Thomas S. Gayner on Things That Matter in Markets (Podcast)

investment portfolio for quite a while. That's their second arm. And they have, for lack of a bitter word, of venture or private equity group that purchases companies, really a fascinating history, a tremendous track record, and really a very interesting gentleman. I found this conversation to be fascinating and I think you will also so with no further ado, my discussion with Marquel Corporations is mesters in Business with Very Results on Bloomberg Radio. My extra special guest this

week is Tom Gainer. He is the c i O and co CEO of Marquel, a diversified financial holding company. He has been dubbed the next Warren Buffett by no less an expert than Jason's wide of the Wall Street Journal. From two thousand to Gainer's stocks have averaged a return of eleven point three percent annually, while the SMP five hundred returned a mere four point two percent counting dividends. Tom Gainer, Welcome to Bloomberg. Thanks so much for having me.

So I've been looking forward to having this conversation. You're kind of an interesting guy working in kind of an interesting company. I don't think a lot of folks know what Marquel is and does. Why don't we start by just give us the short version? What is Marquel? Sure? And in fact, not only do a lot of people not know what Marquelle does, a lot of people don't know how to pronounce it. So uh, it's an easy screening uh technique. When somebody asked for Markel, they probably

don't know who they're talking to. So yes, Marquelle to some degree. I think the shorthand way of describing it in the usage of today's words is, we're a family office that happens to be publicly traded. Now, the way that business started was in the nineteen thirties as a

specialty insurance company. It's kind of an interesting history in that Sam Marquel was in Norfolk, Virginia and he was on the city council there, and Norfolk, Virginia was a place where a lot of veterans would be getting off the boat from World War One, some of whom decided to stay. And it was the early days of the automobile and trucking industry. So Sam Marquel had been an insurance agent. Uh, there were veterans getting off the boat.

They were they were providing cab rides which were unregulated, unlicensed Nicola Ride Jitney's was the name of the term. Of course, accidents ensued, as would be the case and anything like that, and Sam Marquel got a law passed that said, if you're going to operate one of these jydneys, you had to have insurance and just the people would provide it. And well, no insurance company would was willing to take that sort of risk. So Sam markl said, well,

I'll started an insurance company to take that risk. I don't know what the chicken and egg was, whether Sam had the chess moves all laid out before you proposed the proposal of the ordinance. I would not be surprised if he did. But that was really the start in the genesis of the company, and they caught a mega wave in the sense that the automobile trucks, the highway system, the internate interstate highway system for thirty or forty years, you really had this tail wind of epic growth in

the underlying business that that they would ensure. Um. We could go on and on with this conversation, but I think the hallmark that still matters today is you look at problems, you look at something that somebody needs, You try to be creative. You try to figure out a way to solve it. And that's what Marquell does historically, largely through insurance products and ensuring things that a lot of other companies choose not to do for a variety

of legitimate reasons. But then also we've expanded into a lot of different products and services, industrial products and services over the last fifteen years with the growth of mark El Venture. So we we can we can do anything and everything, and if we can figure out a way to make the customers and the employees better off by

doing so, we'll do it. So the interesting thing about the insurance side is insurers taken cash against the future potential liability, but between when the policy is sold and want to pay out has to be made. Hey, we have to do something with all this capital, which brings us to your job, your essentially c i O of of market al assets. How do we describe your title? And we'll get to the co CEO thing in a bit,

but technically what is your job description? Well, the c i O in terms of chief investment officers post chief information officer. That is exactly the job I had prior to becoming the co CEO, and effectively it is still a job that's embedded in my role. Now, again, if you're a business historian and you have a sophisticated listening base, if you think about insurance, first off, set it up.

Your your initial point is correct in that an insurance company collects premiums today and they're gonna make a payment to for a claim sometime in the future. So embedded in every single insurance company is an investment operation. And historically it's not been unusual for insurance companies to make the vast majority, if not the totality, of their earnings from what they make on the investments while they're holding

that pool of money. That that's the case. If you can if you can run the the insurance side as a break even and then just be free to do what you want with that capital over until those potential liabilities come home to roost. That's not a bad source of capital. It's very cheap, exactly, and a lot of minds have figured that out and and and known about that.

There's some interesting sort of financial history episodes. If you go back to the nineteen sixties or seventies when conglomerates were sort of the hot money things of the day, many of those had an insurance company as the financial core of the business. In the Gulf and Western teleedi

and things like that. Now, I think there's an interesting cultural circumstances that's at play there in that if you look at insurance companies that are run by investment people, oftentimes that that movie didn't end that well, uh, because you know, investment people have a certain mindset, a certain culture, certain way of doing things, a certain lifesty, sort of lifestyle they'd like to to lead. Insurance people probably not

wired that way. And most insurance companies are run by people who came up through the discipline of insurance, so they were claims people. They were at stuaries, they were salespeople whatever, But the realm of insurance is what they're wired to do and how they understand life. Uh, they may or may not understand capital allocation and investments quite

so much. Similarly, and and as such, since they don't understand it, I don't think they appreciate it and the discipline and what's required to be really top league in that requirement. Similarly, investment people when when they run an insurance based organization and they came up through the realm of investments, I think sometimes there's a tendency not to appreciate the detail work and the daily discipline of what it takes to to run a very good insurance operation.

So if you look at organizations that have successfully been able to balance that tension and have both sides of the house not have one overwhelmed the other side, that list is very very short. Yep, And we're gonna talk. Let's talk a little bit about that list, um. And part of the reason you're implying is, Hey, some groups are a little too safety first and to risk averse

if they're overly waited on the insurance side. Other groups are too aggressive and risk embracing you need that balance, which leads us to the comparison that I have to ask, when did you start first hearing yourself described as the next one Buffett, a mini one Buffett. He used Geico as a giant source of inexpensive capital, and obviously did okay with it, right, did pretty well with it, better than pretty well. Um, when did you first start hearing

these noises? Because you've been with Marquel now for twenties something. Wow, she's thirty one years. So how long was it before these silly comparisons began? Well, I guess the first time I really heard it was when I said it to myself looking in the mirror, and and and frankly, that would have happened even before I joined Marquelle. Really, the way that started was the first time I became aware of of Buffett and Berkshire was in eighty four with

the seminal Carol Loomis article in Fortune. And I can remember I worked for a firm called Davenport and Company of Virginia. Wonderful firm. Um still there today, been in Richmond since eighteen sixty three. So uh, not going anywhere. I'm going anywhere. The head of the department was a gentleman named Joe Antram, and I read this article and here's how naive and stupid I was. So it was

in eighty four. I was twenty two years old, and I went into Joe's office and I said, hey, Joe, have you ever heard of this guy named Warren Buffet? Had Joe was sort of a crusty fella, and he says, it's Buffet, you idiot, and threw me out. Well, I went to the cutting edge technology of the day, which was the standard and Poor's tear sheet and I and I looked at the Berkshire Hathaway page. And my training

is as an accountant. I started out as a CPA with Price Waterhouse Coopers, and I looked at those numbers and I could tell, without resorting to four decimal point calculations, they were good. So I became a Berkshire. I became aware of Berkshire at that point. When did you first become a Berkshire investor? Not until which also points out how stupid one can be. Because when I first saw he was right when he when he said get out of here as exactly, he was right. So as a kid,

and the stupid things you do as a kid. Now, i'll, i'll, i'll defer to the notion that at age two you're still a kid. So I asked for grace, and in that sense, so I looked at it. I could tell the numbers were good, and I made the Syrian mistake. I think the stock was dolls or something like that, so expensive exactly, and I said, no stock could possibly

be worked that much. So I made the great mistake of oh mission, and sat there and watched it go from that to the first share we bought was five thousand, seven and fifty dollars. And by the way, that's still a pretty goodbye. But there's immense lessons to be learned from that. So the per share value as opposed to the per share price, it's do your math or do

your homeworking about that. And by the way, getting back to Teleedin, which is one of those companies that was on the list of balancing out the insurance in the industrial sides of the business under the leadership Henry Singleton. Uh Phayus Seraphim is a famous money manager who made a lot of his reputation and returns by being right about tele dine in the early days, and people used to ask Sarahim what's the next tele dine and his

