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Me, My Boy, and Warren Buffett with 2023 Postscript
You can listen to a professional narration of this article below:
I've been attending Berkshire Hathaway Annual Meetings since 2008. I am Jewish. We Jews are big on traditions. If we do something twice, you can draw a straight line through it; it’s now a tradition. So yes, going to Omaha is what I do. I’ve written many essays on this annual pilgrimage, and even contributed a chapter to Lawrence Cunningham’s The Warren Buffett Shareholder. (You can read the chapter here.)
Today I am going to share with you the essay I wrote about my trip in 2015, and add a postscript to it. Also, this year I’ll be speaking at more events than usual, and I’ll provide that info as well.
I have a confession to make. I want my company to someday be called Katsenelson & Kids. That doesn’t have to be its official name, but I want to work with my kids. I want my kids to be value investors. I know I am supposed to want them to be doctors or nuclear physicists. I don’t. Maybe if you go Freud on me, you’ll tell me this is my way of not wanting to let them go.
But I don’t want to push them into investing unless they absolutely love it. I want them to be happy. So far, none of my three kids — especially my 15-month-old, Mia Sarah — has shown any interest in following in my footsteps.
Six or eight times a year, I am invited to give a talk on value investing to undergraduate and graduate students at the University of Colorado Denver or Denver University. I really enjoy these talks. They are always structured in a Q&A format (I thereby pass the burden of class preparation on to the students). As part of their homework, they have to read my articles and come to the class with questions.
At these talks I always get the question “How do I start investing?” My answer: Forget everything you’ve learned about Modern Portfolio Theory. Start with an area that you know. If you like shopping, you have plenty of retailers to choose from. If you know cars, you’ve got some choices there. You don’t need a diversified portfolio, just a few stocks. But research these stocks. Read everything you can about them.
Don’t do a model portfolio; do real money. Take as much money as you can afford to lose and start investing. Look at this as your tuition money. The most difficult part of investing is not the analysis but the psychology. A paper portfolio doesn’t trigger fear or greed — only real money will. Charlie Munger has a saying: “Learning about investing from books is like learning about sex from romance novels.” (I skip this line when my kids are in the classroom.)
There are many reasons why I do these talks. First, I’m trying to undo some of the damage that Modern Portfolio Theory dogma has done to these young minds. Second, my firm employs three or four interns from these schools, and I use these talks as a recruiting tool.
The third reason is a long shot. I have a secret plan (which is not so secret anymore). I always bring at least one of my kids with me to class (two if I’m lucky — my son Jonah is 14, and older daughter Hannah is nine). I never have to drag them because after my presentation we usually go to DQ (my bribe of choice). I don’t know whether they pay attention all the time or not, but I know that they are at least listening a little because I ask them to give me a list of six things they learned from the lecture. My biggest hope is that these talks will spark some interest in investing. If they don’t, I gave it a shot, and at least we got to spend time together.
Jonah is my immediate hope. My wife, a typical Jewish mother, says that he can become an investor or anything else — after he finishes medical school. (She doesn’t share my dream.) Jonah has so far shown little interest in either investing or being a doctor, but he loves to make people laugh, so maybe he’ll be a comedian.
In my latest attempt to gently nudge Jonah’s direction in life, I am taking him to the Berkshire Hathaway annual meeting this Saturday, May 2. I don’t know if he’ll be able to sit through six hours of the Warren Buffett & Charlie Munger Show or if he’ll just spend most of his time browsing the showroom at the convention center and eating DQ Dilly Bars (DQ, of course, being part of the Berkshire Hathaway stable). But in the worst case, he’ll have a memory of this trip. And memories are important.
It was the winter of 2001. I learned that Luciano Pavarotti was going to give a concert in Denver. But by the time I found out, only the very expensive tickets were left. My wife was very pregnant with Jonah — we were a brand-new family. Those two tickets could buy the nice TV we were saving for. I was trying to figure out how to convince my wife to spend what was at the time a significant amount of money for a two-hour experience. We are both big fans of Frank Sinatra, and we were watching a biography about him. I said, would it not be incredible if you and I could see Frank Sinatra live; it would be one of those once-in-a-lifetime experiences. Then I said, we can’t go to Frank’s concert, but Pavarotti is coming to town, and we have a chance to see him. She was still under the influence of the Sinatra movie, and she agreed. Today neither of us regrets that decision. The TV is just a thing, but we got to see Luciano Pavarotti, the one and only, live!
Why am I telling you about this? Well, this trip to Omaha is going to be a similar experience for Jonah (though he probably doesn’t understand that yet). He’ll be telling his kids and grandkids that he actually went to the 50th Warren & Charlie Show.
Will Jonah become a value investor? I don’t know, but I hope that some of the values of value investing will rub off on him and he’ll treat the stock market not as a casino but as a place where you buy businesses at a significant margin of safety. If he decides to become a doctor or a comedian, at least I have two more kids to nudge (brainwash). Maybe it will be Katsenelson & Daughters.
Postscript – Eight Years Later
The fourteen-year-old Jonah could not sit through the annual meeting; he was preoccupied with anything and everything but Buffett’s and Munger's wisdom. The highlight of the trip for him was taking a selfie with Bill Gates.
Let me take a slight detour.
I was worried about Jonah when he was 13; he had managed to get a 1.3 GPA in his junior year of high school. He had a victim mentality – he believed every bad grade was someone else's fault, not his own. It is hard to change when you think you are perfect and everyone around you is at fault. This is the problem with the victim mentality; you don't improve. But then, during the summer between his junior and senior year, something changed. He started taking school seriously and finished his senior year with a 3.9 GPA.
