Chit Chat Stocks - Brett Bivens; Audio & Ambient Media

Episode Date: May 19, 2020

This week we have on the show special guest, Brett Bivens (29:20). Brett works for TechNexus and has a deep understanding of the entire audio industry, and in particular, Spotify. Before we get to the interview Ryan and Brett have their own stories for the week, starting with Michael Burry's 13F filings (1:43). Brett dives into Uber's potential GrubHub investment, Taiwan semiconductors, and Facebook's Africa plans (10:22). SoftBank was all over Twitter this week, and we also talk about our favorite 3 stocks for the next 3 years (18:24). Right before the interview we have a big announcement as well regarding the future of the podcast (25:13). Our Brett Bivens interview starts at (29:20). With Brett we discussed investing in the VC world, and what he's learned from some of the world's best. We also cover "ambient media" and what he sees as the future for audio. After the interview, as always, we have our Hot Water (1:08:12), FMK (1:16:19), and Anecdotal Evidence (1:17:48). --- Support this podcast: https://anchor.fm/chit-chat-money/support Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

All right. Welcome to Chit Chat Money. Today is Tuesday, May 19th. And today we have an interview with Brett Bivens. It was a lot of fun. We talked a lot about the audio space and then his career as well. But before we get to that, Brett and I both have our own stories. Brett, what are you talking about? Yeah. So interview is great. I definitely listen to that, especially if you're interested in Spotify or startups at all. That's what Brett has written about. And that's where he works in but my stores are short uh so they're going to be quick hitters i guess uber wants to buy grubhub um so there's some fallout over that we're going to ask a little question about that

taiwan semiconductor is going to have a factory in arizona which is a big surprise and then facebook is building an undersea cable uh in africa spending a lot of money to partner with that okay and i'll be talking about uh michael berry's holdings or uh scion asset management's 13f that they filed uh it's kind of a big it was a big week for hedge funds they all had to file their 13f or anyone i think it was like anyone with more than 100 million in aum or something like that um so uh i'll be talking about that we can kind of analyze that and give our thoughts but uh Yeah, and then as always, we have Current State of FinTwit, Hot Water, Fuck, Marry, Kill, and Anecdotal Evidence. Let's go.

Okay, welcome in. I'm going to kick things off. Scion Asset Management released their 13F this week. So this is Michael Berry's LLC that he runs. And if you don't know who Michael Berry is, he was played by Christian Bale in the popular movie, The Big Short. He's well known for shorting the housing bubble during the financial crisis. That's kind of what he's known for.

And so we're kind of going to just dive through his top 10 holdings and then kind of give our thoughts. He's definitely a value guy. He's well known as a value investor. he's not these aren't i don't to the best of my knowledge these mostly are not growth companies um but just for everyone's information the total portfolio value is around 85 million he's been keeping it at that maybe he's like withdrawn some i think he doesn't i think he's afraid of getting too big it might all be his own money at this point i'm really not sure um but i'll get into

the holdings his largest holding which makes up 18 of his portfolio is gamestop um and what we can talk about them after but uh yeah so we won't give any thoughts we'll just go through them first um second largest is 12 jack in the box third largest 12 corvo which is like a semiconductor company that designs manufactures and supplies radio frequency systems and then 12 in facebook which is his fourth largest holding that's a new holding for him uh 11 in maxar technologies it's space technology company that makes communication tools earth observation stuff radar and satellite products so just space tech i guess um and then sixth largest holding new one as well 10 in boeing and then seventh largest eight percent in discovery communications that is they're responsible for

like discovery channel discovery channel animal planet and a lot of those like nature channels i guess um and then eighth largest is michael's companies which is if you've never been to a michael's it's like an arts and crafts store it's like a chain store i think it's the largest one in north america um and then ninth largest holding this one's a little interesting he has three percent in las vegas sands corpse call options so lots of upside there um and he also has calls on win resorts and those if you don't know what either those are their casino and resort companies So I guess he's along or he thinks there's going to be a lot of upside for the casinos. And then his 10th largest holding was Tailored Brands, which is a holding company for Men's Warehouse and Joseph A. Bank.

Any surprises there for you? Yeah, biggest surprises would be Boeing and Las Vegas Sands Corp. But I guess what he typically looks at, and this is kind of the way he goes at it, is he's going riskier, but he doesn't need everything to be right. So, Boeing, if things work out well, could be great because it's the only American company that does what it does currently. So, that's interesting. And he probably looks at that similarly like a call option where they're almost too big to fail. And then the Las Vegas Sands Corp and Wynn Resorts call options are also interesting, probably because he's seeing whether either these companies are going to go bankrupt or they're going to be worth what they were before. They're not going to be worth what they are currently trading at. So I think that's, for the way he likes to invest, that makes sense to me. And those seem like the most interesting positions.

Yeah, he runs a pretty concentrated portfolio as well. I did the math a little bit here and his top six holdings make up 75% of the overall portfolio. So like you said, not necessarily risk averse by any means. He dropped all his holdings in Google, BlackBerry, and then three others. And when he sells, he sells it all. There was no trimming. Every position that he sold, he sold a hundred percent. Yeah. That seems to be what a lot of renowned investors do compared to the ones that are just average. And I think that's a good note, but you know, Buffett did that with the airlines and I guess, you know, whoever Berkshire Hathaway did that with the airlines and a few other investors have done that recently where when things change you don't just

sell 10% of something and just wait, you sell it all immediately because if the facts change and you don't think it's a good investment anymore, why should you have any money in it? Yeah. Yeah. I guess that makes sense. Um, and then Boeing, Jack in the box and Facebook are all entirely new positions. Um, Jack in the box.

I looked at their financials kind of, kind of bland. I didn't check the valuation, which I'm assuming is what he's kind of playing on there. Yeah. I can look it up real quick, but it's, uh,

they are profitable. Um, the, I would guess it's a value play. They're not growing super fast. Um, and then Boeing, uh,

yeah, they must think it's too big to fail. And then Facebook, interesting to me, it feels sort of like a Google substitute being that he swapped it out for Google. Yeah, he's been trading Facebook a while. He goes in and out of that position. But if we look here at Jack in the Box, and these are like 45 days old. So Jack in the Box fell from 90 all the way down to almost 30 in the March trough there. and now it's back up to 63 and then if we look at their current evita free cash flow at 17 so

they're trading below 10 evita free cash flow on a very steady business that was probably his thought there and i wouldn't i mean whatever maybe he ended up selling that but that's a good note on 13fs you're not looking at the current holdings you're looking at the holdings from 45 days prior right um theories on what he sees in gamestop because we've gone over this before and we've gone over it with aaron bush who is on the show who's probably the foremost expert that we know in the gaming space we hate it so yeah it's weird it's very weird uh-huh maybe he's done some digging talk to management and it's strange that it says a number one holding because it seems like one of the riskier ones and it's not like oh god it's not like it got there by appreciating

in value like it's not like a double then he had nine percent or something like that he has added it's 15 million um and the he has 15 million dollars worth in there and the market cap is like 200 something million so yeah they're they haven't recovered at all so yeah no there has i mean there might have been single blips with single recoveries but he's been adding shares frequently i just don't i don't understand what he's seeing and maybe he's maybe he's going to single-handedly buy them out yeah possibly uh i mean you could argue that video games are getting a bump right now but it's probably all digital sales that are getting a bump and yes gaming itself is going to grow but it's going to go all digital soon and we're

talking downloads um which is about what 80 of the main digital games are uh you know i'm sorry the main games are sold digitally now which just means you download it in like 20 minutes from your console or on your computer and you don't use the cds or disc or whatever you know gamestop sells they have been transitioning to being esports hubs and gaming hubs which could be interesting uh kind of like a that's i mean that's interesting i don't know i don't know if that can replace the entire business yeah but it's weird because again though he takes risky positions and he doesn't need everything to be right he probably needs 30 of his positions to be right at least you know facebook or whatever and boeing or i guess not even boeing but something

like facebook is more reliable the small cap positions that he's taking he needs about a third of those to be right because when they're right he's right really big yeah um do you think he's earned the right to not have his holdings questioned. Because if I were looking at this portfolio and I didn't know who owned it, I would not think it's a great portfolio. Yeah. I mean, who cares? I don't know. I can question it. I can question Buffett's portfolio. It doesn't really matter. He's not listening to me, but it's fun to talk about. Yeah. All right. Well, what do you have for the week? Okay, so three short stories here. News stories. I'm not going to be talking about a novel. But first one is Uber. They want to buy Grubhub. And if you don't know, Uber runs Uber Eats and Grubhub is one of the other Uber Eats competitors, which is just meal delivery. The deal has not gone through though. Grubhub wants more Uber shares per Grubhub share. So it's going to be a stock deal. And I guess they want a higher price. We'll see what happens though.