famous response was the next tele digne is teleed. So when you got something right and you're gonna have exactly dance with a girl you brang with and keep dancing. But so answering your question about how the Berkshire comparison started to take place, So six Marquet went public and luck of the draw, I was the analyst at Davenport who was assigned to cover it. So I started covering Marquelle from the day of the I p O. And what I observed was here was an insurance company that

made an underwriting profit. And at that time, in an era of meaningfully fire rates, you didn't really need to be disciplined about your insurance so much because you make so much from interesting income that you you could engage in cash flow underwriting. You just wanted to get cash

in the door and we'll worry about the claims. Well a nominal basis, not necessarily real basis, but still, but this was an unusual discipline to stick to the idea of making an underwriting profit, even amidst the ability to earn epic investment returns. So what I saw and by this time, I'm twenty five or so from the I p O is that here's here's an insurance based organization which is going to make a dedicated to making an

underrated profit. And Steve Marquell, who was the vice chairman at the time, was open minded and had already started making some equity investments with those pennies of underwriting profit out of each dollar. So they had a long term mentality from day one. So I saw that instantly. It was it was it was a lightbulb kind of realization, and I wanted to own some of that stock and

be connected to the company. So from eight six through ninety four years Steve Marquelle became up friend, a client, a business associate, and he might tell the story differently. I might tell it differently depending on the point of view. But I sort of begged him for a job for four years because I just wanted to be part of that. In Marquelle did one of their famous double the size of the company deals or they bought they bought another company that was as large as what they were. Steve

had been managing investments by himself. I thought he might like a wingman, and UH offered me the job at that time. I got to call it at that and I assume you jumped right at it exactly. And and let's let me just stay with Marquelle for a moment. They famously they don't hold analyst days. They don't give earnings guides or things like that. At least that was the reputation back then. Tell us a little bit about that. What was the thinking behind if you're going to cover

us you figure it out? Well, there's a lot of layers to that, but but I think it makes sense think about it this way. If you if you really are as you said, the first definition of Marquel the family office, which is a very popular term these days, that was not a term so much when I joined.

If you really want shareholders who are going to be there for a long period of time and have a sense of ownership and have a sense of partnership and really wish to be multigenerational investors, Well, I run a business and setting aside the investment side, but the markl ventures sides of things in the businesses that we run, which are long term established businesses, I don't think and the people who run those businesses do not think about

their customers in a quarterly timeframe. We think about our customers. Once you're a customer of ours, in whatever business we have, we want to be doing a good enough job for you and delivering enough value and delighting you in such a way that you want to keep doing business with us. So cutting that into quarterly time frames and setting expectations that are tied to that, I just see it's like a bad idea and and contradictory to to how we would really run a business. So we didn't have to

think up all these things ourselves. We got to observe the way Buffett did things. And we've been going to the Berkshire Annual Meeting since UH since nine, which had been the first year, the first year I joined, because what he said to Steve at that point was, in terms of investors that we wanted to get at Marquelle, the people who are most likely to understand what we're

doing are people who already own Berkshire. So rather than try to get them to come to UH Richmond and engage, so, well, if you own Berkshire, you're already you're already qualified, So let's go there and start meeting people. So that very first year that we were there just because I've been

in the investor business for a couple of years. There were there were six people that were willing to sit down and drink coffee and eat bagels with Steve Markette and I And we didn't have formal presentation or anything. We just talked and answered their questions and then went on for maybe two and a half three hours or something like that in that room, six people. Uh. Chuck Achery was one who's a legendary investor. I don't know whether he's been on your your your podcast or not.

Wonderful guy and an introduction. Uh, he would be a well worthy person who's talking to and he's a meaningful teacher to me. I do indeed. Uh. Michael Lowenstein, whose father was Louis Lowenstein, the professor at Columbia Business School exactly Um, and one of his cousins I can't remember who, but one wonderful family and sort of the right kind

of people, goteamed Peter Caman from Boston. Jonathan Brandt at Ruwayne Kinnef is one of the panelists that asks Buffett questions at the meeting, whose father was a roommate and buddy of a Buffett and Bill Rwayne. So we started off with just an absolutely wonderful set of people and and all Steve and I said at the end of that meeting was you know, we'll be back again next year and if you know anyone who would be interested,

please let him know and we'll get together. So we started doing that, and that became an annual tradition, and we did that year after year after year. What started with six people. By the time you got to the year before last, which was the last in person meeting that Berkshire had, we had something on the order of people at that meeting, and again the same format. We open it up, we say thank you for being here, great to see you, what questions can we answer for you?

And and there are more Marqueue shareholders in that room then typically come to our annual meeting. So it really is cultivating of the community that that's out there. And this year, uh, unfortunately, because the Berkshire meeting was virtual and and that the crowd wasn't there, I said, well, we have the opportunity to try to create some center of gravity in Richmond, Virginia, because that convening, that worldwide convening of people who are searching for certain values in

certain ways of running a business. The world is hungry for that. So let's give him a forum and the venue to do so. So we found a concert arena and Richmond, Virginia that had a roof but open air to to try to, you know, meet people halfway that the pandemics are coming. We're getting better. We had a meeting we had My goal was to get a hundred and a hundred out of town professional investors to attend. We ended up with about a hundred and fifty professional

investors and then between employees, associates, local people. We had five hundred people at that meeting and we tried to make it fun. We had we had food trucks, we had beer trucks, we had a band. And that makes seem minor, but it speaks to the culture of trying to connect with people in ways that you just cannot do in any other way than than be with them, and and to cultivate this long term sense of ownership where your time horizons are infinite, eternal, rather than than

than cut into two quarterly things. It's it's just an entirely different way of approaching things and thinking about things, So it doesn't really comport a match up with the typical way that that major finance has done. Not right or wrong, just different. I like it. I love the idea of burning Man for finance exact it of oh great, another boring hotel conference room. I mean, the one good takeaway from the pandemic is those sorts of financial you know,

just deadly meetings. They seem to be attenuating quite quite a bit. And I think people are maximizing their multitasking skills when they're listening to something like that on a on a zoom. God, I don't out have the patience for the endurance to do that with the without fidgeting and looking at something else too. I'm with you on it. Let's talk a little bit about your background, which has some really interesting things about it. You've described yourself as

knowing that you're just good and not great. Explain that who who goes out and says I'm not great? I'm good and I'm aware of that. Well. I was in a discussion last night with an absolutely fascinating person, absolutely high end quality on every measure you could you could think about, and and that excellence shown through and the discussion took this twist and turn where the distinction between

an optimizer and a satisfier came up. And and I think there is a tendency among type A people, extraordinarily high accomplishment people, high achievers, to really latch onto the idea of optimization. And there's nothing wrong with that, But sometimes there can be a hidden, intangible, unquantifiable cost to focusing entirely on optimizations all the time. Einstein says that you know, not everything that counts can be counted, and

not everything that counts. Einstein smarter to me. Here's a perfect example of how you can remember not not everything that counts can be counted, and not everything that can be counted counts. There you go, my special guest, Very Riddles, thanks for the pickup. And the was that Einstein? I thought that was I thought that was some management consultants. I'm gonna go with line stuff, but I'll defer to

I'll defer to the fact checking experts on that. But but the point is there there's an element of intuition of of the the intangible sense of spirit and culture that I find extraordinarily different difficult to matter that sometimes you got you gotta to let people have some room to make some mistakes and look at outcomes that are not optimized and what you get in design thinking and in systems approach, if you're dealing with the right kind

of systems, there there's there's a bit of an evolutionary process where um mistakes that you make start drifting away, and things that you did right start compounding and and and and magnifying themselves. And and as such, if you just if you just leave a little slack in the system and you don't try to press it to the last red line of what's there, you allow time and space and muscle and rest and energy to create things that you you couldn't have thought of beforehand, and that

happened somewhat through serendipity. So I think, I think humility. Uh, And it's it's an epic challenge. I'm fifty nine years old now, and fortunately things have worked out well, and

