Brian Gubernick argues that wealth creation requires a survival mindset: patience, low leverage, and the ability to endure market swings. He contrasts Warren Buffett's minimal-debt approach with a cautionary tale of a partner named Rick who used margin buying and was forced to sell Berkshire shares during the 1973-74 crash, illustrating how impatience destroys wealth.
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Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Today we're going to get better at wealth, wealth building, and it's going to kind of piggyback off of a previous episode I think it was episode 139, a recent episode where I talked about managing investment risk. Within that episode, we talked around compounding interest, compound interest, and how it works and why it matters and how you have to pay attention to compound interest to understand how to negate investment risk. Go back to that episode and take a listen to it if you missed it. It's a foundation for today. So let's kind of pick up on that, uh, that Session 139, Episode 139 message. Compounding interest, compounding only works if you can give an asset years to grow. It's like, uh, it's like planting a tree. Let's say planting an oak tree. After a year of that, you know, after that tree has been planted, You're not really going to see much, right? There'll be some growth, but it'll be rather nominal. Now, 10 years, 10 years of growth is noticeable. There's something there, but 50 years, 50 years of growth, 50 years is extraordinary. So compounding works like planting an oak tree, a year of compounding, not noticeable. 10 years starts to really show up. 50 years, it's extraordinary. Getting and keeping that extraordinary growth though requires survival, surviving all of the unpredictable ups and downs that every, every investor in real estate, in stock, whatever it may be, it, the unpredictable ups and downs, they're going to come. They're going to be experienced over time, no matter who you are. If you're in the game long enough, you will have ups and downs. So getting and keeping that extraordinary growth requires surviving these unpredictable ups and downs, which leads me to Warren Buffett. Okay. The, the, the greatest investor of our time. We can spend years trying to figure out how Buffett achieved his investment returns, how he, how he's been able to identify the best companies, how he has been able to identify the best ownership groups or management groups or families that he's dealt with that own these companies like See's Candy, uh, how he's found out or how he's discovered the right time to buy, you know, when the stock was at its right valuation before he acquired. It's really hard to do that analysis. Less hard though, but equally as important, is pointing to all of the things that Warren didn't do. Warren has never gotten carried away with debt. He's, he's rarely uses debt, but even when he has, he never got carried away with it. He never jeopardized— still hasn't jeopardized, of course— his business reputation. He never once panicked and sold during the 14 or 15 recessions that he's actually lived through, which is amazing. He never attached himself to a single strategy or one single trend or a single, like, worldview. He's always been rather open-minded. He's always reading. He's always learning. 90+ years into his life, he is still reading and learning and committed to certain things, but willing to decommit if he learns something new. He's never relied on other people's money. He never managed investments through a public company. His, his, his investors are just simply stockholders. So he's never really had to rely on other people's money. He hasn't yet, still amazingly so, burned himself out. He's never quit. He's never retired. Warren has survived. Survival has given him in his life, longevity. And this single point is what matters most when he's describing his success, his longevity, his ability to survive. Now, I recently heard of a story, uh, about a third partner that I've— I maybe heard this before, but I forgot. But a third partner named Rick, can't remember the guy's last name, Rick was a third partner to Warren Buffett and Charlie Munger. So there was, you know, Warren and Charlie have been partners for years and years and years, but, uh, there was a third guy, Rick, who was apparently equally as talented, just as smart, an amazing partner, but also, uh, according to Warren, wanted to, uh, get wealthy at a faster clip. Than his partners Charlie and Warren. Charlie and Warren always knew they'd get wealthy, but you know, like they were, they knew it was going to happen, but they weren't necessarily married to the timeframe in which it occurred. Well, apparently Rick was. And so as a result, Rick was more aggressive. And specifically during the '70s, Rick had pulled debt to acquire stock. He used a specific strategy that many still use where he, where he put, you know, where he had on margin, he bought stock on margin. And in 1973, 1974, the stock market collapsed. As a result, Rick's loans were due. And when his loans were due, he had no choice but to actually sell his Berkshire Hathaway stock. To Warren Buffett. Rick couldn't survive, and Rick couldn't survive because of his impatience. So why am I emphasizing this message today? You know, especially after I just talked about it a handful of episodes ago, ago, I'm emphasizing this message because I think we're in rather turbulent times. The market's unpredictable right now, the housing market, the stock market. We are seeing signs of economic turmoil. I believe the next 6 to 12 months are going to be really, really interesting, not just because of interest rates and trying to get inflation under control, but we're going into an election year. It's just a lot. I mean, and of course, there's so much going on around the world. There's just a lot of unpredictability. I think that we're going to have to work really hard to stay the course. We're going to have to work really hard to be patient. And so my intention in sharing this message is to get you thinking about survival in the sense that Warren and Charlie and the greatest investors of our, of our time think about survival. They are patient. They allow that oak tree not a year or 10 years, but 50 years. And as a result, that oak tree turns into something extraordinary. And that's what your portfolio, that's what your investment's about. So over the course of the next year, if you're thinking, I gotta liquidate, I gotta move, and that may be the right call— I'm not giving you financial advice, I'm not licensed to do so— but I just want you to check yourself and, and ask, do I have staying power? Does this cash flow? Can I survive? And if I do, knowing how compound interest works, what might this turn into? Just something to contemplate. And I really, really encourage you to be, to be patient, to be patient, because creating wealth, it's not an immediate thing. It's something that's going to take years, if not decades, but it'll happen if you stay the course. That's all we have for today. The No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it.
