October 2025 Random Ramblings

Episode Summary

Executive Summary: Andrew Walker’s October 2025 ramblings focus on investing judgment and founder/manager behavior: Buffett’s late-career excellence as a form of “risk riding,” skepticism toward lavish investor-relations spending, the difficulty of averaging up versus averaging down, and recognizing when a stock is cheaper today despite a higher price. He closes with a personal update that his second child is due in mid-November, prompting a temporary slowdown in ramblings.

Main Topics: Buffett, age, and “risk riding” (Priority: 5/5): Walker argues that part of Berkshire’s long-term success may reflect not only Buffett’s skill but also tail risks that never materialized—especially around age, health, and missed or delayed decision-making in key periods. He frames late-stage Buffett as especially impressive because he kept compounding at enormous scale while avoiding the decline seen in other older investors. Investor relations spending as a signal (Priority: 4/5): He questions whether companies that spend heavily on investor relations—through time, events, gifts, and executive attention—are deploying shareholder capital wisely or treating it like “funny money.” He suggests these behaviors may reveal management culture and capital-allocation discipline. Averaging up vs. averaging down (Priority: 5/5): Walker reflects on a tweet that stuck with him: everyone wants to average down, but few want to average up. He argues that investors often cling too tightly to lower entry prices and miss the fact that a stock can become more attractive after rising if fundamentals improve and downside risk shrinks. “Cheaper today than yesterday” despite a higher price (Priority: 4/5): He explores the idea that a stock can rise in price yet become materially cheaper if earnings expectations rise faster than price. He distinguishes between temporary margin/cost-cutting improvements and durable demand-driven growth, urging investors to understand the source of the change. Behavioral discipline and emotional bias (Priority: 4/5): Walker repeatedly returns to the challenge of controlling emotion: excitement when a stock rises, fear when it falls, and the tendency to overreact by either selling winners too early or averaging down into losers. He sees these as core behavioral traps for value investors. Personal update and podcast scheduling (Priority: 3/5): He announces that a second baby is due in mid-November and that the rambling segments will likely pause or slow for a couple of months as he adjusts to family life, while keeping the broader podcast active with guests.

Key Arguments: Buffett’s returns are even more impressive when considering that he was operating at age 75 during the financial crisis and later at age 85 when he made Apple his largest and most profitable investment. Part of Berkshire’s historical performance may reflect “risk riding” — e.g., tail risks like age-related decline, antitrust crackdowns, or catastrophic insurance losses that never fully hit. Other older investors such as John Malone and Carl Icahn show how aging can impair judgment, making Buffett’s sustained sharpness notable by comparison. Excessive investor-relations spending may indicate poor stewardship of shareholder capital, especially when management time or company products are used to court relatively small investors. A stock can become more attractive after it rises if the business fundamentals improve enough to reduce downside risk or increase earnings power. Investors, especially value investors, are prone to averaging down because it feels natural, but that can turn a manageable loss into a catastrophic portfolio concentration. The better framework is to judge whether the current price is cheap relative to revised earnings and risk, not relative to one’s original purchase price. Emotional responses to price movement can cause investors to become overconfident on winners or overly defensive on losers, undermining disciplined decision-making.

Data Points: Podcast episode reference: Podcast #166 - Doug Laughlin’s prior appearance pitching AppLovin, cited as the podcast’s best-performing pitch. AppLovin share price at pitch: $20 per share - Price when Doug pitched AppLovin on May 8, 2023. AppLovin share price at mention: $566 per share - Approximate price on October 20, 2025 when Walker recorded the ramble. Return multiple: ~32x - Walker describes AppLovin as a “casual 32-backer” from the original pitch price. Berkshire vs. S&P 500 over 20 years: ~11% vs. ~10% annualized - Walker cites Berkshire having modestly outperformed the S&P 500 over the past two decades. Berkshire vs. S&P 500 over 30 years: ~11% vs. ~10% annualized - He repeats the same rough comparison over three decades. Buffett age during financial crisis: 75 - Walker notes Buffett was 75 when the financial crisis began. Buffett age when buying Apple: 85 - He emphasizes that Buffett made Apple his largest and most profitable investment at age 85. Joe Biden age at election reference: 78 - Used as a comparison point to illustrate how quickly judgment can deteriorate with age. Analyst day gift cost: $135 - Approximate retail price of the solar rechargeable battery/charger given to analysts (as stated in the transcript). Estimated analyst-day attendees: 200 analysts - Walker estimates a large company analyst day with roughly this many attendees. Small-investor example allocation: $7,500 of stock - Example of a small shareholder purchase versus the CEO spending two hours on outreach. Company size example: $750 million company - Used in the discussion of time spent with small shareholders. Value investor example: 2% position - John Hempton example of a position that can be averaged down repeatedly until it becomes dangerous. Average-down price path example: 50 → 25 → 12.50 → 6.25 → 3.125 - Illustrates how a small position can balloon into a large loss through repeated averaging down. Duration of pause: Next two months - Walker says the rambling segments will likely take a mini hiatus or slower schedule.

Pivotal Quotes: "Everybody wants to average down, but no one wants to average up. And that's why there's alpha and averaging up." — Andrew Walker: The core behavioral insight that anchors his discussion of position sizing and post-rally buying. "What I call risk riding." — Andrew Walker: His term for recognizing that some investment returns include unobserved tail risks that never materialized. "Cheap today than it was yesterday" — Andrew Walker: His shorthand for situations where a rising stock may still become more attractive if earnings expectations rise faster than price.

Implications: Listeners should focus less on anchoring to entry price and more on evolving fundamentals, downside risk, and management behavior. Late-stage leadership quality, IR culture, and emotional discipline can materially affect long-term returns and portfolio outcomes.