AUDIENCE MEMBER 00:00
I have a question and it is – why did you decided to sell your initial company TransTech?
MOHNISH PABRAI 00:05
Oh because I lost interesting in it. So I have a rule I follow – I followed that for – I think I followed that almost from the beginning of my career that if on Monday morning, I’m not fired up to go to work then I do two things.
Number one, I don’t go to work and number two I hit the reset button. And so in the past before I had my own business, hitting the reset button was easy because I could just go to my boss and resign which is what I did.
I did it twice where once I actually move from one part of the company to another part because I just felt I was not excited on Monday morning. And second time I did that was when I quit to start my business TransTech.
And so I ran TransTech from about 1990 till 1999 about 10 years. And in about 1994 or so, I heard about Warren Buffett for the first time and I started to learn about investing and was quite intrigued by that model and approach and I found that from 1994 to 1999, I got more and more interested in investing and less and less interested in the IT business to the point that I actually got to a point in, actually, remember the date is in early February in 1999 where I was not excited to go to work and it was very strange feeling because at the time the company had about a 170 people who thought I was excited to be there and I couldn’t fake it.
And so I was very confused because I said, there’s no one to resign to, you know, nobody from you to hand my resignation and do something else. And so I actually was part of a group called YPO and I met my fellow president and I explained to them the way I was feeling and we had a discussion and they actually made it pretty easy for me.
They said you can own the business without running it, so just find somebody else to run the business and you can go to whatever else you wanted to do, right. And so I thought about it, I said yeah, that’s – why didn’t I think about that? You know, sounds like a good decision, easy decision.
And they said look, it will take you six months, maybe eight months to find someone. I couldn’t think of someone in the company who I could think is obvious to run the business, so they said just do a search and look for someone and then when you find someone you can leave the arena.
And they said that since you know that you have a finite time, six months, put a smile on your face and go to work every day, you know, and you know because you know it’s coming to an end. And so that’s what I did, I basically and then they ask me another question, they said that what you want to do after this new guy comes in and he’s going to run the business?
And I told them that ideally what I want to do is I want to go work for Warren Buffett. That’s really what I want to do, I don’t want to run the IT business, I want to work for Warren. So they help me write a letter to Warren applying for a job and of course, in a week he wrote back saying thanks, but no thanks.
And actually in just about 5 or 6 months after that the new CEO came on board. And in fact, so after Warren said no, the same group told me why don’t you just set up a partnership like the Buffett Partnership? And I didn’t think that was a such a bright idea because I said, you know, I’m not sure how it would scale or whatever else and I –
So I anyway I set up a partnership but I treated more like a hobby then this guy came on board in like third quarter of 1999 and he took over. And then a month later, he called me and said someone wants to buy the business.
And so, you know, he had just moved from Texas to Chicago, so I didn’t want to pull the rug out from under him, so I asked him what he preferred, whether he preferred that we keep the business or we sell it?
And he said sell it and I think the reason he says sell it is because every all his options everything vested right away, you know, one month after he arrived. And the people who wanted to buy the business, we’re going to give him a new deal and a new set of options. So he didn’t even take two seconds to tell me sell it, you know, and so that’s what we did. We –
So the good news was that because this person was already on board, they weren’t looking at me to run the business, right, because I have already left the scene. And then when we were kind of doing the paperwork for that for the deal, they still wanted a non-compete on me and they wanted like a 4 year non-compete, they said for 4 years you will not enter the IT business.
So I told him I said, can we make it 40 years instead of 4 and just add a couple of million to the purchase price, you know – (Laughs) – because I was absolutely sure I was never gonna go back into that business. And they said no, we’re not doing that we just want 4 years. (Laughter) So that was that, sorry for the long answer.