Chit Chat Stocks - Jake Taylor - A Call From Munger & the Role of Solitude

Episode Date: May 4, 2021

This week Jake Taylor joins us to discuss Charlie Munger and how Jake got into his career. Jake mentions that he rarely pays retail price for anything and explains how that has carried over into his investment career. Listen in after the interview to hear Brett and Ryan's show notes, including their comments on the annual Berkshire meeting. Let's go! Follow Jake Taylor on Twitter: https://twitter.com/farnamjake1?s=20 Subscribe to 7 Investing with the code "CCM": https://7investing.com/subscribe/ Subscribe to our YouTube channel: https://www.youtube.com/c/ChitChatMoney Follow us on Twitter: https://twitter.com/chitchatmoney Visit our website to see more from your hosts Ryan and Brett: https://www.chitchatmoney.com Email us: [e-mail] Timestamps Interview 1st Half | (3:07) Interview 2nd Half | (28:35) Berkshire, Big Tech & Apple | (1:11:08) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is Tuesday, May 4th. Today, we have an interview with Jake Taylor, someone we have listened to for a long time because we're big listeners on value after hours. What were some of your highlights of the interview? Yeah, I would just say, I think, three things. If you like Berkshire Hathaway, he is one of the experts out there, especially on FinTwit. All the value after hours guys are on the Berkshire model, on Buffett and Munger's philosophy. If you love that stuff, it was perfect timing to coincide with the Berkshire Hathaway weekend. Although we really didn't talk about that because it was recorded beforehand. But if you liked John Bathgate or John Rotonti's interviews, I think this fits up perfectly as

well. We talked a lot about investing philosophy, value investing in the 21st century. And then I would lastly, I would say, if you like our show, Value After Hours is something we modeled our show after. So if you don't know about, you probably know what Value After Hours is, but if you don't, I had to give it a listen because it's very similar to what we do. Okay. And then we'll have our show notes after. A quick reminder also, we are separate today. So if it sounds a little weird or anything like that, we're actually in different spots.

So we apologize if there's any hiccups with that. But before we get to that, new recs are out. Seven investing. Which one was your favorite? Who? I would say Max Chatscows. All of them were interesting. I think there was a wide range of picks. Great addition to the research process,

but I definitely took a hard look at Max's. It may have to be a company that we take a further look at, take a deep dive on maybe. Not really sure, but overall, really great group of picks. Their track record shows that the 7investing team has beat the S&P 500 over a year since they started. And it's for a cheap, not a cheap price. It's for, you know, quality at a discount. It's 17 bucks a month usually, but with our discount code CCM, you can get $10 off your first month. Try it out for only seven bucks. Help out our show, help yourself out with great investing picks. And that's all there is to say, right, Ryan? Yeah. I mean, it's not a deep value play but it's value uh it's quality kind of you're you're you're getting quality uh on a drop yes

the now the analogies are are definitely there yeah okay all right uh without further ado here's our interview with jake taylor welcome to chit chat money on this show host ryan henderson and and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or a recommendation.

Now please enjoy this episode. today we are welcomed by jake taylor uh he's the ceo of farnham street investments author of the rebel allocator uh you might recognize his voice from value after hours he co-hosts that with uh tobias carlisle and bill brewster who's been on the show before am i missing anything i guess the host of the five good questions podcast also sure that's that's good too wear a lot of different hats. Yeah. All right. So let's start with Farnham Street. I guess just how did you end up starting that and how did that come about? Sure. By the way, thanks for having me on guys. It's good to be here. So I was, I had a little bit of an unconventional route to get into the finance

industry. And I'm still not sure if that's helped or hurt on net, but my original background, I got an undergrad degree in economics. But then right out of college, I got this job to become an operator in training. And this is to be running the power grid. So it was about an 18-month slog that was an electrical engineering degree crammed into that time period. And once you graduated from that program, then you were eligible to go work on the control room floor. And so I worked on... Ran the power grid for the state of California for about a dozen years. Um, and while I was working that job, it was a great career. I mean, it was like terrific. Um, I loved it, but I wasn't quite sure what I wanted

to do when I grew up fully. And, um, I thought, well, if I go back and get my MBA, maybe that will allow me to, if I want to go into management here or it just keeps my options open. So I, uh, I got into UC Davis's MBA program, uh, while I was working. Um, they have a working professionals program. That's like nights and weekends. And my first year there, uh, I happened to win this lottery to go back and have lunch with Warren Buffett. Uh, and he's, you know, he does this, he did this a lot, uh, in that time period where he'd have students come and, um, you know, different schools would come visit him. So, but I felt very fortunate obviously. And I knew something about him, but I didn't know a whole lot other than like, you know, here's this really

wealthy guy who's an investor. And I was into money. I liked it. I wanted more of it. But I couldn't say that I had a real investing framework. But so I go back to Omaha and obviously, Buffett's as amazing as you would expect. And I came away from there just fascinated with how does he have such a well thought out articulate answer to every single question that anyone lobbed at him, which got me to reading more about him. And of course, you're going to then uncover his investment style. And when it was explained by different people, including by himself, Benjamin Graham's work, I realized, oh, he just likes to get a deal on things. He just doesn't like paying retail. That's been me my whole life as well. I hate paying retail. I'm

always looking to try to find an edge and pay less or arbitrage something. And it turned out, when you do that in partial ownership of businesses, it's called value investing. And it made perfect sense to me. It was that inoculation. It clicked right away. So fast forward a little bit. My boss actually at the Energy Place was a huge Buffett fan. And he left to... And he was on the fast track to be the CEO in a couple years, maybe less. But everyone was shocked because he left. And he actually left to start his own Buffett partnership. He started a hedge fund. And when he left, I said, well, you know, you don't have to pay me, but can I come sweep the floors and just learn from you and I'll help out however I

can. And he was like, yeah, sure. And so I came and did that. And we really like working together a lot. And in fact, my last year of school at Davis, I was kind of thought I could be cheeky and get credit for the work that I was doing already with my internship with him. So I like did like an independent study kind of thing, uh, trying to double dip. And, um, I had some friends do this independent study class with me. Um, and we like basically my boss and I co-taught the class and we developed like a value investing kind of program out of that. Um, and I graduated and didn't think much more of it. And then the next year, some students came back and said, Hey, we heard good things about this. Would you come back and teach it again? And we said, well, okay.

I mean, it was fun. Let's we can go back. And so then we had 30 students, uh, and then it happened again the next summer and we had 45 and then happened the next summer after that and we had 60 uh and at that point then the the finance department was uh didn't really care for our uh the success of that and we were teaching something other than efficient markets uh and i right right i tried to couch it as behavioral uh finance but that didn't really work either um so but they so anyway it became too much work like to go to i didn't want to go to the finance meeting faculty meeting. So we stopped teaching, but it was such a tremendous acceleration and learning for me as the teacher to have to come up with smart things to explain to very critical, smart

people how something works. And anyway, fast forward a little bit further, my boss and I, we enjoyed working together so much that we started Farnham Street together and rolled that original fund into it. Then we started doing some separately managed accounts as well and um, have built it into a, like a real business. So I never worked at Goldman. I never, um, I never worked at any other real shop other than like another one guy shop from somebody who was outside of the industry. Um, and I think, you know, on where it's helped has been that it's much easier for me to stay outside of the noise often and, and keep that a healthy distance, um, and not have expectations or cultural Klingons from being in a certain place and like, well, that's just how

you do it, right? I challenged every single assumption and tried to build it from first principles. Where that can blow up is that you also make a lot of first principle stupid mistakes that anybody who's been in a real shop would know right away how dumb that idea is. So it's not an an alloyed good, but, um, yeah, that's a little bit of the background of how I came from very far a field of investing to being the CEO of a, an investment shop. Yeah. We just let, uh, we just let Twitter do the, uh, the correcting for us that usually, uh, the people on there are pretty good. Uh, if we have any embarrassing mistakes to correct us there, how are, uh, how, how are the stakes with Buffett? Uh, well, it was at garage if you're familiar with that restaurant, which is

like the, that's Buffett's favorite restaurant, uh, supposedly. Uh, but you know, it was kind of a little bit mass produced for that particular, uh, that situation because, you know, there's a fair number of students. And so it wasn't, I've been to Karat's lots of times since then and had a much better steak than I had on that first trip. Um, but all in all, like you can't beat the company. So it was good. Right. And then you, we mentioned before, but you've written a book called The Rebel Allocator. And kind of like the investment fund, it came out of, you didn't think you were going to be an author. At least that's what I think I've heard you say on Value After Hours before. So what was the inspiration for The Rebel Allocator? And we

got to ask as monger diehards ourselves, we got to ask about the, I think the call you had with him too. Sure. Yeah. So yeah, I mean, if I would have known the work and heartache that was involved in writing a book, I would have sworn off well before I even started. It's just such a soul grinding process and really just takes you to the mat. But it grew out of... I was studying all these different capital allocators and I saw who was doing it well. And I owned companies where I felt like, gosh, that's not really the right decision. Why would they make that decision? They're not stupid people, but they're making obvious mistakes. And it boils down to that I think a lot of times they just don't have a framework for thinking about cap allocation. And Buffett's lamented about this in his letters before about how oftentimes CEOs get to that role through being either good at sales, maybe, or even engineering, or worse, perhaps, political organization and the ability to climb a corporate ladder, as gross as that can be sometimes.