I have credibility because my record is pretty good. I have a lot of empathy and and understanding of the challenge that would face year old or twenty five year old or me at two trying to get on the ladder and get the career and get the leeway and latitude that I enjoy right now, because if you think about it, say you're twenty two or and you're trying to pitch somebody to demandage money for them or being

given discretion. Typically if you just say the kinds of things that I do for a long time, and we're gonna be patient, we're gonna look at this and sifting, so you don't really stand out enough to get people to to write you a chack, especially exactly so you're you're forced, almost almost bullied by the system to make hyperbolic statements and and claim precision and flame efforts that are that are super human just to get people to to give you the job and give you the money

to manage. And I think markets are are are quantum systems. They defy understanding, and you can do a lot of work and you can keep trying to get to the next decimal point of understanding. But there's a certain irreducible quantity to human psyche and greed and fear and all those sort of things that really do matter and markets, And I just think it's helpful to be humble to acknowledge that, don't pretend you can know it. And but

virtue of not pretending that you can know it. I think you're more open to ideas, people, different ways of thinking. Um that you can start out with the premise that this person I'm talking to is probably smarter than I am. They're demonstrably smarter than I am. So I think I

should listen and learn something. And if you just go about your daily life that way, you do learn things, and you do get exposed to things, and the people that were right they start to occupy a greater and greater share of your mind share, and the people who are wrong kind of kind of kind of drift away into a smaller and smaller little thing. So the math of compounding really accentuates the positive, and it it makes the it makes the mistakes drift away into irrelevance over time.

I do like the idea of of not being a maximalist optimizer to give you a little breathing space to allow um. Creativity and collaboration are the things to bubble up. I don't remember whose quote I'm about to steal, but the line is jazz is the space between the notes, and it's that same You need a little breathing room in order to allow some creativity to take exactly. So, so let's talk about a horrible, terrible, ridiculous mistake you've made um or at least everyone else who does this,

it's a horrible mistake. Co C E O S is usually a disaster. Somehow, you guys seem to have made that work. Yeah, I think you're correct to point out that that's that's not the odds way to bet. And I think it gets back to some of the history and culture of Marquel that makes it work in the sense that, all right, you had Sam Marquell, who was the original founder of the company. He ran it from its inception up until I think the mid fifties, late

fifties something like that. Sam had four sons who were two sets of twins, and when he unfortunately died, the business then was taken over by the by the four sons, and and they ran it essentially by unanimous consent. I believe they had lunch every day, if not almost every day, and for any kind of strategic or or more than just little decision, there had to be unanimity among the four And I think you can sort of picture how this unspoils everyone has veto power exactly, and the company

did not grow that much during their era. That they ran it. But then what happened, But so he went from one CEO to effectively four despite what the titles might have been. So then the second generation started to go the way of all flesh, and the third generation comes along. And at this point there are twelve cousins that that are in existence, some of whom worked for MARKL, some of whom did not, And the generational transfer succession

issues started to be become paramount and become important. A lot of sifting and sorting about that. The public offering offering in Night six was one of the tools used

to bring about some some finality that. But at the end of all that sifting and sorting, three of the twelve cousins said we're in, and in effect they did a leverage buyout of the second generation where they gave them a note with a coupon to provide income and sale process to the to the second generation, but gave them the stub equity underneath of it, so that as they built, the value of the business had attributed to the equity as opposed to the debt that was there

for the second generation. The the I p O did two things. It paid off that debt, It gave the company a little bit of a capital bay and culturally it said, you know, you don't need to be a member of the Marco family to own equity interest. And I'm a perfect example of that. I'm not a Marquelle family member, not married to Mark, I haven't no Markel blood. I mean, but I've been there thirty some years. I've been there since I was a kid, So I feel

like a member of the Marco family. And I owned some equity in the company from the I p O from day one and had always sort of been accumulating more stock as uh as as time goes by. So um, there's that element of how the transition is taken place. So the four went down to three and and really a triumvirate of Steve Markel, twenty, Mark Ellen, Alan Kirshner,

who was a cousin in law. H ran the business for decades and as as they started to to to move on, um Alan retired from the board year and after years or so ago, Steven Tony are still in the board but not active in day to day management. UM. You know that that went to read it too, so Richie and myself. And it's also connected to the evolution of the business itself in that historically the insurance business

was the largest single piece of the company. Investments are there, but um, you know, it's just the investment operation that's embedded in an insurance company. So while we emphasize investments more than most, every insurance company has an investment operation, so that that wasn't weird. As Marquel Ventures has grown to become substantial part of the company, you have two

very distinct pieces of the company. So in in reality, the way it works between Richie and myself is that and this is really the way it worked with Allantoni and Steve as well. Um, in the era of the Triumvirate,

everything on the income statement reported to Tony Marquel. So what branches did we have, how many salespeople, what were the locations, all the all the sort of things that would the managing the reals, all that would Tony would be the ultimate authority and really the ultimate EO of that.

And I was in the room sometimes when when Alan and Steve would disagree with him, but they would always say, at the end of that meeting, if that is your decision, that is your area, so we support you, and they walk out of the room, the doors closed, and there's the team speaks with one voice. Similarly, Steve was in charge of the balance sheet of the organization and anything the lost reserve, setting, the m and a activity strategy,

stuff like that. Steve was the ultimate authority on that sort of stuff, and Alan joked he was the world's highest paid referee because he would adjudicate disputes between the two of them to make sure that's how it worked. So with Richie Eye, it's a slightly different gearing. He's in charge of the insurance operations of the business. I'm in charge of the investments and the ventures operations and

um Our. Our normal working relationship is if something meaningful, substantive comes up in one of our areas, the first person that I will talk to about an upcoming deal or a capital a big capital allocation decision, I'll talk to Richie and make sure he and I get on the same page. We we don't see the world Eye die on everything, but we we functioned and work it out. And similarly, um on an insurance thing, he would come

to me first and we worked that out. So on major capital allocation decisions, it's very important that he and I managed to find agreement and we have on day on, day to day matters. The tactical execution of the business itself. We both operate as soul CEOs. In the realm of the business was as we run. So you mentioned so we have insurance, we have asset management, and you mentioned the third arm Marquale Ventures. That's kind of unusual for

an insurance company. Let's talk a little bit about, UM, what what brought this division about and what sort of things you look at? What do you focus on? Sure? Well, again, the way it came about was being aware of the Berkshire example where you saw Buffett and Buffett would give a lot of credit to Henry Singleton and Telen and

seeing that model and how that how that worked. UM, we'd always bought equity securities, and there's a there's a construct and a way we think about what we buy and and really it's the same thing we hope Marquel shareholders think about us when when they when they buy Markel stock. So we look for profitable businesses with good returns on capital that don't use too much debt to do it. We look for management teams with equal measures

of talent and integrity. We look for businesses that have reinvestment opportunities or great capital discipline, and we look for that at a reasonable price. That's that's the quick and dirty way of describing what we look for when we're buying a public security. Well, from my point of view, whether that's buying a hundred shares or something, a thousand shares of something, or the entire company, the thought process

is exactly the same. So we'd seen the example from Berkshire and Televign of what it meant to go from passive minority shareholders to actually controlling shareholders in diverse businesses, and and that's really the way it happened. Really from the first minute that I went to Markel in ninety always had it in the back of my mind that this would be a future leg of growth and sustainability

for the company. It wasn't until two thousand and five that the stars aligned in a particular deal because it happened to be in Richmond, Virginia, because I happened to personally know the CEO. We were not in the traditional investment banking channels deal flow channels. It just happened through serendipitous circumstances. Some of that time and space that we

talked about. Found a company called m F. Bakery Equipment, which if you if you get McDonald's hamburger or hot dog, very good odds that there's buns and rolls were baked on a m F. Baker Equipment, the leading company at what they do, and that in that world. So happened to be headquartered in Richard, Virginia, happened to know the CEO, happened to know it was for sale, a knew the seller,

and we were able to do a deal. And doing that one deal raises a flag and then all of a sudden, my phone starts to ring and I didn't know you guys would do that? And how about this business? How about that business? And it really has cascaded from that.

