IM 044: Learn to Invest Like Warren Buffett | Danielle Town
June 19th, 2018
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Andy Wang: [00:00:00] Today on inspired money
Danielle Town: [00:00:02] This investing stuff doesn't have to be difficult and heavy. It can be light and fun and something you really enjoy while you're on your own time and so I really wanted to make it something as you said that's like a memoir. It goes through the details of investing. By the end of the book you will know how to invest on your own. That's very important to me, but you'll get that information through hearing how I did it and all the ups and downs and there were many downs that I went through as well.
Andy Wang: [0:00:34.3] This is Episode 44 with New York Times bestselling author of “Invested” and host of the “InvestED” podcast, Danielle Town. [background music]
Welcome to Inspired Money. My name is Andy Wang a Managing Partner at Runnymede Capital Management. Each week we bring you an interesting person to help you get inspired, shift your perspectives on money and achieve incredible things. From making it to giving it away, Inspired Money means making a difference, creating something bigger than oneself and maybe, just maybe, making the world a better place. Thank you for joining me.
Andy Wang: [00:01:16] Hey inspired moneymaker, if you're returning, welcome back. If you're a first-time listener, then welcome. Today, we're talking to Danielle Town who calls herself a reluctant investor and this is kind of funny because her dad, Phil Town, is an investor, hedge fund manager, speaker and the author of two books on financial investment that were New York Times best sellers. If you're a reluctant investor too, this episode is for you because Danielle is going to tell us about her investing practice. That's the process by which she transformed herself from a non-numbers person into an investor. In this episode, you'll learn why purely saving is not good enough to prep for your financial future. How aligning your investment money with your values can be more impactful in effect positive change and how Charlie Munger and Warren Buffett's investing principles can give you a framework to be an informed and better investor. Now, let's get inspired with Danielle Town.
Andy Wang: [00:02:30] [background music] Danielle, welcome to Inspired Money. It's so great to have you on the show.
Danielle Town: [00:02:34] Thank you so much, Andy. I'm thrilled to be here.
Andy Wang: [00:02:36] Awesome. Let's jump right in. What's your earliest childhood memory of money?
Danielle Town: [00:02:42] Whoa, that is jumping right in. Let me think back to that. You know, I really wasn't very aware of what my parents did for money, but I remember being really interested in businesses as a kid and I remember my dad being involved in businesses although I didn't really know what that meant. And I started my own business out of my house. I literally – [laughter] this is funny because we use it in our book, but I literally had a lemonade stand where we were out on the street trying to sell lemonade to like, 10 cars that would pass our house in a day because we were out in the middle of nowhere on a farm. And I remember that very distinctly and discovering that products that you put into your lemonade cost money, and I was really surprised about that. I think my parents set something up where I had to pay them some amount for the ingredients and then later I had a beauty shop out of my bedroom and my sister was my only client and my best friend at the time did it together and we gave her all these facials, and makeup applications, and charged her crazy amounts of money for such excellent services because we knew she couldn't get them anywhere else. So, that was my first lesson of a moat.
Andy Wang: [0:04:05.6] That is so cool, entrepreneurial.
Danielle Town: [00:04:09] You know, looking back I was but to me at the time I was just kind of bored I think and it was a way to fill the time that was productive and somehow you like, got money out of it which was crazy to me because I enjoyed doing facials, and makeup application, and making lemonade. And the connection was not lost on me that hopefully, the way that you create money is by doing something you enjoy.
Andy Wang: [[0:04:36.0] Yeah, a true capitalist.
Danielle Town: [0:04:38.5] Conscious capitalist. [laughter]
Andy Wang: [0:04:40.6] Right, exactly. Well, you started your career as a lawyer. You got your law degree at NYU. You were an associate at a leading firm. What did you learn from that time in your life?
Danielle Town: [00:04:52] It was such an incredible time to be an attorney in the startup and venture capital world. I absolutely loved working with my clients. My favorite thing was my clients would call me and they would say, Danielle, here's what's going on with this thing, with our startup or with this thing with our investment. What do you think we should do from like, a legal perspective but also kind of from a business perspective because in order to give good legal advice in my opinion you really have to understand all the different factors and incentives that a client is dealing with and through that process of just getting to talk with them and understand what was going on with them I had such an incredible view into that world without actually having to risk any of my own money which was incredible. And especially in Boulder Colorado where the entrepreneurial community is a real community consciously so where people actively give up their time if they're an expert past investor/past entrepreneur where people actively seek out counsel if they're a new entrepreneur or if there's somebody who’s new to the investing world people really treat it as an arena in which to learn, and grow, and pass knowledge down and I think that's so rare and extraordinary and really special to Boulder. I'm sure it exists in other places as well. Boulder is such a small town, and people know each other, and your reputation matters a lot and so being just part of that and plugged into it was so much fun. I actually miss it a lot sometimes.
Andy Wang: [00:06:33] So, for you though it wasn't all fun because as an associate at a law firm it was long hours. It was it was a lot of work, right?
