went wrong there? What was the mistake you made? What was the mistake? Eddie Lampert made? What happened and what was what was preventable also?

[01:03:44] Bruce Berkowitz: Well, I had a very simple thesis about Sears, that it was one of the largest real estate empires in the world.

[01:03:55] Bruce Berkowitz: And that from a failed retailer can come a great real estate portfolio. That was my point, and that’s what I was trying to push for. I thought it was very reasonable. I thought it was sensible. I did not think Sears was going to become the next Amazon, even though Amazon did become the next Sears. But the board didn’t agree with me.

[01:04:24] Bruce Berkowitz: Eddie, Lampert didn’t agree with me today. I think that’s exactly what they’re doing. They’re trying to convert all of their remaining real estate into productive mixed use places, which makes tremendous sense to me. But that processing billion dollars earlier, but it would’ve been a painful process Yes.

[01:04:42] Bruce Berkowitz: With employees and so on. But that was my simple point. And there always seemed to be the re the recovery of retail always seemed to be right around the corner, but never came. So eventually, if I gave up, I thought it would’ve been easy. Eddie Lampert’s a smart guy. I thought it would’ve been easy for him to see that the only true defense and would be to focus on the real estate, similar to Alexander and Alexander’s and other retail stories of the past where, you know, these retailers were very popular places, very valuable land where not far away from where people lived. And all you’re seeing it happen now everywhere, and it should have happened to Sears.

[01:05:36] Bruce Berkowitz: So in a way, is your investment in St. Joe, where you have much more control, also a reaction against the pain of Sears, where you’re like, I didn’t ultimately have that much say that much control over what Eddie Lampert could do.

[01:05:51] Bruce Berkowitz: I was running Sears, I would’ve done for Sears what I what I’ve recommended to do at St. Joe, except at St. Joe, I’m the chairman. And the management team agreed with me. I mean, it took time to find a management team that would agree with me, but they but the, you know, it’s very sensible.

[01:06:11] Bruce Berkowitz: You got to, you have to do what’s best for all shareholders. You can’t be a big, wealthy guy that has the ability to roll the dice and take a chance. And you know, I believe that if you’re going to be the chairman of a company, you have to be somewhat the captain of the ship. You’re going to, if your ship’s going down, you should go down with the ship.

[01:06:32] Bruce Berkowitz: You should not tank your shareholders, or you should not see your shareholders suffer. That’s why at St. Joe, I don’t take a penny. I don’t take a, I don’t take a penny of compensation. I don’t even ask for my expenses to be reimbursed. Don’t take a board salary. I don’t take, I’ve never taken a share of stock and I won’t, you know, I, if St. Joe does well, I’ll do very well and all shareholders will do very well. And I’m at a point in my life where I want to, I want to see that, and I’m at a point now with St. Joe, where I can start talking about the cash flows. It’s not just the value of the real estate, but it very much is. I mean, you know, think about it, if you could buy a company and you buy it at $2,500 an acre, it’s not that hard.

[01:07:19] Bruce Berkowitz: A stretch to think about 5,000 an acre, 10,000, 25,000, a hundred, a million dollars an acre. It just takes time. We’re seeing it now. If you go through the tax rolls, you go to the county assessors of Walton County or Bay County, you could see the transaction prices and what’s going on there. It’s quite it’s quite good.

[01:07:41] William Green: When I look at your career Bruce it’s fascinating to me because in some ways it, it brings up this very fundamental issue for investors, which is that, that you need to diverge from the crowd in order to outperform, right? So you got to be a little bit eccentric. You got to have the courage of your convictions, a really independent thinker, and you have to do what you like.

[01:08:06] Bruce Berkowitz: I mean, because it requires a tremendous amount of work. So you have to follow what you like to do and what you think is going to win. You know, it was always my desire to invest client’s money.

[01:08:20] Bruce Berkowitz: The way I would invest my money. It wasn’t to build. A fabulous investment firm that could be sold. It was that I, for a reasonably small amount of money. So everybody take the ride together and when, and we get to a point, you know, if a St. Joe ended up becoming a Berkshire Hathaway and, you know, and it was no longer an investment, but everyone had their St. Joe shares distributed and St. Joe did well for everyone. What a nice way to end.

