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BILL FLECKENSTEIN: I was very fascinated with everything technology. But as I got in the investment business originally, in 1980, and the books that I read led me to be a value investor. And the interplay between value and tech doesn't happen so often. And oftentimes, I found that over the course of my career, that when check then tech stocks get demonstrably cheap, oftentimes they're on their way to zero.

At the University of Washington, where I got my math degree, computer science was a budding thing and in the mid-'70s. And I learned a handful of computer languages, one being ALGOL, which has been the-- was sort of the precursor to C, and all the things that run the computers today. And Burroughs Corporation had those kind of computers. And since I could program in ALGOL, I got a job. And so I was a software tech for a couple years, but became interested in finance, much to my perhaps disfortune, and left.

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JIM GRANT: To great fortune actually.

BILL FLECKENSTEIN: Yeah.

JIM GRANT: I think Mrs. Fleckenstein, if she were here, would agree with that.

BILL FLECKENSTEIN: There was plenty of times along the way where I thought, did I really make the right decision leaving tech, given what happened?

JIM GRANT: We'll get around to that in a second.

BILL FLECKENSTEIN: Anyway, so I started out programming computers, and was very fascinated with everything technology. But as I got in the investment business originally, in 1980, and the books that I read led me to be a value investor. And the interplay between value and tech doesn't happen so often.

And oftentimes, as I found that over the course of my career, that when tech stocks get demonstrably cheap, oftentimes they're on the way to zero. And sometimes you have to find a different way to value them. They can be cheap without looking Graham-and-Dodd-like cheap. And that's a little tricky thing to learn how to do.

JIM GRANT: Yeah. Well, the whole story of a successful investment career is one of adaptation, right? It's adapting to different valuation ideas, and different received truths. Sometimes in the marketplace people will say, oh yes, paper money, very, very questionable item. We must hedge against that, or invest against it.

Other times they will say, precious metals, do you recognize that they don't yield anything? That would be another thought. So everything is cyclical, as Howard Marks is want to say. And the trick, I suppose, is to hold on to a set of primary beliefs that are important to you, while being adaptive in tactics.

BILL FLECKENSTEIN: Exactly. And of course, a lot of this you only learn over time, as you make mistakes. And I think initially, when you come at it from a value standpoint, as I did, it's easy to be dogmatic. And it was a lot easier to be dogmatic in the '80s, cause stocks were demonstrably cheap.

I think the much harder hand to play was to be value orientated-- orientated, it's not a word-- oriented. As multiples rose, because interest rates collapsed. And I think learning how to find a margin of safety and all that sort of thing, you had to leave the textbook behind to some degree, at least as to the book value.

JIM GRANT: Let's help the viewers imagine, or revisit the scene in which both of us really got started. I think I'm a little bit older than you are. Fine, I'm a lot older than you are. But in 1980, we were one year away from a truly apical peak in interest rates. In the spring of 1980, there was a treasury. As we called it, the DC-10. This was a morbid joke about a plane crash. But the 10's, two crashed.

And they became, by the fall of 1981, they became 15% yielding securities. So you were present at the tail end of the 35-year bond bear market. I think it was Napoleon who said something, in effect, that everything you think is colored significantly by the experience you had in your early 20s. So you came of age in finance at a time of arithmetically very cheap equities owing to the interest rate backdrop, and to a general revulsion against financial assets.

Here we are today, more than 35 years later another great subsequent bond bull market, with a different set of precepts, a different set of prejudices implanted in the minds of investors. Namely, that financial assets are for all time, and that interest rates are made to go down. And that multiples are made to go up.

BILL FLECKENSTEIN: And that the experience of anyone who's been in the business now since about the mid '90s, which is probably the bulk of the practitioners, has seen central banks do things that some of us with a longer historical cool perspective would say are insane policies. But they've only seen them work-- but for a couple years of pain in the early 2000s, one year in '08. So there's been a 25, 30-year run of what we might think of as monetary abuses that have net, net, been nothing but a gigantic W.

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