 Warren Buffett made a fortune by doing this technique, this investment technique, but he doesn't want you to do it. You mentioned that 56 to 69 was the best period, actually my best period was before that. It was from right after I met Ben Graham in early 1951, but from the end of 1950 through the next 10 years, actually returns averaged about 50% a year. And I think they were 37 points better than the Dow per year, something like that. And actually, he doesn't even invest that way anymore. And here's why. Well, that's what I did for years. It's a mistake. Although, you make money doing it, but you can't make it with big money. It's so much easier just to buy a wonderful business. If you look at this chart that I'm showing right here, this shows Warren Buffett's money-making results by age, and the biggest jump how he made his fortune, how he became a millionaire, was actually doing this strategy that we're about to reveal. He actually made the most money doing this strategy 30 to 50% per year doing this technique, which he later changed when he met Charlie Munger. That's here in his own words. Warren explained how he started out and made his fortune. Thank you, because Berkshire was a lousy textile business, and I bought it very cheap. I'd been taught by Ben Graham to buy things on a quantitative basis, look around for things that are cheap. And I was taught that in, say, a 1949 or 50, they made a big impression on me. So I went around looking for what I call you cigar butts of stocks. And the cigar butt approach to buying stocks is that you walk down the street and you're looking around for cigar butts, and you find this, honestly, this terrible-looking soggy, ugly-looking cigar, one puff left in it, but you pick it up and you get your one puff disgusting. You throw it away, but it's free. I mean, it's cheap. And then you look around for another soggy, you know, one puff of a cigar. Well, that's what I did for years. It's a mistake. Although you can make money doing it, but you can't make it with big money. It's so much easier just to buy wonderful businesses. So now I would rather buy a wonderful business at a fair price than a fair business at a wonderful price. But in those days, I was buying cheap stocks. And Berkshire was selling below its working capital per share. You got the plants for nothing. You got the machinery for nothing. You got the inventory and receivables at the discount. It was cheap. So I bought it. And 20 years later, I was still running a lousy business. And that money did not compound. You really want to be in a wonderful business, because time is the friend of the wonderful business. You keep compounding, it keeps doing more business, and you keep making more money. Time is the enemy of the lousy business. I could have sold Berkshire, perhaps liquidated it, and made a quick little profit, you know, one puff. But staying with those kind of businesses is a big mistake. So you might say I learned something out of that mistake. And I would have been way better off taking what I did with Berkshire as I kept buying better businesses. I started an insurance business, seized candy, the buffaloes, all kinds of things. I would have been way better doing that with a brand new little entity that I'd set up rather than using Berkshire as the platform. Now I've had a lot of fun out of it. I mean, everything in life seems to turn out for the better. So I don't have any complaints about that. But it was a dumb thing to do. So there you go. He said it right there. He learned from his mentor, Benjamin Graham, author of The Intelligent Investor and Security Analysis, to buy companies so cheap, it didn't make sense. So cheap that you almost couldn't lose money. Below working capital, below tangible book. The stock price was so low. It was below the money on the books. And that was the way Warren Buffett made his big jumps. He had partners, so he would get capital from the partners and they would split the profits. But he would find these super cheap stocks and get that one jump in value. Sometimes he would have to go direct to the operators of the business and free up the value. But that was the strategy. Later on, in the 60s with Charlie Munger, he changed his strategy. He became more of an investor in quality names thanks to Charlie Munger. Two short questions. One is, how do you find intrinsic value in a company? Well, intrinsic value is the number that if you were all knowing about the future and could predict all the cash that a business would give you between now and judgment day, discounted at the proper discount rate, that number is what the intrinsic value of a business is. In other words, the only reason for making investment and laying out money now is to get more money later on. That's what investing is all about. Now, when you look at a bond, so many United States government, it's very easy to tell how much you're going to get back. It says it right on the bond. It says when you get the interest payments. It says when you get the principal. So it's very easy to figure out the value of a bond. It can change tomorrow if interest rates change. But the cash flows are printed on the bond. The cash flows aren't printed on a stock certificate. That's the job of the analysts, is to print out, change that stock certificate, which represents an interest in the business, and change that into a bond and say, this is what I think it's going to pay out in the future. When we buy some new machine for Shaw to make carpet, that's what we're thinking about, obviously. And you all learn that in business school. But it's the same thing for a big business. If you buy Coca-Cola today, the company is selling for about $110 to $15 billion in the market. The question is, if you had $110 or $15 billion, you wouldn't be listening to me, but I'd be listening to you, incidentally. But the question is, would you lay it out today to get what the Coca-Cola company is going to deliver