[01:08:49] William Green: There’s a real challenge here though, which is that as you pointed out in the past, the returns are lumpy and the path is winding. And most investors can’t handle the volatility and don’t have the patience, and don’t have the clarity of mind to see that there’s this happy destination.

[01:09:10] William Green: If they keep going and so it’s the same problem in a way that I saw in many of my interviews with Bill Miller over the years, and also in my interviews with Joe Greenblatt, that like getting your investors to come with you on this ride that’s very not just with St Joe, but throughout your career.

[01:09:26] William Green: Because your returns going back to December 29th, 1999, when you launched the Fairholme Fund have been really good, but so many people have failed to stay through the ride. How do you think through that issue that there’s this kind of fundamental mismatch between what it takes actually to win the game and what shareholders can actually handle?

[01:09:50] Bruce Berkowitz: I accept it and that most of my shareholders, I don’t know. I mean, I can’t really even communicate with my shareholders because if they go through a brokerage firm, that information is considered private. So I. I’ll have a name. Schwab will be a shareholder, but who those invests is a Schwab.

[01:10:10] Bruce Berkowitz: I don’t know. So I try and write once in a while. I try and be clear. I try and make sure I eat my own cooking and so that I can, you know, I feel the pain, I feel the joy. I have a second fund, which is quite different than the first, which is a focused income fund, which has a very good record, especially for a period, the period we’ve been through with interest rates.

[01:10:36] Bruce Berkowitz: You know that portfolio believes roughly two thirds in United States, Treasury bills, and it’s done quite so there, there’s a bit of a variation, but I understand if people are not interested in what I’m doing. I’m going, I’m going to stay with it until the last shareholder leaves and then I’ll be done.

[01:10:58] William Green: It just, it points at such an interesting philosophical question about investing. So I’m not saying any of this critically. I actually just think it really gets at a fundamental kind of mismatch. Right. And so, the someone called there is a mismatch.

[01:11:10] Bruce Berkowitz: Yeah. There is a mismatch in terms of you have a daily liquidity of a mutual fund and you have a very large position.

[01:11:17] Bruce Berkowitz: The only way I can sort of, handle that mismatch is by having been the significant shareholder in the fund and having a significant amount of cash and when the positions become quite large, continuing to sell some at appropriate times, but. It is a problem. I mean, people, they want, people, investors want it both ways.

[01:11:46] Bruce Berkowitz: I mean, you are one investment of many. So they, there’s, I mean, how much diversification does a person need? Multiple managers, multiple funds. But then you want diversification within each one of those separate funds. I can understand it, but you might as well go into an index fund.

[01:12:04] William Green: Do you have other investments yourself? I mean, how you, I know you put the bulk of your money in your funds. What, like, how do you think about diversifying with your family’s fortune?

[01:12:14] Bruce Berkowitz: No, it’s just shareholder. I mean, each of the funds by far, anything outside of the funds is invested the way I’ve invested for my other shareholders, I am a, not in any investments that, not offering to other shareholders. Once in a while I’ll do something with my children just to help them progress. But no, I don’t invest with others even though there, you know, they’re quite successful people out there. So, no I’m strictly eating I, the being the cook of what I’ve done for investors and that, whether it’s for the Charitable Foundation, family Next Generation we’re all in it together. And over time the funds will be more diversified, but it’s going to take some time.

[01:13:10] William Green: Can you talk a little bit more about this issue of cash that, that you raised? Because I’ve seen you say very interesting things about cash in the past one, in, in the interview I mentioned before that you’re done with.

[01:13:21] William Green: Outstanding Investors digest back in 2009, you said, it’s not hard for me to be detached. This is emotionally during very difficult time at the bottom of the market. Then in March 2009, you said, I think that’s because I always keep three years of cash off to the side, so my family will be fine. Whether it takes three years, five years, or even 10 years for a recovery and stock prices.

[01:13:42] William Green: And then another time, you said cash is the equivalent of financial Valium. It keeps your cool, calm and collected. Can you talk a little bit more about that? Because you, you keep an uncommonly large amount of cash compared to a lot of the best investors.

[01:13:59] Bruce Berkowitz: Well, I always have, and I felt the need to, I’m being there, you know, for unknown unknowns, emergencies.