So so Berkshire is kind of known for when when Buffet and Monger find a company I like that meets similar qualifications, including very very strong leadership, talent management of the company, they basically put them into the Berkshire family and let them run the business continue running the business so successfully. I'm assuming you bring a similar approach that is correct and for instance, one of the ways to validate that and look at what people do not what

they say. The CEO of a MF Bakery, who we bought that business with in two thousand and five is still the CEO of that business sixteen years later. Correct. Of the twenty or so businesses that we have bought over the last sixteen seventeen years, probably fifteen or sixteen of them are still run by the CEO who's there

the day we show it up. So we're very much hopeful that the management team, the leadership team that is in place, well, we'll stay with us and become part of the Marquelle family and grow and flourish because we will take the worry about capital off the table from them. We'll take and and I'll tell this story about a MF for example. So UM, you know, it was owned by a local set of of business people in Richmond, and it was what I would call a club private

equity deal. So it's not levered to the extent that many private equity circumstances would be, but it had some leverage attached to it. And the CEO of the business when I showed up Um and Marquelle bought things. I said, you know, in the in the old days, Ken when a when a machine broke. That was a really bad day for you because you had an unhappy customer and you had an interest built to pay at the same time,

and that creates tension. I said, um, these days and forever going forward, I'm not rooting for machines to break, but I know in the real world world they do. And on that day, instead of that being a bad day, I now want that to be a good day. I want you to show up. I want you to fix it. I want you to make it right. I want you

to make your customer happy. And if you do that, and you do that repeatedly, dependently, and never waver from that, what will happen over the course of the next three, five, seven years is your reputation for being that person will grow and grow and grow, and you'll get paid fairly

for doing that. So by removing the financial constraint of an interest bill and adding the dimension of that time horizon where look, I'm not gonna worry about this quarter because I know this is the right thing to do. So we're just gonna do it, and then the accounts will tally up with the results of that. But I'm just I'm willing to bet that will be good, and that is a business that in a no growth industry.

They've done a couple of tucking deals since that time, but there's six times the size that they were the day we showed up, and they're every bit as as profitable, if if not more so. And I think the mentality with which the businesses run has been helped by the market capital umbrella. We really give somebody the room to do what they want to do anyway. So, so bakery equipment is the first acquisition you do, what are the next couple of acquisitions and what Because from what I've read,

there's not a whole lot of rhyme or reason. It just seems as long as it meets those four metrics that you described in terms of UM profitability and return on capital, talent, integrity, etcetera. UM, you guys seem to be pretty open minded as to the sort of acquisitions that makes sense for you. Well, that's exactly right, and

those four things are indeed the selection criteria. Now, if I wanted to speak in an academic setting, and I wanted to convince the consultants and the academics that I did indeed have some sort of rational strategy, I could frame it in such a way where I said, Um, what we are looking for is large companies within small industries, because if you look at a mark get leader in a small industry, what you have is a situation where you are the go to vendor, you are the go

to supplier, you have some advantages of incumbency, and unless you mistreat your customer or do something wrong or don't keep up, um, you are highly likely to get the next order. So if you if you look at all our businesses, it is often the case that these companies are actually pretty well known and and very good and

very dominant at the little niche there in. And because it's a small industry that is not as attractive to bigger, bigger companies that are gonna come after it, And because it is so well established and so dependent upon by their customers, it's harder to start up a competitor into garage. And I don't think uh, you know, the young geniuses at the Stanford Business School are trying to figure out

breakthrough to disruptive ways to break brand. Uh So these are these are not the sort of things that people are talking about our our interests, but we can build a fine business, uh By by collecting these these wonderful things and grow. Give us another one. Tell us another example of a business that UM the average person might not think of as a long term profitable business, but you guys have managed to put into your UM balance

sheet and have been very happy. Well, I mean the most recent company that we we bought as a company called Buckner Cranes and and and this is an interesting case studies well and why we get these these things? UM fourth generation family. So if a family business has made it to the fourth generation, they know what they're doing. And there's something that's just fundamentally right about a circumstance

like this. This was an inbound call. Somebody called us and said, laid out the snippet thumbnail case of what this company was, what they do UM. And they had started out in a steel erection business, and they rented cranes and the crane size kept growing and it kept becoming more and more sophisticated over time. So they're kind cranes lift things from three hundred to a thousand tons.

And in addition to the crane itself, and it's it's a German manufacturer that supplies Buckner with its cranes and Buckner in turn leases them out to the companies that are erecting wind turbans are very large structures or new football stadiums, things of that nature. Um And and you can't just show up like at the at the hert lot and rent one of these things. You have to know what you're doing. And if you don't know what you're doing, oftentimes Buckner will provide the crew or the

technical expertise right right. So it's a real value add kind of business with a good, good, um you know, physical base there. But the family and the family values really mattered to the family as they were looking to sell their business and create liquidity for the third generation but set the fourth generation up for success to run the business going forward. So they called. We went down

to to visit them. Immediately, we struck up a warm and friendly relationship and did a did a home and home and and and came to came to terms and it came on board. So that's how some things like this happened. Um And at that three hundred tons to a thousand tons crane, I mean thousand tons lifts. You can't do that over the internet. You can't do that

from a foreign country. There's certain there's certain underwriting criteria that if if you really go through the traps of what you're looking at, that speaks to the likely durability and and need for that business. If you need to lift something there's a thousand tons, there are not many people in the world who know how to do that. And again, I don't think that's the kind of thing that kids in business score trying to figure out how to how to disrupt that. You can't. It's not that

you gotta lift it. It's too small to be worth their time and effort, but it's large enough that there's a real business exactly we have. We have These stories could just go on and on, and we're the largest grow of indoor house plants in the world through our

cost of Farms business. If you go in indoor house plans, So when I go to the local whatever home depot, Walmart, Ikea, Kroger, all those kinds of films, Marquel is the company that's providing the cost fight and Costa Farms gives the name of that company, and even within Costa there would be sub brands within that, so you don't exactly know when you're looking at the label who the ultimate, uh, folks. Folks are but but that would be us very interesting.

So so there are two data points I'm kind of fascinated about. One is in your public investments, your ten largest holdings, they're almost half your portfolio. They're about that's pretty unusual. When I look at the average let's look at a stock mutual fund, the top ten holdling is usually way below thirty. Tell us why you approach this with such a concentrated bet on those top ten stocks. Well, I think there are a couple of things that come together.

And and one of my great investment teachers was my grandmother, So let me get to her in just a minute now. Obviously, those ten have worked, and those have been circumstances where we're basically right, and I had a high degree of confidence in order to make some substantial bets to put them in the portfolio at that size. But then time and being right about your fundamental under right into the

business kind of is your friend. As Charlie Munger says, you know, the time is the friend of a wonderful business and the enemy of a mediocre business. So here's here's my grandmother's story. So when I was a kid,

um and a and a nerd at that on Friday nights. Unfortunately, instead of being able to get a date, sometimes I would I would sit with my grandmother and we would watch Wall Street Week with Lewis rock Eiser and my grandmother, Um, she was widowed at a my my grandfather had died and she was one of the types of widows that basically never made any substantive decisions after that, so she remained in the same house. His suits hung from the rack in the closet, his shoes were on the floor.

And being a just a small town, local business man in the nineteen sixties, they would have been the type that, uh, you know, they drank coffee at the diner together and they would talk about their stock portfolio and that sort of thing. That's what small town business people did. And he had a twelve fifteen stock little portfolio. These are these not massive sons sums of money. And those twelve fourteen stocks that my grandfather had when he died, my

grandmother held those until she died. Now within those that that little portfolio there was Lockheed, Martin and Pepsi. Now the fact of the matter is the other ten holdings could have gone to zero and it wouldn't have mattered the total. I bet my grandmother was the ninety five percentile in investment returns basically because she caught two mega winners that she was able to hold for thirty years in terms of the growing dividends and and funding her

pleasant but modest lifestyle. It did that and observed that basically, when when you're right about something, uh, don't don't get off the train's if that train is gonna gonna keep rolling. Uh. I think we're both searching for who we should attribute these quotes too, but I think it might have been Peter Lynch talked about that tempt, that human tendency to want to, you know, sell your winners. Exactly. Well, that's that's a that's pulling the flowers and watering the weeds.