And they never get trained up to actually make really the important decisions, which one is the culture that you set, and two is really your cap allocation decisions. And those are huge drivers in the success of a business. And Buffett cited before that even if the assets of a company get reinvested 10% per year, within five years, 60% of the assets within that company will have been turned over. So the decisions they're making, they have a big impact. And it doesn't take that long until they have a big impact. So it was this question in my mind of like, well, these guys are really smart and gals. Why are they making what seemed like really stupid decisions? And I thought, well, it must be because they don't have a good framework. So I sat down to like work out a framework. And that was probably a year deep dive of just, okay, well, what is capital? What is capital allocation? What are all the different ways to think about it? And which can take you into just, I mean, it's crazy stuff from buybacks down to like VC to like all over the place. Too much, right? And I got burned out and I took a break from it because I just wasn't making progress. And I

thought, oh my God, if I write this book in a nonfiction way that I imagined writing it, like you would typically do if you're a finance nerd and wanted to write a book. I was like, oh my God, this is going to be so boring. No one's ever going to want to read this. It's a terrible idea. So I'm like, well, I can't do that. And there were a bunch of other little things that I felt like were nudging me towards telling a story. And what ended up happening was I thought, man, I don't know much about telling stories. I've read a little bit about Joseph Campbell, but who has told stories and who knows how to do that? And that led me to actually reading a couple of books on screenplay writing. And I then took those principles of a screenplay,

which is actually like, it's a Swiss watch of emotion. A screenplay is like, there's high points that have to be hit at certain junctures, low points, and it's all dialed in completely. And that's why movies often feel formulaic is because there is a formula to it. So I took all of that. And then I took my sort of nerdy capital allocation principles and I overlaid it with a story. And I basically just took the Karate Kid and I made Mr. Miyagi like a Warren Buffett, Charlie Munger, Amalgam, and some other luminaries. And then let that play out and just retold Karate Kid, but with cap allocation instead of karate. And so fast forward a little bit, finally, about three and a half years it took of messing around with this off and on.

And eventually, I had a book done that was about cap allocation, but it was a fictional story, kind of an allegory. And like everybody, I sent a copy to Charlie as a thank you because he's obviously a huge influence on it. And a couple weeks later, I get a phone call at the office and it's Charlie. And he says, well, I started reading your book and before I knew it, I'd read the whole damn thing. I said, wow, I can't believe it. Uh, and obviously, you know, I'm a, I'm a huge Charlie fan. So this was the most surreal experience. Uh, and it was, it was a half hour conversation with Charlie and, um, talked about different things. He had a lot of actually plot points of what I could have done better, uh, in the book and classic manga right

there. Yeah. Um, so yeah, I mean, it turned into one of the most interesting half hours that I've ever had and, um, made all of the heartache. And even if I only sold one copy or even zero copies and gave him a copy, um, would make that whole heartache worthwhile to be able to talk to one of my heroes. Right. And then I guess on the actual topic of capital allocation, you kind of talk about how there's, you know, you have to move from disruptor a lot of the times and people get stuck in that and you might need different management teams to go from disruptor to capital allocator to potentially capital returns. I mean, how does that process work? And when can someone go right and wrong in that situation?

Yeah. I mean, there's different skills required for the different life cycle of a business. So, you know, when a business is in its infancy and it's just an idea, like you need someone who's a visionary, you need someone who has a high appetite for risk. You maybe even need someone who ignores the base rates of understanding that failure is probably the most likely outcome, right? And that you have to be able to push through that and believe that you're going to do something special. And you have to be able to motivate people around you and build teams and that will get you to sort of stage one. But then after that, it's like it has to become processes and culture and really an operating system of like how a business operates within

its environment. And that's a different skill set. That's building teams and cultures and procedures, finding new opportunities. And then eventually, there's no business that's ever existed that will be around forever and never will be. And at some point, the right thing to do is to have more of a cash cow mentality for a business and not just plow money back into it, into rapidly depreciating assets, into low return on capital assets. And eventually, the business should probably be liquidated and wound down in a responsible manner that is true to all of the stakeholders, whether it's the owners in a capital deployment to you in the form of maybe special dividends, all the way to the employees and helping them find new

jobs to your suppliers, doing them right out the door. The regulators, you know, not leaving a big like toxic dump mess, the communities you do business in, like every single facet has to be managed. And there are different requirements depending on where a company is within its life cycle. How do you think about management using like buybacks as a tool? I mean, have you seen any horror stories with that at all? Oh, there's plenty. I mean, Bed Bath & Beyond, I guess the one that I think of, but... Yeah, sure. I mean, I don't really like to criticize by name, but I will by category in that the average CEO is a probably relatively subpar investor and they buy back their shares when they are relatively expensive, when there's

a lot of momentum. And it's no different. I mean, you sort of understand how they get there. They're excited about the future. Everyone is. The shares are expensive. And they do buybacks typically towards the peak. And then conversely, when you really, as an owner, want them to be buying back when they're really cheap, when it's the most accretive to you as a remaining shareholder, they're scared. And they want to hold on to liquidity and cash. They don't want of deploy it to shrink the number of shares. And you can understand that too. You want them to survive. You don't want them to take undue risks and plow all the cash into buybacks and then have nothing left over to pay the bills. That's not good management either. But this is where the

book that I wrote, I was hoping to help with them think through that and at least have a little bit of confidence in themselves that if they could think independently what their business was worth, then they might make some better decisions and not just sort of follow the herd blindly. But there are huge institutional imperatives to following the herd. So it's very, you could see why the ones who are iconoclastic and think for themselves are kind of a rare bird. And it's because you really have to have a lot of confidence in your own decisions. Yeah, that kind of reminds me, we were doing some prep, reading some of your old letters

to clients that you put on your website publicly. And I think you mentioned that capital allocators are an anti-fragile bet. Can you kind of explain what that means in the context of what we were just talking about? Sure. Yeah. I mean, a good capital allocator is. Yes. Right. Right. If you imagine, let's just take Berkshire to make it a very tangible example. And I will praise by uh, by individual in this case, they, they run their assets in such a way that they're very anti-fragile. Like Buffett has a ton of cash on the balance sheet. He's, he's pretty conservative in the accounting. Um, at every juncture, he is thinking about the future and how to, to number one, arrive there safely, but number two, uh, make sure that he can bring everyone

along with him. Another point I want to make about the buybacks, if you think about the job of the CEO, one of the public goods actually that he or she can provide is to have the intrinsic value of the shares and the price very close together, as close as they can. The reason for that is that if the price is well below intrinsic value, and this is not necessarily even buybacks, but this is even just for individuals who are buying and selling ownership to each other, you are favoring one class over another. The people selling are being hurt if they're being paid a below intrinsic value price. And conversely, if they're selling, then they are taking advantage of the remaining shareholders if it's selling for well above intrinsic value.

So if you're irrational in management, you want it to trade as close as you can to provide that a reasonable price for the shares that therefore no parties are able to take advantage of each other as much. And I think there's huge public good to be done from that that sort of goes unrecognized that no one really talks about. I feel like that's sort of contrarian to the way a lot of management think now. I feel like there's so much stock as currency, stock that's being used as currency that it's in a favor to have sort of a premium valuation. Would you disagree with that? it is um okay so let's let's like play that forward a little bit and you have a very expensive currency right and you're able to take your currency you take your stock and you buy another

company in an m&a transaction stock for stock the incoming shareholders got a bad deal right like they overpaid. The management of the other team overpaid. Now, do that a couple more times. You will start to be recognized as someone who takes advantage of other parties. And maybe your deal flow dries up. And maybe people don't want to take your currency anymore. So you can maybe win in the short run with a rich currency, but lose the reputational long run eventually. Okay. And you think that's, we're a little young for this, but that kind of is what happened in the dot combo, right? People are like, well, they're using their currency, they're making these acquisitions. I guess it's accretive at these prices, but in the long run, it's not a

way to build a durable business over a few decades. Well, I take it even further and say that anytime a company is getting over on any of their stakeholders, any of the ones that we mentioned already, that is not a sustainable situation. Eventually, there will be a defection and that they will figure out a way to try to bring the company down or at least harm them, uh, and get even with them. And so anytime that somebody is getting over, um, it's, that's not a sustainable, it has to be win-win if, if you're going to have a truly long run, sustainable, uh, situation. And it's just kind of, it goes back to game theory. So if you were, if you were management and you had, uh, an insanely overvalued currency or something like that, what would you do about it?