[01:14:09] Bruce Berkowitz: I can’t control and I do it for the funds now. And I have always had a relatively high. Position for clients and for my funds. Yes, it is all that. It’s financial value and it gives you flexibility, use necessary liquidity financial value being that you don’t have to worry about paying the bills.

[01:14:31] Bruce Berkowitz: And you could think about what something’s going to be worth five, 10 years rather than tomorrow or get to that critical point that so many people do where they go through a very difficult period and then say to themselves, they always get to the same place. Can I afford to lose anymore? In other words, can I afford for the investment to go down any lower in value?

[01:14:54] Bruce Berkowitz: And of course, the answer’s going to be no. And that’s going to be the rationale for selling the investment. Usually that takes place when people do not have the appropriate liquidity to put aside. Yeah, I think it’s important for anyone I’m dealing with or dealing with me that they do have a significant amount, cash. So they don’t develop huge levels of anxiety over the investments. That’d be the first one to tell ’em to take money out.

[01:15:24] William Green: I remember once you also said that the people who had the smoothest ride were those in Bernie Madoff, and you said Life is not smooth. And it, it seems to me that part of the lesson of your career is that there have been so many ups and downs and you have to set yourself up to survive. As my friend Matt McLennan says, you, you got to set yourself up to survive the dips.

[01:15:49] Bruce Berkowitz: Yep. The dips are very painful. You know, some people say it’s easy, but it isn’t. And it’s easier for your own money than it is for your clients and shareholders because you know, let’s face it, most shareholders are going to base you based upon the price movement on a daily basis of, of the fund. That’s it. They don’t want to really know about the basics. You try and explain the company why it’s good, try and give analogies and so on. But most aren’t interested. They just want to see you make the money in a smooth, a possible way. It’s just, there’s no free lunch. It’s either not free or it’s not lunch. It’s just there. You can’t you know, life isn’t that smooth up into the right process.

[01:16:34] William Green: So how do you, I’d like it to be, yeah. How do you deal emotionally yourself with the difficult times? Because you’ve been through, I mean, you went through this amazing period, right? In the first 10 years of the fund where you were like, God, there was everything you touched.

[01:16:48] William Green: Right. Turned to Golden and Morningstar said, you know, you were the manager of the decade, the domestic manager of the decade, and I remember Fortune get some Jeff. Yeah. Fortune said you know, you were some, something like arguably that the greatest manager on earth or something to that effect, something hyperbolic.

[01:17:06] William Green: And then you go, I didn’t read that. Yeah. And then you go to being like, this fool who, you know, your long term returns have still been very good, but you know, o over the last 15 years you’re trailing and then everyone starts to kick the I’m not allowed to swear on this podcast, but kick whatever out of you.

[01:17:26] William Green: And how do you deal with that emotionally? Because it seems to me that managing your own emotions and keeping some sort of equanimity is. Along with having cash on the side and knowing what you own is pretty key to actually being able to handle the pain of this ride.

[01:17:45] Bruce Berkowitz: I don’t pay a lot of attention to what people write. I never did and I haven’t, and I’m grateful for what I have. I bet it’s been a very interesting road and I look back and I think, boy, I’ve done a lot better than I ever thought I would. I have a great family, try and spend time with them, especially make up all those times. You didn’t spend time with your family when you were on the road or building a business.

[01:18:16] Bruce Berkowitz: And I look forward to the future. Still many years left and I believe I’m wiser. And I don’t think I’m going to make the same mistakes and I’m looking forward to the next 20 or 30 years. But on my terms where it’s enjoyable, I don’t market. I don’t raise money. I don’t look for claw. I mean, no, I’m just, I’m only dealing with people who want to be with me.

[01:18:43] Bruce Berkowitz: And that’s it. And so I’ve changed dramatically and appreciative of the past with all its ups and downs and look forward to the future.

[01:18:52] William Green: Is there a philosophical or spiritual or religious kind of well, of wisdom that you can draw on that helps you to get through this stuff?

[01:19:03] William Green: Whether it’s your Jewish heritage, which I share, or stoicism, which people like Bill Miller draw on, or philosophy like, like how do you actually deal with this stuff philosophically so you can handle these ups and downs?

