I keep a study sheet. It's my journal.

I call it "Painful Lessons Learned".

Each time we complete an investment, I write my learnings on this document. It includes every mistake we've ever made.

It's 11 pages long now.

Before I make a new investment, I re-read this document.

But this document only includes the mistakes that we made.

And I prefer to study from other people's mistakes.

So I study history. And you should too.

There's a treasure trove of stories out there. You can find them on podcasts, audiobooks, books, or old newspapers.

In particular pay attention to the mistakes people made in the past

You can learn a lifetime of lessons reading these stories.

I'm going to tell you a story that taught me a lot.

I read about a famous investor named Rick Guerin. Unfortunately, most people don't know who Rick is today.

But everybody knows about Charlie Munger and Warren Buffett of Berkshire Hathaway.

Rick was the 3rd partner in Berkshire in the 1970s. If he kept his shares those would be worth $8 Billion today.

Rick Guerin was a meaningful part of Berkshire's success.

He had the great idea to buy Blue Chip Stamps with Charlie Munger.

Blue Chip Stamps distributed stamps through grocery stores and retailers which customers would collect and exchange for merchandise. Rick noticed there was a difference between the volume of stamps purchased and redeemed. This was called the "float".

Blue Chip Stamps kept this money in the bank at the ready for their customers to use. But the beauty of this was only 50% of stamps ever got redeemed.

In 1970 the company market cap was $63.5 million.

The unredeemed stamps were $86mil (only half get used so it had $43mil of cash value).

And the company held $72mil of investment securities.

You could buy $115mil of value, for $63.5mil. And they only needed 60% of the company ($38mil) to control the investments of the company.

After buying 60% of the company, they used the "float" of Blue Chip Stamps to buy See's Candy with $25mil. Then they bought Wesco Financial for $25mil and the Buffalo Evening Post.

See's Candy alone went on to generate over $2 Billion of income for Berkshire to-date. Wesco Financial has a market cap of $7 Billion. These were three transformative investments for Berkshire Hathaway.

Rick was an important part of the Berkshire Hathaway story. But what happened to Rick?

In a 2013 interview Warren Buffett was asked:

"Are you in touch with Rick Guerin? What happened to him?"

Warren explained:

"Charlie and I knew we were going to be rich. But we weren't in a rush.

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Rick Guerin was just as smart as us. But he was in a rush to get rich. He was levered with margin loans, and in the crash of 1973 he had to sell his Berkshire stock to me for $40 a share (now worth $560,000 per share)."

Ouch. Rick lost out on $8 Billion in the span of a few months.

The learning?

As an investor don't take any actions that benefit you in the short term but massively increase your risk in the long term.

Debt does this.

Don't use debt that can wipe out your portfolio if the market turns. If you do use debt, use it selectively with low leverage.

If you're smart and patient good things will happen to your investment.

Don't be in a rush to get rich.

There's another lesson in this story. But it's hidden a bit deeper.

As you read above See's Candy returned $2 Billion in pre-tax income for Berkshire over the years.

The Buffalo Evening Post returned over $300mil with the sale.

And Blue Chip Stamps eventually withered and died as the business model went away.

The learning for me is that even the world's best investors don' t know exactly how great a company will be over the years. They may aim for a double or triple. But the company may far exceed their estimations. And it's those outsized returns that can transform your career.

But the most important lesson is you just need to avoid losing money as an investor. Because if you don't lose money, you can keep investing.

And you get more "at bats".

With more "at bats", you learn more and you're more likely to see a homerun like the Berkshire's See's Candy investment.

Goodluck out there!

🔑 a Useful iPhone Feature I just taught my mother

This is silly but useful. And I promised to be useful to you in this newsletter so I'm sharing it (instruction here).

This feature blocks out noise around you and ensures only your voice is heard.

I've taught my business partner, my mother, and all my friends since learning it last week. You can test it out. Wash the dishes or clap your hands and see if the person on the phone with you can hear. Works like magic

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Have a great week,

Sieva

ps: what did you think of the history lesson today? Did you enjoy learning from another investor's mistakes? Reply to let me know. I read all your feedback, and I usually respond too!