Danielle Town: [00:06:44] It's a lot of work, yeah, to be at a big law firm. I mean, I was at a big international law firm, and I was in Boulder in a small office, but certainly, they expected big international law firm hours and we had big clients and it was completely what I knew I was signing up for so, it was not a surprise to me. I wanted it. I wanted to be on those kinds of sophisticated deals and really get an education, which I did. And I loved my colleagues there but as you said, the time pressure, just the sheer hours after a few years and the stress of it was really getting to me physically. I mean, I was starting to get really ill. I started throwing up randomly. I just couldn’t digest food. I started getting fevers out of the blue. It was really weird, and nobody could really tell me what was wrong with me except that it was just stress. And I actually, truly did not feel like I was stressed. I truly was happy with what I was doing. I knew I was exhausted, but other than that I really didn't feel like I had some kind of terrible life. Everybody I knew had the same kind of stresses, the same kind of life. All my friends doing the same kind of stuff so, I really didn't see it as anything weird and it wasn't until I really started to get sick that I realized I wasn't sure I would actually be able to keep it up. And that's when I had to take a hard look and that's when I started just to look around and notice, oh yeah. Maybe there are other people who don't feel like this. Maybe there are other people who are not as stressed out as I am. And I started to connect it to the exhaustion, and the stress, and the daily grind, and all the pressure and realized that yeah, my body was really trying to tell me it's time to get away from this.
Andy Wang: [00:08:43] What's one of the important messages there? Is that when you’re the hamster running around the hamster wheel it's hard to see beyond that wheel?
Danielle Town: [0:08:53.6] I think it is hard to see beyond that wheel. I mean, I as I said, really wanted that job. I wanted that life. And when I look back – every now and then my dad will say to me like, oh, do you wish you had never done that and I'm like, no. It was fantastic. It was exactly what I wanted. Every instinct told me that was the right path for me and I think that's still right. I think the part that I didn't see is that as you said, once you're in it it's very hard to look outside and realize that maybe the path of life has shifted a little bit. I mean, sometimes I think of life as kind of like a river where the river is going down and you've got the current, and the current moves and curves as the river moves, and curves, but the current doesn't do that on its own. It only moves because it hits a wall, or it hits a rock and then it moves around that thing and I was up against the wall and I was getting slammed into the wall by the river current and I couldn't see that if only I would turn and push away from the wall I could get right back into that current and move down the river. I just needed to turn and I couldn't see it and so, all that sickness, and stress, and exhaustion was the universe saying to me, hey. You need to notice that you're getting slammed against the wall. This isn't normal. So, it's very hard when you're in it to notice what's happening until it gets really bad.
Andy Wang: [00:10:28] So what did that look like for you getting from point A where you were having fun practicing law, but your health was suffering to point B where you said, “Okay, I'm going to change.” What did that look like?
Danielle Town: [0:10:44.5] [laughter] Well, it looked like a series of resistance [laughter] because I still didn't really want to do it. So, my first thought was okay, I need to do something and I didn't know what that something was. And I had a conversation with my best friend which I put in the book. Her name is Kamala Nair. She's an incredible writer. She wrote this book called, “The Girl in the Garden,” which I highly recommend to you guys. It's a novel and it's beautiful and she had written that book a few years before. And was now trying to write her second book and so, she was feeling really stuck. She was working a day job and so we both talked and we both just said, like, this can't be how things are supposed to be. It just can't. We're miserable, and we just put that idea out into the universe a little bit. And I really didn't have a clue what to do beyond that. Zero idea. And at some point, I talked to my dad about it and, you know, he knew that I was ill. And he said, “You've got to learn to invest.” And I said, “No. I don't want to learn to invest at all.” He's been talking to me about it my whole life kind of here and there and I had tried it a few times and it just never took, and I didn’t – I just was completely and just no. And then he started talking to me about it a little more and it got to the point where I really, I tried. So, first, I tried to think of other ideas that I could do that would be, you know, to be able to depend on something other than my salary and all the ideas I came up with he totally shot down or I shot them down. And then I thought, okay. I'm just going to save my money because I'll figure this out at some point in the future. I don't have the answer right now. That's my solution. Simple. I don't have to learn how to invest. And he said, “What about inflation.” I said, “Inflation? Inflation is something that doesn't really affect me. What are you talking about?” Well, it turns out Andy that inflation affects our savings which I don't know if you knew this, I certainly did not know about this. So, it turns out for everybody who is like me, inflation I knew was this like, macroeconomics force that affected the prices of things, but it never connected to me that my actual savings account would have its buying power reduced by inflation. So, what that means is like, if you put $10,000 in your savings account inflation is at an average of about 3% per year so, the buying power of your money goes down by about 3% per year with no fault of your own. To me, not doing anything wrong at all my money is losing buying power and the only way to make it up is to actually invest your money and in order to just stay even we have to create an average of 3% per year just to stay up with inflation which blew my mind. I had never put that together and nobody had ever put that together for me. So when he told me that I realized I had to do something even if I came up with some other idea to not depend on my salary anymore I realized I had to learn about investing just to handle this inflation problem.