[01:19:18] Bruce Berkowitz: Yeah. I feel like the downs was so long ago.

[01:19:22] Bruce Berkowitz: And I feel like last few years are getting better. Last year was great and I believe when the portfolios in a good position, my families in a great position. I control my day, do what I want, only talk to the people I want to and I’m learning new and I’m continuing to learn and reading on subjects and understanding where I put my mind somewhere else, petroleum industry, midstream services.

[01:19:52] I never thought I would be reading books on our hydrocarbons and understanding the chemistry and trying to, you know, I spend an awful lot of time trying to figure out how the world really works and I get significant joy from that. Yes, I want to do better. Yes, I want better performance.

[01:20:11] Bruce Berkowitz: But I really just want better performance for the people who are with me. And that’s it. Its less ego driven, really quite at this stage. Much less ego driven. No, I’m in I’m in the third act now, I am three act play. So, very happy. Wanna spend more time with my family. I want to see St. Joe develop into the company.

[01:20:35] Bruce Berkowitz: It’s becoming it should become. And I just want to figure out ways to just these days generate much more cash flow because of the higher interest rates and trying to figure out ways to lower the duration of investments because people, I am a bit worried about all the different possible events around the world, and I want to make sure that we’re ready for the portfolios ready for it, and the companies in which I have invested in.

[01:21:09] Bruce Berkowitz: They are ready for whatever adversity, in fact, not just ready for it, but being able to take advantage of it and what form that comes, higher interest rates. You always ask yourself, what happens if a small nuclear device went off somewhere? Would you behave?

[01:21:25] William Green: How vulnerable is St. Joe and Florida in general, but particularly St. Joe, how vulnerable is it to global warming and adverse weather events? Because I have a close friend who’s one of the great writers about environmental issues and the science of global warming and the like. And I remember him once coming back from a trip and being like, somewhat hyperbolically is like, Florida’s toast, dude.

[01:21:48] William Green: I mean, what, how do, given that you are somebody whose process is one of focusing on how to kill your business, how do you think through that issue of global warming and the impact of extreme weather events on Florida?

[01:22:01] Bruce Berkowitz: It’s an issue for Miami. It’s an issue for the East Coast. It’s issue for the west coast.

[01:22:07] Bruce Berkowitz: I mean, the elevation of Miami International Airport. I think it’s one foot or seven feet. I can’t remember. I mean, all the airports are basically zero elevation. I’ve been through been through a hurricane in Long Island. I’ve been through a hurricane in Miami, St. Joe is elevated. The land, most of the land is between 20 and 70 plus feet above sea level.

[01:22:31] Bruce Berkowitz: So there’s no surge there. There’s no surge, everything. It’s fairly new construction. I mean, there are some old parts, but everything that St. Joe does is built to the latest hurricane standards. So even during hurricane Michael there was very little damage. The only damage we had was two hour a couple of marinas, which were right on, on the bay.

[01:22:55] Bruce Berkowitz: But no flooding, construction, no issues. And it’s the safest part of Florida. So, I mean, people in Florida will continue to build up in the same way people build up in Venice or in other areas. But you’re already built up in Northwest, Florida. So the insurance costs are reasonable. You just don’t have the issues don’t exist, even though there’s a perception that they do.

[01:23:22] Bruce Berkowitz: And, you know, yeah, it’s a problem. If you’re living in a double-wide on the bay you have an issue. But if you have a, if you have a house or a townhome or apartment that’s fairly new, something that St. Joe’s been involved in you have a very durable house and you have an elevation where you don’t have to worry about surge.

[01:23:42] You have the latest in infrastructure, whether it’s gray water management, fresh water, electrical wires on the ground. I mean, you have modern infrastructure. So it’s quite good. It’s actually, it’s quite a positive for the area. So we’ve been through bad weather and we come out of it bigger and better cause people realize the natural defenses of the area.

[01:24:11] William Green: Going back to this issue of what your daily life looks like Now I like the fact that much like Bill Miller, actually, there’s a sense that o over the years of my interviewing Bill, that his life has become more and more aligned with who he is, and he lives the way he wants to live, and he does the work the way he wants to work.