That exactly. Sorry, I'm not the smartest guy in the roby trying to have to be the dumbest. If I got a flower, this is blooming, let it grow. And and another data point that's kind of mind blowing. Uh. So, your your capital portfolio is about twenty seven billion dollars. Your costs are just incredibly low, less than point oh one, about one seventy the cost of the typical U S stock mutual funds. How do you manage to keep your cost structure that low. Well, we don't have a lot

of people, so it's it's myself. I have had um gentleman named Dan Gartner who works on the on the on the equity side, that's been there ten or twelve years for the For the first seventeen years that I was at Marcale, after Steve hired me, we managed the portfolio in house and I did that solo. After seventeen years of doing that, I decided to add one person and and that was Dan Um And then a couple

of years ago added one more person. So um, we have that group of people thinking about the equity investment portfolio. We have three people working on the on the fixed income side, which is also a treasury function of managing just the cash balances of the coming So we have an extraordinarily small number of people doing it by Wall Street standards, our compensation is very modest, so that keeps

the keeps the keeps the costs down. And here's here's the implicit cost savings that cannot even be measured or quantified. But make the numbers you cited even better is our turnovers extraordinarily love. We tend to be able to buy things and hold them for a long period of time, which means we're not occurring the tax costs of realizing

gains and paying the tax at point. So the growth in the deferred tax liability, which is just compounding over time, that isn't an easily quantifiable cost, and it's not captured in that in that basis point of management figure talking about. But in terms of dollars, that's bigger than all the others by multiples. Quite quite interesting. So so we talked a little bit about markul Ventures earlier. You're not doing what I think of his venture capital is early seed stage.

You're buying mature companies. And you mentioned you've done fifteen of these deals since two thousand. We talked about the crane company, We talked about UM, the bakery machinery company. Give us another example of the sort of transaction that

attracts your attention, well, a couple of the other examples. UM, if we have a company called the Catrell and if you're driving up and down the highway and you see a trailer hauling seven, eight or nine cars, were the dominant company that makes those trailers, and we've owned that again, I lose track of times, five, eight year or something like that. Spectacular business and the gentleman who runs at

Danny's Inc. Just a first rate individual. Um, they open carriers is like like when they pull up to a car dealership and twenty new cars. It's one of those that's exactly wrong. Um. So they've just done a spectacular job over many, many years of taking care of their customers and incrementally, uh, sort of getting more and more of the flow and and the wonderful thing about that particular business and a variety of reasons that we were

able to to buy it. Uh, it's cyclical. So for instance, when car sales are going up and there is incremental demand for the trailers to move the cars around, it's it's a it's a nicely profitable business and that they're going to earn good returns if they if they run their internal operations reasonably well. If car sales are flat or going down, they're gonna ruggle to break even and there's nothing they can do about that. You can't you can't reduce your prices by ten percent to induce demand.

People either need it right now, or they don't need it at all. Now, that makes that business a little hard to finance if you're using a lot of debt to buy it. So by virtue of the fact that we're not using debt to do that, our underrating decisions gets to be a lot easier and you don't need to have an MBA to sort of figure this out.

My math was, if I buy that today, I'm pretty sure that within the course of the next five years, I'm gonna get out all my money and and then still known the business was probably better and bigger in five years, especially with the culture they have and the people that are running it. And I really have some indifference about whether I'm make zero in year one and of it in year two, and ten percent of it in year three and zero again in year four, and

whatever the residual is in year five. That that pattern doesn't matter to me because I'm not trying to pit quarterly quarterly goals and as such, um we're able to be competitive to buy businesses like that because we're not competing with people who are using leverage finance to do so. So that's just another small example, and it's it's been cars, uh I was about to make the mistake of saying

cars can't drive themselves. Uh, but you know, well we'll get Arguably they still can and believe they'll get their eventus. That was one of the things we thought about. And even if you have a car that can drive itself, if you don't want to say you want a brand new car to come on, do you want to have twelve miles on it? Not seven hundred. So so let me ask you a little bit of a twist question, Um, how do you know if one of your acquisitions is

not working out? I mean, there's some pretty clear metrics for hey, we're seeing revenues increase, we seeing profitabilities increase. How do you measure when hey, maybe we made a mistake, this one isn't working sure. Well, Mike Keaton, who is my partner in mark l Ventures and he's the president of Marc le Ventures day to day execution of the mark le Ventures business, he has a great saying. He says, you know what it feel it's like when you're making

a mistake. It feels great because it didn't feel good. So we we make mistakes, We do that, but we do have financial reporting. And again I started out life as an accountant and the accounting profession where we could do hours and hours on the path of the accounting profession. But a good accountant, a true account an accountant who is honoring his craft, is giving you a feedback loop that this worked or didn't work. So when we make mistakes,

in the fullness of time, they show up. So what we do is we stop doing that um and we do more of the things that work, and we do less of the things that didn't work, and over time, the weighted average of that really works in your favor. And again I use that language very precisely, the weighted average, because the things that worked mathematically become larger and larger as a percentage of the total, whereas the things that didn't work become less and less a percentage of the total.

So the mistakes get deluded into the the overall solution, which which in aggregate worked out just fine. It's my grandmother's lesson. I really don't know the names of those other ten stocks she out, but it doesn't matter. So so you pride yourself on investing with management groups that not only have been successful, but have integrity and have built a corporate culture of both quality and success raises an interesting question during COVID. You have twenty thousand employees,

How did you maintain that corporate culture? How did you keep everybody involved, integrated and all moving in the same direction. Well, it's a I mean I roding last year's annual report. There's been an unprecedented use of the word unprecedented, and that's an accurate statement to make. None of us had a playbook for how to do this and how to proceed. And of those twenty people, fifteen thousand of them are within ventures, and a lot of them are in the

category of frontline workers um as as are. One of our business is called half Co and it makes the flooring for trailers of tractor trailers and it's wood. And as the president of that business, guy named Bruce Bader, said, you can't make wood floors from home. So we had to keep a factory running, and we had to figure out how to operate cleaning procedure, sanitation procedures, not wildly unlike the procedures that existed to get into this building

this morning. You got to figure all of that out on the fly, and and we did so. And I am so amazed and so grateful for the ways in which the leaders of those companies, and by that I mean not just the CEOs, but the people who work for them, and the front line supervisors and and all of the associates who they went to work among other other reasons because they needed to work. And so it's

our job to figure out. Look, if you want to work, and you can work, and by the way, our society needs you, we must find a way to figure out how to do that as safely and as effectively and as sufficiently as possible. That's our job. So that's really what we have been about, um and the very act

of doing that, it's it's almost like exercising. So if you want to lift a lot away, I would suggest and and that weight is just too much for you right now, but it's within the realm of theoretical possibility. I would suggest to you, Well, let's let's let's lift a little bit. Let's that now, let's do it a couple of times. And then when we can do that and do it a couple of times, well, let's lift

of that. You build muscle by doing this is not theoretical exercises, So there's some theories that guide you but the very act of doing itself is what creates the

learning of of how to do it. So there's been a lot of that going on, where we've been learning how to move differently and lift different ways of what we had, and in and of itself, that act has really forced culture where you could choose, and I believe there is a great choosing going on, not just in Marquel, but really sort of society really large, whether you really want to do that or not. And there are some professions in some circumstances where you don't have to quite

do that so much. In our business, you do both. In the fifteen thousand frontline workers, and I would argue in a second arrive it of sense even the white collar workforce that can work remotely. There's something about being together in person, the the water cooler conversations, the coffee cup conversations, the quips that the use of humor and laughing and joking and going back and forth. It's really

hard to do in a in a virtual world. Of that, I think there's a place for everything in this world. It's not right or wrong, it is just different. So we run the gamut of where it's just the physical reality, whether we're making wood floors or lifting a thousand tons, you've got to be present to win, so you got to do that in and that creates some aspects of the culture by itself of doing. So there's some that

that's creative. So you may not think of us as a creative business and insurance operation or white collar work, but it's something. It's it's almost like an advertising agency. So there are some parts of our business which are actuarial and and formula and mathematically driven, but there's a lot of our insurance business which is more like an

advertising agency than it is a big insurance company. Because you've got to be creative and you gotta figure out how to solve this problem with some risk that's not going to be put the words out of my mouth. All problem solving, unless you're doing basic arithmetic, involves creativity. Hey, maybe this will work. Sometimes not every solution is ideal for this problem. Let's see what else we can come with.

