Ben Gilbert: belief

Transcript context

…Is this assuming taxes are all long-term capital gains? Yes. They are assuming a tax rate of 25%, so some federal capital gains and some state taxes. So if you invested $1 and just let compounding do it’s thing for 25 years, you would end up with $24.90 at the end. This is assuming a compounding rate of 15%. You take your dollar, 25 years later it’s worth $25. If you pay taxes every 5 years, that same $1 is worth $16.8. It’s a 50% increase in the amount that you are left with at the end if you just don’t interrupt compounding, by doing the thing all humans want to do which is manage the money, do stuff, be active. I think that it’s this brilliant insight that Warren has sort of begun to have here. I think of the Buffett Partnership, he moves stuff around much more than he later would in Berkshire Hathaway. This uninterrupted power of compounding—taxes, transaction costs, whatever the things are—if you can find yourself betting on a winner and just let it ride, that is the very best strategy you can possibly employ. It feels to me, at the end of this story, he’s really starting to grasp that. We go way out there in left field, but we’re three hours into this episode so who knows how many people are still listening. There’s this great book called Transitions by William Bridges, and it’s wonderful. It’s about psychologically dealing with transitions in your life, even if it’s a good transition like getting married or having a kid, and bad transitions, too, like big changes in your life. The whole theme of it is that when you have a transition, the old you needs to die before the new you can arise. I kept thinking about this, to this story here in this part one. Warren was so successful. He was the most successful Ben Graham disciple that there was—more successful than Ben himself—but that wasn’t going to work anymore. He needed to start to understand these things that you’re talking about, and he needed to symbolically die—the old Warren—to have the new Warren arrive. I think that’s what happened here with the closing down of the partnership. Whether he knew it or not—almost assuredly he did not—he needed to close the chapter on that part of his life to start to embrace some of these very different philosophies.…

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