[01:24:26] William Green: And there’s something kind of beautiful about seeing that kind of stripping away of the stuff that you do to please other people, and they’re just living in a way that’s kind of true to who you are. And I’m wondering, like when you look at your regular day now, especially given that you only own a couple of stocks how does it look?

[01:24:45] William Green: I mean, how do you spend much of your day? Because when Fortune wrote a profile of you back in 2010, you sounded like kind of a maniac, like answering emails at 4:00 AM and going for a power walk at 5:00 AM and then the basement gym and working seven days a week. Like, are you still like that or have you mellowed a little?

[01:25:05] Bruce Berkowitz: Well, I’m still working long hours, but it it’s much less with talking with people than it is just investigating, just continuing to try and figure out how the world works, whether it’s, you know, understanding on new investments in energy related assets or the latest in the tax codes and the various production incentives or, you know, how everything correlates with everything else.

[01:25:31] Bruce Berkowitz: I’m still fascinated by that and I’m learning more about topics that I wish I learned more about in college, whether it’s, you know, how electricity really works or quantum physics for computers, or just the basic chemistry, biology and how that relates to the investments. So I am. I have become more amused on learning different aspects of, and improving my education more so than I would’ve thought.

[01:26:01] Bruce Berkowitz: I’m definitely not playing golf, and I’m definitely not out there raising money. So I very much still trying to real, I, I very much know that I still have a lot to learn and I try and learn a little something every day.

[01:26:15] William Green: And are you less of a team player these years? Because I remember over the years, you know, you had a partner, Charlie Fernandez, who was an important figure early on when you were investing in in the bankrupt mall business and the like.

[01:26:29] William Green: And then I guess you guys’ parted ways around 2011. Like have you become more of a lone wolf over the years as you’ve become more. [Crosstalk]

[01:26:36] Bruce Berkowitz: My, you know, my greatest success when I was a lone wolf, when I had a relatively simple operation and I was 100% responsible for the investments. And that’s been, that’s the case today.

[01:26:55] Bruce Berkowitz: I have failed miserably in trying to develop a team of people that I could pass the torch onto. I have failed in every way known, and I’ve now, you know, come to the conclusion. I’m just, I’m not capable of doing that. So, I’m staying very focused on the investment process and I let everybody else handle the widgets and the accounting and compliance, and I have very good people to do it, but I am the solely responsible for the investments of Fairholme including the research.

[01:27:37] William Green: And is it just cause you’re like a little ornery and independent minded or what? Like why was it so hard for you to have partners?

[01:27:45] Bruce Berkowitz: I failed to at hiring people that can do the job that was needed. I don’t mean to sound harsh, but I selected the wrong people for the wrong tasks or, you know, I did, or I thought person A who is competent in a certain area could extend that competence to an adjacent area and just it didn’t work out.

[01:28:12] Bruce Berkowitz: And in the end I found out that I would have to do their work anyway. So it was, well, it was less work for me to do it to begin with. So when I’ve always been focused.

[01:28:23] William Green: When you look at other top notch investors who you’ve known over the years, I mean, I guess even when you lived and worked back in short Hills, New Jersey, you lived, you worked in the same building where I once went to interview Michael Price.

[01:28:37] William Green: So I’m guessing you knew him. Well, you’ve invested alongside Bill Ackman. You know, you’ve met a lot of these very successful investors. What do they have in common? Like, are there things that you see in them that you think there’s a reason why these people win this game and most people don’t?

[01:28:56] Bruce Berkowitz: Well, I don’t, well, I don’t think I’m as smart as they are, nor as good looking. Huh? Yeah. I, you know, I realize every year more and more I have a certain circle of confidence and basically it comes down to following the cash and you know, coming up with some simple valuation methodologies and then, you know.

[01:29:17] Bruce Berkowitz: Going into minutiae I mean, to try and figure out if I have a long-term edge. So to some extent there may be common elements, but I frankly don’t know how Bill does what he does with macroeconomics. I don’t know how Michael Price had a handle on, you know, so many different companies, but I’m just going to stay focused on doing what I believe I can do well and continue to do.

[01:29:47] Bruce Berkowitz: And just as Charlie Munger would say, you just need a few ideas in a lifetime to be wildly successful. And that’s what I’ve stayed focused on.