Come up with and that doesn't really work. Great over a zoom um, let's talk a little bit about some of your favorite companies. You have some holdings, and when I look at some of your top five or top ten, they're almost nothing like each other. There there's just a mix of companies Carmacks, Disney Berkshire, Amazon, Regeneran, and then a whole bunch of investing firms Blackrock, Federated, oak Tree,

trow Uh. I have I named anything that you've jettison since or actually you know, oak Tree is no longer with us. That's part of Brookfield Asset Management, which is our second largest holding that we have, And we are no longer owners of Carmacks. Oh, you sold Carmacks, which had a huge run up given the craziness with supply chain, and I think at a certain point that just became

fully valued. Well, I guess no, and I would I would um admit an error on my part in this, and in fact that the gentleman who runs Carmacks, the CEO, I mean, we'd owned it for a long time and have been absolutely great holding. When we sold it, I called him and I said, Bill that that was our circumstance, not yours. Carmacks is a great company. It's very well run. Have epic respect for what you do. We enjoyed being

a shareholder for for a long long time. When we go back to the initial days of the pandemic and the shock losses from event cancelation insurance business interruption, which was uncertain in the first quarter of twenty loose track

of years in time. These days, UM we reported a combined ratio of one eighteen, so as compared to our historical record of underwriting profitability, where that combined ratio number would always be below a hundred one eighteen, that is the worst period market corporation is endured in ninety years of existence. It was not a great quarter UM And the model where we're using the profits from the insurance company to create the flow to to create the exactly

so jet engines don't fly in reverse. That jet engine was flying in reverse during the first quarter of as such. And I think even independent of that, there were kind of a combined set of forces at work where look, we gotta we gotta make sure or that the insurance businesses on firm capital footings. It's a regulated business and we always want margin of safety and margin of air that humility. Look, let's let's not pretend we're the smartest.

So if we were the dumbest, what do we need to do to protect ourselves from us to make sure we keep going So we would have re underwritten in this years. What we did. We re underwrote every single security we wrote, and by the way, in that environment, we also re underwrote our thinking on every insurance policy we wrote. Because it was clear that this was a

fundamental change that that had overtaken all of us. So let's make sure that we're adoptable and thinking that we're able to answer the bell for the next round of the fight. So in looking at each and every security that we owned and recognize and look, I want to take a little bunny on the table off the table, and I wish to make sure that the capital footings are um impeccably sound and unquestionable um looking at each

and everyone. Among the decisions that we decided to sell was was CarMax um and I thought, you know, at that point in time, locations were closed. Who needs a new car? Who needs a used car? Well, it turns out everybody did. But I did not foresee that coming. And you just given the time and facts of the of the circumstances, there were there were several things we sold at that point in retrospect, they all went up, and they all went up a watch since since that sale.

But at the same time, our capital basis has never been questioned. The integrity of the business is there. And we kept eighty percent of what we owned it at that point across the board in aggregate, and that's done great,

so you know we're in good shape. You would have had to anticipate not only a surge of movement to the suburbs that would require more cars, but you would have had to anticipate all of the supply chain on the semiconductor, all that whole interruption and supply issues that have led to just a surge and used car prices and unavailability new cars. Kind of hard to foresee coming um in the first quarter. As I wrote in last year's annual report on the whole discussion of the pandemic stuff,

we did not see that coming. So it's a long list of stuff we did not see coming. To add those to the list, so let's talk about some of the companies you kept, because well, not not a bunch of stiffs or some pretty good companies. I want to get a sense of the thought process as to what leads you to find a company like I guess in some ways Disney and Amazon are somewhat similar, but in so many ways. They're so different. What led you to each of them and what led you to stay with

them over the long haul? Well, let me take each of those two because they think they yes, they are instructives to take Amazon as as a as an example. I talked earlier about the importance of the shareholders of Marquel and the desire that we have at Marquel to have great shareholders who are thoughtful and intelligent and and really contribute ideas and thoughts to me and to mark

Hell that make us better, and specifically with Amazon. I have a friend named Josh Tarasov who runs his own UM investment management firm, and he's he's done extraordinarily well, so mark El shareholder friend Um and and so we had a relationship. We talked back and forth, and Josh noticed that if you went back and I can't again a lose track of time a decade or more or whatever, our holdings in the world of technology were pretty slim

call it. Let's round it to zero, not much. And and Josh and is is kind and helpful and gentle way was helping me realize I might be making a mistake about this. And when you say kind and gentle, was he like, Tom, what the hell are you doing here? You're missing the boat? Or was he you know, how kind and how gentle? He really was kind of gentle. So just despite I mean, I love New Yorkers because they are they are by the way, that was kind

and gentle. Just so you know, I understand that completely. Um And and there's no mystery or subterviews about that. You know, what is warm with you? I get that, So I can absorb that and not take it personally. But by the way, Josh is a kind and gentle person. But it really walked me through thinking about Amazon and helping me to come to understanding in a in a much more productive way than that that I had in

the past. So that's point number one. So that trade worked out, I'm guessing yeah, it's more more more green than red on that one. And here's the other thing that that really matters. So one of my hiccups or concerns about Amazon would have been the idea of the valuation at that instant. You know, what, what what is it if I if I pencil out numbers? Um And because Marquel has been a profitable insurance underwriting an organization for so long, what that creates is regular periodic cash

flow and the ability to do dollar cost averaging. So I've been to Marquel a little for thirty years, well times four for a quarter, that's a hundred and twenty quarters. And I would say of those hundred and twenty quarters that I've been there, the insurance operations and now the venturous operations as well, have deposited cash into the investment account, maybe a hundred and sixteen out of those under in twenty quarters. So you have money to put to work, exactly.

And if I make a mistakes, Among the mistakes you can make are you can make a mistake about valuation, where look, this is a great company, but it's just really high priced and so you paid too much for it. Or you can make a mistake about the business itself

it's not as good a business as you thought it was. Well, if I'm right about the second thing, that this is really a good business, I get to solve for the valuation problem a little bit by dollar crost averages, nibble, nible, nimble, nimble, nimblemble, dooble over time, and and again. The ultimate return that you earn if you really have a long term horizon is the intrinsic return that the business itself earns, not

the trading returns from the more volatile stock farns. It's the underlying returns on capital that the business and self farns. So dollar cost averaging and flow and time. It enables you to get to the point where, um, you can you can. You can power your way through evaluation error, especially if the growth is exactly exactly. I mean, that needs to be true for you to be able to power through the valuation. But if the growth doesn't happen, then you've got a problem on your aunts. What about

a company like Regeneraan, which seems to be so industry specific. Yeah, and I'm going to give credit to my colleague Dan Gartner for that particular stock that is that is his pick and the way our system works, Um, he has a sleeve of money that he manages. He gets a portion of that of that flow as well. And part of his job for me is to signal through his purchases what he has conviction about. And Regeneraan is his

idea and something that he has conviction about. And again, if you look Regeneration's performance over the last five ten years, I mean it's especially the past two years have been pretty good, but even more than that. And and again, while Dan is the expert on that, not me, you have founder leaders here, they were in place. You have a culture of scientific discovery that seems to be embedded

in that organization. And talk about sort of the comfort level that you get from investing people that are making the world a better place rather than the worst place. Regeneration is solving some thorny problems. And and I as a human being, I'm grateful for what for what they do and what they've come come up with a sort of rooting for them. So it wins on a lot

of different counts. So I saw you give a speech some years ago where you said, hey, when you walk into the bar, you want to be the bartender or not the people at paying for drinks. And hence the parallel or things like black Rock and and t ro Price. Tell us about the thoughts about investing in the world of financial services. Yes, I think it's fundamentally historically been a very good business for a long time. I think that will continue to be the case. So now a

lot of people look at this space. I'm sorry to interrupt, but a lot of people look at the space and say, hey, there's fee pressure, and there's competition from crypto and from private equity and from all this other stuff. How do you respond to that. I think there's always been competition.