It seems like both companies are doing well right now. They've had a lot of momentum. I don't know about on the profitability standpoint. If you saw, there's that pizza arbitrage article. Did you read that? I'm not sure I would say Uber has been doing well. Well, Uber Eats has. Right.

No, I did not see this pizza arbitrage article. Well, basically, when I was going around, it's been like, I don't know. it was like it went kind of viral but the basically what happened is this guy who was in finance he knew a guy that ran a pizza joint and he found out that uh doordash and all the other people i think it was specifically doordash had started listing their restaurant even though they don't do delivery because you can just send in the guy and then you know get the pizza pick it up or whatever yeah but he found out that they were charging less than what he sold the pizzas for. So on the website, they had $24 for a pizza, but DoorDash sold to their end user or customer

for $16. So basically they can net $8 if they just sold the pizzas to themselves. And then there's costs associated with that. So again, the way that these delivery companies have been run have been pretty poorly from a profitability standpoint. They've been going 100% for growth and the unit economics are a lot tougher but that's besides the point the combined entity would have about half of the delivery market share in the u.s and they would basically split it with a two-man race with a doordash question here does any of this matter um and would consolidation at all help uh with the delivery food industry i'm i would i would usually say know because i hate the unit economics especially when there's like major competition arising every

which way but maybe they've got maybe they can get like five percent operating margins if there's really one significant player like let's say doordash didn't exist or maybe they couldn't survive and grubhub and ubereats carried the whole market maybe there's five percent operating margins i don't see it but it's possible yeah and even if these companies combine none of them are investable to me no i mean if we're looking if we're if five percent operating margins is the uh that's the pinnacle yeah that doesn't seem very investable yeah their sales ratios are going to need to improve all right second story here uh something that we don't typically talk about but i thought it'd be interesting so taiwan semiconductor which is a

giant as you would have guessed semiconductor company is launching a factory in arizona it's going to be 12 billion dollars investment will provide 1600 high-tech jobs which i guess is not that many jobs uh the finish date is supposed to be 2024 and their customers include apple qualcomm and nvidia so all of their other factories well i don't know about all of them But most of them are in East Asia. And it's weird because this seems like a weird timing where there's a lot of big momentum here in the fissure between the US and China business operations. They're trying to bring, it seems like, a lot of the IP stuff, kind of the core things that run the consumer defense, even the medical and health economy over from China into the United States. so give me a little bit of like history or geography taiwan is like they try to recognize themselves as independent and china does not recognize them that way right yeah so it's like the one china policy china recognizes themselves as or they think that taiwan is a state but taiwan

acts independently with their own government it gets a lot more complicated than that but yeah it used to be a state of china they are independent they're like 23 million people uh very modern very like a bigger hong kong almost um but i don't want to insult anyone by comparing the two but it's yeah it's it's sort of like china thinks they are a part of china but taiwan and the rest of the world so just for reference like taiwan is the number one ally for the united states in that region interesting okay and then what did you ask sorry so like does this mean there's more momentum for the fissure between chinese companies and people operating east asia and the united states companies and by fissure you mean like separation yeah breaking

apart okay then yes then i'm reading the question right yeah i think that i think so and there's and maybe it's maybe it's i'm filled with like these twitter threads and donald trump's tweets but it feels like there's a lot of distrust going on and i mean even even today muddy waters came out with that new report of that chinese company that they think is a total fraud so i obviously that's not i don't think they're doing business in america but i don't know there seems to be a lot of turmoil yeah and i think from an investing standpoint the one thing i would just be concerned with is if there's american companies that have a lot of revenue in china if that separation occurs there could be some downfall there so companies like

apple starbucks mcdonald's stuff like that i it's not getting to that point yet but if you're investing in those companies or even disney as well um and there's others uh i would i don't know i just something i would be concerned about um and definitely reading up on yeah i mean i personally i don't have any businesses that are chinese uh like specifically um and i don't think i have any businesses that do business over there uh i would be very concerned if i did yeah all right i've been investing for two years and it's never felt like this much distrust uh yeah two years that's basically a lifetime so yeah i've learned a lot so all right what's your what's your third one? Okay, third one. This one's an interesting one. Facebook is building

an undersea cable in Africa. So Facebook and a bunch of telecom companies are building the most comprehensive subsea cable ever in Africa to serve the African internet. I think it's like 180 terabits per second, or that's just a number I saw. But another note here should be done or live by 2023 or 2024 should help about a billion people get better internet connectivity. Are we underestimating facebook's goals and ambitions for the next decade to own basically the internet in emerging markets uh i wouldn't say we're underestimating that i mean i i feel like mark zuckerberg wants to rule the world um but sort of he wants to rule the internet world yeah i i mean not like in the adam newman sense but he all right right there yeah i definitely

wouldn't fault him for his ambition because he's he's done well so far but is it the company that we want responsible for it i don't know that's more of a concern for me yeah yeah all right um current state of fin to it then i have two things uh first is the uh did you see elon and portnoy are friends yeah well i think it's all just a show um but yeah probably i don't know i thought they're cultish figures so they match up well together yeah and then did you take a look at the soft bank slide deck yeah i mean there's only like the one slide uh with the unicorns going up the hill that was there's four slides well they're they're for the same unicorn thing but yeah the gully or whatever it just reminds me of the the big short where they're like ah it's just a gully

it's just a gully now we'll be back they'll sell that house soon i mean the first 12 slides were just black smoke behind the back and depressing figures about coronavirus and uh the great depression yeah the one slide that literally just said unprecedented crisis like yeah they need to okay whoever makes warren buffett slides and whoever makes softbank slides they need to team up um because i think they can meet somewhere in the middle and do a lot better yeah and then there was another one where they were like it was like a big problem i forget whether it was titled but it was like big problems facing unicorns and there was two giant red circles and one said massive decline in sales and one said negative free cash flow yeah negative that

was a problem before coronavirus yeah like i mean salt bank's so precarious um if we don't get a strong recovery that could be in trouble who knows there's so many working parts with them uh but i don't know i mean they're really their only significant holdings are alibaba and sprint right yeah spring got saved though uh by t-mobile so that's interesting uh but alibaba yeah i don't know that's that's why like what a hundred set they own like 170 billion dollars worth of that i i don't know it feels like i on their holdings it looked like it was like 80 to 90 percent of their entire business yeah it's they're a strange company um most likely they got a couple of things super right by taking some giant risk they invested in alibaba at the start great you know