And I mean, it's tough because you don't have a lot of levers to pull other than talking it down even a little bit. And there's question marks about how effective that really is. But Buffett and Munger have done that at multiple times when they felt like Berkshire was trading rich. Even like the B share, when they issued the B shares and rolled A's into B's, they said, we think this is pretty expensive right now, effectively. So there's been multiple times where they've said that it's pretty rich. And conversely, they've talked it up a little bit too, when they start hinting at like, we'd be willing to do buybacks at this price to book. Like that's sort of saying like, well, we think it's cheap here and we will be on the other side of the transaction just to let you know, we'll be the ones buying from you. So it's, you could do a little bit of soft pushing, but there's not, there isn't a whole lot that you could do, especially when it's overly priced. Right. And then I guess one more, one more question I have on that is, I guess a big example that I'm thinking of because it's Costco where you're talking about, you know, treating your stakeholders fairly. I guess, creating win-win situations. And whenever a company decides to raise their

minimum wage or something like that, or they're saying, all right, we're going to increase our expenses, lower our earnings estimates because we're paying our employees more. How do you think about that when maybe it's a company that you own and you see that? Do you think of that as an investment into future profits? Or do you think of that... Because it feels like a lot of times people have, at least investors, have a short-term mindset when they see that. But I guess Costco is a big example of paying way above the market rate and their employees are just, I mean, they're the most highly rated retailer, at least in like Glassmore and stuff like that. Yeah, for sure. It's rare to find even the management team who is

as delayed gratification as Costco is. Now, I will say that like anything actually, And it applies to business and investing, but there are always trade-offs to be made between efficiency and resiliency. And you can't have both. You can maximize for efficiency, which would be paying your workers less than you had to over a period of time, but you may be inviting then fragility. And you're not as resilient as you would be if you were paying a higher wage. And maybe they're, you know, you get away with it, but then they go work somewhere else or like your good people all leave. And now it gets much harder to operate in that next time period. So it's, um, there are always trade-offs to these things and they have to be made intelligently. It's not an, it's not an open and shut case, but, um, you're always choosing between efficiency

and resiliency. Okay. I think ensembles kind of talked about that more in regards to pricing power with customers, where the concept of mortgaging your moat. But yeah, it's interesting. Before we take a quick break, I read somewhere that when Munger called, he recommended that you turn it into a movie. Have you gotten anywhere with that? uh yeah a little bit um i have somebody working on a screenplay um somebody was really passionate about it and but i i recognize the odds of these things ever actually going anywhere and i'm not a i'm not that foolish as to believe that like i can defy the base rate in that in any meaningful way so chances are it's never going to go anywhere but it's fun to just sort of have that little ping pong ball in the uh in the lottery hopper no fine finance karate kids basically the next

marvel movie right it's like it's like avengers yeah i don't think it's got a lot of uh it doesn't have a lot of sequel potential so that makes it already a non-starter for a typical studio yeah okay we're gonna hit a quick break and then we're gonna talk more about your investment approach cox panoramic wi-fi includes advanced security to help protect all your connected devices you'll get real-time alerts oh like this one so you don't have to worry about malware or when your kid downloads a song from a shady link. And now all your computer can play is Red color, red color, where are you?

All blocked thanks to advanced security included with Cox Panoramic Wi-Fi. Advanced security must be enabled in the Panoramic Wi-Fi app. Restrictions apply. All right, welcome back in. Next, we kind of wanted to talk more about your personal strategy. Um, so, so I guess what kind of habits, uh, have you developed over the years that have improved your investment strategy, um, or any lessons, I guess, that you've learned along the

way? Yeah, I think my, my biggest lessons are probably outside of the kind of business and investing world and looking for insights in other places. Um, and so I read, when I first started out i read a lot of finance books and i think you probably have to to kind of get up on the just the nomenclature but eventually it was like very diminishing returns on the next finance book and um instead you know i've gone more towards biology and engineering and physics and math and things where um hopefully there's like these mental models to be grabbed there that that do a fair amount of heavy lifting um and make it easier to recognize patterns um also the other thing that i'm kind of obsessed with is really like creating the optimal conditions for for peak decision

making and because at the end of the day like that's all my job really is is like make a couple smart decisions a year and then don't f it up uh that's that's kind of like that's a successful uh that would be a good year so but like how do you then create peak decision making um you know for me i mean there's tons of things when it comes to hygiene mentally that will help to put me in a state that i can make the best decisions and it's you know it's sleep it's exercise it's um good relationships, it's, uh, health, you know, food and plenty of sunshine and walking and swimming. And I mean, just, just kind of all the things that would kind of make you a healthy person, uh, you know, hiking the Pacific crest trail. Um, yeah. Yeah. Um, all of those things and

will, I think, give me the best shot at biologically being in a place to make great decisions, have a clear mind. Meditation is part of that too. Kind of taking out the mental garbage and giving a clear space. It's really hard today when there's so much content out there to, you could just kind of drown in all of it and like to go find solitude. And that doesn't mean necessarily being alone, but I, for me, solitude is not having someone else's thoughts being inputted into me in a sensory way. So I can go when I go for a hike or a run or something like I've, I stopped bringing podcasts with me often now, because it's like, I just need some time where it's just my own little kingdom. And I don't need someone, you know, this input coming

in all the time. So to find some clarity, like it's amazing what the connections that get made and will pop when you actually make room for them. The other part of it is the investing world is a very wicked space. And I use that term in the... Jamie Hogarth, who's a researcher of learning environments, defines them in kind and wicked. And so, a kind learning environment is one in which feedback is immediate, it's unambiguous, and it's very straightforward in cause and effect. It gets to take like riding your bicycle and you jerk the handlebar to the side and you crash. You're going to figure out pretty quickly like, okay, well, don't jerk to the side. Otherwise, it's going to hurt. But in the investment world, it is so noisy and it's so

wicked. It's the opposite. The feedback loops are so long and untangling luck versus skill is so hard that what do you do then when you're trying to get better at something, but the input and the output are so disassociated often. An interesting mental exercise, and we actually did it on the show early on, The Value After Hours, was I challenge you to figure out if you had to make an investment and one year from now, pick the thing that would do the worst, right? What would you guys pick if I said like, okay, you have one year and what would you choose that will produce the worst the most ruinous outcome for an investment like a specific company it could be anything if yeah whatever you want i mean oh man that is a tough question now ryan do you have

anything uh maybe some of these spacks i guess i would i think i i would say uh i think i would say that yeah like a nicola but the time horizon is so hard to get right yeah yeah so i mean you could have said Nikola and whatever it was a year ago, and it would be up like a thousand percent on you in that year, even though it makes no sense. Right. Um, so over that short time period, it can go literally anywhere. And so now how do I figure out, well, I made that decision a year ago and now what, like, am I learning from that decision and am I learning the right lessons from it? So I, I spend a lot of time figuring out and building systems actually that help incorporate tightening up some of these feedback loops and figuring out like, okay, well, a lot of

it is sort of like, it's not much more complicated than journaling. Like what was I thinking at that time? And if I can bring myself back to that time period and then see the result later, I can sort of maybe start to get some intuition growing, right? Because intuition only grows if you have good feedback. And there just is not good feedback in the investment world, especially if you're kind of doing a, if you're not a day trader, um, then, then the feedback is so long and so, so messy. Um, you have to find other systems to help you connect the dots and figure out input and output. Um, so another example that I do that, um, I haven't heard anyone else really talk about this, but you, I, um, so all of us, you know, get different investment ideas and, you know,

someone pitches you an idea and you're like, Oh, okay. That sounds interesting. And you kick the tires on a little bit and then you like, eh, not for me. And you move on to the next thing, right? Like we've all had that experience. Yeah. Well, why did you say no to that particular thing? Maybe it was too much leverage. Maybe it was, I don't understand the business. Maybe it was, I don't like the management. There's a million different reasons to say no. Okay. Well, those are my filters. Like I'm rejecting it for this reason, But are those filters helping or hurting me? And do I know? What does that investment then go on to do? What is the opportunity cost of me saying no? I've started keeping track of why I reject

something to give myself the feedback on how my filters are helping or hurting me. So let's say too much leverage. I have a hunch that because I'm conservatively wired, that I reject leverage much sooner than probably the average person. I can't tell you yet whether that has helped or hurt me over the last dozen years that I've been doing this because it's quite possible that there were, you know, the equity of a company that was highly leveraged was actually a very attractive opportunity and led to this asymmetric outcome because it ended up surviving. And it was like this huge home run. And I threw it away because I said, oh, too much leverage, right? And so I can't tell you yet, my N is not high enough on

this yet. But someday I will be able to tell you that I choose to reject these higher leverage companies and here's what it costs me. And I can either decide, do I want to keep doing that? Or should I relax that filter just a little bit? Because I figured out that it was suboptimal. I think it's not a bad idea to try to bake those kind of processes and efforts in if you really want to get better at this game do you i guess the concern like when i think through that the concern for me is that i'm gonna it's gonna take me 15 years or whatever to figure out whether or not that decision i made was right are you able to learn that vicariously through other people whether it's through reading or something like that uh yes and no you're you're right that it

it may take 15 years. And my first inclination was to say, yeah, it probably will. And that's okay. This is a lifetime game, right? And you keep getting better. And if I'm going to be really good at this 30 years from now, then I kind of have to go through a little hell, maybe the first 15. But my other pushback on that, I would say is, so we get returns on a, for whatever reason, we've decided that one lap around our sun is how we want to measure time. And so, we look at our returns on an annual basis, typically, most people. And that's how you measure yourself. Am I beating everyone else after we've just made this lap around the sun? Well, if I'm looking at only returns, then I'm getting one data point per year per investment. You can dramatically

increase your in by making probabilistic projections about company fundamentals. So for instance, I personally like to look at sort of the drivers of returns, which in my mind are the change in earnings, the change in multiple, so kind of sentiment, dividend, and then there is some place a little bit for leverage changes. But typically, it's mostly like earnings and multiple of earnings, if that's one way you want to measure things. There's five data point predictions that I can make there for every lap around the sun, as opposed to just the one return. And I'm getting more at reality than necessarily just everyone's perception of reality, which is what the short-term market tells you. So I can say, I think one year from now, Apple's earnings

will be 10% higher. And I'm 60% certain that that's the case. The reason why you want to use probabilistic predictions is that this will help you to tighten up how much certainty you have or not. And you want it to eventually, if you did enough of these, you want it to be that when I say 60%, that it happens 6 out of 10 times. I want to be properly calibrated on my confidence. So I don't want to be overconfident or underconfident actually. So you can build up you're in quite a bit faster by making these kinds of predictions and keeping track of them. And then I think you can get to that sort of 15-year luck versus skill question a little bit faster if you're measuring other things purely than just price performance. Right. That makes

total sense. Yeah. I use that journaling part is underrated. I've heard so many people recommend doing that and it just makes total sense. But getting back to your specific investment strategy, how has it evolved since when you started? I believe the first year, correct me if I'm wrong, was like 2010, 2011. How has it evolved from then until now? So when I first started out, I was very, very quant driven. And it was because I felt like, I just, like, I don't know anything. Like, how am I going to, what are the chances that me at whatever age I was, young and stupid, was going to have some unique insight that like everyone else was missing, right? And this was mispriced. And like, I'm a genius contrarian and everyone else is an idiot. And I'm, you know,