Competition is just the nature of things. That's all to to bring in a different topic, the idea of theology that said Martin Luther's Great Gift to the world was not the theology of Lutherism, it was it was competition. So the Catholic Church had some competition. It's been going on for a long time. It is the nature of of creativity and freedom that uh. And this is a wonderful thing that you hope somebody somewhere saying, you know, I could do that better than that. Our rural progresses

on account of that. But and here's the other advantage in financial services, Um, there's not a lot of sunk costs when when you have a financial operation. So if something is not profitable, you don't have a planet that you need to deject exactly, So fire that group and move on. Right. It's all human capital. It's not it's not big factories or cranes or any of that stuff. It's your people are your assets. And you know you're

constantly they're all competing with one another to show their ability. Right. So if you look at sort of anything in the financial services businesses, by and large, it's like our body temperature that we have to check before we got into come into the building today, ninety eight point six, and look, if you're one on one point six, I'm bet they

wouldn't have let me in here today for sure. Pretty quick feedback loops, So financial services groups and and this is a really important notion, the idea of feedback loops and and awareness and tying that to humility and just always been willing to listen to other people. Where people get themselves in trouble is where they where they don't

pay attention to feedback loops. And there are some things that I put in the category these are mistakes that only experts can make because people are so sure themselves. And I read a wonderful book recently called The Long Gray Line, and it's by a gentleman named Rick Atkinson. It is about the West Point class of nineteen sixty six. This is a really good book. And if you think about that, just picture it in your mind for a second.

So those kids, and they were kids when they started would have been the entering West Point in ninetto the height of idealism and JFK and Moon Race and all that sort of stuff. And the author does this great job of connecting you to this kid from Wisconsin and this kid from Tennessee, and this kid from upstate in New York, and there were girlfriends and their family and their situations, and you really felt like you got to

know them. And then you got to follow them through their four years at West Point and who was the rule follower and who was the rule breaker, and and and the branches of the army that they decided to go to so on and over, and then they finished in nineteen sixty six and they had dumped into Vietnam, and you hear their story race and and the tragic circumstances of what was involved. And if the people who were in charge had listened to the people who were

on the ground, we would have done things differently. And when you see that so vividly explain there, it puts me in this situation where we have twenty some thousand people working from Marquel. I feel responsible for them, and I feel responsible for the decisions that I make that affect them with no control or ability to influence their fate by themselves sometimes, so I always went to personally guard against being that expert who thinks he knows. I

want to listen, I want to hear it. I want to I want to get that sense of what the people with boots on the ground who were there doing it have, um and that that feedback loop of just staying connected to that is a fundamentally important philosophy and way of doing things. I liked that a whole lot. Uh. Last company, I want to ask you before we get to our favorite questions. You have been a marriage shareholder for a long time. Are you still a share holder?

Unfortunately now? And again that was also exactly I mean they still haven't recovered. Yeah. And and my goodness, if you um, I mean Arnie Sorenson, who did a spectacular job as the leader there. If you saw the video that he put out in the early days of the pandemic and the emotions that were there. And I'm sure, but I don't know whether the cancer had been disclosed at that point or not. Uh, that was the first

class individual doing first class things. I still have every epic regard for the business but given their circumstances, in our circumstances, I needed to make the painful but difficult decision to to eliminate that portfolio. And technically, you could say, and I'll admit made a mistake that that stock price is higher today than it was when we sold it, But we sold it for different reasons than just what

the stock price was at that POINTE fascinating, Tom. I know I only have you for a couple of minutes, and I have to thank you for being so generous with your time. But let's jump to all of our favorite questions we ask all of our guests. See if we can get a little insight into a little more insight into who you are and what makes you tick. Starting with tell us what has kept you entertains? Uh during the past eighteen months? What are you watching on

either Netflix or Amazon Prime? Uh? Well, during this period when we've all been stuck at home. Well, sure, I am completely grateful for the return of live sports and live music because those are both things that I just love h immensely. And uh, it's football season and I have a college football guy. But to be able to go back to u v A and be in person for those games, and over the last forty years i've been I've missed no more than five home football games

at v A. And it's what my family does. So so I went to v A, my wife went to u v A. I have three children who went to address everybody up in the guard the stadium. Fortunately, my children are old enough that I don't have to dress them anymore, and when they were young enough to have to be dressed pretty much my wife did that. So I'm not much what I mean, you're wearing a sweat show, We're there. We're good for that. So it's it's fun to be back at live sporting events and live music

in terms of podcasts and streaming. I'll tell you one that has really captured me is Broken Record with Rick Rubin. I don't know if you know Rick music producer with complete diversified portfolio, everybody from Jay Z to Johnny Cash. Did he record a Springsteen albums? I don't know, but I certainly wouldn't rule it out. Who didn't he record and who didn't he do over the last thirty years. So it's a fabulous way of learning history when you have somebody as knowledgeable as as what Rick Rubin is

and has been connected to so much music. I mean music reflects the zeitgeist of the times, and whether it's reflecting it or cause and it it's it's it's right there. So uh for these artists to talk about their craft and talk about their art with I find those conversations to be things that I really learned from and have been UM just sort of as I go out and walk listening to that podcast quite a bit. It's my favorite one. I'm gonna check that out. I'm a big

music fan. Um. Since you mentioned going to live shows, what live acts have you seen since the world has begun to reopen? Well, there's a there's a particular artist in in Virginia. I'll give him a plug here. His name is Scott Miller. He's from Swoop, Virginia, which is outside Stanton. And neither one of them sounds the way it's spelled. And I'll let your viewers google that that map and figure out what I'm saying there. But Scott I would describe as someone who has sort of a

definitive Virginia voice. So listen to his music. It's a singer, songwrite or folks stuff. And I think I've heard him about four or five times since the uh since the pandemic is that it first when first live shows started, he had one in Staten, Virginia and then one up in a natural Chimneys which is near Harrisonburg, Virginia. So you've done two shows in two weeks, and I had been to both shows. I was telling people I had been to on of the Scott Miller concerts that had

been since the pandemic. And I'm not still a little hundred percent, but anytime I get the chance to to hear him, I looked to do. So. One of the artists that threw the during the pandemics that he's not touring anymore is Aaron Neville. He's probably a little more well known than than than Scott Miller up until the pandemic. That's the artist who had seen the most times and absolutely love his his music and just just being in a room where Aaron Neville is saying that's a good thing. Yeah,

to say the least. The Neville brothers also the whole the whole family's supertown. Correct. Um. Let's talk about your early mentors who helped shape or guide your career. Well, clearly my father probably occupies a singular spot in that um. He was a cp A in Salem County, New Jersey.

In Salem County, compared to most parts of New Jersey's very rural um, he would have started his c p A practice in Salem County probably in the early nineteen fifties, after serving in World War Two and finishing up his UH education at Temple on the on the G I bill just to give some insight into my father and the way he did things. So he became a reasonably successful businessman over over time. And when people would ask him where he went to school, he would say Temple, oh.

And I observed my father doing that all the time, and I kind of one time I asked him, Dad, when when people ask you where you good school, you say Temple? Oh? Why? Why why do you do that? He said, Well, when I say Temple, people say oh, So I figured i'd save him the time. That's very flat, but that's an insight into the way he did things.