Masayoshi's son feels like, okay, you can be stupid and get rich. They're not exclusive. He used to be the richest man in the world once in 1999 for like a day. That's mind-blowing to me. Okay, what do you have? All right, so I tweeted out this question. That seemed to get some good responses, so I thought we'd discuss it quick. so if you could only own three stocks for the next three years what would it be yes i responded

to this um for the next three years i would like to own square now this next year there's obviously going to be some headwinds with the loans that they've put out and the uh just the business in general because lack of traffic in terms of in-store volume maybe but over three years i'm confident they'll be fine and then spotify um i feel like they're going to dominate the audio market and we talk about that on the interview so i'll kind of let brett discuss why and then third i'm gonna go match group i think i saw a figure today that it was like three percent of marriages came from online or were derived online like 10 years ago or something like that and then it said 40 today in the u.s so i'm optimistic about the outlook for online dating damn well

we said the same three you responded though you didn't say match i said roku didn't i yeah well those can be three and four match group was probably my fourth yeah actually roku sorry throw roku in there i don't know who i discard maybe maybe match group uh maybe push match group before but roku i've i've discussed why i think the coronavirus is accelerating the cord cutting uh anecdotal evidence my parents just cut the cord and we've been just fine um yeah i think this i think this is accelerating that and they're starting to see that shift from advertisers as well a lot a lot of positive tailwinds coming into that industry and roku who stands to benefit the most in my mind what about you well i said square match and spotify

i don't know we talk about on the interview but we've talked about it before why we like spotify but i said axon enterprises i think they're recession proof they sell to law enforcement agencies which have very stable budgets and they're launching a lot of new initiatives to try to upend the very slow paperwork and management and evidence management and documents for the back-end offices, for judges, policemen, firemen, stuff like that. I did, however, I was surprised by your second tweet, which was what one company could you own for five years? I'm surprised Boston Omaha hops in there for five and not the three years.

Well, if you're thinking, okay, so three companies for three years, I'm confident that one of those companies will do very well just because the likelihood and we invest in riskier companies, more growth names. So you need less of them to do well, but they have to do really, really well. But if you're investing in one company, you are, and this is the 100% of your wealth, you are protecting against the downside. So Boston, Omaha, I think is very stable and has that upside potential compared to someone like berkshire hathaway or i don't know facebook or amazon or something like that okay so you're you're more looking for like a diverse diverse enough revenue streams that if one got cut you'd be fine for five years yeah or like

say you invested in spotify and that was your only stock and the investment thesis didn't work out uh i it's just you can't the risk of losing a lot of capital is a lot higher and the diversification is just insanely low that in that situation it's not realistic but i just thought it was a good thought exercise yeah okay well we have an announcement uh sort of some gloomy news am i using the word yeah right yeah it's kind of some bad news good kind of a good news bad new situation here um we are going to have to put a pause to the podcast uh for what three or four months yeah for the summer at least so i am going on a trip in the outdoors and ryan has a job that uh requires him to uh under their compliance rules since it's a finance job he cannot

uh talk about companies outside of whatever their purview so that's just kind of the rules they have and then I will be away from civilization, I guess. But we plan on starting it up. It'll end by the end of May, and then we plan on starting out the same exact stuff when we get back. Yeah, and we're already sort of queuing up some interviews for afterwards. Yeah, so we're stopping. We're going to have one more show, I believe, next Tuesday.

So this will be our second-to-last show, and then after that we're done but you do you care if i tell them that you are on a long walk yeah i'm going from uh mexico to canada on the west coast yeah and uh if tesla is at 1500 a share by the time you get to canada do you keep walking yeah yeah probably if it's not bankrupt when i get back i'll just stay out there until it goes bankrupt uh but no yeah it's uh it's exciting but it's disappointing we have to pause it because you know we've had some good momentum uh but we'll probably you know just stay following us um and we'll get you know we'll start right back up with the same stuff maybe even some more stuff uh in the fall so yeah all right and

then uh next we have our interview with brett bivins what did you like the most he i like to talk about what he writes about on his sub stack uh so he's kind of just started this up i think And then he talks about how Spotify and AirPods work into the new audio market that is being, I guess, disrupted is the word you would use. Or there's a lot of change going on right now and a lot of money going after that. And just talking about how that might end up, you know, a few different scenarios talking about that. yeah and i liked uh specifically his comments on liquidity quality which i think was a term coined by bill girley um and it's it's actually had me thinking differently about the businesses that i'm looking at ever since the interview so definitely pay attention to that part um

yeah i hope you guys enjoy it here you go you All right, today we are welcomed by Brett Bivens. He is a writer. Well, we found him through his writing on Twitter, but he also works at TechNexus, I believe. I'll kind of let you introduce yourself. So what do you do for TechNexus and then what is TechNexus? Perfect. Yeah. Thanks a lot for having me on. So really quick kind of background on TechNexus. We are an early stage venture capital firm based in Chicago. And our focus is really on the intersection of the early stage world and the

corporate world. So we work very closely with a broad network of corporate partners who we build vertical focused funds alongside and go invest alongside into early stage companies that are really kind of reinventing and changing the industries that those large corporates operate in. And so that, you know, kind of gives us a really interesting perspective in terms of the emerging new technologies, new companies that are being built up, as well as how large incumbent companies are reacting to those. And so my role with TechNexus is on the investment team. So I've been with TechNexus for about four years. In that time, we've done nearly 100 investments across a number of different categories and different funds. We're extremely active in

areas like audio and media, in industrial markets, in public safety, in health and wellness. So we really touch, you know, many things across the board. And personally, I mentioned we're based in Chicago. I'm personally based in Paris, where I also kind of head up a lot of our European investing and European operations, as we do have kind of a global purview to the types of founders and the types of companies that we want to work with and back. So that's a bit about us prior to tech nexus i had a number of different roles in early stage companies um in areas like business development and marketing um but also on product as well so kind of come to investing and come to the venture capital world uh with a bit of an operator mindset so um that's that's tech

nexus and uh yeah that's that's a bit about me interesting all right well we have a few questions about uh investing broadly and then we'll dig into uh audio specifically so first one here i uh i saw that you sort of talked about time arbitrage on Twitter. Do you want to kind of explain what that is and why it gives investors an advantage? You know, I think I'm probably very similar to the two of you in that I'm always, you know, studying other investors and trying to pick up best practices and tips and, you know, different frameworks from people across the spectrum, across asset classes who have interesting ideas and you know time arbitrage is is kind of a natural thing to think about and understand but it's uh it's something that that i've picked up along the

way just just reading various people and you know what it is is it's kind of just a way to think about different time preferences that competitors have in a market um so you know differing time horizon uh that's kind of structurally dictated so giving an investor or giving an operator of of a business, a longer term orientation into the way that they're investing can be a really tremendous competitive advantage. And I guess to give you one example of sort of what time arbitrage looks like in practice from the world of venture capital, I guess is, you know, the ongoing like fundraising cycle for a venture capital firm is typically every two or three years. So you go out, you raise a venture capital fund, you go invest most of that capital over the

course of two or three years. And then you go back to the market to limited partners and say, Hey, we'd, you know, we want to raise another fund. Maybe it's the same size, maybe it's bigger, but you know, each time you go out and raise a new fund, um, you are, you know, going out there with the, uh, you know, the traction of your portfolio and kind of what your portfolio has done. And so you're, uh, you're trying to convey progress with a portfolio of early stage companies that may not actually have a ton of progress. The feedback loops in venture capital are very long. And so that can create a little bit of a weird incentive

for early stage investors who are maybe pushing money into companies that are intended to grow super, super fast and get a ton of press and do a bunch of things that on the surface look really good, but don't actually translate to long-term returns. And so a way that you might kind of think about time arbitrage in that sense is if most investors are playing that game and have this incentive to fund these hot companies