I'm the smart money here. I just thought that that was a really tough proposition to say that that's true. And so that led me then to, well, I'm just going to be mostly quant. Like this is like, is it cheap now? All right. Like I know if I buy a basket of these really cheap things that I'm approximating the returns that have been put up by a lot of the studies of different value strategies. Like, Hey, great. I'll, I'll take that. Um, and I'll, I'm willing to buy stuff that like, it seems like no one would ever buy it, but it's just based on the numbers. I don't know anything about the management. I don't know. I don't care. Um, but, and that, that works. Um, however, like, you know, you get to the point where net nets dry up. Okay. Well, that was one

thing I like to do now. What, um, now I got to move up a little bit. Okay. Uh, net current asset value as a thing versus price. Okay. Well, now I'm moving up to, well, price to book. I'm working my way down the balance sheet to less and less liquid things and trying to assign values to them and feel like I'm still getting a deal. All right. Well, now that's starting to require a little bit more judicious judgment on my part, like what something's actually worth. When I was just counting cash, that was pretty easy. I felt pretty good about that. Well, you keep going and eventually, you're valuing intangibles and you're valuing all kinds of parts of a business. And before you know it, you've moved from the balance sheet to the income statement. And now

you're looking for what's the business quality. And this was a very, very gradual process for me. It's actually only recently that I felt like, you know what? I've probably done enough work and put in my 10,000 hours to be deserving to at least give myself a little bit of credit if I do find something that I think is a unique situation and is mispriced. And I don't want it to be arriving at that conclusion because we're at year 12 or whatever of a bull market when everybody is that genius. There's no dummies left. Everybody's a genius. Everything's worked. Everyone can explain with a beautiful narrative why it worked now. Um, so I don't really want to be that person. Like I w but I do think that I can find the occasional insight. Um, and you know, I go back

to, you hear Charlie talk about, he says that him and Warren, and this is after 50 years of looking have found like four or five businesses where they thought, Oh wow, this is just like, it's such an obviously great business. I can't believe it's on sale for this price. And this is probably I mean, no joke. If Buffett really does just run the Geiger counter all day over stocks, like looking for these kinds of things, he's probably looked at, I don't know, 50,000 and found like five. So what are the chances that all of us are... We have a whole basket of them. Like everything in my portfolio is that, right? At this one time, right? What are the chances? I'm a little dubious that that is what's happening. And yet, boy, if you're on Twitter

at all, you would think that they're just growing on trees and everybody's like, has this narrative of genius of these special businesses that are layups and nothing can go wrong. Uh, and I just, I don't know, like I have this little negative streak in me. That's like, yeah, I got to call BS on that. I just don't think it's possible that we're all that smart. No, I mean, yeah, the, uh, I think when you see like his Apple investment, um, and I guess Coca call back in the day too, where I think now it's what, 40, 50% of the stock portfolio. People look at that and say, all right, he did that. Now I got to be super concentrated as well. Do you think that means like the way you were framing it? All right. Well, maybe, you know, we shouldn't have

as concentrated positions. We shouldn't put all our eggs into one basket unless we've done the work like they've done. Well, I mean, part of that is you have to look at, you have to look at Berkshire as like the marketable securities portfolio is not a portfolio. Like that's not how Buffett looks at it. He looks at the entire asset base and that's like upwards of $900 billion. So his $100 billion-ish, whatever it is now, I'm not sure. I think he might've sold some of it. Let's just say it's 100 for argument's sake. It's not a 50% position, 100 versus 900, right? It's like, what is that? 12 or something. So he's much less concentrated than armchair pundits would imagine when they just look at the marketable securities portfolio. Right. Okay. And then one

more question about your strategy. I think you've mentioned this before, but I didn't find the exact paper. You had this growth, either blog post or paper you wrote and maybe in 2015, if this is wrong uh correct me uh how during that time you know deep value is kind of on a good run then how does having like a contrarian take how does it feel in the current moment because i know a lot of people say they can do that but then there's just a ton of pressure on you from the consensus you know uh opinions out there yeah i think i know which one you're referring to um and toby likes to carly likes to bring this one up a lot i don't know why i think he's he thinks it's funny or something. So in 2015, and this was no macro call. I just was finding that our holdings had

been pretty fully priced. We'd done well, but I didn't see a ton of headroom for them based on what I thought they were worth versus what they were trading for. You sell and, God, what do I replace with this? I don't see anything really that's as interesting or where do I put my money. Nothing's on sale. And especially in this cheaper 10% of the market, which is where the kind of stuff that I traffic in. I'm digging through the dumpster and there's not many interesting garbage in here at this point. And so that then led me to looking at more, not so much macro stuff, but macro valuations. What is the general price level? Things like CAPE and market cap to GDP and other very dangerous macro valuation distractions.

But at that time, I saw this work on what was called dispersion. And what that is, is measuring the cheapest, call it decile, and you can use price to book or price to earnings or any multiple versus the most expensive. So basically, how wide is the dispersion around whatever average you're looking at. So you could say that the market's at a 15 PE, but if the, if the quote unquote value basket, the cheapest decile is at a 12 and the other, um, if the most expensive is at 17, the, uh, very tight dispersion around that 15 average. Well, previously, historically, you know, 2008 and nine, uh, other periods where like that actually preceded a value heyday, like 2000, were really large dispersions on that cheapest versus most expensive.

And in fact, the 99 cohort is especially interesting because when you took the cheapest basket there, it was actually better businesses, higher returns on equity of the cheapest 10% decile than the most expensive. So you got better businesses and obviously like way cheaper. And so the whole market was very expensive in 99. I think we went up to like a 44 cape, but you had this basket that was really high quality and was super cheap. So average, just like anything, if you look at the average, that can belay what the real curves look like and what does the hunting ground look like for that cheapest 10%. Well, when we get to 2015, it's really tight around a pretty expensive average. And so I said at that time, I don't think

value is going to have a particularly good run from here because we're just starting off from kind of a weak opportunity set relative to other points in history. That was really smart. Where I was dumb was I didn't then make the next logical leap, which is, therefore, growth might be mispriced too cheaply right now. And my brain didn't ever go there in 2015. And I think that's what Toby finds funny and why he likes to bring it up. Because then, like I had the answer sitting right in front of me if I could take just one more logical step, but I couldn't do it at that point. I was too stupid. All right. Well, in our book, you were right.

Well, I was half right and then half very wrong. So, I'll try not to make that mistake again, I guess. I read, I think it was an interview on like Guru Focus or something like that. And you said, I think it was in 2016, that you were a little worried that you were too risk averse. Has that changed at all? Do you feel the same way? Uh, I guess, have you adjusted your framework now versus sort of those comments then? Well, I mean, has, can anybody who's like kind of conservative and, uh, worries about the price that they're paying, not feel like they aren't too risk averse in today? It's pretty tough. Yeah. No, it's so hard to do that today. It's weird. I mean, I guess for anyone that's listening that's kind of younger like us that's only been around in the markets for you know four or five years or something like that how like are there any what's this sentiment like

from someone that's been around for you know different kind of years here i mean how different is it really right now well i mean i wasn't a i wasn't a professional investor in 99 um i i've heard from others who were that this feels worse, actually, like more insane. Um, and I think part of that is that, I mean, at least in 99, like you had that great opportunity and value at that point. Right. But that was, you know, even if you didn't see that, um, you know, you could get five or 6% on your treasuries and you could sit there and at least that's, at least you're making some forward progress. But today I don't really know where you can put money to get a reasonable, safe return um if you're not willing to go out pretty far on historical speaking like risk

spectrum to even get some return going um and you know i mean it's uh i think munger's got a great great quote about he says that there are times where the market trades based on the use value of the cash of businesses. And there are times where the market trades like a Rembrandt and there's nothing to do with cashflow. It's just purely like, if I buy this, is someone going to pay me more for it later? And I think we're pretty safe to say that we're in a very Rembrandt environment. It's not so much the cashflow of anything that really matters. Is there someone else behind me who would probably pay me more for it? And if I think it's worth two X, can I find someone who thinks it's worth three X? Cause that's the only way I can get to

two X is if they think it's three. Um, so, and I mean, thus far that's been a, that's worked pretty well. And I mean, there are lots of ways to play this game and like, I don't begrudge people that, um, that are making money in ways that to me, like, don't make sense. Um, there's this concept in Buddhism called Mudita, and it's basically the exact opposite of schadenfreude. So if, you know, schadenfreude is where you get delight in watching others misery and suffer and um you know and and the finance world is the worst when it comes to this right like we hate it when someone else is having a great year yeah we all are it's really it's human nature but for some reason money like supercharges that and mudita is the exact opposite where you can genuinely celebrate when other

people are successful and i've been trying to cultivate more mudita in my life and less schadenfreude. And if they can make money doing it that way, then you know what? I'm trying to be happy for you. But to me, that's not how I want to do it. I want to buy businesses that I feel like I can understand what they're worth and pay a fair amount less than that. And feel that I wasn't taking crazy risks when I made the purchase. And I feel a little bit like a dinosaur in that way. Cause it's, it's like, it's very out of step, but I don't know how I would do it any other way. Like, like going back full circle to the beginning where I was talking about that sort of inoculation and value investing and not paying overpaying for something. Well, the big part is