[01:29:59] William Green: It seems like one of the keys I. When I look back on your career is this ability to stick with games that you can win. You know, when you said earlier in our conversation that you realized you couldn’t handicap that game anymore, it seems like there’s a through line that goes all the way back to you as a 15 or 16-year-old boy trying to figure out the odds as a bookmaker that you, you need to know that the odds are on your side.

[01:30:25] William Green: And so as you’ve evolved over the years you know, the odds were heavily on your side when you were betting in on AIG and the like. But then later, once you saw that Fanny and Freddie went against you, you started to see, well, maybe the game’s not as being played the way it used to be played. And now with St.

[01:30:42] William Green: Joe, it’s like you’ve found a game where you have a really good sense that the odds are in your favor. Is that a fair, kind of overarching view of your career trajectory?

[01:30:54] Bruce Berkowitz: Yes, I think that is fair. That less volatility. Less chance of what I would call takers, people out there that can take what you have, either by regulation or taxation.

[01:31:10] Bruce Berkowitz: Yes. I keep narrowing the list down. The list of possibilities are getting slimmer and you know, maybe, you know, I’m, you know, I’m all, I’m studying waste management and rebar and alternative technologies for rebar and the great re-domestication of industry in the United States and the implications of interest rates going up.

[01:31:36] Bruce Berkowitz: And I keep trying to talk to smart people who I respect. And I mean that, that’s my day. And let me tell you, it goes by very quickly. Five o’clock in the morning starts, the only difference is I don’t stay up as late anymore.

[01:31:52] William Green: I got the sense you were asleep by nine o’clock reading, read, you know, listening to audio books and reading annual reports and the like.

[01:32:01] Bruce Berkowitz: You hit the nail on the head. I’ll start with the annual reports. Then when I’m done with the Kindle and or the e PDFs then it’s straight to audio books. Yeah. Especially yes. My, the latest was, who is it? The latest is Vat Club. Smell. His Energy and Civilization. Very prolific author.

[01:32:23] William Green: Yeah. I have how it works, which I gather I have to read, but I haven’t actually got around to reading yet. But I know that it’s the sort of thing I need to read.

[01:32:31] Bruce Berkowitz: It’s quite good. I’ve given it to all my kids. I don’t know if they’ve read it, but I’ve given it to them.

[01:32:38] William Green: What I mean, your ha you have these three children, right, who are adult, right? Danielle, Alexander and Chloe. So, two sons and a daughter. And I know your daughters very involved with your foundation and your art collection and the like what have you tried to convey to them over the years about what you’ve learned about how to construct a happy and successful and abundant life? Because I’m sure that’s a big concern when you’re as successful as you’ve been, not to let the money screw up your family. And what do you try to convey to your adult kids about how to live?

[01:33:09] Bruce Berkowitz: Well, they, well they know that most of it’s going to be given away via the foundation. And other than that I just try and help them and give them advice when they want to hear it from me and keep telling them to do what they like. You know, well, I didn’t know of anything of art, but Chloe art history and had a knack for artwork. So I support her in that, Daniel with real estate.

[01:33:34] Bruce Berkowitz: If I’ll support him with that. My son, Alex, is finishing up law school, so I don’t know how the slightest idea of what type of law he’ll be practicing. So, and, you know, whatever makes them happy and productive. That’s really all that I care about.

[01:33:49] William Green: And you’re unusual in that you’ve actually managed to sustain a marriage for a very long time in the investment industry. You know, I’ve mentioned four on the podcast. When Charlie Munger read my book, he said one of the things that struck him was just how many of us got divorced as he put it, you know, like, like, and he said it made sense because it’s such an all-consuming business that it’s very easy to neglect your partner and you got married to Tracy, I think in 1980.

[01:34:16] William Green: So this is like. Getting on for forty-four years after meeting in your dorm at UMass. And I read this old interview that you did with Graham and Doddsville in which you said it’s important whom you marry. The right person will be beyond words helpful, and the wrong person will destroy everything in your life.

[01:34:33] William Green: And I wonder if you had advice for our listeners who are trying to figure out, how do I actually be successful in my profession with all of the intensity that requires, and yet not wreck my family, you know, not be hated by my wife and kids. You know, what do you actually like, how do you, how, what have you learned about getting that balance right both through failures and successes over the years?