and fund the companies that are going to be in the press and raising big rounds and burning a ton of capital to grow, grow, grow, maybe your perspective is trying to partner earlier on with capital providers for yourself that are going to commit upfront to two or three funds down the line. So you have a little bit more of a sustainable incentive to grow the business. So I mean, that's, that's kind of a, maybe a long winded example of what time arbitrage looks like, but it really is kind of this mix of behavioral and structural advantage that you can kind of bake into the way that you operate that, uh, you know, in theory gives you a, an advantage over those that you're competing with. So I, um, I think Brett and myself are a little uninformed

on the VC industry as a whole, uh, specifically. But, uh, so when the LPs, you said they raise like a VC fund and you sign on LPs, do you usually have a specific timeframe in which you're supposed to take an exit and return that capital to the LPs or is it kind of very? Yeah. So it's typically the life of a venture capital fund, broadly speaking, is it tends to be about 10 years. And the first two or three years of that is when you're sort of actively investing most of the capital. And so the, you know, the, the first two or three years is when you're investing most of the capital in the fund. And then, you know, you sort of manage that, those investments, those companies over the course of the next seven, eight, or even longer

years as that fund kind of continues to go on. And then kind of, like I mentioned, you, you tend to go back out kind of two or three years down the line to, to raise additional funds. Okay. And you wrote a piece about Benchmark Capital and talked about their bottom-up approach to investing. So first off, can you tell us what the difference is between bottom-up and top-down investing? And then secondly, can you talk about how maybe the individual investor might be able to implement that sort of bottom-up style or throwing out the crystal ball? I know that was kind of a quote in your article was at Benchmark, they are trying to see the present clearly and it's not about predicting the future or predicting trends or you just want to throw out that crystal ball. How can an individual investor do that? Because I know most investors like myself, we sort of extrapolate out into the future

and then we revert back to what companies are going to benefit from that type of future now. And it sounds like that might not be the strategy to go with. So how can investors change that? Yeah. And I think it's a really, I mean, it's a really tough distinction to, to understand. Um, and it's a tough distinction to apply for, for anyone. Um, and you know, I think the, the idea of sort of bottoms up and top down investing

really has its roots in, um, value investing. So going back to like Ben Graham and, um, you know, Buffett and Munger and, um, all of these people who have sort of talked about it. And I kind of came to it and started reading more about it and thinking more about it as I read Margin of Safety from Seth Klarman. And what he talks about in there is that this idea of top-down investing, like you said, sort of looking out into the future, trying to be very, very smart about the trends that are occurring and not just being right about the trends that are going to occur, but also being able to, in practice, find the right investment opportunities, size those investment opportunities right, do it faster

or better than the thousands of other people out there that are thinking they're just as smart. I mean, it's a risky strategy. It's a strategy that's very difficult to pull off. The sort of flip side to that, bottoms up investing, I mean, is equally challenging to pull off. I mean, it's crazy to say that anything in investing is easy, right? But the idea with that is just what you said, it's sort of throwing the crystal ball out, coming to new investment opportunities with a very open mind, and really trying to stay close to sort of the things that are occurring really on the ground as things are going on. So yeah, so that's kind of the high level distinction of it. You know, I think a firm like Benchmark has the advantage of being early in

venture capital, being around for a long time, having the brand recognition where they can sort of sit back at this point and say, okay, great. You know, we can let all of the entrepreneurs sort of come to us and pick and choose from there. The challenge for, you know, maybe for venture investors is most firms that come to market don't have those baked in benefits. So you do need to have some kind of perspective on the market that you put out there as, you know, as marketing to cut through the noise, to get attention, et cetera. So it can be a bit challenging to apply this in practice. And I think it's, you know, equally challenging for an individual investor. You know, I don't know if I have any, you know, specific tips for an

individual investor to apply it other than just to really say, try not to think you're the smartest person in the world and that you have all the answers in terms of what the future is going to hold and have a very open mind in terms of taking new information and processing new information and updating your priors every time new things come in that either confirm what you thought before or contradict what you thought before. Interesting. So Bill Gurley at Benchmark, he talks about liquidity quality. It's hard to say there, but what is that specifically? Because I've never heard of that term before. Yeah. And I think it's a term that he made up. And it applies to this idea of top-down investing versus bottoms-up investing. And the way that

he sort of describes liquidity quality is this sort of high engagement among users, among customers, this deep passion, loyalty, love, whatever, whatever you want to call it, customers are, you know, paying for a product, coming back to use the product, telling their friends about the product. Even if it's in a very, very, very small cohort of users can actually be, you know, more important, more valuable and better data to go off of as an investor than if a company is, you know, trying to spread itself super wide and, you know, launch in new markets and do all these other things where they may not be getting as sort of as deep of a customer relationship or customer love. And, you know, I think that's sort of similar to this idea of

bottoms up investing, which is, you know, keeping your sort of nose to the ground and understand sort of the tactical on the ground things that are happening that are, you know, building up to what these markets are going to look like and what these opportunities are going to look like long-term versus trying to go super wide and have this, again, top-down view of what the world's going to look like. So he talks about it with marketplaces a lot. So trying to really, really prove out engagement and retention and just this burning engagement really for a small cohort of users before trying to go wide and trying to boil the ocean. Are there any examples of companies that have done that before? I know there are,

but just for the audience? Yeah, I think the one, you know, the one that he uses is Yelp. And I think that's a good one where, you know, when I think when Benchmark led the round in Yelp, they, you know, they weren't, you know, super broad. They weren't, you know, national, maybe at that point, they had a couple of cities they were doing, you know, I think Paul Graham from Y Combinator always has, you know, famously said things that don't scale. So sort of these on the ground tactics to really, um, make sure that, you know, customers in their core markets were happy and engaged and coming back and, you know, spending money and doing all these things. And, you know, that's, that's kind of exactly it. They were able to sort of say, okay, this is,

this is working in one place. There's this burning, uh, passion from users and we can see how this is going to extrapolate out. Um, you know, another example that I think he's, he's talked about in the past is a company like Stitch Fix, where they, you know, they just saw incredible engagement, incredible word of mouth pickup from the product, even among a small cohort of initial customers. But that was enough to kind of give them confidence that it could be scaled out long term. Right. Okay. And then one more question about investing in VCs before we transition to audio and Spotify, which is what you tend to write about a lot, at least from the stuff we've read on your newsletter. So what is the Facebook and Google tax and are there ways

that companies can skip it? Yeah. So I think there's a few things or terms or sayings that have become common and I guess people might be familiar with. So there's the sort of notion that 40% of venture dollars get funneled straight back into Facebook and Google via ad spend. so companies needing to acquire customers and kind of grow grow grow very quickly the fastest most scalable way to grow is by paying those companies to advertise to customers um that's a you know that's fraught uh in many ways because of the fact that you know it really is facebook and google standing in the way of of your customers they're the ones that sort of own that relationship with with so many people that's a challenge you know you're always uh subject to

you know, changes to the algorithm or, uh, different, you know, different things that occur, you don't really own your own customer. And so that's kind of the tax that they, you know, that they, um, that they impose on, on the internet writ large. Um, it's, it's kind of this, you know, this, you may have heard the term like CAC is the new rent customer acquisition cost is the new rent. So, uh, you know, consumer internet companies for the most part, and, you know, there's more of a mix now than there was a few years ago, but, you know, they may not pay rent for a physical location, but they, you know, their, their rent is now, um, acquiring customers via Facebook and Google. And so, um, you know, I think similar to similar to, uh, the, the notion