understanding what it's worth at the beginning. And so if I can't figure out what something is worth and I can't know if I'm getting a good deal on it. And a lot of these things, I just, I can't tell you what it's worth at all. Like there's no fundamental for me to anchor to like, why would it be worth that versus half that versus 4X that? I don't know. So, I just stay out of those games. But those seem to be a lot of the most profitable games right now. So, yeah. And one, I guess we wanted to go back to Munger for a bit. I think, I mean, there's people that have studied him a lot, but you are well-versed in the Mungerisms and all his writings and his talks and stuff like that. So, what are, for people that aren't, I guess, experts on Munger

and Buffett, what are some unknown or underrated things about Charlie Munger that investors and maybe just people in general can learn from? Well, I mean, yeah, no, actually, I think, so let me paint the scenario for you. He's, you know, he's a real estate lawyer. He's a lawyer, but also like does a lot in real estate. And he's, he's made a fair amount of money already doing that. Buffett talks him into running a fund. He sets up Wheeler Munger, I think it's called, limited partnership. He's managing money for, I think, about 10 years. His track record is pretty good, although, boy, was it volatile. I don't know if you've seen the year-to-year results, but I think he's in a three or five-name portfolio sizing. When those things move,

the whole thing moves a lot. The volatility is all over the place. It's a rough ride to get to that pretty good return that he had. He stopped doing it and you go, well, wait a second. He's clearly successful. He's made a lot of money. Why wouldn't he keep doing it? I think it's because he recognized like, yeah, I'm really smart and I couldn't do this if I wanted, but I kind of want to go design a dorm room and a catamaran and read all day. But boy, I know this guy who is just an absolute deal junkie. And he just likes to read 10Ks all day long. It's all he lives for. He barely talks to his family because he's reading about businesses. He just loves to be in the nitty gritty of it. And I can help him along the way by pointing out some bigger

picture things and I can be helpful. But this guy is just a grinder. He'll grind more than I ever will. So what does he do? Like he turns over most of his net worth to letting Buffett grow it for him. And he's a billionaire now because of that, that one decision. So he was smart enough to kind of put his ego away and not say like, well, I'm going to do this better than even Buffett, right? He's like, this guy's so good. And he's so into it and has such a passion for it. You know what? You can run most of the Munger family net worth, Mr. Buffett. And I'm going to go back to doing things that I find more fun. Um, now I don't know how much of the takeaway is there is for everybody. Like, you know, if you, you know, who, you know, an early Buffett, but

I'm sure there are, there's some situation where it can apply, where you, you might be doing something for yourself right now, where there is someone who is super passionate about it and might be willing to do it for you and do a way better job. If you could kind of put your ego away and let them work on it no yeah and then uh it feels like munger is almost like was he buffett's coach kind of you know it seems like it's kind of like a belichick brady type deal i don't i don't know that's kind of the analogy i have in my head but that might be a bit flawed and i think that gives too much credit to to munger probably i mean i think he helps him and like with i mean listen so So you can work on the nitty gritty and saw wood all day long and create a beautiful log cabin,

right? Or you can be reading about these really esoteric, reading about psychology research when no one else was doing that at that time, like going all over the place for multidisciplinary ideas and really sharpening the saw. And when you already have someone who's as smart as Munger is, who, I mean, he, he tested off the charts in the army as far as IQ. Um, and then you give him like a lifetime to work on finding patterns and, you know, things that work and historical examples and him being able to pattern match. I mean, Buffett says that Munger has the best 32nd mind that he's ever come across. And that's where it comes from. Like he's a genius and he has all of these patterns that he's built from reading all these years. So having someone on your team who

has that 30 second mind, I think could probably save Buffett from sawing a lot of wood that didn't need cut potentially, but that doesn't mean that you can build a really nice log cabin without eventually cutting some wood. Uh, so I, I don't think the coach analogy is exactly right. I think I'm not sure what the right replacement for that would be, but, um, but maybe just friends who have different skill sets and compliment each other. Yeah. I mean, they're both, uh, obviously really smart but it seems like uh like the more i learn it seems like uh munger is kind of just a normal person with outside interests and buffett's just addicted to making money yeah i'm well i don't know how normal munger is like i don't know too many people who just like

sit and read all day uh just for the for the joy of it um but yeah he definitely has he's got a lot more uh well-roundedness to him than buffett for sure um all right so you've also been on twitter for a really long time if i'm getting that right um why would you accuse me of that has uh has that helped you at all or i mean do you think it's been an advantage to be on the platform have you gained anything from it oh boy i have a love-hate relationship with twitter i I started an account, I think 2011 or 12 or something, which now that I'm getting old was a long time ago. But I wasn't real active early on. It wasn't that interesting to me. And it wasn't until even in the last couple of years that I actually started to be a little bit more

regular on there. I hate it from a solitude, find some space from the noise, get a healthy mental reset standpoint, like Twitter is the inverse of meditation. However, I'm not sure there's a better networking platform. I mean, just the people that you can meet and kind of get to know, especially if you're willing to meet, well, at least before COVID, if you're willing to sort of meet outside of in the real world and connect with people, it's such a, I mean, it's everything that LinkedIn wished it could be when it comes to networking. But I mean, it carries that huge cost of the noise. And, um, the other problem is, is that like, I'm kind of an idea junkie. Like I love to find like a new big idea and it will serve up just often enough,

some really interesting article or, um, you know, interview or something that really adds in a meaningful way to my, my mental model arsenal that it keeps me coming back. But God, do i have to sort through so much bs to get to that like one nugget and if i wasn't such an addict like i wouldn't be i wouldn't subject myself to that so it's uh i guess it's a really mixed answer but it's i i love it and i i also absolutely hate it how's it or god uh has it ruined your solitude or that uh environment you talk about oh it will if i let it like yeah there have been periods of time where i've i've indulged in more twitter and um i find myself feeling empty after those like there's something kind of gross feeling or it could actually just be like dopamine

withdrawal honestly like at the biochemical level um it raises your blood pressure for sure i mean you gotta i mean you see people you know all caps rocket ships you know a lot of emojis you kind of got to filter through all those to get those golden nuggets that you're talking about. Because I mean, sometimes you find just people, I mean, even anonymous accounts or just written stuff that is just amazing on there that you never find anywhere else. But yeah, I guess we'll hit the wrap-ups. We're going a little bit long, but we ask this to everyone. So we'll just ask it to you as well. What is one financial saying that you disagree with? Maybe it's not so much a financial saying, but I've been thinking a lot lately about labels and identities and the impacts that they

have on us. And even calling myself a value investor, well, what does that really mean? And what does that then mean that I'm not? And what does that close off? And I think it's really dangerous actually to paint yourself with too many identities, too many labels. I think it's like a really a good shortcut to turning your own brain off because your brain wants to try to keep consistency with what you say because it really wants to keep your ego at a certain level right and if it knows that if you go out there and say that you're this and then you're you don't act that way then like it's going to be a hit to your ego because people are going to call you out on it so it's just trying to protect your ego really at the end of the day and if i can not give that

ammunition to my, my brain that like, Hey, uh, all these things are off limits because you are labeled yourself as this. Um, like why tie that hand behind your back if you don't need to. Uh, so I guess it's tough because you also want to be principled, right? Like, and you want to have things that you follow and like, you're not, uh, swayed by every breeze, but I think, uh, you know, keep your principles, but, but keep your identities to a minimum. um do you think uh like stan drunken miller is the biggest example of doing that the best because it seems like he doesn't care about getting stuff wrong it feels like every interview he has he's admitting yeah i put up 30 returns for 30 years but look i got this wrong i got this wrong i got

this wrong i got this wrong and it seems like he does everything under the sun do you think that's kind of if someone's looking for inspiration for that reading some of what he he's talked about right about? Yeah. I think it's really dangerous to pick any one individual to model yourself after even Buffett. Like you're picking, like we have to be respectful of base rates whenever we can. And the chances that you are, that you're going to have that outcome of these very extreme outliers in whatever it is are just, you know, I mean, we just have to recognize that the chances are not that great. Like it's probably not going to work out for us. So let's try to pick base rates and people and or a class of people that we can maybe more more accurately emulate

that have had good outcomes and see if we can get that as opposed to the very very extreme outcome like there's there which they're always going to be good and bad right like you throw it there's enough luck in the universe that there's going to be these really extreme outcomes and to draw too much inference from any one of those i think is kind of a dangerous thing to do right that makes sense okay before i ask the last question this one kind of just came to mind but i'm curious what uh what sort of influence value after hours has had on maybe your philosophy at all has it changed the way you think about investing or not much um the good thing about it is that it's it's been a really nice forcing function for me to keep going and like looking for

interesting tidbits to read more about and bring back to the community and do a little write-up on it and talk about, I don't know, some random thing of how a sperm whale works and why that can help us be better investors. So it's fun to have that like a deliverable every week, like, hey, you better come up with something kind of interesting. Otherwise, people are going to think you're a dummy. But there's also a part of me that is really hesitant to do the show, actually, because I know that I'm going to say something really stupid in hindsight. If you talk that much for once a week, like it's just inevitable. Like something I say is going to be cringy in a big way eventually. And so, I mean, I try to pick topics that are timeless so that