[01:35:00] Bruce Berkowitz: Well, so one aspect it’s maybe more up to Tracy and this to me, in terms of being tolerant. I think in the case of Tracy I’m sure she’s keeping one eye closed when looking at me. And I think that’s a good idea for everyone to do that. You go into something with both eyes wide open, but you got to relax a little bit.

[01:35:20] Bruce Berkowitz: Keep one eye closed that and you got to realize, you know, your children are different than you are. They’re going to, they’re going to pursue their own path, and you want them to be happy and healthy and productive, and that’s all you can ask for. Anything else is a cherry on the topping. So it’s more, you’ll have to ask Tracy that question about how she’s been willing to put up with me as opposed to my ability to keep Tracy happy staying with me when she sees this pretty monotonous daily routine.

[01:35:57] William Green: Yeah. Yeah. Well, Munger always said that the key to a successful marriage was low expectations. Right. I think he was only half joking.

[01:36:06] Bruce Berkowitz: Well, I think he was half joking. Yes. Yes. And, you know, and sometimes even to have a bit lower expectations for yourself.

[01:36:15] William Green: Yeah. Do you feel like you’ve become less hard on yourself over the years?

[01:36:22] Bruce Berkowitz: I’m trying to, there’s no one but more critical than you know, I know what I’ve made a mistake and I, you know, I feel it and analyze it to death. I mean, in terms of postmortems and got to let it go and move on.

[01:36:38] William Green: Do you have big regrets when you look back on your career or your life or anything? Or is that just not the way you function?

[01:36:46] Bruce Berkowitz: No, I don’t have big regrets. In fact, I’m quite happy I. Instead of having a disaster with Fanny and Freddie, what happens if it was a disaster with Wells Fargo early in my career?

[01:36:59] William Green: So it’s, in a way, what I’m hearing from what you’re saying now and from earlier in the conversation is you have this ability to reframe things so that they don’t seem that brutal to you. Like you’re like, well, I’m still pretty lucky. I’m still happy.

[01:37:13] Bruce Berkowitz: I try, I try to I don’t want to make it sound like it’s that easy, right? A lot of high performing people are very critical of themselves and sometimes it’s difficult to move forward, but really what you learn is your ultimate success is based upon how well you do after a failure.

[01:37:35] Bruce Berkowitz: And everyone has plenty, you know, no, no one’s adding a thousand. The question is, how do you. How do you change your way? How do you perform after it? How do you handle that failure? Learn from it and move on.

[01:37:51] William Green: I feel like sometimes I, you I look at my family history, which I suspect is not that different than yours, that, you know, my family fled from Russia and Poland and Ukraine and pogroms and the like, and I was always I mean, I ended up at Eaton right?

[01:38:06] William Green: Surrounded by all of these really posh kids. And I always had this tremendous pride in the fact that my family was decidedly not posh. That they were just incredibly resilient. And, you know, I, my, my narrative about my family and my own mind was that I would think of my grandfather who slept in the kitchen with his brother in Glasgow, and one of them became an eye surgeon and one became a brain surgeon.

[01:38:29] William Green: So it was all sort of drive and intelligence and there’s something I do wonder if just that sheer. Ability to be resilient through thick and thin is something that we learn from seeing our ancestors having to flee from different countries and the like. Does do you have that same sense of your family history of, as one of resilience and having to adapt and recover from setbacks?

[01:38:53] Bruce Berkowitz: Well, I wish I could tell you more about my family history, but it go, goes back a few generations there. It wasn’t even, to a large extent discussed, it was not and, you know, growing up was very, you know, could be very difficult. So I understood what it was like to not have any money or to be hungry or to not to be out of work.

[01:39:14] Bruce Berkowitz: So I mean this when you go through that kind of hardship as a kid, it doesn’t seem that difficult to have to put up with these severe blows. I mean, I’ve, that’s the way I rationalize it, that I’m very lucky, super lucky that I’m alive at an age that some people don’t make it to Kids are happy and healthy life still loves me.