of liquidity quality, um, companies that, uh, you know, maybe fall victim to this idea that they need to spend to grow, spend on advertisement to grow, sort of have this idea of, you know, going broad very early and, uh, tend to lose sight in a lot of cases of real value to the customers and, and really generating the type of loyalty that's going to build the, you know, the word of mouth and the engagement and the retention that keeps people in your product and, and builds your own kind of, you know, network effect, um, whether probably a weaker form network effect than Facebook or one of those companies might have, but kind of builds your own, um, you know you build your own ownership of of those customers and it's it's hard to do it's

challenging not many companies have been able to do it um but it's really about you know things like how do you um how do you build community with uh with your users how do you make sure that um when behavior changes like it like it has recently with this whole pandemic that you're able to you know shift incentives and shift distribution models to make sure that you're able to serve your customers uh in the right way and deliver on your brand promises so it's a big mix of things that kind of come together. And it's a tightrope that companies have to walk because those companies, Facebook and Google, are monopolies. And they are so strong that if you don't do right by your customer and you don't build a product and build an entire experience

that is passion-inducing for them, then you're at risk of losing them and losing out to that kind of competitive landscape that's there. That's a fascinating idea that the best way to sort of expand and go broad is to focus on your existing customers first. But now let's transition to sort of audio-based questions. And so Brett and I are both shareholders of Spotify. So I'd love to get some of your takes on it. One question, and this is usually the first one because the gross margins are somewhat alarming to new investors because you look at it and it's like, well, that's not, you know, that's not great gross margins. I think it's around 25% or something like that. Right. It's definitely not tech, tech company. Yeah. Tech company margins. That's for

sure. And so I think a lot of that has to do with the unit economics of the music industry. What is so unfavorable about them for anyone that doesn't know? yeah i mean i think the big thing is we talked about monopolies just before and and the record labels and sort of the the small group of record labels that uh that hold so much control and sway over uh the rights to to all of these music tracks and the output of many of these artists um is is monopoly-esque in itself so uh because you know three or four major labels hold the keys to accessing any music, you know, it's a broad set of music companies like Spotify, despite the fact that they've sort of, you know, they, along with the rest of the streaming services have

reignited the music industry, they still have to pay a pretty hefty tax to, to companies like, well, to those record labels to, to access that music. So that's, I mean, that's really the, the crux of it. Those labels have a significant amount of leverage because they own the content And yeah, Spotify kind of, to this point, has had to play by their rules, which pushes their margins down pretty significantly. For music specifically, can Spotify change that down the road? Let's say they got up to some like 500 million total users or listeners. Would that sort of extensive reach give them more leverage in the negotiations with those labels? Or is it kind of stuck that way?

no i mean i think there's definitely there's definitely leverage that they can gain over time and i think they've they've gained leverage over time um the the tough thing for spotify is like they've got this they've got monopolies on both sides of them so they're competing with you know monopolies that are there well yeah their their suppliers are these record labels that are monopolies and then they're competing on the other side of these massive social media monopolies so they're kind of stuck in the middle um but yes i mean i think as they as they continue to grow if they're able to continue to carve out that path as the leader in streaming music and audio content and develop additional lines of business that, that leave them sort of less dependent on

the labels and give them a little bit more leverage and just kind of, yeah, incrementally take steps to build better relationships with the artists, build deeper relationships with the customers. They, they will definitely, you know, gain leverage over time. Now, I think that's, you know, a difficult path again, because of what I mentioned about the competitive landscape and them actually being able to, to get to that point. But yes, in theory, you know, there's, there's definitely paths for them to, to get that leverage into, you know, kind of shift those terms that they have with, with the record labels. Is there any way for, and I've heard, I think Daniel talked about it on the invest, like the best podcast with Patrick O'Shaughnessy, where

it's not favorable for the artists if you try to do exclusive music or original music content with Spotify exclusively? Why doesn't that work? Well, you know, I think that the way that artists kind of make money is by having their music listened to as broadly as possible. That's sort of the way that they not only generate streaming revenue, but generate awareness for other ways that they make money, which is touring and all of these other adjacent kind of ways that they make money. I mean, most artists make most of their money from touring and from live shows today anyways. And so they want to have as broad of a reach as possible. And so that, you know, by doing exclusive music, you know, there's

elements of that that cut down on their ability to make money in the way that they make the most money so yeah exclusive music is is pretty tough um when it comes to uh when it comes to that and yeah artists like you said are probably not in favor of taking that approach i'm uh sorry i'm kind of getting off script here with um with these questions but from the artist's perspective how hard is it to sort of bypass the labels can you do well without signing to a label yeah i mean i think you know this is this is probably getting a little bit beyond my own personal expertise. You know, I don't know, uh, super deep, uh, kind of knowledge of, of kind of how the labels work and all of that kind of stuff. But yeah, I mean, I think there's definitely been

artists recently that have, um, you know, because of their own leverage, because of the fact that they can go direct to consumer, um, with not only their music, but their sort of personalities in general. Um, they, they can certainly bypass the labels to a degree. Um, and I think that over time, you know, one of the things that, um, going back to sort of can Spotify or these other platforms incrementally shift their leverage with the labels. Um, there's, you know, there's a new feature on Spotify that's all about sort of direct payment to artists. And, you know, if, if more artists are, you know, less dependent on labels for, uh, directly, you know, uh, monetizing and sending them revenue, then yes. I mean, I think there's long-term paths that more and more artists

can kind of go independent and build their own paths for themselves. Interesting. Now, Spotify specifically has acquired a few companies recently, Gimlet, The Ringer, Anchor. Maybe I'm missing some, but those specifically are more on the podcasting side. How does that alter the business model, if at all? yeah um so i think that you know podcasting uh for spotify as at its core is is sort of that that leverage play against um against music streaming against sort of the power that the record labels have um so that's kind of the i think maybe the first way to look at it

is you know diversification of of their business um the you know the there's there's really big opportunities available to Spotify or to anyone else in podcasting. Um, you know, if you think about just the, the scope and the scale of the sort of, um, you know, terrestrial radio market and the way that people listen to, to that kind of content, to, to be able to shift that online and bring, you know, internet level advertising to that at scale is, uh, is a huge opportunity because today, you know, podcasting has remained kind of a niche business. It hasn't really had advertising, um, at internet scale applied to it. So huge opportunities there. And, you know, similarly, uh, this is a type of content that Spotify can access in some cases can create

exclusively. Like you mentioned, some of the acquisitions they've had with, uh, the ringer and Gimlet media where they have, you know, exclusive types of content, um, that they can monetize. And, you know, at some point don't have to pay a full cut to the labels. I mean, right now All of the money that kind of flows to their platform from subscriptions and things like that does flow through to the label still. But again, over time, maybe that changes and maybe their margins kind of go up along with that. I'm curious what you like better in terms of when they diversify into that podcasting space. Do you prefer those content acquisitions like Gimlet and The Ringer or sort of owning the production side? Like we use Anchor to produce our shows.

So I'm curious, what do you think will be more beneficial for them down the road? Yeah, I think it's a really good question. You know, I don't know if I can sit here and say which one will be more beneficial for them long term. But I do believe that both will be necessary and both will be beneficial. So, I mean, I think even beyond podcasting, I think as they build deeper relationships with the artists directly, again, as they're able to shift the leverage with the labels to the extent they're able to, So, you know, you could certainly see them moving back into more creation tools for other types of audio artists as well, for music artists. And so I think that both pieces will be pretty critical to how they sort of try to develop platform power over time and really make sure that both consumers and creators are dependent on them and on their platform.