it decreases my chances of that. But it's unavoidable. So, and I also just like, I don't have that many interesting things to say. Like, you know, I don't know if you guys noticed, but I talk the least on the show. And I kind of pick my spots. And a little bit, I'm thankful that the other guys are good at carrying the conversation and kind of let me be a counter puncher. But I'm going to say something really dumb. And it's just like, I don't know, it kind of makes me sad to think that that's unavoidable if I just keep showing up every week. We kind of have that in big way because we do stuff that's obviously less evergreen than yours where we analyze like one or two companies a week and sometimes we'll give hot takes that just come out as probably the dumbest

like a year oh i disagree completely with that a month later you know yeah so it's that's yeah that's the other thing you kind of have to worry about is that that public proclamation commitment consistency bias um anything you say too much publicly can i mean you're you're going to try to live up to it somehow for better or worse. And yeah, I don't know if you noticed, but I also don't really talk individual investment ideas that much. I don't talk about the things I own because I'm worried about that. I don't want it to be, well, that's the hill I'm going to go die on. Just because I talked about it one time in a value after hours. Yeah. Yeah. All right. Last wrap up question here. What is one piece of advice you have for anyone that's considering a career

and investing? Well, I say this a little flip, but like, do you think there might be something more meaningful to do with your life? I'm a little joking, but I mean, really, I think it requires an extreme passion. And I think if you, it will be so psychologically challenging over at some point, no matter what strategy you're running, like you will be tested. And so if you're not really passionate about it, it's hard to do enough work to get through those really dark periods. And I say that as someone who's lived through this last value winter. If I wasn't really believe that I was doing the right thing, I would have been scrubbed out of it by now. And you will be if you'll be tested. And so if you're not passionate about it, then I would say, and if it's just about making money, then I think there's a lot more interesting ways to do that and a lot more value added to society ways to do that than necessarily choosing businesses in a secondary market like is the stock market. Uh, but you know, if you're still, if that still didn't dissuade you, then I would say, um, you know, do everything you can to, to really think for yourself, um, try to fight

that, uh, that institutional inertia, which is really strong in this industry. Um, and, and you could see why, like all the incentives are pushed towards that, like to be wrong by yourself. Contrarian is, is the death sentence, um, to hug the index and collect your management fees is probably the smart way to go from a business standpoint. But then you get to the finish line of life and you go, well, what did I really do that whole time? I didn't really deliver much value to the rest of humanity. So I would just maybe push people to think a little bit deeper and not just chase the money. Okay. Well, that's all the questions we have.

For anyone that wants to see more of your stuff, where can they find you? What are some good resources um well yeah i guess so i have farnham-street.com which is our our investment business um five good questions.co is the the interview series i do with authors that's um been on a little bit of a hiatus because i've been busy with other things but um it's on apple podcast right yeah it's all over the place i mean it just hasn't i haven't put out a new one in a little while um then uh you know value after hours is on a bunch of different wherever podcasts are on youtube uh rebel allocators on amazon if you want um check out the the auto book i thought that turned out pretty good like the i i hired somebody to do the

the the reading of the book so you don't you don't have to listen to this nasally drawing drone on and on so uh it's much better this guy was like a real pro he did a great job with it yeah. And then I guess on Twitter, I'm at Farnam Jake one, if you're interested in that, but I don't know. Don't follow me. Go like do your own stuff. Go, go pick your own adventures. Go do something fun. Yeah. Well, there's plenty, there'll be plenty of veggie segments. That's what we know for sure on value after hours. Right. I'm trying, I try to stay like one or two weeks ahead with like a reserve just in case, like I run into a dry patch, but it's, they're not, there's only one or two in reserve at a time.

Okay. All right. Well, uh, thank you for joining us. Had fun. Thanks guys. Appreciate having me on. Okay. Welcome back in. Thanks again to Jake Taylor for, uh, coming on. Really enjoyed it. Uh, let's get to show notes. There was some big stuff this week, really just one big event, which was the Berkshire annual shareholder meeting. Uh, it was not in person. And they said it might be in person next year. I'm hoping to go.

Yeah, we only have a few chances left. So maybe we don't have any. I don't know. There was some big news that came out of it. Greg Abel will succeed Warren Buffett as the CEO. I'm not sure this was super newsy, but I thought it was hilarious that Charlie let it slip. And Warren was sat there quiet.

I got nervous for him when it happened. I was like, oh shit, oh shit, oh shit. He just did it. And he just goes, Greg will keep up the culture. It was like, it was like, and Warren just sat there quiet for 10 seconds. I would love to be a fly on the wall when they, they met backstage. They said they never, they said they never get into arguments. So maybe this started their first one.

I thought, I thought it might've been the start of the first one. A few quotes, though, that I took from the meeting. I think I got some of these from Trent Griffin, also on Twitter. Charlie said at one point, capitalism is brutal. Think of what's died in my lifetime. Just think of the things that were once prosperous that are now in failure or gone. It's incredible what's happened in terms of the destruction. do you think because this is something we've come across a lot recently as people are sort of valuing some of these companies as if growth will go on forever or that they have these long runways and everyone's going to be able to capture a significant portion of their tab do you think we're going to see sort of this recycle again or do you think the companies that are sort of in the top tier are a little more permanent maybe than 20 years ago because they talked a lot about the companies that were the largest 30 years ago, that kind of thing. Yeah, I'd say, yeah, the,

the night, you know, I did that comparison, the 20, it was the top 20 companies in 1989. My market value were not, none of them were on the top 20 today. I do believe that is the general framework you have to go out with, but two caveats from 1989 to 2021 or no, I don't know what I think might have been doing it to 2019 whatever the time period was a few decades of span there uh 1989 was at the height of the japan bubble that was the biggest bubble in possibly history so that misled some of the numbers of bits and then two from 1989 to 2020 we went through one of the possibly like top five biggest uh technological revolutions in human civilization so which would be the internet revolution and stuff like that and all the stuff that came along with that. So

yes, I think I agree with them to a point that things will grow and die. But the last 30 years are probably one of the most rapid and destructive times. And I guess that could continue. You never know. But I wouldn't look at the past 30 years and think that just because there was so much disruption then doesn't mean there has to be disruption at even that rate over the next 30 years but in general you know they're they're they're right as usual yeah it's always hard to picture like some of the top companies dying but when you think about it i feel like at any period in history you could say the last 30 years were the most revolutionary you could say it was the most uh disruption that's happened yeah you could argue that you know there's a few other

times in history i mean late 1800s maybe early 1900s uh with the automobile revolution and stuff like that. But yes, this time is clearly, I mean, if you're making a top five, you definitely put the last 30 years in there. Okay. Another quote that I had was from Warren. He said, if present zero rates of interest on risk-free US treasuries are appropriate and last, big tech companies are bargains. Big tech has an ability to deliver cash that makes their valuations very cheap. I now that he was asked this, he was asked about the valuations on about how crazy the valuations were on big tech. And he said, uh, we don't think they're that crazy. Yeah. I feel like every quarter I just want to buy big tech and go to sleep for the next decade.

Yeah. I mean, I think you go down to, uh, you go down to Google and Microsoft in my book. i just like i like those two the best but yeah it's just i mean there i guess there was one a little yeah an important point there was that if present rates are appropriate and last i think that's hard to extrapolate that out but some i hear this from all the best investors that these are different than previous big conglomerates that it's yeah it is a little different this time. Yeah, I think that's true to a point. And that's my next topic. So I'll probably just save that for that. Okay. Another Charlie quote. This one was pretty demoralizing. He said, investing is harder now. The millennial generation is going to have a hell of a time

getting rich. Does it feel right? Does he feel correct? As much as it hurts to swallow? Yeah, I kind of think of like the time period, the last 40 years we talk, I think the big bull market is from like 1982 to now is kind of, I mean, there's been, you know, 2008 and 2000 and COVID and stuff like that. But, you know, from 1982, the valuation low to now, I kind of put it in the framework of what Chris Meyer does with his 100 baggers, where to get really good returns, you need multiple expansion and fundamental growth. From 1982 to now, we got huge multiple expansion across the United States stock market, and we went through one of the biggest technological booms, like we mentioned earlier, ever. I mean, that was just fantastic for boomers' portfolios. And now our generation, people in their 20s right now, even early 30s, we're starting to invest. I mean, there's no other way to frame it. we're starting at all-time highs or sorry, not all-time highs in all-time high valuations. Yeah. It's so, I mean, I don't know. It's such a tough, it's tough to conceptualize and it's tough

to digest because we're in the situation where we're the ones that have to invest for the next 40 years and you hate to hear it, but I just, I find it hard not to agree. Yeah. Yeah. especially when it's not even anything sort of macro it's just you know every rock we turn over high valuations are kind of becoming the new normal i hope it's i mean selfishly i hope that changes soon obviously for society uh we don't want a huge downturn but i mean if you look at it from a berkshire hathaway standpoint if they didn't start in 1982 but instead they started or you know they started before that but if they were you know coming into their 80s and 90s for

of their heyday right if it was a huge advantage for them that valuations were so low and you know right in the in the early 80s i mean that's just a gigantic advantage and that's a little bit of luck on their part obviously a lot of it was skilled too but if they're starting now i mean valuations matter maybe 50 times earnings is the new normal in 2030 so you never know uh yeah i Yeah. I mean, do we have to mention that Robin Hood quote too? Our statement today? I mean, that just feels so much like 1999. I don't know. Do you want to? There was so much Charlie and Warren hate coming out of this one that it's never made me feel sort of more pessimistic about general markets because there was so much like,

oh, they're out of touch. They've lost it. They don't understand markets anymore. I've been doing this for two years and I've crushed their percentage returns. It's like, guys, just listen. Just, I don't know. You don't need to have some hard takeaway, especially, yeah. You know what, Vlad Senev? He doesn't like you. No one likes you.