to you over the next 200 or 300 years? The discount rate doesn't make much difference after, as you get further out. And that is a question of how much cash they're going to give you. It isn't a question of how many analysts are going to recommend it, or what the volume in the stock is, or what the chart looks like or anything. It's a question of how much cash it's going to give you. That's your only reason. If you're buying a farm, it's true if you're buying an apartment house, any financial asset, oil in the ground, you're laying out cash now to get more cash back later on. And the question is, is how much are you going to get? When are you going to get it? And how sure are you? And when I calculate intrinsic value of a business, when we buy businesses, and whether we're buying all of a business or a little piece of a business, I always think we're buying the whole business, because that's my approach to it. I look at it and say, what will come out of this business and when? And what you really like, of course, is them to be able to use the money they earn and earn higher returns on it as you go along. I mean, Berkshire has never distributed anything to its shareholders, but its ability to distribute goes up as the value of the businesses we own increases. We can compound it internally. But the real question is, Berkshire's selling for, we'll say, $105 or so billion now. What can we distribute from that $105? If you're going to buy the whole company for $105 billion now, can we distribute enough cash to you? Soon enough to make it sensible at present interest rates to lay out that cash now. And that's what it gets down to. And if you can't answer that question, you can't buy the stock. You can gamble in the stock if you want to, or your neighbors can buy it. But if you don't answer that question, and I can't answer that for internet companies, for example. There are a lot of companies that are all kinds of companies I can't answer it for, but I just stay away from those. So the main difference between the cigar butt net net cheap strategy is, you would get one bump, one gain, maybe 50% or 100% best case. And that would be it, because it's not a great business. It's a cigar butt. You're just finding a discount, and then you're realizing the discount. And that was how he made his money. But he doesn't recommend that anymore. He believes that you should buy quality businesses. I believe it was Phil Fisher that influenced Charlie Munger and then influenced Warren Buffett. But then you buy a quality business and it keeps growing over time. One example is their Costco trade. They were in it for 20 years and they got, I believe, around 900%. So a cigar butt, maybe 50 to 100%, but a quality business for a long period can give you hundreds of percents. And here's the math. He's gonna explain it and it's gonna be discounted cash flow analysis. Written down your set of formulas or your strategies in written form so you can share it with everyone else. Well, I think I actually have written about that. If you read the annual reports over the recent years, in fact, the most recent annual report, I use what I've just been talking about. I use the illustration of ESOP. Because here, ESOP was in 600 BC. Smart man, wasn't smart enough to know it was 600 BC, though. I mean, would take a little foresight. But ESOP, in between tortoises and heros and all these other things, he found time to write about birds. And he said, a bird in the hand is worth two in the bush. Now, that isn't quite complete because the question is, how sure are you that there are two in the bush and how long do you have to wait to get them out? Now, he probably knew that, but he just didn't have time because he had all these other problems to write and had to get on with it. But he was halfway there in 600 BC. That's all there is to investing, is how many birds are in the bush, when are you gonna get them out, and how sure are you? Now, if interest rates are 15%, roughly, you've gotta get two birds out of the bush in five years to equal the bird in the hand. But if interest rates are 3%, and you can get two birds out in 20 years, it still makes sense to give up the bird in the hand because it all gets back to discounting against an interest rate. Problem is, often you don't know, not only how many birds are in the bush, but in the case of the internet companies, there weren't any birds in the bush. But they still take the bird that you give them if they're in the hand. But I actually have written about this sort of thing and stealing heavily from Esop who wrote it some 2,600 years ago, but I've been behind on my reading. So there you go, folks. The formula to make the best decisions, it's DCF, and what he's talking about is the time value of money. You have to compare the opportunity cost, which would be investing in government bonds, treasuries, or even just a bank, like a CD product from a bank. The money has to work and earn, so if you're gonna buy a stock, it has to compete with other investments. And that's what he's talking about when he's saying a bird in the hand is worth two in the bush. The two in the bush are not guaranteed, so you have to give up the opportunity cost, which is the bird you already have, the cash you have to risk to make that investment. And that's his point. DCF for the future, sometimes it's harder to do, future investments, quality companies at a good price, that's what he does now. What he used to do, the style he doesn't recommend anymore, was the cigar butt, buying super cheap, below tangible book. Rich and working capital, but the price was below that. That was the old way, that's how we did it. You can actually still find them, but not as good as just buying a quality company and holding it for a long time and letting the money work for you over time. Hope you found this helpful. I love this topic and I thought I knew it, but once I dug in deeper, I learned so much more. Cheers.