Andy Wang: [0:14:20.4] Right, because squirreling away your money and not spending wasn't good enough.
Danielle Town: [00:14:26] No. It's not good enough which is terrible. I mean, that's what everybody tells us to do, right? Like, save your money. Be a good little saver and that's true like, we still need to save our money in order to have anything to invest with, but yeah. You can't just save and that is so depressing. Even to this day I can't really get over it.
Andy Wang: [00:14:47] Well, congratulations on your book, “Invested: How Warren Buffett and Charlie Munger Taught Me to Master My Mind, My Emotions, and My Money (with a Little Help from My Dad.)” It's a New York times best seller.
Danielle Town: [00:14:59] Yes. Thank you so much.
Andy Wang: [00:15:01] Congrats. That's huge. In the opening pages, you call yourself a reluctant investor. What were your first steps in changing this? Because I notice that you are LinkedIn profile you now lead with investor.
Danielle Town: [0:15:16.0] [laughter] I probably just threw that in there one day. So, I still – thought you were going to say I lead with reluctant investor because I couldn't remember what I put on there. I think on my Instagram it says reluctant investor.
Andy Wang: [00:15:29] What do you have? You have Investor, Host of the InvestED podcast with my dad, and author of Invested.
Danielle Town: [00:15:36] Well, there you go. I don't even mention being a lawyer so, you know. [laughter]
Andy Wang: [0:15:40.2] It's a thing of the past.
Danielle Town: [0:15:41.4] Funny how things change. So, yeah. I mean, frankly, I still feel like a reluctant investor and I think there is no like, one thing that made me shift, you know, and in Chapter 3 or something from not feeling reluctant. I think, it took me this whole year, this whole book to become less reluctant. And as you know, I think, my last description of inflation pretty much illustrates it perfectly. I wish there was no inflation and we could just sort of chill out and not really feel any pressure to have to do any of this stuff, but we can't. And I actually discovered that investing the Warren Buffett value investing way has been a really beautiful addition to my life so, I am not super reluctant any more. At the same time, numbers are still difficult for me. I mean, that was a big reason I stayed away from this stuff for so long is my dad – so, my dad is an investor. He's written about investing. He has written two other books, and speaks about investing, and educates people about investing and has been doing that stuff for many years as well as having other businesses so, I've been around this stuff my whole life unconsciously, unconsciously. And he would just constantly come at me with numbers like, he loves them, and he loves spreadsheets, and he loves going through a sequence of numbers to figure out an answer and I can't do that stuff at all. Now, I'm much better at writing than he is and at words and I enjoy doing deep research. And you know, we have different skills so, this not trying to put myself down here. This is just a fact about me. I'm not great with numbers and so that's how he always approached it with me and it was a really big reason that I never got into it. So, a huge turning point for me when it came to learning value investing was being able to interface with the numbers in a way that worked for me and that really took me sitting down by myself trying to figure out these equations, trying to take the stuff he would teach me and how that makes sense to me in a way that I could truly go and use it reliably. And that took a lot of work, but the good news is I've done the work so now, anybody who reads the book can take the equations and the methods that I developed and go and use them on their own.
Andy Wang: [00:18:26] It's interesting that your book reads like a memoir, 12 months of your life and the process of you, learning these principles. And it sounds like you're really trying to introduce the world of investing to people like yourself who may be self-described as I'm not numbers person and that's why I'm reluctant to invest.
Danielle Town: [00:18:50] That's exactly right. I mean, I frankly really don't enjoy investing books and as I said my dad has written two other investing books both of which are very “investy.” They’re good and I've read both of them and I finished them, and I put them down and I forgot everything that was on them immediately. And I just kept on wanting a book that was interesting and fun to read and not just like straightforward numbers, numbers, numbers. Here's how you do it and so I thought, well, why don't I just write it myself because nobody else seems to have done it. We had started our podcast and people kept on emailing us saying, you know, the podcast is so great. We love the info that's coming out, like, Danielle is asking all the questions I have so I knew that the stuff, the really beginner stuff that I was asking was resonating with people, but they would say, oh, we just don't totally understand the way you described this thing or can you repeat this other thing because it was just too hard to figure it out while I was listening in my car. So there's a lot of things that are just better conveyed. A lot of information that's just better conveyed on a page where you can go back and really figure it out, and study, it and read it over twice, if you need to. [background music]
Andy Wang: [00:20:11] Coming up! Danielle outlines Charlie Munger and Warren Buffett's investing principles and why she added one of her own to have a mission of supporting companies that aligns with her values. But first, what she wanted to create with her new book, “Invested.”
Danielle Town: [0:20:27.4] …and I wanted to make it something that people would enjoy reading like, on a beach like, on vacation. This investing stuff doesn't have to be difficult and heavy. It can be light, and fun, and something you really enjoy while you're on your own time and so I really wanted to make it something as you said, that's like a memoir. It goes through the details of investing. By the end of the book, you will know how to invest on your own. That's very important to me, but you'll get that information through hearing how I did it and all the ups and downs and there were many downs that I went through as well.