No one likes what Robinhood's done. You don't have to sit and defend it. Yeah, you're a sin stock. I mean, I would just say, one, you know, Berkshire Hathaway will probably, I would make a good prediction that Berkshire Hathaway this year will generate more cash than Robinhood will ever generate in its lifetime. then two i would say that you can disagree with him about like bitcoin and stuff whatever they're old they don't get it um that's fine but i mean they're right that a lot of the markets have been

turned into gambling if you don't think that's true i think you're just kidding yourself so yeah right i mean do you agree with that that stuff i know that that cash flow thing is kind of a joke it just puts into perspective what they've i mean it's basically like these guys It's like a guy at your gym, say, in a pickup game, hits 10 threes in a row randomly, and then he's like, no, yeah, I'm basically Steph Curry. Nothing made me want to get off Twitter more than the post-commentary of the meeting. It was so frustrating. I'm going to go to my last quote here.

It was Warren. He said, we're seeing substantial inflation. We are raising prices. People are raising prices to us. It's being accepted. it. We really do a lot of housing. The cost is up, up, up. Steel costs, just every day they're going up. It's an economy really that's red hot. Now, we keep getting data that says we're not seeing inflation. Have you witnessed any sort of rising prices just in day-to-day life?

Yeah. I'm saying probably not a good anecdote here just because I don't really spend money on anything so except food so i'm not really sure but if i i think it'll hit personal lives and consumers you would guess right like it would be a lag right you know what i mean like okay so they're a business and they're looking to source stuff when they actually start selling to consumers there's probably going to be a lag so maybe this summer uh but who knows but yeah if if If Buffett is saying this, because they basically are in as many industries as possible, so they really got their eye on the ball of what's coming down the line. I'd be very skeptical about CPI this summer if it stays low. Seems like it's got to hit like 3%, 4% at least.

Yeah. All right. I'm just going to leave it at that. You want to talk big tech earnings? Yeah. So last week, all the trillion dollar or at least the companies. I think Facebook's the one that's just below a trillion dollar market cap. They all reported earnings. So it was huge for the market in general. I mean, they make up like 20, 30% of market value and all of them knocked it out of the park. You got to remember a bit when reading these numbers that we were getting to COVID. So some of it was a good comp setup. The comp sales could have been a lot better. And some of them aren't like recurring revenue businesses. For

example, Apple sales were up 54%, but a lot of the times the revenue can be lumpy, but still, I mean, Apple growing revenue at 54% of their scale is amazingly impressive. Amazon did over a hundred billion in sales with AWS growing 32%. Facebook total sales were up 48%. Operating income was up 93%. Microsoft sales were up 19% with operating income up 31%. And then finally, Google sales were up 34% and their operating income doubled. Clearly, I think I'm going to say this now, we've been wrong on the quote, law of large numbers

theory with these companies. The question I have, will we look back at this January, April period? So, you know, the last four months behind us kind of during the, you know, when stocks like Tesla and GME and a lot of these SaaS companies and SPACs kind of went to the moon, are we going to at this time and see this group of stocks fan mag i guess you know don't include netflix but these five trillion dollar companies are we gonna see them as the best risk reward investments 10 years from now what are your thoughts on that yeah i mean for most of these it's hard to just it's hard to like refute the success um and it's always i'm i always get worried that But once I finally, there's going to come a day when I cave and say, all right, this is a great risk reward.

And that's the day that I capitulate and realize that the law of large numbers is real. Yeah, it's so hard to weigh, like admitting you're wrong and, well, maybe I wasn't wrong and I'm just acting really stupid. Yeah, I saw some good tweets about it. They're like, for some reason, people, we are seeing one of the best sort of technological disruptions or cycles ever. and there are clear leaders in it and some of us will rationalize any reason just not to own the companies i think that's me it just yeah most companies are are just incredible now i will say with facebook there's they are trading at the cheapest multiple google might be it's close google's a little higher yeah google's close but i think facebook's going faster and then

you've got but i would say facebook's future is the least certain yes 100 i think the two things to take or go ahead of well just because the personalized ad stuff with ios and they said they're they're they're not sure about their second quarter i mean so yeah yeah well you know yeah we'll see if that's just a temporary thing or it's permanent and i'd also argue that they don't really have the entrenched you know they're not as entrenched with consumers as and while they all, you know, they have almost 3 billion users. Now you could argue they're entrenched, but I just, I think it's a lot easier for consumers to leave their services, uh, could be proven wrong and could continually get proven wrong on that. But I think the big takeaways is we feel like

with fan mag and stuff like that, we've always felt that the instinct is that it's lazy to just invest in these companies and that at their size, it's going to be hard to put up these numbers, but I just really think we were wrong on that for sure. Yeah. I think maybe it was lazy to say it's too big yeah and that's where the opportunity plenty of people were probably thinking the same thing as us yeah all right um is that all you have for them uh i got one more so playing off the you know buffett had that the big company slide uh where 30 years ago the top 20 companies you know weren't the same as they are now it was like companies like ibm exxon mobil stuff like that so playing off of that which of these five stocks do you think has the highest likelihood

of still being in the top five companies by market value in the world a decade from now? If you don't have one yet, I can go first. I would say it's between Apple and Google for me. I'm saying Google. I think second for me would be Microsoft. I think Google's the clear one here. The only potential downside to Google

is that somehow there's some huge mobile or some new like a device shift where they're not the search platform you know what i mean yeah yeah but i guess that's pretty speculative i would say google is a pretty safe bet yeah because they i mean they lock in with android play store search gmail youtube drive i mean it's a lot it's tough to overcome all those uh ancillary services but i'll let you on to your next story what do you have uh apple the the story i have is titled is apple in trouble so last week the eu uh charged apple with anti-competitive behavior uh the eu's competition chief i'm not gonna even try to say her name because i'll probably butcher it uh vestiger

i think that's what it was yeah i've heard it pronounced that's that's all everybody i know it she says that uh apple will be charged because the app store breaks eu law and this is in response to a complaint filed by Spotify two years ago. For anyone that doesn't know, Apple charges a 30% commission on in-app payments, and it also prohibits apps from directing users to sign up elsewhere. So Spotify used to tell its users,

like, you've got to go sign up. I think they did this. You've got to go sign up. They still do this. Yeah, 99% of their subscribers aren't subscribing through the App Store. And so Apple tried to prohibit that. And there are more steps in the process,

So I should say this is sort of like more of a developing problem. But Apple, I believe, is going to appeal it. But if Apple is ultimately found guilty, it will face a fine up to 10% of global revenues. I think there are similar disputes going on in the U.S. right now. We saw sort of the transcript of the dialogue where Match Group, how much money they're sacrificing to the app stores. I guess just where do you stand on this? Do you think Apple's in the wrong? What do you think the commission should be? Yeah. So I'm not as, and this is less an investing mindset and more of just a personal mindset. I'm not as hot about the 30% commissions. While I do think it's not

a great way to treat your stakeholders and your customers, which in this case, or sorry, your partners, Spotify and Match and stuff like that. It's fine. You can charge them that much, but that's just going to open up for competition. Yeah. You can argue that they, they, they own the phone and stuff like that. So you'd probably expect that they're going to make the app store commissions go lower. I mean, you've seen Google go down to 10%, I believe, although that could be wrong. But the thing that I really believe is just a cold set case is the Apple music stuff and the evidence, the clear evidence that Apple, when they're dealing with someone who they compete within services like spotify they make it really difficult for people to sign up for stuff in the

app they make it really difficult for updates and they make it uh there's just a lot of things they do to inhibit them and there's a lot of evidence that spotify has that they've done that historically if you read the spotify play and i'm just speaking spotify here because we know the company so well but the examples can go to many other businesses uh there's plenty of times where apple has used monopoly power through mobile to inhibit them now the commission's thing is whatever but i was reading a thing about andrew carnegie and they had a quote from like the sherman antitrust act and i forget exactly what it said but i was like huh and it was something about how you can't use your power to basically make it it was i can't remember what it's saying but i was like all right

this is exactly what apple is doing with these apps where it's just totally it's just yeah you could you know business isn't fair or whatever but it's totally anti-competitive and bad for consumers because like the app is just worse than it could be yeah i'm i'm probably biased as a spotify and match group shareholder because i'd love to see their operating margins grow but Oh, yeah. As an investor, put them to zero. Let's get going. Right. Yeah. I just, I think Apple's come away like the hero of privacy, but it feels so, I don't know.