I do think, though, that the the content side and the content acquisitions that they've made are pretty critical and pretty important. You know, Spotify seems to be the type of company that stays very close to their users, really understands culture, cares a lot about culture and, you know, content creation is all about that. And so, you know, to the extent that they can keep bringing in content houses, content creators that understand various pieces of culture that are interesting and relevant to the Spotify user base, I think that's going to be, you know, continue to be important for them and continue to help them evolve as an audio first platform. right and transitioning from spotify specifically uh you write about ambient media which i think is a new topic um well maybe you coined it i don't know if you did but what is ambient media and why do you think it is important yeah uh i'm not sure if i coined it maybe uh that'd be cool if i did but i mean definitely ambient computing is is this notion that's that's been out there for a while And companies like Google care a lot about it, which is really this idea that, you know, as you go through your day, the content that you're consuming, the communication that you're having flows seamlessly across devices, whether it's, you know, over time, your phone to your smart speaker to eventually, you know, AirPods and headphones that have some degree of intelligence and compute to them to a computer.

So whatever, you know, whatever device you're on, being able to kind of integrate seamlessly works seamlessly together. And this idea of ambient media is interesting, because a lot of the ways that, you know, that new computing paradigm comes to life is in a sort of heads up fashion. So if we're talking about, you know, using a smart speaker, or we're talking about using AirPods and communicating, you know, via voice with with AirPods, that's, you know, eyes up content, that's content that's occurring while we're sort of moving around the city or moving around our house, we're not staring at a screen. And so there's lots of opportunities for audio to kind of fit in there in interesting ways. And, you know, the obvious way is with just pure consumption. So owning a share of, you know, what, what people call the audio day, you know, and that's when you're commuting or at the gym or doing dishes, all these different, all these different times when, you know, you're sort of occupied in one way or another, but audio can, can fit into that. And that's, you know, that's one piece of ambient media.

So being able to, you know, surface contextually relevant content and help you find the right content for the right moment. Um, so that's, that's certainly one piece of it. And, and then the other piece is, um, you know, going beyond just maybe music and spoken word content to the way that, um, you know, social media evolves in a world where we're, uh, you know, less on a screen and more using voice or using smart speakers or, uh, communicating, um, you know, without, without video or whatever it may be. So I think that there's just a lot of different ways where audio fits in there beyond just content consumption that could be paths for, you know, for Spotify or for other companies in this space to make moves and kind of take the share of the, you know, the consumer's audio day. So within that, why are AirPods so important? yeah i mean i think that uh they're they're important because they've i mean they've already proven that they've delivered a superior i guess customer experience and user experience to um to users out there and so just the fact that they've grown as fast as they have

and that whether or not it becomes a you know a new platform or a new way that you know developers build new experiences and solutions it's at least a new peripheral to the way that we think about sort of our mobile computing uh world and so it's it's relevant from that perspective because it does change sort of the um you know as as voice assistants get smarter as siri etc um get smarter over time it does change the the way that we interact with with our devices and the way that we think about um you know consuming content and even creating content and communicating with one another. So I think that all of those things, again, I can't sit here and say this is exactly what's going to happen with these. Is it going to be a platform? Is it not? I don't know. But

just the fact that the adoption that they've seen and the depth of engagement that they've seen is so high, there's obviously something to it. And I think that they play a critical role in the future of that ambient media world. Okay. And one last question from me on audio, So what avenues for growth are there outside? Well, I guess you can include maybe podcasting and music, but what avenues for growth are there maybe over the next decade for the audio industry? So I think, you know, within podcasting,

and just to touch on that really quickly, we talked about that a little bit where podcasting and spoken word audio really hasn't seen sort of internet scale advertising, targeted advertising applied to it. So, I mean, I think that's certainly one path uh, for growth there. I think that there are, um, you know, as we're kind of seeing right now with, you know, everybody's stuck at home and, and, uh, communicating in different ways. Uh, right now

it's a lot of video streaming and video communication, but there's a, there's a world where, you know, audio live streaming, um, is, is large and grows as well. I think in, you know, in China, for example, there's, um, there's been a proliferation of audio live streaming, uh, via, via different applications that we don't necessarily have here and so you know that's that's one path as well and then you know I think audio I mean the really interesting thing about audio is like we sort of think about it today as like this is a podcast and this is an audio book and this is a audio based workout that I'm doing or this is in you know a class that I'm taking in school that I'm kind of listening to via audio and I think that over time we're going to see

some really interesting new content formats emerge that aren't an audio book and aren't a podcast, but are a mix of the two or, you know, aren't a, aren't an educational class and aren't a, you know, entertaining host giving us a podcast, but are a mix of the two. And so I think that there's just a lot of opportunities for sort of format innovation around, around audio related content that's going to start to integrate into, you know, different parts of our life. So I think those are a few of the a few of the areas there that that I'm most excited about and interested in for Spotify specifically do you think it's helpful that they are sort of the pure play in the industry and by pure play I mean they are that their sole focus is audio versus Apple who

podcast and music probably make up very little of their top line so do you think that's beneficial for them because I've heard some people kind of have the take where these big tech companies that are moving into the space have so much capital to throw at it that they are going to be able to win um do you think it's better that spotify is a pure play i do i you know i think one of the things that one way to think about sort of the uh the approach that those big platforms are taking to the music streaming space and even to to podcasting and spoken word audio is that they're really looking to commoditize that part of the market so they've got these core core businesses whether it's airpods whether it's alexa whether it's you know google search whether

it's uh you know bite dance is a massive player here as well with with tiktok and and they've had just a tremendous um impact on the on the music industry over the last couple of years and so all of those core platforms and core core businesses of those companies are um are the focus for those for those you know large uh monopoly players basically and so they're looking to again commoditize the the music streaming business and uh you know maybe take costs down or do whatever they need to do there and yeah i think the only way for spotify to really fight back against that is to have a pure focus on delivering the best experience um you know and that's that cuts all the way through from uh the way that it's presented in the product itself and and sort of the additional

features that come in the app but um you know things like discoverability which is really where they've, uh, made their reputation and still seem to stand out amongst all of those competitors. So yeah, really, really, you know, committing fully and having this sort of existential threat looming that, Hey, if, if we don't get audio, right, we don't have a company, uh, versus some of these others who, you know, may not, uh, have the same degree of focus on nailing that audio experience because it's really just in service of more lucrative businesses. So yeah, I think to your question, um, it's, it's probably necessary that they really focus on that and stay, stay true to that, um, that part of the business. Okay. And now let's get to the two wrap up

questions we ask on every interview. Uh, first one, what is one financial saying that you disagree with? So, you know, I don't know, I don't know if it's necessarily a saying, but I think it is going back to some of the stuff that we were talking about earlier. Um, you know, I think that in the venture capital space specifically, um, because of, you know, all of the noise that's out there, all of the challenges with really cutting through, uh, the, the attention and getting yourself known, getting your firm known, uh, to entrepreneurs, to other investors, et cetera. Uh, there is a tendency to be sort of very top down and try to be the smartest person in the room. And I think that that kind of gets in the way of, uh, of what we talked about,

which is kind of this bottoms up approach to investing that, um, that is more sustainable over time. And so I think it's, it's less of, less of a saying and more of an approach where, uh, because of some of the incentives that are baked into the venture capital market for investors, uh, they tend to, you know, chase, uh, chase hot deals and chase, you know, high growth at the expense of more sustainable, um, operations. So, yeah, so I guess that'd be, that'd be my answer. Not a, not a quick fire. I apologize, but that'd be my first answer there. Okay. Last question then. What is one piece of advice you have for any novice investors? Yeah. So there's a really good essay that I actually reread yesterday called The Playing

Field from someone named Graham Duncan, who runs a, I think it's a multifamily office in New York. And it's really all about understanding the game that you're playing at different stages of your career and not trying to get too far ahead of yourself and making sure that you're learning learning at the right pace and, and kind of, you know, progressing in the right fashion. And he kind of goes into these five different steps that somebody takes in their career from it's apprentice to expert to professional to master to steward eventually. And it's really all about being kind of self critical and self aware enough to know what you don't know. And, and try to, yeah, try to use that to make sure that you're playing the right game at every point in your

career. So that'd be, I guess my, I don't know, not really in a position to give advice, I guess, but that'd be the thing that I try to keep in mind all the time is, you know, am I, um, am I, you know, playing a game that fits my strengths and my weaknesses and do I understand what those strengths and weaknesses are? Yeah, no, I like that one. Um, all right, well, that's going to do it for us. Thank you for joining us, Brett. Thanks guys. I appreciate you having me on. And, oh, before you go, where can people find you? Yeah, so I spend a lot of time on Twitter at Brett Bivens. I write a lot at VentureDesktop.com.