Andy Wang: [00:21:06] The show notes with our guest’s bio, links and other items mentioned in this episode can be found and inspiredmoney.fm/044. If you like transcripts we're slowly adding those, too. If available, you'll find a link in the show notes as well. Now, it's time for the Runnymede money tip of the week. Today, I have a pop quiz for you. Would you rather have a million dollars or a penny that doubles every day for a month? Think about that for a few seconds. [silence] So, what's your pick? If you're thinking that this is a trick question, you're right. The simple act of doubling your previous day's investment can rapidly reap huge rewards, thanks to the power of compounding. On day one, you've got one cent. On day two, you have two cents. On day three, you have four cents. Repeat this for 30 days you've got over $5.3 million. Cool, right? For you realists out there, I know that a hundred percent return every day is highly unlikely, but the principle of compounding holds true even with smaller returns. It'll just take longer than a month to amass your fortune, but in order to realize the power of compounding, the sooner you start investing, the better. Also, make regular investments. This can be especially effective in tax advantaged accounts like a 401k or IRA account. Contribute regularly even just putting in $20 a month can add up over time possibly to a much larger number than you might have imagined. That's your Runnymede money tip of the week.
Andy Wang: [00:22:48] As a follow-up to Inspired Money Episode 40 with Broadway Producer, Ken Davenport. Ken gave me two tickets to his new show, Getting’ the Band Back Together Coming to Broadway on July 19th. If you're in the New York area or know friends who will be in New York July 19th through October 5th of 2018, visit our Facebook group for a link to enter. That's inspiredmoney.fm/facebook. If you share the link or do things like listen to Ken's episode, follow me on Twitter or Instagram, you can increase your entries and improve your chances of winning. The show looks really fun and stars Marilu Henner. The giveaway will run through July 10th and I'll post a couple of promo videos in the show notes. Inspired Money is brought to you by Runnymede Capital Management. We help you to plan, invest and worry less. Learn more about us and educate yourself for free by subscribing to our blog at inspiredmoney.fm. You're listening to Inspired Money. I'm Andy Wang.
Andy Wang: [0:23:53.9] Well, I really like that you see investing – you compare it to learning a language.
Danielle Town: [0:23:59.5] Yeah, absolutely.
Andy Wang: [0:24:01.0] What can the Inspired Money listener learn from your experience?
Danielle Town: [00:24:05] I mean, first of all, I think what you're doing here, Andy is so fantastic talking about making a difference with money, making the world a better place. One of the turning points for me, making me a little bit less reluctant was discovering that the money I'm putting into public companies and public markets, my investing money could actually be used in the same way that I think of my consumer money which is putting my money where my values are. So what I try to do and probably a lot of us do because this is so much in our vernacular now is support companies with my money that I think are doing good things in the world. So, like, I try to buy organic food very consciously because I would rather support those companies and that kind of food than the other kind, the conventional kind that's maybe, not using our earth, as well as, they could be. I try to support companies and buy food that's grown animals that are grown without antibiotics. I try to support companies that are treating employees well and have fair trade products, you know, stuffs like TOMS® shoes where they're giving a pair of shoes away for every shoe that we buy here. These are companies that are doing great things in the world and we think about it a lot now with our consumer dollars, but we haven't really connected it to is our investing money and we can actually invest in companies that are creating those products and those services that we're already interested in and that we're already supporting but just on a higher level on an actually an even more impactful level than with our consumer money. And it's extraordinary what we consumers have done already just in this world of deciding where we are going to put our money of voting with our dollars. I mean, look at organic food. Thirty years ago, you had to go to the tiny organic hippie run grocery store in the corner and I remember that Stork's. My mom used to take me to buy carob because I was only allowed to eat carob and not chocolate because she was a total hippie mommy. And we would go to the tiny little organic grocery store and get the organic food once a week. And now, Whole Foods is everywhere to the point where Amazon bought them and conventional grocery stores put their organic products that are their house label products – organic products. Right up front so that people know when they come in that they're competing directly with whole foods. This is entirely because of us voting with our money, and we have changed the landscape of food in America. It's the same kind of thing that we can do in the public markets and all we need to do is think about it a little bit more. All we need to do is take control back of our money. Take power back with our money and we would change these markets and it would happen very quickly.
Andy Wang: [00:27:03] Yeah, I love that. I love that. And you're a hundred percent correct. You can find organic foods at Wal-Mart and Costco, too.
Danielle Town: [00:27:10] Yeah. Costco is fantastic. I love Costco. Yeah, they have such good options there and I mean, it's the best example because it's so clear and it's so personal. I mean, the food that we buy, the groceries that we buy is one of the most personal things we do with our money and it has completely changed everything in how companies serve us. And it would be exactly the same in a larger way with public companies.