They feel like they're really kind of the monster in big tech. Yeah. They just grandstand with stuff like this. I mean, you see them talking about how Apple music charges more or sorry, pays more per stream, but that's just total clickbait because it's not how you should evaluate evaluated i mean a lot okay it just they the revenue is just based off of subscriber pools it has nothing to do with streams streams are just percentages based off of those subscriber pools it's all about total subscribers and ad revenue i mean you know what i mean it doesn't matter it

just shows that spotify is getting more use and apple music doesn't whatever that's a whole that's a whole hole we don't need to go down but yeah all right what's your next story okay uh so upslope Capital. I don't know who runs that. Sorry, if you're listening. I really like your work on Twitter. But they produced a document that they kind of go through to evaluate how they should look at an investment. And this is from someone who has a lot of experience in the industry. So if you're someone that's new or inexperienced like us, this is a great doc to keep handy. If you message me, I can try to find it. But you can find it on Twitter. Maybe we'll put in the show notes i bet we'll forget so don't count on it but i'll go through a few things he said or they

said uh and i you know they're not necessary these are things we don't necessarily do and i'll see what we think about them um no questions on i'm just kind of going to read them off and see what you think uh first one quote learn to say to love saying quote no for now what do you think about that one i i think that's something we do and it's something i agree with i mean we do two deep dives a week we've probably done hundreds and we own how many companies in arch capital yeah 10 12 so i think i think that's something i think maybe sometimes we're too piggy so but uh yeah i guess i do we a lot of times we say the company's good like about 50 of the time because we you know we usually choose companies we think are gonna be good uh like 50 of the time

we're like yeah the company's good but watch list you know yeah i mean it's the whole buffet thing like wait for a fat pitch like sometimes you get a good company the wrong price yeah for sure and that's something that i think a lot of investors go through where you're like oh my god this company is amazing you gotta just temper your expectations we're like well i mean yeah it's trading at 100 times cash flow and yeah i mean that's what you expect for a company that amazing all right next one or go ahead i would also flip that and say if you're sold on it say yes but for now and wait to kind of digest the idea because sometimes you can get too excited and be willing to pay up for stuff you shouldn't yeah yeah i think for me and you may go through a slower

faster process it usually takes about a month you know it might only take me a day to write down the idea but it usually takes me about a month after learning about it to kind of digest everything and think about you know it might just it's not constant thinking about the stock but you of go through periods you're like what about this risk what about that blah blah blah you know yeah all right i'll i'll hit the next one quote good or bad m a ipos spin-offs etc can be a great source for value dislocation what are your thoughts there uh yeah i think that's been going on ever since greenblatt wrote his book i mean before that too uh what's it called you could be a stock market genius that kind of talked a lot about the spin-offs and stuff yeah it's a it's a harder

area to dabble in um and you got to really understand the inner workings of every deal but if you can get an edge in there there's more there's more certainty yeah and because there well yeah that's true and there's a higher i think chance of good returns just because a lot of people are uncertain about these type of things and sometimes there can be expenses that mess up what the true operating margins and unit economics stuff like that are i think two examples are one for a spin-off the paypal spin-off from ebay um that was one of the best investments of all time or sorry has turned over the last five years not of all time and then two i think an example we'll see if it plays out but the m a of or sorry that the merger of callaway and top golf a lot of

people are wary about it but it's interesting to see like how those assets can work together that one's still up in the air but we'll see yeah all right next one uh just because those with an opposing view either bull or bear are defensive that's his words not ours doesn't mean they're wrong yeah uh yeah i guess it is easy to write people off if they're too passionate about something but or if you think they're dumb because they might not be and you might just be done they yeah they could have the proper tech i think evaluating the idea and not the person saying it's the best thing you can do yeah all right i'll move on to the next one quote lay out your estimates in graphical form what do you think about this one we don't we don't

really do that uh no we don't really do it in graphical form but that's a good idea and maybe something to implement uh yeah i'd be curious as to why he prefers that i think it's yeah i don't know it's probably just the visualization aspect to see what the difference because sometimes you see like a number like 99 versus 60 or something you know you're like whatever it's not that big of a deal but in reality it's actually a lot bigger than you think um all right next one quote write a pre-mortem instead of a post-mortem for all your investments so kind of in the risk session right if things are going to go wrong this is what's going to happen what do you think about that yeah yeah i agree with i think all these are good ideas i think that's the best

thing you do is make sure you're certain about the downside to protect against it yeah yeah it's uh and if you write the pre-mortem it gives you something that you can anchor to where you can't just trick yourself into think things are fine when they're actually going bad it's like no no you wrote this down three months ago or a year ago. It's actually going wrong. It forces you to help yourself admit that. All right, last one. And I guess we already kind of covered this earlier. Quote, if you missed a long and it's higher or a short and it's lower, don't automatically write off the idea because you feel dumb. This is a tough one. Yeah, this is one that I do all the time. I think it's probably the hardest one. The hardest sort of bias that I get as a

investor it's so easy to like it's so easy to just check what uh the stock has done um i yeah i feel like every time you end up saying i missed the boat the boat goes a little further yeah something like that yeah it's so tough when something's up like 100 but but it's crazy. It's, it's really tough. Cause yeah, it's hard to do it right now. It seems even harder just cause we're at, you know, peak valuations, 99th percentile right now, but yeah, that's it. You want to move on to your next topic? Yeah. So it's an anecdotal evidence.

I subscribed to the print edition of the wall street journal yesterday. Wow. You're trying to be a boomer and get those 1982 returns. I think I'm just missing the, yeah, I think I'm just missing the valuations of that Beckett. I haven't got it delivered yet because it takes a while for them to get like update the post route or whatever. But I think it'll feel good not to stare at a screen. It was $12 for 12 weeks.

I've got the student discount. So that's pretty easy. Life hack. And I'll keep the listeners posted. Cause this could, this could really change my morning routine. Yeah. You gotta do the,

what are they, what did Buffett used to do? he bribed the postman to give him the the journal the night before you gotta start doing that oh and i don't know if you got into that part of snowball yet but no i think he just uh spoiled spoiled it for me but yeah so you see he used to get him at midnight and then read it at midnight because he's kind of a psychopath for for news but i was thinking of this like i i'm probably gonna have to get your leftovers the next day and it may be time for me to get those you know you see those bloomberg digital subs they're pretty cheap i might have to get that and i also feel

really dumb for subscribing to real vision they convinced me with that joel greenblatt and howard marks interview to subscribe and you can only do it for a year i think now it's just crypto crap yes that's exactly how i describe it crypto crap and chart crimes i'll let you have stuff on there but God, I'll let you have my leftovers, but if there's any good ones, I'm going to frame them. So frame them. What do you mean? Frame them. Oh, sure. Yeah. Yeah. Well, I can give them back to you and you can frame a March, March 23rd. Yeah. I think I'll give it back. Yeah.

You can have it for a $13 for the next 12 weeks. Yeah. Okay. All right. All right. All right. What's your story? Okay. This one should be short. uh call it data versus the narrative not a foolproof study here to be fair so don't think this is like set in stone laws of physics or anything but there was a harvard business school study and this is what they found uh we found that the more a firm responded to complaints on twitter the more likely it was to fall in both value and in perceived brand quality in addition we also found out that when firms responded to complaints publicly on twitter it would often drown out their other tweets leading to lower engagement rates for their

non-complaint related tweets so you know it's kind of weird it falls on the face of what my people might presume is a good for a company you know you got come you know ceos on twitter you got um you know the brands themselves on twitter i guess you know like when you see wendy's responding to those complaints trying to be super hip and funny uh and they're getting deep into a Twitter conversation, people might actually forget about the products that the company is supposed to promote. That's interesting. And I guess customer support is dead. Chivalry is dead. I don't know if they showed an example of like a company that went into conversations, but every time McDonald's gets a complaint, they just

put the customer support link. And that's all I do. Check this link. I bet it's automated. to check this link. And apparently they got a lot more better results because they just did that. I mean, yeah, I guess if you just ignore the angry customers, they don't exist, I think. Or no, I can think of a company that's very good at that. Well, well, I think, yeah, we don't need to talk about that. But what the conundrum you get into is if you try to respond to angry customers, it kind of inflames it where if you don't ignore them, but listen to them and try to improve the product you know what i mean like if you start responding to so many people they're going to people other people are going to realize that there's an issue

at hand yeah it's kind of weird and also if you're spending your time as a company doing this it means you're not that's time not spent focusing on improving your products and services all right what's your uh last story yeah i got one quick one here stripe announced that it's buying tax jar which if you've seen us cover Avalara, this is an Avalara competitor, a little smaller though, might be for different businesses. And if you don't know Stripe is one of the, I guess you don't know Stripe, you probably don't know Addion. How would you describe Stripe? Just plugging in an API to websites and allowing you to take payments, right? Kind of. Increasing the GPV of the internet.

Yeah, yeah. Whatever their fancy schmancy mission is. Honestly, I couldn't tell you exactly what Stripe does, but if I were just guessing from commentary it's the most well-run company in the world yeah and apparently it's trading at like 100 times gross profit in the private market so it must be it it's got to be a good one uh but again this is a short one does this acquisition make sense and do we need a shopify avalera acquisition shop if i would probably buy avalera or definitely would because they're a lot bigger what are your thoughts uh i mean there's synergies for sure but i think shop if i could really come up with something in-house that competes um maybe i guess i don't

know the complications of the industry it's pretty complicated i've kind of researched avalara there's a lot of stuff yeah i don't know i think good for stripe i guess kind of it helps people you know like a small business yeah i don't know the industry well enough but i don't think it's that big of a deal to on the customer's end pay two different service providers that's true it can't be that big of a deal yeah i'm sure you just boost the cost of shopify plus if you added avalara or avalara or whatever yeah i mean it has the integration already so it's basically a merger they should just get you know it's kind of like one of those like get married already kind of deals so the thing is if shopify had brought avalara well it's tough

you can't really bring it in-house you'd lose all of avalara's non-shopify customers but it's weird it's kind of a weird connection where you want to get you want to try to build a competitive advantage with some of these products maybe these tax compliance products but it's kind of tough you don't want to lose all their customers too i don't know don't need to go don't need to go down that rabbit hole that's kind of all i had on that all right well that's gonna do it i don't have any more stories so thank you guys for listening thanks jake taylor for coming on the show i don't know hey check out yes thank you jake taylor and check out the seven investing recs we'll harp on at this show because they just came out with the new ones but seriously

code ccm ten dollars off all right uh thank you guys for listening we are general partners at arch capital uh and other partners may have securities discussed uh positions and securities discussed on this podcast we're not financial advisors anything we say or discuss here on chit chat money is not formal advice or recommendation thank you guys for listening We'll see you next time. Somehow things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride.

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