[01:39:42] Bruce Berkowitz: Nothing to complain about. No hardship feel good. Still have, I think a good 20 years left in me. I’m enjoying what I’m doing. cause if I didn’t enjoy it, I wouldn’t do it. I don’t think, I mean, after decades, I don’t think you can fake it. I mean, did you have to enjoy it or you won’t do it.

[01:40:03] And if anything I’m learning more. I have no idea what’s going to happen tomorrow.

[01:40:11] William Green: Bruce, that’s a beautiful note on which to end. You’re in good company. I have no idea either, but God willing, it’s all going to be okay.

[01:40:19] Bruce Berkowitz: Well, thank you. It’s been very enjoyable. I hope I haven’t bored you too much.

[01:40:23] William Green: Oh, it’s been a great treat and I’ve really enjoyed, you know, studying your life over the last few days and you’ve had such an interesting career. And I’m sort of, I’m temperamentally very much on your side cause I love this kind of long-term contrarian and very independent spirited approach to investing. So I wish you much success.

[01:40:41] Bruce Berkowitz: Well, I’m very impressed with your research. I mean, you pulled out some nuggets I haven’t thought about in a long time. So, I don’t even remember talking about that in any interview, some of it. So, you have the great skill of the digging in for the investor.

[01:40:56] William Green: Thank you. Yeah. I suspect that investing and investigative journalism probably are not that dissimilar. And so just the voracious desire for more information and to understand things better and not at a certain point, I was saying this to you before our conversation started, that you start to feel almost like you’re insane because you’re so obsessive that you keep researching and studying and learning about stuff long beyond the point where it really makes rational sense.

[01:41:22] Bruce Berkowitz: Yes, I’ve been told that. I think you’re, I think you’re absolutely right. I mean, when the internet has created a whole new insanity for me. I mean, the ability to go back 10 years and as you do go back to what someone said 10 years ago, five years ago, a year ago, how they’ve changed, does it make sense what they’re saying?

[01:41:43] Bruce Berkowitz: Are they willing to address their mistakes of the past? Is it fairly is it consistent? They spend a lot of time digging in a lot of time, especially if it’s a public company with tens of billions of dollars with a tremendous amount of information on it. Yeah. And some people know how much, how far to go, and that’s enough.

[01:42:03] Bruce Berkowitz: But that’s the problem with focused investing. You know, if it’s 1%, maybe you could stop there. But if you want to make it a meaningful difference in your life you keep going. Especially if it’s interesting.

[01:42:18] William Green: I think you have to be a little crazy. There’s got to be an intensity and an obsessiveness really to get really good at anything and so.

[01:42:28] Bruce Berkowitz: What’s the term for that? You got to be a little bit on the spectrum.

[01:42:30] William Green: Yeah.

[01:42:32] Bruce Berkowitz: Yeah. I think that’s, yeah, that’s quite true. I think I, a quite normal person wouldn’t be doing this.

[01:42:39] William Green: On that note, Bruce, it’s been such a delight. All right. I hope I’ll to talk to you again before, before long hopefully. Maybe in Florida. I’ll come visit St. Joe, finally.

[01:42:49] Bruce Berkowitz: Alright. Please do. I’ll give you the tour.

[01:42:51] William Green: That’ll be wonderful. All right, lovely tot chat. Thank you so much. [Crosstalk]

[01:42:54] Bruce Berkowitz: Bye-Bye.

[01:42:56] William Green: Alright, folks, that’s it for today’s episode. I hope you enjoyed this conversation with the remarkable Bruce Berkowitz.

[01:43:03] William Green: As I’m sure you could tell, I had an absolute blast interviewing him and find him a fascinating character. I’m guessing some people will be appalled by the fact that Bruce has so much money writing on one stock and will think it’s grossly irresponsible. I definitely agree that this isn’t something that any of our listeners ought to do, but there’s something very impressive to me about the strength of Bruce’s conviction and I think it makes some sense that he betting for the very long term on a business where he has a good deal of control as Chairman of the board.

[01:43:36] William Green: In any case, I’ll be back very soon with some more fascinating guests, including a long in-depth conversation that I recently had with my old friend, guy Spear at his home in the Swiss Alps. In the meantime, please feel free to follow me on Twitter @WilliamGreen72 and do let me know how you’re liking the podcast. I’m always delighted to hear from you. Until next time, stay well.

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