And I don't know if you remember the show Green Acres, well, there was Mr Douglas and Mr Haney as the polar opposites, and my father was somewhere between the two so he had practiced with the predecessor firm of Deloitte in Philadelphia, but left the big city to return to where he was born, in Salem County, and became an accountant there. And he had a very interesting practice. So he would do people's tax work. He did business consulting, He owned

a liquor store, among other things. He would put together deals and as opposed to taking a fee, would take a percentage interest in the in the business of a little bit of carri Avengers. And his office was in our home and in the house where I grew up, among other things. In addition to just during my father and liking him and hanging out with him. Um in the farmhouse we grew up we grew up in, there were only two rooms that were air conditioned. One was

my parents bedroom and the other was his office. So for all kinds of reasons, I hung out at his office. And he read the Wall Street Journal, So I read the Wall Stree Journal. And and as a kid doing my homework or just sitting in his office coloring books or reading whatever, I would hear him as he was talking to people on the phone, or people would be

in and out, and and he was kind enough. I came along a little bit later in his life where I was just allowed to be an observer and through osmosis pick up the idea of business without formal instruction. But that was that was the case from a from an early age. So so many things I learned about life and business was just hanging around with my dad through the early years of my life. Interesting, you mentioned the long gray line. What are some of your other

favorite books? What have you been reading lately and what are some of your favorites? Well, it's funny you should ask that, And um, I read all the time. That's what I do in spare moments. And I love traveling for so many reasons, not the least of which it's always have a book in my hand and a bag of stuff to read. And it's like asking me, what what did I eat last Tuesday? I don't know, but I'm sure I ate something. So I always draw the blank when people ask me that questions. I know what

I'm reading right now. It's The Lincoln Highway by Amor Tolls. And I thought his book Gentleman in Moscow was a spectacular book, so I eagerly awaited his his next book that has come out recently. I think it might be even better written than Gentleman in Moscow. So it's it's it's a wonderful book. And I will say one thing about reading, uh, I mean obviously connects to role models. Charlie Munger is about as good as they get. At the top of the list, Monger talks about not reading

fiction and he thinks it's a waste of time. That's something that I would disagree with. And I think one of the reasons I enjoy fiction is fiction by definition, creates muscles of empathy. To read a good work of fiction, what's gonna happen is you're going to find yourself sort of inhabiting the character, and you're gonna find yourself in that setting and in that circumstances. And what you're doing without even realizing is you're figuring out and learning how

to put yourself in someone else's shoes. And I think that is a very underappreciated skill in today's world where we it's it's so easy to just get inside your own head and living your own world, to live and work remotely, to have your groceries delivered, you kind of forget what it means to be part of a broader society and to be able to see things from somebody else's point of view. I can't think of anything that's

really more powerful than that. So I think the tool of reading fiction, just to just to teach yourself how to do that, is a really good way of of doing things. I'm gonna share something amusing with you. We were having a conversation about uh. Isaac Asimov's Foundation is now a show on Apple Plus and Dune. Frank Herbert's June not only is in the theaters, but it's on

HBO Max. And the conversation we had amongst a group of investors are the kids like me who were big sci fi nerds not coincidentally, tend to be more inclined to invest in technology and some out their concepts than

the people who always thought sci fi was wacky. And I'm I'm I would be fascinated to find out if anybody has ever done a study on that, because if it makes sense, Hey, half the stuff we read about in sci fi self dry in cars, robots, Uh, magic shots of your own DNA that make diseases go away. That's eight years old, and here it is a portable computers that allow you to do video talking in your pocket.

All this stuff is straight out of sci fi. So who better to be investors in that than the people who it was formative for them as as a child. I can remember as a kid, I spent a lot of saturdays in my youth at the Franklin Institute in Philadelphia, which is their science museum, And I can remember the um first telephone that had video attached to it, and you would stand in one room and your friend would stand in the other room, and you would talk to

yourself over this amazing thing. Of course, it died because network effect. At that time, it was so expensive that all right, you got one, Well are you gonna call? There's nobody else who has one. But it has become pervasive. In your point, your point is well taken. What sort of advice would you give to a recent college grad who was interested in a career in either venture private

equity investing or traditional finance investing? Well, um, there's a guy even here's a book I read Robert Hagstrom, who has written a lot of books about Buffett. I think you wrote a book, if I'm remembering the title exactly right, called Investing the Last liberal art. And it really is the concept and the notion of using both the right and left side of your brains, both of them too.

Analyze and be disciplined and and do your work, but at the same time, never lose your sense of imagination, creativity, curiosity, wonder about what else might be true, what's the other side of the argument. Um have one friend, shad Row from from Texas, who has Texas ways of saying things, And one of his statements that I always remember is that you must remember that any pancake, no matter how thin,

has two sides. So I think the number one thing is as you're coming up, is just always be developing your mind, be developing your creativity, and be developing those feedback loops and and don't ever think you've arrived at the answer. This is not a problem to be solved. It's a problem to be worked at, and it's fun to work at it. It's it's it's exercise in your mind.

It's it's it's free, and it's it's it's like that scene from Chariots of Fire where the you know, the sister is telling the runner, you know, he shouldn't run on Sundays, And there was a person of deep faith, and he responded to his sister that, well, yes, the Lord giving me faith, but he also made me fast. So the run is how he feels his grace. That

was what he was made to do. So I think if you're if you really are fascinated by finance and investments, and I know as a kid, I always have been um doing it every day, reading something, talking to somebody,

arguing a case back and forth, both sides. In fact, one of the things that I joked with Steve Marquelle about had this sort radminical style about him where at any given point in time, his office was next to mine for many years, and if I had an idea, I would go into his office and I would tell Steve this idea and he would say, and that's just

the dumbest thing I ever heard. And we would argue it and I would go away, and then I would come back a couple of days later or something that I said, you know, Steve, I think actually you were right about that, and he and he would say, no, I think you were right about that, and then we would argue with the other way. And that was just the technique to get more robust understanding of what might in fact be the case, and usually it's not the polar extreme. In either case, the answer is to be

found somewhere in the middle. And as one of my one of my digitally cool friends says, people have forgotten the fact that there are some numbers that exist between zero and a hundred. You know, the genius of law school is that mood court forces you to not pick usaw and argue it. You have to be prepared not only to argue both sides, but at at a moment's known as switched positions, and suddenly you know alonely the plane if you're now the defendant, and you have to

make that case. And there's something to be said for you shouldn't be long anything unless you understand you know, you shouldn't be bullish on anything unless you understand the bear case, and vice versa, because listen, someone's for every buyer, there's a seller. There's two sides to you know that pancake. You have to be able to be on to see at least both sides of that argument. So our final question, what do you know about the world of investing today?

You wish you knew thirty seven years ago or so when you were first getting started. If I look at the mistakes that I've made, the ones that have been most costly have been those of admission. So to look at Berkshire when I was twenty two years old and have it so obvious to me as an accountant that this is good, and yet not by it that's stupid. UM, And I think I make that mistake less than I used to. Um. When you find something that's really good.

I mean, here's another thing that Buffets said that has has profoundly changed for me over time. He says, you know, being an investor made him a better businessman, and being a businessman made him a better investor. I can tell you through the responsibility of what's involved in mark a ventures and operating real businesses. I know from firsthand experience that operating a real business and doing well at it

is hard. It's hard, and people who are good at it, Uh, don't be so quick to abandon them when they go through a rough spot. Uh. Again, going back to Shadow, he has a saints is in the investment business. Uh, You're You're never smart. People generally speaking don't become stupid,

and stupid people almost never become smart. So if you find smart, hard working, intelligent, creative, dedicated people, stick with them because they're going to accomplish things over time that will amaze you, and and give them the leeway, give them the grace to make mistakes when there are mistakes of learning UH and non fatal that you can you can recover and learn from. And just having grace for that is something that's easier when you're older than it

is when you're younger. So those are things I wish I knew was a twenty nine year old instead of having to them. That's a lovely point to end on. Thank you so much, Tom for being so generous with your time. We have been speaking with Tom Gainer. He is the c i O and co CEO of Marquel Corporation. UH. If you enjoy this conversation, we'll be sure and check out any of the previous four hundred such discussions we've had. You can find those on Apple, iTunes, I Heart Radio, app, Spotify,

wherever you get your podcast from. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. You can sign up from my Daily Reads at rit Halts dot com. Follow me on Twitter at rit Halts. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Paris Wald is my producer, Mohammed is my audio engineer. Michael Batnick is my head of research. Atika val Bron is our project manager. I'm Barry Retolts.

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