Andy Wang: [00:27:40] I noticed in your book that this 5th principle, the mission behind your investing and I hear the passion in your voice, the genuine passion and interest that you have in your investments, and it makes it more relevant, and meaningful and you're working towards a greater good, too. You're not just thinking about how am I going to make money? And then you're building upon time-tested principles of Warren Buffett and Charlie Munger.
Danielle Town: [0:28:12.2] Yeah, you’re exactly right. So, the book is structured in my investing practice which is how I treat my investing as a practice is structured according to four principles that Charlie Munger put out in an interview he did with the BBC. And these four principles of investing are just beautiful and genius and then I added my own which is mission, which is what I was just talking about, putting your money where your values are. So, his four principles and the book goes through these in great detail are be capable of understanding the business. Notice he doesn't say understand the business right away but just know that if you studied this business, you would be able to understand it at some point and if it's too boring or too hard, you toss it out. You don't even go there. I also think too boring is a very important category that I don't even want to touch. So, be capable of understanding the business. Two, make sure that the business has an intrinsic and durable competitive advantage which colloquially in the investing world is called a moat, like the moat around a castle. So, the business is going to be intrinsically protected from competition in a way that's very deep and very hard to get around. Now, it's not that some company couldn't do it but understand what that is and understand why. The third principle from Charlie is that we would like to have management with integrity and talent which always makes me laugh because he doesn't say we would like to have the other ones he says, we have to have the other ones and then the management thing. He's like, yeah, you know. Sometimes there's going to be some people who kind of screw it up. So, the point of having a great moat and a business that you understand is that if somebody comes along who is a CEO and does try to screw up the business then the business will be able to withstand that mismanagement and hopefully then we'll get somebody else in there who does have integrity, and talent, and can lead the business going forward. And then the fourth principle from Charlie is you buy at a sensible price and that is the key. So, you make sure you understand the business. You make sure it's a great business fundamentally and then you buy it cheaply. You buy it when it's on sale and companies can be on sale just like buying a dress at T.J. Maxx. So, that dress at Bloomingdale's is going to be a hundred bucks. At T.J. Max, hopefully, you find it for like $30. It's the exact same dress but you got it on sale and buying a company on sale is the exact same way. So, of course you have to understand what the value of the company is in order to know that you're getting it on sale. So, that was a big challenge for me to put together these equations and make sure I could understand financial statements, but I've put it all out there. Put it all in the book. It is totally doable even for people like me who are numbers phobic. And then as you said, I add mission. I want to make sure it's a company that I really want to support with my money that is doing something for our world, that I want to be identified with, that I'm willing to stamp my name on what they're doing because that changes the whole game for me. I mean, I'm really passionate about it. You're totally right, Andy. It takes it from being this sort of small feeling like, oh, I'm just sort of doing this to like, make money for myself and that's kind of like, maybe I should be doing like, different things with my time. And it turns it into something that is powerful, and larger than me, and important to our world, and important to help other people, and important to actually change the way we think of companies and the way companies think of their stakeholders. And I really think that if we all started to think about this differently we would make a huge change in the way companies behave and that is only to the good of everybody. It's to the good of my own personal bank account. It's to the good of companies doing great things and it's to the good of our market as a whole.
Andy Wang: [00:32:16] I would suspect that the mission part is very individualistic. How's your mission different from your dad's?
Danielle Town: [0:32:24.8] Totally different. Yeah, you're exactly right. So, your mission is going to be different than my missions and that's really important. I'm really glad you brought this point out. Warren Buffett was recently asked at the shareholder meeting for Berkshire Hathaway this year. He was asked about how at some point a number of years ago, he had said that he would not invest in cigarette companies and would he make the same kind of statement about gun companies today or this year. And he basically punted the question and refused to say yes or no. They started talking about hunting wild turkeys in Omaha. Without saying it, clearly was not going to take a stand against gun companies. And I wish that they had just come out and said directly, we are choosing not to take a stand on gun companies like, cigarettes. We are willing to take a stand on guns. We are not and that's where we draw our own line and everybody just has to deal with it. And if you're not interested in that take your money out of Berkshire Hathaway; we're fine with that.
Andy Wang: [0:33:29.9] Right. Call a spade a spade.
Danielle Town: [0:33:31.3] Exactly. I wish they had said that because that's I think, what they're saying indirectly but they didn't. They kind of punted it so, that's unfortunate in my opinion, but I think the way they handle it is that they vote their values with their money. And if you're not into that, if you want to invest in cigarette companies then they're fine with that. Take your money and go do that. So, my mission, my values are going to be different from my dad. It’s now, are they really all that different in reality? Bot really. We tend to agree on a lot of stuff so I wish that I could say like, oh my dad loves this company and I hate that company. Oh, you know, he does like Apple a lot and I'm like, the one person in the world who does not think Apple is a good investment and doesn't think they're doing great things. So, there you go. There's one.
Andy Wang: [0:34:25.6] What do you dislike about Apple right now?