And then if anyone's interested in learning more about TechNexus, it's just TechNexus.com. All right, perfect. Well, thanks again for coming on. Thanks, guys. Appreciate it. Okay, welcome back. Thanks again to Brett Bivens for joining us.

had a lot of fun but next up we have our hot water i have like five i think so wow you're going for one of our last shows temporarily as we said uh the you're going with one of your records here how you're finally catching on yeah yeah i've got some good ones uh i've got some real ones and some stupid ones so but yeah go ahead you start off you start off okay so being humble is in hot water this week uh papa john was on tiktok literally just bragging about how rich he was first was a video tour in his mansion and on one post it said did you know i have my own helicopter and that was like just his helicopter in his yard and every single post was hashtagged with money yeah once you realize like papa john's insane he's he's he's also the same guy that said

he eats 40 pizzas in 30 days yeah and that the day of reckoning is coming uh but which he was right i guess the day of reckoning he was the prophet like in november he said the day of reckoning was coming and then the coronavirus hit so you know who knows he could be a prophet but this kind of once you realize that about 70 percent of the people that are on tv that aren't like media or whatever reporters and things like that are insane that are just famous for being famous stuff like that is kind of when you realize oh yeah you know papa john doing all this stuff that that makes sense you know i can see it yeah um men are also in hot water this week according to an article from the new york post which i had this one i know new york post whatever uh

a study no i have this one too oh yeah and i i guess new york post is usually bullshit headlines but whatever um a study was conducted by researchers from middlesex university london that men are less likely to wear a mask because they are not cool and a sign of weakness i i feel like it's kind of true i feel like guys i i could see that being true oh yeah you could have predicted this in february if it's save your life or look dumb uh or sorry look cool guys are choosing look cool every time why do you think they all smoke cigarettes don't get me wrong i've had i've been wearing a few masks that sucked um in the uh throughout grocery stores and whatnot and i i feel like taking them off too but it's because of like

airflow and not because i look stupid yeah just get those cloth ones you know the i got a one time i got a nice mask guy like a like some guy drove by and said nice mask i was like what dude buzz off buddy that's probably the same guy not wearing it yeah he wasn't wearing a mask uh so i just kind of was well he couldn't tell but my face was not too happy with him he's gonna have a lot of people to uh tell that too if that's if that's his thing now um okay my third one is uber this one's real they are cutting 3 000 additional jobs on top of their already existing cuts that we discussed last week that's more than 25 percent of their workforce gone in less than a quarter so here's what i'm inferring a i was right um oh humbled right you there's literally no cost

cutting that a platform that's not responsible for anything can do other than fire people. So once again, I was right. And when they say, don't worry, we have liquidity and you're burning two and a half, three billion, a quarter, it's not because they have liquidity with their current operations. It's because they're going to fire half their workforce. yeah i mean they had like 10 billion dollars after the ipo but if they're burning that much money uh it'll go fast yeah um okay my fourth one jesus is in hot water because today as analysts pressed masayoshi's son about his 13 billion dollar annual loss he compared himself to jesus christ he said his investment strategy was misunderstood much how jesus was misunderstood

right that uh yeah i wonder how that'll go well with the uh saudi investment fund who has 40 billion dollars in there i think they're they're christians right i have no idea but no they're they're not they're muslim but yeah right sorry uh uh fifth one i'm sorry i'm laughing at this already uh crowdsourcing is in hot water and i know most people probably aren't here to listen for sports but the organization attempting to build an mls team in san diego there's like a group that's i don't know if they've gotten certification to build one or whatever but they're trying to build uh an mls team in san diego and they put out a poll asking fans what they wanted the name to be and the most voted on name was the san diego footy mcfoot face

nice should have known crowdsourcing would be a bad idea here did you see that uh the nets player spencer dinwiddie is crowdsourcing his next contract through bitcoin futures and deciding where he should go for his next team i did not know yeah so damn um okay those were my five what have all right first up vcs are in hot water because the chain smokers are starting a 50 million dollar investment fund definitely not the type of things you see in a market that i don't know band or like a group yeah whatever that you know the group the the big musical group oh yeah no i love them yeah you big chain smoker guy pretty unique uh pretty unique band they got some unique noise uh they they're starting a 50 million dollar fund though this is like when

an athlete does something when you see them investing in something you almost always have to say ah no no no i'm not gonna i'm not gonna invest in that because look you can't just turn into peter teal overnight wait i thought you meant they are looking to raise money they are starting a fund a fund yeah they have well i don't know if they uh are starting with all their own money but it is a 50 million dollar investor fund assuming they're pretty rich so it could be all their own money i hope it's not lps so all right other other ones uh gifs and twitter because facebook is buying giphy for 400 million dollars weird acquisition uh but it's kind of just a fuck you one because facebook can do that really overnight on twitter hopefully they keep the giphy on there

because it's the plug-in's nice, but I don't know. That's going to be really frustrating if my gift game goes. I mean, you can download them to like your photos or whatever and then do it, but it's just a whole other process. Yeah, yeah, who knows? Who knows? Maybe they'll start having to license it. All right, us young workers, though, this is my last one.

So young workers are in hot water because the average working hours it takes to buy the S&P 500. So saying like you have to work this many hours on the average salary to buy whatever the $3,000 it is of the S&P 500 is at all time highs now. So it's over 115 working hours to buy one share of the S&P 500. The average since 1860, it's a long timeframe here. And I know whatever the markets weren't the same back then, but the average since 1860 has been about 31. It's not great. I think I saw this chart, and it's kind of an interesting concept because it kind of relates to wealth disparity.

Definitely, definitely. It's kind of a good indicator. I mean, maybe there's flaws in it, but it feels like a good indicator in terms of that disparity between the 1% or the rich, I guess. All right, any others? That's it. That's it. uh my my fuck marry kill this week the theme is the three stocks that you want to own for the next

three years so you have to fuck my kill square spotify or match group wow making it tough making it tough i'll marry so you're basically gonna make me rank these huh i'll marry spot although before the coronavirus it would have been square just the risk i'll kill square just because the facts have changed. It's going lower in my portfolio, although as conviction, but Cash App is still very strong, and I think that's going to help them a ton and be the biggest part of the company in five years.

