Insider Monkey: Is there any way that that process has changed since you started at Markel, either because you learned a way to improve or because the technology has changed?
Tom Gayner: No, that basic framework has been consistent with the way we’ve been doing things for 22 years. I would like to think we’re better at it than what we were 22 years ago by virtue of having practiced it for years and learned a lot of lessons but the basic intellectual framework hasn’t changed.
Insider Monkey: How does Markel track its performance and talk about its track record?
Tom Gayner: Well, we just count up how we did each quarter and each year and cumulatively keep track of it. I’ve been here 22 years and we’ve done very well and I make that statement on the basis of, we’ve outperformed the S&P 500 over 22 years by a couple hundred basis points, and that seems pretty good to me. That’s the first thing and largest thing that gives us some sense of how we’ve done.
Insider Monkey: Are there some books about investing that you’d recommend to a general or retail investing audience, either because they were useful when you were starting out or because they offer an interesting point of view on the markets?
Tom Gayner: Well, this is not an original answer but that’s okay because it still works. I basically start with Graham & Dodd, and the first or second edition not the later editions, that’s very important, The Intelligent Investor, just like Buffett says, those are fundamental books and it’s very important to have those under your fingertips. I think it’s important to have some reasonable understanding of accounting. You have to know that accounting is the language of business, you need to know what those numbers mean when you’re looking at financial statements. You don’t need to be the chief accountant of the SEC but you need to know something about accounting. Once you know that, then the investment books are further explanations or anecdotes or stories or refinements of those basic things. I also like a lot of literature because I think the way my mind works with the reasoning and analogies, heuristics, things of that nature, is very helpful. For instance, sometimes off the wall I tell people, “If you understand accounting and you really have Graham and Dodd down cold the next thing you should read is every word that Mark Twain ever wrote.” Mark Twain was rich and poor- or as I should say, rich and broke, rich and broke, rich and broke several times in his life and there is an undertone that he’s writing about money and the way people act when they have money and the way people act when they don’t and in terms of being helpful in decision making and recognizing human foibles and weaknesses and having a good laugh while you’re learning. Mark Twain is at the top of the list.