Danielle Town: [0:34:28.5] Well, I just don’t think they're really doing that well with their products. I mean, Apple is a difficult one because they have so much money they can just acquire their way through the future and probably take over the world just through that.
Andy Wang: [00:34:46] Yes, a lot of the leading tech companies are like that because they generate so much cash.
Danielle Town: [00:34:50] Exactly. I think Facebook's going to do that too. So, I'm not saying that they're a bad investment at all. They might be a fantastic investment and I own Apple products. I have an iPhone, like, I'm the worst person to be telling you that I don't like apple because I'm a total purchaser of Apple in my daily life, but I don't think -oh, I mean, this is so sad but since Steve Jobs died I just don't see that their innovation is there and I don't think that their software is… I think it's hard to use. I don't think it's really keeping up with the clean, beautiful, really simple standard that Job’s set. I find that it's clunky, and complicated, and hard to use and… I don't know. I think, at some point I might have to switch to a Google phone here so, yeah. I think, Apple, the company could still be a great investment just because they have so much in reserves, but the products are, for me, going a little downhill. So, I just – as somebody who wants to be very identified with the company as I buy and as somebody who's only going to buy a few companies in my lifetime, I mean, what Warren Buffett says is you should have a punch card like, you have for the gym or yoga class and you get 20 punches for your life. Twenty punches! Now, that's crazy! And I think it's actually like, literally, a little bit crazy. Like, he's bought more than 20 companies in his lifetime and I imagine I will, too but the point there is the number is going to be very low. And I don't want to be purchasing Apple as, you know, investing funds investment and then in my own life with my consumer funds be going, oh. I don’t really like that stuff, like, it's a disconnect that I don't like and it's one that I'm not going to do.
Andy Wang: [00:36:53] Well, I think that the important thing to come away with is that the punch card idea is about a specific mindset and mentality that you have to spend the time and pick your spots very carefully. You're going to do the research and you want to buy at those opportune times because I think in your book you talk about Warren Buffett's shooting for like, a 26 plus percent return.
Danielle Town: [00:37:23] Yeah. He said something like, if he had… I'm going to get the number wrong but if he had like, less than $1,000,000 to invest, something like that or some small amount of money then he would be able to get 50% per year on that money. And then he says, no, I guarantee. I would be able to get 50% per year on that money.
Andy Wang: [0:37:45.8] Right and for most people to say that, you would say, okay, right, but when it's Warren Buffett, time and time again…
Danielle Town: [0:37:52.0] Oh, you to take it seriously.
Andy Wang: [0:37:53.9] …he's showed that, okay. He will give you the numbers behind it over time.
Danielle Town: [00:37:59] Yeah. It's wild. So, you're exactly right. He is talking about the mindset of how deeply you have to understand a company and then how – I want to say how invested you'll be in that company, but I can't use that word too often so, how married you are that company once you buy it. I mean, he holds companies for 30 or 40 years in some cases. Some companies he may never sell. So, what he's saying is when you buy a company be in it for the long haul. You may never sell that company. You may be married to that company and take it seriously on that kind of level.
Andy Wang: [00:38:42] Now, your approach, it's very focused on individual companies and this is counter to the popularity of index funds and exchange traded funds.
Danielle Town: [00:38:59] It's sort of counter. So, it sounds counter. I agree with you, but actually, I think, what investing in an index fund or an exchange traded fund is actually an investment in the U.S. It's a bet on the future of the United States of America doing well, having a strong moat with two oceans on either – one ocean on either side. Two oceans, total. One ocean on either side and a strong military, good political system, reliable currency it's a bet on the U.S. in the future. And I think as long as you understand that that's what you're doing and that there will be some ups and some downs on that bet and you're going to be in it for the long haul then it's really exactly the same kind of investing as choosing a particular company. You just have to understand what you're doing and that's exactly what Buffett talks about. He says, if you're going to, not put in the work to learn how to invest on your own, how to really understand individual companies and do the research to make sure you know what you're buying then an easy choice for Americans because we generally understand our country is to bet on the U.S. by buying an index fund and I don't really have a problem with that. I think as long as you're going low cost, low fee because that's what, you know, that's the part that kills you are the fees then go for it. I think, that's fine. But I think if you want to get a higher level of return like Buffett talks about like the 26% which is the goal or I think my dad goes for 15% per year is his goal then you've got to start choosing your own companies because the US alone, we've been having a great run, but it's not going to continue forever. And I think the U.S. alone is not going to get us there. What will get us there are fantastic companies that are shooting up and are going to be strong even in a recession.
Andy Wang: [00:41:02] Yeah. Can we talk a little bit about money and emotions because I noticed in your book, you wrote my feelings about money had nothing to do with money; they had to do with the mess inside my head. I wanted to sort out the mess.