Neither Jonah nor I know what triggered the switch that summer. But he did go to Israel with a group of kids from Colorado, and he met Molly – they’ve been dating since. Molly is a wonderful girl, an A student, and a great influence on Jonah. In addition, my wife and I started giving him a weekly allowance based on his grades. I can't remember the exact formula now, but I think he was taking five classes. Every Friday we would look at his running grade in each class, and I would pay him $20 for each A, $8 for each B, $0 for each C, and -$20 for each D and F. If he got all As, he would get $100. I guess if he got all Bs then he’d get $40. This was the time when you could get a Chipotle lunch for $7. Jonah responds extremely well to financial incentives, but I'm not sure if they actually did the trick. I think he just matured. He spent most of his senior year of high school in a local library studying; he found that changing his studying venue helped him a lot.
Eight years is a long time. Jonah has transformed into a thoughtful and kind young man, whom I am very proud of. He is a junior at CU Boulder. As he explains, he swore to himself that he would major in anything but finance. He took an accounting class and, to his surprise, did not hate it. Then he took a finance class and loved it; it came so naturally to him that he was setting the grading curve for his whole section.
He doesn't know exactly what he wants to do after he graduates. And that is absolutely okay. The topic of working for IMA came up, and before I could even say a word, he interrupted me and said, "I know you want me to work for IMA [he had read the essay above]. I'm sure I'll learn a lot, but I want to feel that I have accomplished something on my own, not just because I am your son."
Jonah said exactly what I was thinking. Yes, the eight-years-older version of me, the one who is typing this, has a lot less hair but also understands the importance of accomplishing things on one's own – the value of struggle, the character it builds, and the meaning that pain brings to our lives. Though we don't appreciate the pain at the time of the struggle, if I look at the most meaningful moments in my life, they were usually accompanied by pain and frustration when I was solving problems that were important to me.
If Jonah decides to join IMA after he has explored on his own, the door will always be open. In all honesty, IMA would be lucky if he chose to join it in the future. He’d be a find for any investment firm. I am as objective as any parent can be; but if you are in Omaha and see a 6’3 young man with dark hair sitting next to me, strike up a conversation with him; you’ll see.
Oh yes, I forgot to mention. After coming with me to Omaha eight years ago, Jonah never asked to go back, until last year. He came to the meeting and loved it. He actually sat through almost all of the main event. He is coming with me again this year.
This year I’ll be doing more speaking than usual.
On Thursday May 4th, I'll be speaking at the Value Investor Conference. My talk will be in fireside chat format, and I’ll be interviewed by my friend Saurabh Madan.
On Friday, May 5th, from 8:00–10:30 am, I am hosting a meet and greet with my readers at Upstream Brewery. It is absolutely free, but space is limited to 80 people, so registration is required (you can register here). We are completely booked, but you can add yourself to the waiting list.
Right after the meet and greet, I am attending and speaking at VALUEx BRK, organized by my friend Guy Spier. Guy will be interviewing me at 11:45am. This event is free as well – you can register here.
Saturday, May 6th at 4:00 pm, after the BRK annual meeting, I’ll join Tom Russo, legendary value investor who specializes in consumer goods companies, and Tom Gayner, CEO of Markel, at an event hosted by YPO, where we’ll answer questions for about an hour. You have to be a YPO member to attend.
One last thing. My books are available in the best investment book store in the world, Hudson Booksellers at the Omaha airport. Pick up a copy (or 10) and I’ll sign them.
I hope to see you in Omaha.
This is a continuation of my series on Alexander Siloti.
Last time we discussed Siloti and Rachmaninoff. Today we are going to explore Siloti in connection with Tchaikovsky’s Piano Concerto No. 1.
At first Tchaikovsky was Siloti’s teacher in Moscow Conservatory; but later in life Siloti became his friend, a performer of his music, and even a proofreader and contributor to Tchaikovsky’s music.
Tchaikovsky was a symphonist; the piano was just another instrument to him. It is important to note the difference between a symphony and a concerto. A symphony may have solo passages, but it is really written for the whole orchestra. Concertos are written for a solo instrument (piano, violin, cello…) and orchestra.
As we discussed last time, Siloti studied under Liszt and was highly influenced by him. In a Lisztonian piano concerto, the piano makes its own stand; it plays a dominant role in the concerto and is not afraid to go against the orchestra. Liszt never lets you forget that the piano is the hero of the story (the concerto). Tchaikovsky did not have the same affection for the piano, and thus he lessened the piano’s role in his concertos.
Tchaikovsky consulted Siloti on the technical role of the piano in his concertos. This is where things get more interesting. Tchaikovsky’s piano concertos that we listen to today are not the versions that Tchaikovsky wrote.
Let’s explore Tchaikovsky’s first piano concerto. Most of us think of this concerto and remember the powerful, larger-than-life, piano chords during the opening bars. This is not what Tchaikovsky wrote. His version was gentler, with the piano complementing, not competing with, the orchestra. In fact, that is the version Tchaikovsky conducted just days before his death.
After Tchaikovsky’s death Siloti rewrote parts of this concerto and made the introduction more Lisztonian, giving the piano a more leading role. Siloti’s version is what you hear performed today in most concert halls.
I’ll share two performances, both with Mikhail Pletnev at the piano.
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Vitaliy Katsenelson is the CEO at IMA, a value investing firm in Denver. He has written two books on investing, which were published by John Wiley & Sons and have been translated into eight languages. Soul in the Game: The Art of a Meaningful Life (Harriman House, 2022) is his first non-investing book. You can get unpublished bonus chapters by forwarding your purchase receipt to email@example.com.
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