The biggest part will be Cash App, but I'll fuck Match Group just because they're probably second. They were up like 7% today. Nah, whatever. I don't know. Who cares? yeah i might be marrying match group um and then spotify just seems sort of like it's going to take longer to see the material impact of some of the stuff that they're doing

in terms of like podcasting and other forms of audio content so uh it might take a while for us to see that so maybe i'll bang square kill spotify maybe score's got a higher valuation though now than now that the price has recovered so much it's true um okay anecdotal evidence i have two um they're both kind of crappy but whatever you want me to go first go ahead okay i'm going on a cross-country trip for this job that we discussed um and i'm staying in a few places while i'm there i'm staying in an airbnb but while i'm going i'm like driving so i'm gonna stay in hotels and i thought about it one night stays and two night stays i'm gonna take a hotel over an airbnb every time you sure though for are you talking cleanliness or just in general

if you're doing a one night thing most airbnbs with the cleaning fee and all that you're gonna hit around 100 bucks anyways right right because of the okay so week-long airbnb just because you incur that cleaning stuff and that's not yet grouped okay and then secondly there's the risk that you don't know who you're staying with you know all that stuff like if you pick the wrong airbnb there's just dude you're like no there's less risk factor staying at a marriott you know what you're getting i know i know but especially if you're only doing it for one night you just get the good ratings on airbnb i don't know but and there's like a point zero zero zero one percent chance that anything happens to you no i don't the same as a hotel in terms of like room

accommodations and what all's there i don't know i've stayed in some bad hotels but you know what you're getting if it's like name brand uh hotel like chain like marriott i guess but then it's gonna be more than 100 bucks a night no i found every every hotel i'm staying at's a marriott and they're all like 100 bucks a night okay then it's the same yeah and if it's the same i would probably rather stay in a hotel you know i don't know i don't know and then i guess obviously if you're staying somewhere long term then airbnb is probably the way to go um all right and then my second one here is i am starting to see sort of this and it's probably been going on for a while it's the yeah i know it's out there but i don't care anymore attitude with coronavirus i'm starting

to see that everywhere i mean i'm already feeling it a little bit i'm trying to resist but i'm is there gonna come a point where where america or have we reached this point where people just say screw it let the consequences fall how they may work we're restarting the momentum's building to that but i would say i have no idea okay all right it's a very difficult situation uh mine so what should i do first here did you see that shopping cart post that went viral no all right okay so basically the theory is if you see someone or you're with someone and they don't return the shopping cart at the grocery store it's an easy sign that you should never do you shouldn't be friends with them and you shouldn't do have a relationship with them or you shouldn't

go into business with them because if you don't return the shopping cart you're not meant to live in society because there's basically no it's so easy and you're not like you don't have to return the cart but a good person will return the cart and my question for you would be what other things can people do where you go okay i i'm never going into business with you or i probably am not gonna you know, call you back or something like that. I mean, right now, probably wear a mask. The mask is, or I mean, if they forget a mask, whatever, but I mean, maybe if they don't want to wear a mask on purpose.

Yeah. Cause there are, I mean, there are definitely, or people that are like, you know, nice mask, like you had, cause there's definitely people that are doing it just simply out of like refusal to accept it. But like, listen, like regardless, of political ideology there are some people that are at higher risk and wearing the mask

would help it's like an F you to them it's like smoking cigarettes three feet away from a grocery store door yeah alright I got another one

for you it is if you okay this is more investing related but say someone

some person has and they're not even into investing they have a super hot take about a stock that I know for a fact they're getting all the facts wrong or something like that. Or they're talking about, you know,

you know what I mean? You probably had that before. Yeah. A million times. That is a big red flag that I would never want to do anything investment related with them. And then two, if someone is lying about something and you know, they're lying and you say something like, are you sure? Or are you sure that's true? Or, you know, something like that. And they never even like say, no, maybe it's not true or something like that. But if they're so hard headed on something like that and they have total confidence in a lie or maybe they don't know they're lying maybe they think something but it's not actually true that's a big red flag for me too yeah i feel like you've been just like livid with some people this week or some someone didn't someone didn't

return a cart and someone no i just uh no no the the cart thing was there was like 200 000 retweets on this i'm surprised you didn't see it but the i don't know the theory is there and i guess maybe holding a door open for someone but that's a little less sometimes whatever that's you can't just base a whole relationship off that yeah it is tough like i feel like every person in finance has encountered that at some point like someone just outright like some take they don't really know what they're talking about um i've had it with some of my professors not gonna lie um that's why they're professors not investors yeah it's a little it's frustrating but like i don't know all you can really do is because maybe that's like me to

someone else like maybe maybe they hear my takes my takes and think the same thing so i don't know like it's easier said than done but just try to like not be that guy yeah but yeah Yeah. I don't know. Is there any other in-life things where, like the shopping cart, like something in public? Ooh, like parking. I think an easy one is if you are with someone and they don't park within the lines, or if they make a mistake and they don't go out and fix it, huge red flag for me. These just sound like your biggest pet peeves. No, no. It's not about the pet peeve because it doesn't affect me, and it's not really a pet peeve but it just shows that i wouldn't want to go into business with this person because they don't

put others before them you know what i mean yeah and also who who like doesn't who doesn't return a cart like what are you gonna do leave it people people don't you you've probably people don't you know they just leave them right i mean i usually like return it on my way out like i just carry the bags to the car right i don't know all right well that's gonna do it then i got another one oh you got another one all right so there was this uh i guess it's older but patrick posted it did you end up reading this blog post called the playing field yeah that's the one with the like five tiers right and you're like yeah huge recommendation uh for anyone investing or that's trying to get better at any field uh but he classifies it so it's this guy and his name's

Graham Duncan. And he says he's interviewed over 5,000 investment managers over his years. So he's kind of an expert in that field. Whatever, I don't know, he runs some sort of capital management, but I'm not sure why he's interviewing so many of these people. But he basically talks about how they're in the investment game. There's basically five levels. One is apprentice, learning the game. Two is expert, mastering the game you were taught. Three is professional, making the game you were taught fit your own strengths and weaknesses. Four, master, which is changing the game you play as a part of your own self-expression and operating at scale and five which is steward becoming part of the playing field itself and mentoring the next

generation who are obviously we're like apprentice right but who do you think are some of the professionals masters and stewards out there um yeah so i don't even know for apprentice yet honestly um no apprentice is like learning the game so anyone that's learning is apprentice Yeah, but you're, like, looking for, like, a role model above you, right? That was the first one? No, no. Anyone can do Apprentice. Oh.

Well, yeah, that's basically us on Twitter. So, and, I mean, yeah, we are Apprentices. Man, the best, the stewards. Buffett, Dalio, Graham. Dalio, I am tempted to say no. Well, no, no, no. He's the guy that controls the markets by, you know, if he says something, the markets will move.

And he is the one that people look up to. There's a lot of people, you know, the last three years or whatever, the last even year, he's kind of gone off the rails. But before that, he's been really renowned. Yeah, I guess that's true. Buffett's a for sure. I don't know. There's like smaller people probably on Twitter that I like

that you kind of just sort of have to respect i mean patrick no no they're not look no no stewards there's like three of them total i thought stewards were like those giving back to the community of what they've learned no no matt stewards is look like basically they make a comment and they're they're a part of investing themselves they are taught like they're going to be remembered for hundreds of years because of what they've given back to the investment world and plus you have to become a master first which is like david tepper drunken miller maybe jim o'shaughnessy but maybe i just thinking about them because he's on twitter michael barry's probably a master um i'm missing quite a few others but stewards there's like

three or four maybe five total okay then yeah buffett dalio icon i can yeah icon gram monger uh maybe peter lynch i don't know is he peter lynch yeah he he's a steward charles schwab maybe a little different jack what's his name vanguard bogel bogel yeah there's my stewards right there yeah all right is that it yeah i just i would recommend reading it if you're into and you're listening to this you're probably into investing um it's like a 10 minute read and it's probably the best investing post I've ever read. So definitely take a, take a look at it. All right. Well, that is going to do it. Thank you all for listening.

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Anything we say or discuss here on Chitchat Money is not formal advice or recommendation. Thank you guys for listening. We'll see you next week. Thank you. it's an honor this family is on the brink of civil war on september 18th mob land the hit original series is back on paramount plus we are the harrigans don't know the net and googlers from the underworld of guy ritchie do you want to step up the ladder i want karma

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