Danielle Town: [00:41:18] That's true. Yeah, I think that's in Chapter 6 which is where as you said, it's set up in as a memoir over the course of a year and each month is a chapter so there are 12 chapters, 12 months. So, Chapter 6 is June, right in the middle of the year and it was where I really hit the wall. It was where I had been learning. I had been through at that point had learned Charley’s four principles. I had discovered missions. I felt really excited about what I was doing. I was starting to really understand it and enjoy my investing practice and yet somehow, I just still couldn't totally get into it. It was like, kind of that felt separate from me and I couldn't figure out why. So, I sat down and started to really think about it and really try to delve inside myself and understand what was happening here and what came out was not what I expected at all. What came out was that I was having all these feelings about being blocked from learning because I didn't totally trust my investing teacher when it came to money stuff and my investing teacher was my dad. So, I sat there I try to figure out what was going on and I realized that it went back to when I was a kid and I think this is true for many of us, you know. We all grow up with some relationship to money which is often taught to us by the people who raised us and because we don't have any perspective as kids on money stuff we just think that whatever our life is, whatever we're given, whatever the structure is, is how it is then we don't really think about that stuff until much, much later. And often when it's painful we don't think about it at all. So, for me it was painful and I hadn't thought about it at all and it wasn't until I sat there and I was really trying to figure out what was blocking me that I realized it was because my parents had gotten divorced when I was 11 and they had a typical divorce war and it was really bad and really ugly. And my dad laughed and his weapon that he could use was money. So, he took the money with him and it was awful. I mean, we have obviously repaired our relationship now and did soon after and my parents ended up ditching their lawyers, and they just got into a room with a mediator, and they worked everything out, but that took a few years to get there. And in the meantime, so, we were with my mom and we had to sell our house and we moved into literally, a trailer and she had to go back to work and we didn't have much money for anything besides food and a few necessities and this is, you know, we've lived a very nice life before that. So, it was a huge shock for me as an 11, 12, 13-year old to go through that change. And I mixed it all up with all the divorce pain and all the other stuff going on and I had never really thought about the money part of it until I was trying to learn investing from my dad and I realized that I didn't trust him on some really deep level. So, we ended up having conversations about it and trying to talk about it in a way that we had never, I mean, we had never really talked about it. So, from an adult perspective, from my perspective now, I can understand what they went through a little bit better than I could when I was a kid. And there's just – so, that was my thing, you know, I have that and I've realized from talking to so many people that we all have something from when we are kids, or young adults, or whatever. Even stuff as adults has affected us around money the way we feel around money often. As you mentioned, it doesn't really have much to do with money itself. It has to do with how we feel about it, about other people, about support, about security, about our worth as people to our families, to our jobs, to our communities. I mean, money is a representation of so many feelings that really aren't implicated in any other way and I think because of that we think of money as something a little bit dirty, and a little bit unhappy, and a little bit something like, you don't want to touch it quite and that's all for very good reasons. I mean, these are often very painful things, but if we can take that back a bit. If we can face it, and transform it, and take it back so that we have the power there is so much good that we can do with that experience and that knowledge around money that we're not doing right now and so, I really hope to inspire other people to make those changes. I'm doing a TED Talk in a few weeks about this exact subject because I think, it's a real area of growth for us and nobody is really talking about it.
Andy Wang: [00:46:45] Cool. Well, thank you so much for sharing that very honest part of your process and story. It goes to show how complex a topic money really can be.
Danielle Town: [00:46:57] It really is. I mean, it's crazy that learning about investing turned into this whole thing of like internal growth, and practice, and values. I mean, who knew? I certainly, didn't, but it was a really, really good discovery and that's why I'm telling everybody about it now. I think, it's so important to talk about, and put it out there, and have more and more people being able to invest on their own and go through these processes and transformations themselves.
Andy Wang: [00:47:28] And today, you're trying to associate thankfulness as part of your money process. Can you talk about that?
Danielle Town: [00:47:36] Yeah. This is something my dad taught me first thing, really. The idea of thankfulness he learned it from an investor in Japan who was the Warren Buffett of Japan, Wahei Takeda. And he was somebody who was incredibly successful and actually instituted thankfulness into the companies he invested in so that if the management of that company would not teach employees to be thankful he would actually divest from that company. He took it that seriously. So, it's something that my dad told me after he spoke to him about it and we started to integrate into our investing practices because when you start to think of all the fantastic things to be thankful for in our lives it really shifts your perspective on what's going on. Now, that said, I have a big problem with like, forced gratitude which I think is how I've felt about it before. I mean, you hear this recommendation like, oh, be grateful, be thankful and I've always felt kind of fake about it and I didn't like that feeling. So, what I've done and just for myself is to just kind of like keep it real. I've started being thankful for the stuff that isn't so good in my life. I've tried to notice the stuff that I'm feeling down about and find a silver lining. Find a way to be thankful for the problems in my life in addition to the wonderful things which are so easy to be thankful for. Like, today, I got up and I was thinking, oh wow. It's an amazing day and I get to do interesting work that I'm so excited about and I'm in good health and I just was really consciously thankful for all of those things, and at the same time I was going, oh, it's raining outside and I thought, okay. Wait a second. I also have to be thankful for that so what can I do? Oh, ok. It gives me the chance to be snuggly indoors, and naturally nice, and I have a roof over my head, and that's fantastic and it just shifts the perspective a little bit. Yeah, so, when it comes to investing the way to do that because you start to feel kind of down about something sometimes with like, having to deal with all that. For me, it's having to deal with all the numbers. It's… I have the opportunity to learn this stuff. I have the brain power to grapple with it. I have the chance to get financial statements which I detest from the Internet and I can read them on my couch. That's amazing. People couldn't do that 30 years ago. So, there's a lot to be thankful for and it just shifts your perspective a little bit. It's really nice.
Andy Wang: [00:50:19] Well, great advice. It is important to shift your perspectives in a positive way. I like to ask all of our guests how do you define success?
Danielle Town: [00:50:29] That's a lovely question. For me it's feeling satisfied, feeling like I've helped people, feeling like I'm spending my time well and particularly, selfishly, for me, feeling like I'm supporting my family well. I'm supporting the people that I care about and then also just having fun. [laughter] Life should be fun, right?
Andy Wang: [0:50:58.3] It should definitely be fun. Can you share an Inspired Money tip that's had a big impact on your life?
Danielle Town: [00:51:04] The biggest thing I can say to people who are grappling with starting this thing, it's hard to start. It's definitely a hump to get over and my number one tip besides being thankful which I think is actually number one is just start. Start right where you are. Start with reading the business news. Don't go to anything boring. Don't deal with anything you don't understand. Just pick some headlines that look cool and probably are about companies you already know about. I mean, talk about Apple. Apple is in the news all the time. Read a couple of articles and start to notice how much you actually know about these companies already and that you have opinions about these companies and those opinions may or may not be the same as the one of the article you're reading, and all of a sudden, we can start to notice how much we already know about publicly traded companies. It's not some far off behemoth that we never touch. It's stuff that's in our homes and it's services that we use. And as soon as you start to do that and start to notice what's around you and that there are companies you can invest in all over the place that you already know about it becomes so much more personal immediately and that takes about maybe 15 minutes and all of a sudden, you're seeing things totally differently.
Andy Wang: [00:52:31] I love it. I love it. It makes it meaningful and relevant to your life and then it'll be an easier path, it sounds like.
Danielle Town: [0:52:39.4] It will not only be an easier path. It will be the right path because we should all only invest in companies that we are capable of understanding and we should start with companies that we have a really good insight into, that we already have opinions about. So, it's the place to start. Whether it's hard to start, or easy to start, or it needs to be meaningful that's the place to start for everyone.
Andy Wang: [00:53:03] Great first steps. Thank you, Danielle for your time and for inspiring people with your story, and experience, and how you got started. Where can the Inspired Money listener follow you and find out more about your book and podcast?
Danielle Town: [00:53:17] Well, thank you so much for having me. You can find out all the stuff I'm doing at danielletown.com and the podcast is the, “InvestED” podcast it's on iTunes and Stitcher and every podcast format or at investedpodcasts.com. I've got a monthly newsletter that talks about my investing practice; it's totally free. It's just got like, fun resources and what's going on and things I'm thinking about. You can sign up for that at danielletown.com. And my social media is danielletown on Instagram, danielle_town on Twitter, DanielleTowneInvested on Facebook and Danielle Town on LinkedIn.
Andy Wang: [00:53:55] Awesome. Thank you, Danielle, Appreciate it.
Danielle Town: [0:53:57.7] Thanks so much.
Andy Wang: [00:54:02] [background music] So, what was your favorite Inspired Money moment? I loved the idea of voting with your investment dollars, supporting companies that are both profitable and they can make the world a better place. Most of all, what I love about Danielle’s story in her book is that she went through a transformation. She went from reluctant investor to someone who enjoys reading Berkshire Hathaway annual reports and perhaps, maybe, even enjoying listening to quarterly conference calls of the companies that she's invested in. As Danielle likes to say, if she can do it, you can too — so go do it! If you had a different favorite Inspired Money moment and takeaway, please let me know by going to inspiredmoney.fm/facebook. Let's continue the conversation there and you can also enter into the Broadway show giveaway.
Andy Wang: [00:54:59] [background music] All the music on today's show is by Jim Kimo West. Aloha, Kimo. Thanks for tuning in. Have an inspired week and do something that scares you.
Mentioned in this episode:
- Phil Town
- Warren Buffett
- Charlie Munger
- BBC NEWS Business Charlie Munger Boom and Bust Is Normal (Munger and Buffett's checklist for picking a company to invest in)
- Berkshire Hathaway, Inc.
- Wahei Takeda – the Warren Buffett of Japan and thankfulness
- Invested: How Warren Buffett and Charlie Munger Taught Me to Master My Mind, My Emotions, and My Money (with a Little Help from My Dad) by Danielle Town
- The Girl in the Garden by Kamala Nair
Gettin’ The Bank Back Together: