Chit Chat Stocks - The Science of Hitting & Matt Cochrane: Banks, Big Tech, and CTV

Episode Date: September 29, 2020

This week on Chit Chat Money hosts Ryan Henderson and Brett Schafer have their first 4 way discussion with The Science of Hitting (TSOH) and Matt Cochrane (20:33). Before they get to the interview Ryan and Brett dive into their stories for the week. Brett breaks down the gap in the American e-commerce space (1:53) and Ryan takes on the Joe Rogan Walk-out (5:47). And of course it wouldn't be a Chit Chat Money show without mentioning Elon in this week's Current State of FinTwit (11:30). After the first part of the show we get to discuss the CTV and content space (27:15), where big tech goes from here (42:32), and the disruption of big banks (62:07) with our special guests TSOH & Matt Cochrane. After their interview, as always, Ryan and Brett have their Hot Water (86:40), FMK (92:08), & Anecdotal Evidence (94:23). --- Support this podcast: https://anchor.fm/chit-chat-money/support Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. Today is Tuesday, September 29th. Today we have an interview with The Science of Hitting, or that's his name that he goes by, right? Yes. And then we also have Matt Cochran in on that interview, so it's the four of us. We talk big banks, big tech, connected TV, and a lot of the discussion was like Wells Fargo and Facebook primarily, right? yeah and then comcast versus roku so we're fans of roku as you probably listened to before but the signs of hitting and matt know a lot about comcast and that's a business we hadn't really talked about before and it was pretty interesting to hear about that because cable gets a bad rap and comcast has been doing okay i mean you know for the last decade here it's really interesting because you tend to just like exclude them you tend to like not even look at them because you're

just like the trends are against them but then you have a lot of good businesses with a lot of value that people are just writing off early on because they're facing headwinds or whatever. Definitely. And we talked about that for a while. So it was a great discussion. And then before that, we both have our news stories for the week. What are you talking about? Yeah. So I'm going to be talking about a niche in e-commerce that's big in East Asia. It's called browsing e-commerce, but it has not really grown in the United States or the West. And I think it could over the next few years here. So it could be another thing to watch out for. We're going to talk about that for a few minutes and then you got yours, right?

Yeah, and I've got the Joe Rogan walkout. I'm sure most people kind of know what it is, but we're going to discuss that as well. And then we have current state of FinTwit, and then on the back half, Hot Water, Fuck, Marry, Kill, and Anecdotal Evidence. Let's go. okay welcome in let's kick things off with your story so what do you have okay so this wasn't a news story it's more of a medium article is this guy named vivek go all and i apologize vivek if I'm butchering your name because I don't know what you specifically do. This article just came from someone else, but it was about the browsing e-commerce market. So browsing e-commerce is basically bringing more of the traditional shopping experience online. So the mall used to be a place where people would go and they would go just to shop. But when people shop online, a lot of the

times, at least maybe some people don't do it this way, but a lot of times you think of something you need and then you actually go and look that thing up specifically. Like on Amazon, you search for an item and then they show you a bunch of items related to that but it's not really browsing so pin duo duo has a model that more is browsing e-commerce it has 180 billion dollars in gross market volume or whatever you call it you know the volume gmv that's flowing through their system and is it based in china they have nothing at scale in the west yet which is surprising vivek says that we need more you know discovery fun personalization and then social commerce in the West, which I could agree with, at least in e-commerce. It's so stale online right now.

Pinduoduo sells itself as kind of a combination of Disney and Costco. So they might be different than something that would work in the United States or in Europe. But Vivek also lays out potential companies that could build something similar. He says Facebook, who owns Instagram and Facebook, obviously, and then WhatsApp. And then Pinterest could do something interesting with this. Shopify, Stitch Fix, Wish, and Verishop. I don't know much about Wish or Verishop, but what do you think is this an easy way to bypass amazon or create your own competitive advantage that maybe amazon can't you know even compete with with their size and scale yeah potentially i mean essentially what he's talking about is an experience where your intention is to shop

for a while your intention is to go in there spend some time for something to buy yeah but then get recommendations fed to you based on your preferences or based on data that say you might like this as well and amazon you're really just going there for one thing typically or you're like all right here's the list of stuff i need to buy but you're not you don't want the shopping experience on amazon um and then on the flip side the other ones they're trying to integrate basically these inspiration tools whether it's pinterest or instagram you're not directly going there to shop you're going there sort of because you need to fill time in your day or you're looking for inspiration but it's not necessarily to shop i guess the only place that kind of does this

would potentially be stitch fix or maybe even like some of the online like the shopping the browsing experience might happen for like a lululemon website or so maybe shopify might power that i mean shopify is more the back end in general but maybe lululemon or nike we always say those names there's some other big brands you can do it i feel like the number one combo here would be a combination of stitch fix and instagram kind of just merge those 50 50 that would be i think that would work well but there's nothing specifically that's doing this or even maybe if they're trying it it's it's really small right now maybe it exists but it's fragmented yeah real fragmented you're going to nike's website and you're looking for various different things you're

going to lulu's and you're basically going to brands and shopping that way which is kind of like the mall experience but there should be or there could be something that ties all that together and feeds you either nike or lulu or any different version of your shopping stitch fix they might be able to do that i don't know how well they're succeeding in that right now but i think they have they're on the best path right wouldn't you say of getting to there they're not there exactly but they're kind of close maybe if they've changed things up we'll see over the next few years yeah that might not even be their intention but it looks like they might be the earliest to get there um my story though joe rogan walkout from spotify because people might not know that

he works you know for spotify now so now he is exclusive on spotify is he officially exclusive or is he still on youtube no it's the start of 2021 so it'll be he'll be exclusive on spotify in 2021 but right now he's on spotify he's actually been since i have a well was a spotify shareholder i don't know he's number one show on there still right now even though he's on all the other platforms too okay um so this came through a barstool sports article so they obviously had their own take but the source um was someone else apparently there's preliminary plans of a high profile strike or walkout um and they were shared with digital music news which is basically a news site for the music industry um and there was already prior talks about this because i think

was last week or two weeks ago there was an all-hands meeting at spotify about rumors about censorship um over joe rogan's podcast and spotify employees basically want editorial oversight over the joe rogan experience um which first and foremost there's got there's and people said this on twitter there's got to be a clause in his contract that says you can't do this or i walk or and he gets yeah and he still gets paid yeah it makes sense i mean my gut feeling here i'm no lawyer i don't know any of this stuff you know front and back but my gut feeling is there's no legal claims to do this or do what they're saying they already took out that alex jones content which made sense and it seemed like a decent compromise perhaps or maybe they all agree

like you know alex jones is kind of a psychopath and he tries to spread lies on purpose um he's not like some conspiracy theory guy just smoking weed which is most of his guests yeah so i mean and so this was all the new york-based spotify employees by the way so it is i mean when you talk about this is violating the first amendment kind of thing it is it is the american uh headquarters so right um and they're headquartered in sweden so this isn't even going to be a big part of their office i would think do you feel like this does violate the first amendment in any way no oh you mean like i don't know in what way like them censoring or removing parts of interviews i don't think well it's a it's a private platform so no but i think it would be a

bad idea because he could go somewhere else i they could technically do it because it's their own company they own the platform just like facebook could do it but i just think it would be a bad idea and it's not really gonna help anything i mean it's not helping any like they're not even trying to help out he's not like a politician he's not a public figure you know it's just there i think people overrate the importance of him he's just a uh really really good talker that asks weird questions and dives down you know random rabbit holes with famous people it's kind of fun i mean if you were if you're looking at this as someone that works for spotify first of all i imagine you take some form of stock options yeah you know how valuable he is

you don't have to agree with everything he says i mean most people don't and but at the same time you can easily see the listener statistics and be like yeah this is important that we have him why would i shoot myself in the foot by going out on a strike and according to the article the employees also demanded the ability to add trigger warnings corrections and references to fact check articles on topics discussed by rogan in the course of his multi-hour discussions yeah i mean that's just that's waste that's just laughable that's just laughable right there i mean i'm not i'm not even not even politically like it's just it's just laughable in general that they think they can do that it just doesn't make sense to me people aren't listening to this like like and and i am

i'm defending joe rogan but i'm not a joe rogan fan i don't like his podcast that much i mean there's good interviews all the time but i don't i don't really enjoy it i don't take what he says as truth if people did every single person would eat bison burgers and go into cryotherapy every morning yeah he's a comedian yeah he's a comedian he was signed up because he gets listeners it's like howard stern back in the day spotify employees should probably listen to uh what he did and he was the biggest name in digital or not digital i keep saying digital satellite radio uh and it's very very similar he said things that people probably wouldn't disagree with um last question though you had written down here spotify bull thesis if he goes i would say does it worry you

at all like if he it would worry me it wouldn't ruin it as a spotify bull thesis but it would worry me a lot because he was a huge grab for them yeah this is actually one of the most concerning things i've seen come out for spotify because here's okay yes he is a huge grab for them it's a giant asset for spotify drive maus yeah even if say i mean because danielek i don't think would say all right yeah we're gonna take down his videos and risk losing him they'd he'd rather just hire 20 new developers or however many people are at the headquarters i hope i yeah like i hope this stuff is totally overblown because it is something that is clickbaity so hopefully just you know all the websites are like you know we should do something on this because

we'll get a hundred thousand clicks something like that you know yeah i mean it it's also concerning because if he feels like he isn't wanted there i'm sure there's also some way he can opt out yeah true you know and so it just doesn't sound like it's a very good relationship between him and spotify as well yeah uh maybe it's overblown i i bet it's okay like i would hope that the executives or whoever's you know you know what i mean like i hope he's just like hey you're hearing this news but we're chill kind of deal and i'm following this closely it seems like it wouldn't be a big deal but i'm following it very closely as a spotify bull um that yeah it's it's super important and i hope they don't botch it um current state of fin twit

what do you have okay i got three things first up is something i tweeted uh that got a lot of discussions so i thought i'd share with you and on the show here i have an idea for google to return value to their shareholders five steps first one sell anything that isn't search or map so this would be waymo youtube other bets all the stuff that hemorrhages money um i know youtube makes money but that would raise upwards of 250 billion dollars tons of cash probably more maybe closer to 400 billion especially in this market uh then you would fire 80 of the workforce because search um i don't even know why they have any employees there you could get 60 plus free cash flow margins that way and then you can lever up like apple does with a bunch of 20 40 bonds

that yield like two percent because it's just ridiculous what the interest rates you can get right now on those long-term bonds and then you could buy back 80 of your outstanding shares over the next decade probably return 10x to shareholders who says no here uh probably everyone at google but true it's a nice fantasy to imagine as a google non-shareholder but it's just not going to happen i don't see that as any possibility we also i think discuss that on the interview as well so why don't we shoot to your next one okay uh this is from joe joe weisenthal um there's always those charts around that show stuff getting more expensive and less expensive um he tweeted that you know there's charts out there that a lot of people you know share um they don't even check

the sources they actually show that inflation for wage growth is growing virtually faster than every other category so food cars etc um consumer staples televisions electronics are all actually in a deflationary environment and there's actually a really interesting book called the price of tomorrow by jeff booth that show that talks about how a lot of things we do now um are deflationary which basically means that you know computers are a lot more powerful and they're cheaper so it costs less there's a few things that obviously cost more health care and education does this like i don't know it seems like the main thing here is that a lot of things are more expensive a lot of things are getting inflated away but when you actually look at the numbers it doesn't seem that

bad right yeah i mean i can't remember the last maybe i don't notice it but i don't go to the grocery store and get all the same stuff and go like wow that was way more expensive ever like it tends to be a similar price um but also a lot of this stuff is like goods that are getting more competitive so hardware tvs stuff like that i mean it's more and more competitive they're driving down the price that way benefits of capitalism right yeah i'm but think about like finite goods real estate stuff like that that's going to go up maybe maybe for sure but yeah i do think that it's overblown i think the fear of inflation is huge like anytime you're like well the fed printed money and they're like yeah well you know we're gonna have to pay for that or everyone's gonna

be everything's gonna come back to inflation and it's like i haven't noticed as as a consumer i haven't noticed well and the thing is i think a lot of people grew up when inflation was a giant problem so that's kind of how they view the world and the thing is currently maybe that's not an issue but it was when they grew up so that's kind of how people have set their uh worldview especially if you're like over 40 yeah all right all right last one this one's a funny one okay so there's a guy um i'll just say his name because he's verified it at vc his name's jake chapman uh he had a very interesting tweet i want to see your reaction to this one he said my robinhood portfolio is up 300 in the last year why am i in early stage venture again oh yeah because i want

to help create and shape the future my daughter lives in what's the cringe rating on that i think 10 out of 10 was that sarcasm no he's serious i think he's a vc and he has a robin hood account well i mean yeah he's just personal when you know my robin hood's up 300 he's bragging that i thought this was i thought he was making fun of people i hope he was i thought he was making fun of people maybe i i is he like the guy vcs congratulating themselves no tweets is that the kind of yeah that's the kind of account i don't know he's his his twitter handle is at vc so there is the things vc say i'm so glad that account was made because some of the stuff it's hard to decipher whether they're joking or not i mean yeah all right um what do you think

what's the cringe rating 10 out of 10 oh yeah it's up there because i thought it was one of the worst ever okay um current state of fin twit for me i know we're trying to talk less about tesla in general but it's a show once a show is good i thought it'd be worth mentioning um a tweet from this weekend so musk mentioned in a tweet that they were having some trouble with logistics someone asked how can we help and he responded and said totally up to you but if you head to a tesla delivery center near you and maybe help out new owners that would be cool and make sure to bring an e-pad okay hold on hold on what help them with what a like i know get acclimated to the car you just bring your shareholder bring your semi-truck warrior yeah um and then on the other

on the flip side who spends their weekends volunteering for like the what is he fifth richest person in the world people in cults do that that is literally like if i went to a street corner and held up a sign that said use the cash app as much as you can like it's not going to do anything i don't care you know yeah it's it's another it's cringy it's cringe yeah it's bad it's so bad um and it's a cult and there's nothing else to say okay second tweet um i saw this i'm forgetting who tweeted it but um it was days with two percent drops and then it did the years and how many days so in 2004 there was zero 2005 there was zero 2006 there was zero 2008 there was 41 2009 28 wow this year so far 24 if i'm getting right that's up there was 2004 through

2007 the easiest time to invest ever apparently i was like eight years old but yeah imagine three years where the market never drops more than two percent that's amazing that's actually amazing i guess i guess it's a bubble but yeah well it wasn't even a bubble specifically in the market because pe ratios weren't even that bad but it was the real estate that kick-started it because everyone was having liquidity issues um it's strange that things were happening that well and it was a great time to be a value investor a lot of the times like deep value guys value factor investors do well in more volatile times at least i think um i could be wrong stats might show it's different but at least i think i read that before so that's strange kind of a

contradictory uh it's not what you think would have been right yeah it's just strange to think of a year without any two percent drops like that happens feels like every other day memories um okay that's gonna do it for our first half we have our interview coming up with tsoh signs of hitting and matt cochran what were your highlights highlight was probably the facebook discussion so i have some bearish uh concerns i'm never gonna short facebook but i just have concerns i don't know if it's going to be that good of an investment over the next few years here and you guys were all three you i think disagree but it was a good discussion we had some nice debates on the merits of some of the stuff going on there and i really can't make up my mind on facebook so i mean i

don't know it was just good i thought the i thought the fascinating part was like the wells fargo and the comcast discussions because you just think they're dying and then the operational okay wills fargo's had some trouble but the operational sides of the business whether it's deposits or operating income for comcast subscribers tend to do well yeah and people just overlook it and they think fintech or smart tvs are taking over and it's not going to happen overnight at least if they are taking over it's not going to happen in a day or a year or even a decade yeah there might be a floor too which creates a lot of value okay um hope you enjoy the interview here you go all right today we are welcomed by now third time guest matt cochran um he's a lead advisor

at seven investing and we're also welcomed by a new guest alex at science of hitting if you i'm sure you know him by his twitter name the science of hitting he writes for guru focus and he has the science of hitting podcast am i getting all that right alex yep that's pretty much all of it Okay, so welcome to the show, guys. Thanks for joining us. Thank you for having us. Yeah, thank you. Yep, and all right, we're going to start out with Alex. Since we already know Matt, if you want to know about his background more, we talked about that in the first episode that we did with him, but Alex, we kind of want to get an introduction. So first off, your strategy on your Twitter handle says you follow a patient strategy followed by pretty aggressive conduct. Can you explain that a little further?

yeah so i'd say at at a high level my portfolio construction is you know i run a pretty concentrated book and i essentially look to maybe make a handful of decisions a year um so to give you some numbers i currently have 23 holdings in my portfolio but it's pretty top heavy with 40 in the top three and uh 60 in the top five wow in the bottom the bottom 10 are only 10 so So they're kind of, you know, I kind of view them more as starter positions, something that I just want to track more closely, essentially. Obviously, that design leads to, you know, the results in my portfolio are obviously driven by those three to five companies, which is by design. And I also tend to hold companies for a long time. So the largest positions I have are Microsoft and Berkshire, and I've owned both of them since 2011.

So, you know, at a high level, what I'm trying to do is find a handful of companies as well as managers that I want to partner with for the long term. And then I make meaningful bets when I think I get a good chance to do so. Right. That sounds like a pretty sound strategy. It's worked for a lot of people. And it sounds similar to the Berkshire strategy itself or the Buffett and Munger strategy. I see you tweeting and talking about them a lot. I love seeing the quotes fly along my Twitter timeline. It's always nice to read a good, like a 1988 Buffett quote that I know you're reading about. So you're big fans of them, obviously. What do you think we can learn about them specifically for investing in 2020 and beyond?

That's funny. As a little side note, I imagine some people reading my tweets are like, what does this guy actually do all day? Like he's sending random Bergster quotes and there's these random charts with Nike and other stuff. Like his mind is obviously very scatterbrained as well, which is accurate. it. We like it, though. So it's great. Nice. Okay, cool. Yeah, I mean, there's a lot of things, obviously, I've learned from them over time. And, you know, the quote you mentioned before,

patience followed by aggressive conduct, which is something Charlie Munger once said, you know, I think that's a big part of how I think about investing. And it's just an idea that clicks with me. And I think of another story Munger told once, and he said this at USC Business School in 94, when he did a talk there, Lessons of Elementary Worldly Wisdom, It's kind of a well-known speech. And he talks about how he ate dinner with the president of Santa Anita, which is a horse track. And, you know, the guy basically told him that there's only a handful of bettors who have actually made money after accounting for the handle, which is, you know, the tracks cut of what people bet. And he said the one thing that all these people had in common, their secret to success, was that they bet very seldomly.

And, you know, obviously, they bet on rare occasion. And when they did, they bet pretty big. so he concluded that story with this probably one of my favorite quotes in investing which is it's not given to human beings to have such talent that they can just know everything about everything at all times but it is given to human beings who work hard at it who look and sift the world for a mispriced bet that they occasionally find one and i and i really think that quote captures what i'm personally trying to do and you know i'm sifting through industries and obviously the companies within those industries obviously in industries i think i can understand and i'm

looking as, you know, businesses change, and the stories around them change, and their prices change. And I'm just trying to find situations where every once in a while I can do something that is, you know, intelligent, obviously, hopefully makes me some money. You know, one of the other things I've learned from Buffett and Munger that I think is instructive, I've been going through the late 90s and early 2000s shareholder meetings lately. And I, one thing I find interesting about them is how comfortable they were with going through the late 90s. And obviously it was a period of years so it's easy you know to kind of think it just kind of flew by but it was a relatively long period of time where you know they felt somewhat out of step with what

was going on and in all those meetings as they're asked similar questions year after year I never had any sense that they were angry or annoyed or anything like that there they've always seemed very comfortable even even being greedy and trying to you know play catch up other people who were getting ahead in certain senses they always seemed very comfortable with what they were doing and they understood what they were good at and they didn't fret about the idea of other people making money doing other things. So I think that's something that's also very instructive and definitely applies to today as well. Yeah. I mean, even the best investors, I think Stanley Drunkenmiller said that he, you resisted the dot-com bubble up until March of

2000. And then even him, one of the best investors probably of all time capitulated and started buying those tech stocks right into the uh huge sell-off so that's pretty hard yeah alex do you think you have um a niche or a focus in the markets sort of an industry that you like specifically you know there's certain i could start by saying the inverse which is definitely areas that i do not feel comfortable investing in right um you know stuff like health care a lot of tech for me is just difficult to get my arms around granted part of that's the price um energy there's certain places where i just don't feel i really have any sense to say what it's going to look like in five or ten years and as importantly who's going to be a winner and why so there's definitely areas like

that for me you know some of the areas where i feel kind of comfortable or where i think i understand the competitive dynamics and who has a good shot at being a winner five or ten years now would be you know retail specifically grocery and dollar stores that type of business and you know all these would be something like that and it's kind of discount retail it's different than what someone like amazon is serving in my eyes uh and then another industry would probably be media to a certain extent but uh even that one can definitely get a little tricky for me so i have plenty of blind spots and hopefully i can uh identify them relatively well it's kept me out of trouble for the most part so far. And another area that you've written about before

is sort of the TV or the, you've written about Comcast. So we want to talk about CTV. Cord cutting has kind of been a big theme over the last decade. And I'm curious how you see incumbents fighting back because a lot of people see it as Comcast and sort of the legacy providers are getting kicked out of the market by the amazon tvs the apple tvs the roku do you see comcast being able to push back at all yeah comcast is an interesting example example because of the businesses that they're in so i'd say you know in cable communications which is where they have you know they sell their pay tv service along with selling internet services connectivity they really pivoted the strategy and focused on connectivity so selling internet to residential

and you know business customers so that's that business has grown pretty significantly over the last five years during a period where you know their video business is basically flat as they lost subscribers but uh you know higher prices pass through um i think that as that happens and we've seen this happen it leads to higher margins and it leads to lower capital intensity which leads to you know double digit cash flow growth in the segment essentially so and at the same time I think the results they've shown in the last couple of quarters clearly indicate that the idea that they need double or triple play that you're selling multiple services to customers. I don't,

I don't think that that necessarily needs to be done in order to keep churn low. So that, that idea has kind of gone away. So long story short, I just don't think cord cutting is really a risk for their core cable communications business anymore. Now on NBCU, NBCU, it definitely is a more direct issue. With that said, I would say, you know, cable networks and broadcast TV within NBCU did about $6 billion in EBITDA last year. So it counted about 20% of Comcast's total EBITDA for the year. and also note that that six billion dollar number was about 40 percent higher than what those two divisions had generated five years earlier so you know they're still trending in the right direction for now but obviously there's concerns about where they'll be going down the road

you know I think this is leading to some experimentation and some new ideas from Comcast or from NBCU specifically most notable example is Peacock which you know they're moving a lot of their marquee properties, whether it's the office or sports rights like the EPL, they're clearly trying to drive usage. At the same time, they're pulling some of those properties from a place like NBC Sports. As I think about the next couple of years, as entertainment programming continues to shift to SVOD, stuff like Netflix, and now they're taking

their marquee sports rights and moving those off of linear TV as well, I just wonder what that's going to do for their ability to negotiate rate increases as they talk to MVPDs. So, and I also don't know how effective the Peacock strategy is going to be, you know, something like Disney plus is Disney as well. It's much clearer to me why that's going to work. Peacock certainly has certain advantages, but it's less clear to me that they have the programming and really the

technical chops as well to be a successful product. And they're kind of tied to some of their legacy views on the world. which in terms of putting advertising in the product, I just don't think it's a very intelligent idea. I think they're looking backwards a bit. So I'm not sold on Peacock. That said, I think, you know, Comcast can clearly still work well,

even if NBCU or those segments within NBCU do not work out very well. But I think in total, the pay TV bundle is still going to exist for a decent amount of time. And there'll be tens of millions of subs. And the only way that could really change if something dramatic happens with sports rights,

which even if that happened, that would still probably take, you know, five or 10 years to really play out. So I think it's a manageable issue, but yeah, there's problems there. I was going to ask, do you think Peacock, and Peacock and Roku just signed a deal like the other week, right?

Did that just go through? Yeah. Okay. Yeah, Comcast and Peacock, who knows what the deal actually was, but. Right, right. Do you think that Peacock will ever be like a needle mover for comcast or is it basically trivial like comcast could do well regardless

of peacock success yeah i think it's more the second one i i think you know the franchises that they have which which certainly are not on par with someone like disney if peacock doesn't work out i think they still have avenues to basically sell you know or license their content to a certain degree but it is it is a difficult thing i mean yeah you have these you know negotiations with the rokus of the world you know and then you think about you know companies like apple getting more and more involved in a lot of these spaces like video um yeah i can see peacock having a bit of an issue in terms of securing distribution at least at a price that they deem reasonable um i i like my disney ownership much better in that regard because that's a

that's a harder product to just say you're not going to have on your service so yeah we should probably bring matt back into the discussion here now no worries i'm learning as much as you guys yeah do you have any thoughts on the comcast at all um like honestly it's not a business uh i'm too familiar with alex how much like of a as a percentage of the revenue how much does nbc generate as opposed to their like uh like the services they provide when you say nbc do you mean specifically the the broadcast network all of it like uh nbc what peacock will be expected to contribute universal like including nbc theme parks all that stuff i don't know i don't know number off the top of my head. I think in terms of profitability, it's about 25%, I want to say.

Now granted, they've included Sky now too. So that's kind of throwing the numbers out of whack a little bit. But I mean, that is part of the thing with NBC. It's made, I think over the past 10 years, it's generated about $40 billion in EBIT. And they certainly got a good deal in terms of buying an asset from GE at a time that was probably not ideal to sell. So it's been a good deal in that regard in my mind and they still have the theme park today and the studio business which are both you know they're pretty good assets but yeah they're dealing with an issue here in terms of cable and broadcast and what exactly it's going to become sure and then um i guess this question can go out to both you guys but who do you see having and you kind of

touched on it alex uh who do you see having more leverage in sort of these negotiations the content providers like the netflix's or the peacocks of the world or the platforms themselves because we've seen these disputes play out a few times now and by platforms i'm talking about the roku's the fire tvs that kind of thing matt you want to go first sure uh yeah sorry uh you know i kind of think like i think there's different tiers to all this right so like for top quality content like i think this battle goes to like top quality content providers first so if you're a platform you just can't afford to be lacking must-see tv on your platform because the minute i have to go to like another platform to watch something i want to watch then your platform

becomes like expendable to to me so if something beats you to the punch to offer all of it like i'm dropping you know the other platform now that but it really matters how good the content is like because if you're pluto tv you know i don't think you have any leverage because you know the top draws on your platform are like journey to the center of the earth and hellraiser 2 uh but for top tier top tier content you know i think they have the most leverage so if i really want to watch a show and so like in my house mandalorian season two will be you know i mean i have several kids like that's that's most watched tv so you know i'm gonna get whatever i need to be able to watch that now eventually i think we're gonna kind of see this settle down and i think you're

see a more symbiotic relationship between like the platforms like Roku say and content providers you know I think it'll become a more established playing field like we see with the cable bundle today um you know like I still have the bundle I haven't cut the cord and when Comcast gets my $60 each month you know a disproportionate amount goes to ESPN than like say the travel channel so I think we're going to see eventually like that kind of breakdown in the over the top platform era um where certain content providers get sweeter deals than others and i'm sure that's already happening uh and deservedly so um like exactly like how sweet those deals are and exactly like what some content apps belong in is probably what's being worked out right now but like you

know i think peacock like for instance they probably see themselves as a top tier content app and roku probably uh wanted them to see themselves as a pluto tv afterthought and in reality peacock is like probably somewhere in between but i i just think these things will eventually work themselves out we're still in such an early inning you know for this kind of distribution era right and what are the top content ones is it just netflix hbo and then disney plus would those be the big three or does anyone else have any power maybe amazon prime i don't know right alex what do you think that's what i would that those are the four that came to me and you know these pluto tvs and other stuff it's it's it's hard to really know exactly

how what they're doing in my eyes the companies will certainly give you numbers that sound interesting but i have some doubts of that about that to say the least um so yeah it's hard to say i think you know and a lot of but that's also true as you said matt this is similar to what we saw we have seen in pay tv for decades and there's always been a certain tier of you know there's been the disneys with you know broadcast network obviously and espn that were must have channels and you know you had the 21st century foxes of the world that had fox news and a broadcast network and other channels that were must have but then you had the discoveries in the biocoms that were a little bit different and obviously those you know their positions are certainly changing as

their certain channels are overexposed and stuff like entertainment programming but even in the pay tv world we haven't seen too much in terms of blackouts it's kind of interesting you've seen more of like what we just saw with peacock and roku where it's a day and then they find a way to make it work so i think i think the reality is it probably looks more looks similar to what we've seen in pay tv which these both parties realize that coming together and finding some way to negotiate a deal is is the best way to go and i saw that so you said the big four there none of them have advertising from what i know of of those big four popular ones and on linear tv i think an estimate was that there was 150 billion dollars in spend globally does that it seems like

there's a giant disconnect and there's going to be a lot of more dominoes that need to fall is a bunch of the advertising going to go over to the roku's amazon fire tvs do you guys have any thoughts on that uh yeah i would say yes like eventually right uh i i think uh and i i think you're going to see social media eat up more advertising too like as far as advertising revenue i i think yeah i think uh it'll slowly but surely be leaving the the bundled cable yeah i do i guess either one of you or alex do you have an answer to that sorry yeah i think the only thing i'd add on that is you know for entertainment programming ads were there because the companies that you know basically ran pay tv they could make that

work netflix has blown up that model it's it's just such a better product there's no question about that so i think that's basically dead or dying um sports and news are a little more interesting to me because i guess you can make an argument news doesn't need to have ad time but sports needs you know breaks in between innings it needs half time there's a natural spot for ads so I'm still not entirely clear on what exactly moving you know sports to Amazon Prime or you know Twitch or something like that or even a Netflix and Reed Hastings but very clear about this is part of the reason why they really don't have an interest in sports is the nature of the product so I think that ad time will most likely as long as the audience's whole will you know

become more and more valuable but yeah I'd say in general you're going to see ad spend obviously moved to you know the online platforms and to uh the roku's of the world do you guys think that a ott provider or one of the content providers can successfully launch without being on these new platforms like roku and fire tv and i'll let mac go first with this one uh sure i um like off the top of my head i'd say maybe hbo max is interesting uh just because i i don't think they have quite as wide appeal as say a disney plus or netflix but for fans of those hbo shows i think they're very into them and for people who can afford to spend a little bit more for quality content uh they are a top tier content provider but because of that viewers are going to seek out like hbo max's

content no matter what like if you want to watch like if they come out with a game of thrones spinoff or whatever they come out with next and it's a must-see tv there's people that are going to seek that out no matter what like it doesn't matter if they're not on roku or whatever but i don't think i don't i could be wrong but i don't think hbo max will ever have the subscribers say netflix does either so i just think they're maybe not quite as as wide but like the fans they do have are are very into that content and they can usually generally afford to spend a little more so i think maybe hbo max would be the only one but like i think generally speaking uh you know if you're one of these content apps you kind of want to be everywhere that's just off the top of

my head yeah i would i would definitely agree that you want to be everywhere i think it's it's going to be a tough go without distribution on the major platforms and obviously roku is the major platform as far as i know so you know it makes your life very difficult it's almost the equivalent of not being in you know google play app store and apple's ios app store i mean And it's difficult to think how you get by doing that. As I said before, though, I think both parties come together. Roku realizes that part of keeping their dominant position is ensuring that they have the widest variety of apps that people want to watch. And they're hurting themselves when they do not have apps that people want.

So it goes both ways. It even feels like someone's getting hit disproportionately in the here and now. So I think both parties definitely have an incentive to come together and make deals. Yeah, I agree with that. All right. We're going to go to our second topic here, and that's big tech. We're kind of beating a dead horse, but it's always fun to talk about. And Matt and I had a decent discussion, I think, where we kind of disagree on whether we should own big tech or not if you're an individual investor. So Matt, we're going to start with you. You came across fairly

bullish on some of the big tech names on Twitter. Can you explain maybe why you like them as a whole? or if you just want to talk about some individual names you like within there go ahead as well um we can do either or i say generally speaking big tech and when i say that i'll include amazon alphabet facebook and microsoft i'm not terribly uh like a i'm kind of neutral on apple and i'm not a fan of netflix which i don't know they're not really big tech but they always get thrown in with fang so i just want to clarify like i'm not including netflix but like those companies they're all they're all growing the top line by robust double digits uh uh generally speaking great operating margins very profitable and you know you can argue the valuations are stretched

but compared to the rest of the market i actually think they're kind of at least within the ballpark of being reasonable um yeah compared to some of the other software right for sure right uh so yes they have huge market caps but i think the opportunities ahead of them are bigger and growing uh so i don't think they're done being played out um but we can talk about individual names too so but like i just say that's like a broad overview of what i would say is like what i'm generally attracted to when we talk about big tech yeah i guess so two of the ones i'm concerned with would i mean i guess i'm not bearish on them but i guess i have concerns about whether i would ever own them would be facebook because i do think that i mean it hasn't happened yet but i do think

the network effects can work both ways and that if facebook is dying as a service for anyone under age of 40 it'll eventually go away altogether and that instagram will have some problems like facebook will eventually if they're using the same algorithms that really kind of make people clash that could be a concern i think libra is going to be a total flop and i think vr uh is not as meaningful as people think but you could also say well they're still going to print 15 billion in cash flow every year whatever the number is um if they keep those users up yeah you on facebook matt or no i do it's very large position for me go ahead you start all right uh yeah but i definitely want to hear what you say too um like i would just say

like we can talk about their mistakes and missteps all day we can talk about the headlines and all the fud um we can talk about like the the fines they paid and i am sure the fines they will be paying well into the future but at the end of the day like their their daily active users and monthly active users like they've held steady uh you know where in north america and they're over everywhere else they're they're growing uh they have billions of dollars of cash on the balance sheet um so there's plenty of cash to pay off those future fines and um you know several new media uh new social media platforms have like risen and fallen in popularity since facebook entered the global consciousness google plus pinterest snapchat tiktok twitter um i'm sure there's others but

none have stemmed facebook's growth or user engagement in any meaningful way so i'm not trying to suggest facebook is immune to competition uh but like when people and i'm not saying you do this brett but like sometimes people say it's like myspace where uh like you know um well myspace was very popular and then it went away but that's like to such grossly underestimate facebook scale you know at its 2008 peak uh myspace had basically 76 million monthly active users uh which is about like two and a half percent of facebook's total monthly active people you know and that's like they they added that many uh uh people in their first quarter alone um you know So I think e-commerce will be, can move the needle for them.

I don't know if it will. Like, I don't know if any of these things will, but I think e-commerce could. I think, probably not Libra, but I think WhatsApp or Messenger as a way to move payments could in some geographies. And I think Oculus, I think we're still early innings now. You know, they just came out with Quest 2. You know, it's cheaper than the previous versions of Oculus. and uh you know it's such early innings there like i don't want to cut out any of those or i wouldn't count out any of those uh options as future revenue streams

so i i guess that's how like i'd break down facebook what about you alex yeah i'm long as well so i'll uh i'll reiterate all those points and i think they're all fair i think my pushbacks is along the things that worry me are you know to to your point on you know instagram was obviously an incredibly important deal in hindsight and if they had not done that deal it's a little scary to think about where the business would be today it'd still be fine in a lot of ways obviously but there'd be concerns now granted that said part of instagram success was surely due to being part of facebook so i don't know i don't know how to separate that out those two points but um i think that's certainly relevant and obviously you've seen the rise of tiktok which is you know built

up a massive user base in a very short period of time so i think there's some truth to the idea that there could be something that comes along that maybe doesn't replace Facebook, but it might be, you know, something that takes users time. In addition to that, Facebook does have a fantastic balance sheet. My concern is that I don't think they have any clue of what they're actually going to do with that balance sheet. And I'm increasingly of the view that, and have been of this view, granted, they did the geo deal in India for, I think it was 6 billion.

So that was a meaningful, I think it was 10 or maybe six, but, well, so it was a decent amount of money. Um, that said, I think they will continue to run into regulatory issues. They try to do anything close to their core business, you know, in the United States or in Europe, which, and they also don't really show any willingness to repurchase shares or, you know, they've never talked about a dividend or anything like that, which is fine. They can sit there with a very strong balance sheet.

I just think it's somewhat flawed to look at 50 billion and go, okay, when I value this business, I'm adding 50 billion. in that cash. I think it's going to sit there for five, 10 years, you know, some large number, and it's just never going to get utilized. And in Mark Zuckerberg's defense, he has plenty to worry about besides how to spend that $50 billion. He needs to keep employees happy. He's dealing with a bunch of issues in Washington. He's worried about competitors, et cetera. So I don't fault him too much actually for what I view as pretty inadequate capital allocation. And he's built fantastic business but i i just don't know what they're going to do there and you know to matt's

point maybe maybe some of these other things whether it's arvr e-commerce etc maybe one of those becomes a huge business and maybe you're getting the optionality for a reasonable price they're free depending how you value the you know the main platforms but it seems like oh go ahead for me it's it's a business i enjoy owning at the right price but it's also something that i there's a price where i'd personally sell it right right um one last question on facebook and maybe ryan has one too are you guys concerned at all that they probably are going to be blocked from making any more acquisitions i think that's definitely the biggest risk like with facebook not just acquisitions but just like the regulatory overhang right i think like if uh i was reading a

book by walter isaacson isaacson uh the innovators which is basically like the history of computers and like in the 1950s and 60s the bell labs just how much they dominated like technology and the stuff they were producing and they couldn't use so much of it because they were already like under the micro under the microscope for uh monopoly worries and i i think you have the same worries here with facebook like even if they have a great tech that they could introduce they might not be allowed to use it and yes acquisitions that definitely falls under that um i think that's why you'll see more stuff like them investing in geo like they did in india um i think that might be where their greatest opportunities are but yeah that's definitely

what to me 100 is the primary concern yeah i'd agree with that completely it has to be outside of the scope of american and european regulators for them to do anything of size in my opinion and really anything that is close to their core business they can i think there's almost no chance they get even a billion dollar instagram type deal done today and you know as ben thompson has written about and he's who i go to to make sure i have any clue what i'm talking about I don't think they should be allowed to do that deal again as, as a shareholder. I don't think that's, that's right. A lot of ways. So something great. I'm staying up from today.

And I want the deal happening. Right. Right. Something else that, and I don't want to leave bread. I don't want to leave you feeling isolated on the, go ahead. It's okay. Like for investors, a lot of us are concerned about the moral sort of hazards behind Facebook, but I'm, I'm kind of convinced that the users don't care. Like,

I feel like the investors think about it a lot more than the users do because for like, it's been a concern for three, four years and users continue to climb. So I'm curious if like are worrying about the moral part doesn't really matter in the long run, but I mean, the user data speaks for itself. People, no matter what they say in polls, which I know this is a big deal. I don't know how long ago that was now, maybe two years ago, people said they were going to boycott the service. And as Matt noted, the numbers have been basically as strong as they've ever been.

Personally, I think management gets the short end of the stick on this in a big way. I think they've been very transparent about the issues they're dealing with. They are doing the best job they can. You know, margins in this business went from, I think they peaked at 50%. they've guided to 35 a large percentage of that is paying for safety and security in the platform and those are not small numbers those are billions of dollars a year um so you know they're putting their money where their mouth is and you know going back to ben thompson today he wrote about facebook and this article that came out and said you know basically zuck seems very thoughtful and

far more aware about the big picture than his employees and i'd add to that uh the politicians and people in the media as well i i don't don't don't think they get a fair uh a shake a lot of times and i can understand from people in the media because they are certainly biased in their own ways about what facebook has or the internet generally has done to their business so but i don't have any any qualms with facebook as a you know morally yeah as far as like the value prop for advertisers there was like a global ad boycott and the bottom line didn't flinch at all so it's like you have to come back to facebook eventually and like people are just the inkling to advertise there like they're so good at what they do it's hard not to be on that platform

but um or matt do you have something to say about that i would just say like like so personally i shut off my facebook account like in 2012 and i've never regretted that decision uh but like one yeah i mean you know you can tell people not to smoke but but they will or you can tell people not to eat cake and drink soda but they will you know so as far as like people i i don't think a lot of people do you know a lot of people just don't care and i would also say man they have made a lot of mistakes but i do i agree with alex like i i think uh i think zuck is is doing he's trying to do a good job i'm just kind of unprecedented problem to have the scale uh you know an alphabet too like i mean the scale has it's just enormous it's so hard to

grasp around i think they're both doing a decent job of at least trying and i don't think they get a fair shake of that and i think they would do a better job than like if like government came in or somebody else came in i think they have a better handle on it and are doing a good job now you can argue a lot of things like should they have that power or um or should it be distributed over multiple companies you know not just one company something like that but the people are there i don't know how you get that genie back in the bottle i guess you know um so i don't know i i think like a lot of times the positives for facebook are ignored too and there's a lot of negatives so i don't want to just like brush them over but like for to your point uh ryan like i

mean small businesses like you this is where you go this is how you get your word out there you know for us like at seven investing social media is where it's at and a lot of that is is facebook you know like this is uh this allows us to compete with like you know bigger companies with deeper pockets you know that targeted advertising so it's like it can be a real boon to small businesses you know and um like and like today i think somebody proposed like to ban political advertisements on the platforms and i don't know if that's a good idea or bad idea it's above my pay grade but i would just say like there's a point to be made that like that it might be a bad idea just because like this is a way for like smaller grassroots candidates to compete with people with deeper

pockets and if you get a if you get rid of advertising on social media you might just be left with a bunch of rich people running against each other um because they're the only ones who can compete i i just think there's there's a lot of nuance to these issues that i don't think get quite like uh but there's not nuanced debate about it i guess and i don't know i'm not saying i have the answers i don't i don't but i just think there's another there's a there's another side to it at least is what i would say there's definitely a lot of good that's overshadowed by the big macro problems with the platform um we should yeah i mean thank you even like me to me too and other social issues i mean that stuff was it most likely wouldn't happen without

these platforms it gives people a voice in a certain way and it also gives people the ability to network and meet like the four of us had i mean it's i to matt's point it gets way there's no mention of the positives that come out of this or very little mention of the positives that come out of this and a lot of the complaints about it from the political perspective are against what the other side is doing or saying. It's kind of missing a lot of the point. And, you know, there's no nuance. And, you know, for example, if the president tweets something that is actually inaccurate, I would personally argue that it should stay up on these platforms because it provides insight into the thought process of the person that you potentially are voting for or not

voting for. I mean, it's an important data point. It's an important piece of information. So point being that none of this is black or white they've solved the really easy stuff like dealing with uh terrible content which they largely deal with now through ai um some of the other stuff that's harder to deal with they've proposed the idea of basically having a third party be responsible for the decision making which maybe is a cop-out in some sort of way that i don't see but it seems pretty clear to me that they want to address the issue while not shutting down the platform completely which i think is pretty reasonable well thanks yeah well actually i wanted to ask one question i know you guys both know a lot about google matt i know i think you

own the company um my thought is is that they need to just crank up the buyback machine and stop doing the other bets as or wasting maybe 15 billion dollars like they have on other bets and that it would be way more helpful for the stock and the shareholders if they just i mean the google search must have 50 60 operating margins at this point um is there a reason they shouldn't do that or do you guys agree that they should do a lot more stock by the hex in the future i i wouldn't be opposed to it yeah i would not be opposed to it if you give me one second let me like this is a quote from ruth perrett um their cfo like when she was asked a question at a recent analyst conference about the company spending priorities and this is what she

said the most important uh most important is continuing to invest for long-term growth the second priority is we are very focused on how we optimize within every product area how do we stack rank and look at opportunities to free up capital to then be in part contributing to these longer term growth opportunities and third is to invest in what i call operational excellence it's everything around trust and safety security privacy really ensuring that we deliver on our mission yeah like do i think like to your point like i i wouldn't mind another bullet point saying and then we'll buy back shares but uh you know uh that being said you know there's something to be said like this is in the company's dna right and do you do you lose something whether do you lose

a part of that like if you give that up and become like a very efficient uh buyback machine you know Well, maybe. I would not be opposed. As a shareholder, I would not be opposed to them buying back some shares here. I think they very little nibbled on those edges. I would love to see something bigger. But at the same time, I think it's part of the company's DNA to always be looking for these growth opportunities. And could some of them work out? I would like to be cautiously optimistic that some of them might. All right. Alex, do you have any thoughts on that before we move on to financials no i think that's spot on i mean it's you can clearly see the merit in doing it but it's the nature of the people who are running these businesses and as i said with

doc i don't you know you know what you're getting when you get in essentially i you know i think about bill gates saying earlier today he wanted to have a year of uh cash to cover operating expenses if revenue revenues were zero basically on microsoft and you know i don't know how long ago that was, but their balance sheet looks pretty similar today. So, you know, with a lot of these companies, whatever your definition of optimized is, there's a pretty decent shot, you're never going to get there. So you have to decide whether or not you want to own the business given that reality. That's a good point. You know, like imagine if Nadella had come into Microsoft and said, like, we're going to buy back shares, we have all this cash on our balance sheet, you know,

we're going to like stop investing in these cloud opportunities, you know, you know, would a shareholder's been better off you know no of course not so but that being said like there's a part of me that would love that yeah yeah i mean i think we'd like a little more balance please yeah for sure for sure it's like a slugging percentage thing versus batting average too like you don't know it's paying dividends until out of nowhere you have a massive you have microsoft azure or yeah yeah so right but we should we should shift to banks and financials now. Brett, do you have the first question here? Yeah, this is for Alex, but Matt, you can chime in as well. What draws you to Wells Fargo? I know, I don't know if you own

it, but I know you talk about it a lot right now. They've had all those troubles. I know the CEO was in trouble. They've had another news thing, but the last three years is basically they've been in the news. It's almost probably the second most negative company in the news besides Facebook. And that means they trade at a very low valuation. I think they're priced a book, which is very important for banks. That's probably the only metric I know that's important to banks because it's not anywhere near my circle of confidence. Right now it's at 0.6.

So what draws you to that, and do you have any interest in the company? Let me just start by saying, do you say the most hated or the worst news stories? I own both of those two, so that's good. I've got to find out which other ones are in the top five. I've got to start buying those, I guess. So I own Wells, and I also own BAC. you know the main thing that draws me to both of them is they're sizable and sticky deposit base that's really the heart of the matter and you know Wells

as you alluded to they've had they've had plenty of issues and it's been very public the issues they've had despite this community to pay banking deposits at the ends and he's in the second quarter we're about eight hundred and forty nine billion dollars which is about twenty five percent five years so So they continue to grow deposits despite, obviously, very public issues and very serious issues. It's not like they were a joke. They messed up badly.

So as I think about the industry, I continue to believe consumers are going to favor relationships with these large, established banks, the Wells Fargo, the JPMs, Bank of America, the world. And the reason why I think that's the case is they have established brands. They have a full suite of services, basically their omni-channel. They have best in class, you know, digital properties, they have branches, they have ATMs and everything like that. And I, and I do think people sometimes, you know, they talk about the idea of, Oh, can't, you know, an upstart potentially take the deposits.

I think people under appreciate how valuable it is to have hundreds of billions of dollars that year. You know, the second quarter, Wells Fargo's deposit cost was 15 to 20 basis points somewhere in that range. So just to give an example, Wells Fargo has about 5,000 branches, and they pay about $3 billion a year in net occupancy costs. So on the $1.4 trillion they have in total average deposits, not just the consumer bank, that's about 20 basis points of cost. So said differently, if you want to start a bank tomorrow and you weren't going to have any branches, you're just going to have an app. You could eliminate all those costs. They're just the cost of the branches. and you somehow immediately gathered $1.4 trillion in assets,

you could give your customers that extra 20 basis points, the cost advantage you have over me. So my question would be, you know, how much of the deposit base do you think would leave if they offered those people an extra 20 basis points to go to bankxyz.com? You know, for the company's primary consumer checking customers, you're talking about an increase in interest income

of about $70 a year. So, you know, not that important. And obviously, as I said a second ago, you're assuming this bank gets the $1.4 trillion in deposits without having any branches, without having any legacy, etc. So my point is just that I think people have talked for a long time about someone potentially competing with the big banks and removing the advantage they have, at least in terms of deposits. Now they have other issues, but in terms of deposits, it's still held strong. And I think the reality is that these banks will continue to grow stronger over time. And just as a data point, in the mid-2000s, the three leading consumer banks had about a 20% share of retail deposits in the United States.

Today, Wells, JPM, and Bank of America have about a 33% share of U.S. retail deposits. So obviously, there was M&A activity in the financial crisis that distorts those numbers a little bit, but they've continued to increase their share of deposits. And I think the reasons why that has happened over the past, you know, five, 10, 20 years will continue to be true going forward. So that's really what draws me to these businesses and why I think the franchise is sustainable. Well, it's that dividend yield, right? Well, yes. If they don't keep cutting it, yes. Alex, let me ask you a question though. So like why I agree with you about big things. Like i don't think they're uh if they are going to be casualties of fintech i don't think it'll be right

away like i think some smaller banks might but like why wells fargo over banks of america or or jp morgan like to me it just seems like the quality of those two and i i get the valuation maybe a little but like i just feel like you have so much less concern with those two than say wells fargo so yeah my answer is basically i think you're right and i i own both of them now. And I own Bank of America in size two. For a long time, I just owned Wells. Part of the answer was the valuation difference you're alluding to. Wells Fargo's cost structure was much more out of line. And there was also some sense that it was easier to understand a more plain vanilla bank, as opposed to having a lot of other stuff, whether it was trading, investment banking,

etc. So that was part of the idea. But yeah, there's a lot of truth. And, you know, I do wonder about, you know, obviously Berkshire sold all of their wells at this point. There is some truth to the idea that while deposits are very sticky, I also think Wells Fargo hurting their reputation could have long term effects in terms of attracting new customers. It's hard to steal deposits, basically. So once you impair your reputation to a certain extent, that could be a real issue for a long period of time. So kind of to your point, you may look at that valuation differential and go, well, you know, it's a turn cheaper, two turns cheaper, three turns cheaper, whatever the number is. But if their deposits and loans and profitability is going to grow at a

lower rate for a long period of time, at some point, it's worth paying up for a higher quality bank. So basically, I think you're somewhat right. So I'm both at this point. So yeah. Alex, do you think the, and this is sort of the question we just had around Facebook, do you think the customers care as much about the concerns as the investors do with Wells Fargo? Not particularly. I mean, you know, banks obviously had a period in the late 2000s where they were very much not liked. And that goes for consumers as well as politicians. and, you know, I think you've seen the shift now to the big tech companies that we're talking about

and the influence they have on the world and obviously the dominance they have in so many markets. So I think consumers' attention and regulators' attention has kind of naturally shifted there. You know, I'm not going to say that Wells Fargo's issues will have no lasting impact, but I think in general, I mean, you can look at their deposit base. It's held up relatively well and i think most people when they think about it realize that yeah it's a pretty similar product whether or not i'm banking at wells or jpm or bank of america i probably agree with that alex but like you know what's funny like uh just real quick like the other day when charlie schaaf made his comments and like they were in the news again trending i was just like

man i feel so bad for wells fargo shareholders i know what they're going through because i own Facebook it's just like for so long it was like two or three years Facebook could just not get out of its own way you know like it was always like another headline and I was like wow like I'm so glad I don't you know so glad I'm not alone and then you own both yeah no that is a really good example in terms of and I'm not going to say he said the right thing perfectly he may have worded it incorrectly I think if you go read the story the intention of what he said is pretty clear. And as someone who was in the meeting, essentially said, he's a forthright guy, and he was being honest about the situation as he sees it. Now, people have rightly said, they need to

do a better job addressing the issue at hand. But at a higher level, to your point, it's a company where it's relatively easy to pick. If you're writing articles about the business world, it's a company that's pretty easy to pick on in a lot of ways. And maybe it gets clicks to a certain extent like a facebook article would so you know that's part of life i guess and hopefully they get a fair shake over the long haul and and they certainly made mistakes maybe they deserve it matt do you think there's any way that some of these newcomers like uh paypal or square could cut into that or carve into that moat that some of the big banks have created oh for uh for sure for sure i mean i don't i think you already knew how i'd answer that but

like yeah i think i i think i think it was in my interview with you guys like last year i don't i don't know which time but we were talking about square and i said you know uh and i think you guys said it too i but like we were talking about like we wouldn't be surprised if they introduced buying stocks on the cash app and then it was like a month later they did you know i mean these guys the fintech players are are going to be they're just innovating at a faster pace in the banks now i think the big banks they have enough firepower to invest a lot in tech and to like kind of like keep keep them at you know at bay for the most part i think the smaller banks that do not have that firepower are in bigger trouble and i know there's platforms coming

on that are offering these services to banks i don't think they're going to be able to keep up with like just as an example squares cash app i i personally don't you know cash app just uh you know and and others too others too uh but like they just innovate at a much faster rate so i think there's like uh i i think a lot of banks will be hurt i think the big banks as far as banks go are are relatively safe at least for the most part i think you'll see them maybe hurt all around the margins but they have time in the in the resources necessary to invest enough uh in their own systems and to like copy these guys albeit at a much slower pace in like a year or after whatever but like um the smaller banks like i the regional banks i think are in trouble

what do you think is the best way to for these smaller newcomers like a square or cash app what do you think is the best way to be able to pull those consumer dollars away from the big banks like is it just a bunch of different functionality like the cash app has or is there something that draws the appeal like a higher interest savings account i think as they introduce more services you're going to gain more people and i think to an extent they will grow with their user base right so like right now their user bases who use them as their banks are relatively younger people i think as those people mature and grow older their incomes will grow and i think you'll see them kind of grow naturally just from that and as they introduce more and more services like uh dmo's

coming out with a credit card soon just things like that will bring in a little bit more people and keep the people they have using that using that account more and i think it'll just kind of like create a flywheel and there i don't think there's a silver bullet i don't think there's one silver bullet where all of a sudden you get all these more uh billions of dollars you know and and millions of users but i just think like as their network effects grow i think as they become more accepted universally which we're seeing that now uh i just think it's going to be a slow and steady onslaught as they grow no i think a lot of that's fair and i think these companies can you know obviously something like the cash app is a very very well but well built

product and i think it gets you should usage for kind of what it's made for one thing i do think about some of these, and this might not be specifically about Square, but, or any of those companies, but I do think, you know, big tech and tech companies in general, I think a lot of them run into an issue where they do something incredibly well, and as time goes by, they try to find more things to do. I guess the, you know, the kind of historical example of this is people show the Yahoo page towards, you know, went ahead, kind of hit the end of its run, and the page is just loaded with links to sports scores and a ton of other things. You know, I think that's a decent example of these tech companies, they can become very sprawling in terms of what they do. And it's

very important one for them to continue doing things very well. But also, I think in some ways, consumers in their mind, compartmentalize what brands are and what companies mean to them and what they do for them. And at the end of the day, I think a lot of people are trying to make their life as easy as possible. And they're not particularly concerned about what the objectives of the companies that they're dealing with. So that's not to say nobody can make inroads in different areas. It's just to say that, you know, it's sometimes it might not be as easy as I think about someone like Facebook or Google offering reviews, you know, for restaurants and things like that. They've, Google's certainly done better lately, but Facebook really never gained any

traction with that. And I think part of the reason why is nobody cared to think of them as that. Yelp already had Mindshare to a certain extent, and they didn't need another provider in a certain way. So I think that'll play into some of these things. But that said, Cash App is doing a very good job right now meeting a need. So is Venmo. They're doing something that the bank should have been doing and are doing today, probably not as well as Venmo and certainly not with anywhere near as much usage as Venmo, but they created a product that meets the need and ties directly into people's bank accounts. So I think that's the kind of way, it's the same idea you deal with the companies that have become integrated with the visas of the world. And a lot of times I think

they've found the smarter strategy for us is to essentially work alongside these guys. Replacing them is a very daunting task and maybe not possible. So we can build a business around what they do or alongside what they do so obviously we'll see what happens over time but i think a lot of that might be what ultimately happens yeah i think there's a oh sorry no go ahead matt i was just going to say that i've tried to leave bank of america and i've always came back so maybe that's a good sign i do think there's a future like that plays out that way uh like we're banks but i think in that future like banks are almost just all commoditized and there's the dumb pipes behind the snazzy interfaces that like cash app

offers. Right. And I don't think that future is kind to banks either though, but like, yeah, I can see that. Like we're being, I mean, to a certain extent, to a certain extent, isn't that what they are now or have, I mean, how do, how does the average consumer view the Wells Fargo on the corner relative to the bank of America down the street? You know what I mean? pretty commoditized it's a it's a product that doesn't cost anything in air quotes and they make

a small margin on you know paying people a tiny percentage of interest i'm just my point being that i don't think these are viewed as businesses that people uh hold in this especially a favorable light they're they're already kind of viewed to a certain extent as just that place where i keep my money and it's it's not doing much for me yeah i just think like as these 22 year olds they get older and then soon like they can get their direct deposit right to their cash app and they already have a debit card for it and they can buy right right from there they can buy bitcoin or they can invest in stocks i mean i just think that is a value proposition that it doesn't the banks have a long i mean i kind of see the banks almost as oracle like they like i i kind of see oracle

they're gonna die this incredibly incredibly slow death over decades um but like i just don't think they're the future but i think the people on oracle are just there like you know it's hard to get off oracle and i kind of see that with the banks like as these 22 year olds get older and they get their first job and they're direct the check is direct deposited right into their cash app uh which just as an example uh like they're not leaving that cash app you know just same way you wouldn't leave wells fargo and and and that's where they already are and i think as you know eventually people get older you know and as they age and then they retire so then they don't have direct deposits and and that's i think it's just going to be a very slow transition but i i think

it's going to be fairly steady though like i i think i i don't like the future for banks i i there'd be even more commoditized i guess is what i'm saying okay they are now all right that'd be interesting maybe we can pull the data somewhere i can look and see if i can find it if they have demographics in terms of uh people with checking accounts and usage of those checking accounts i'll look to see if i can find that data and i'll share it with everybody here if i can it'd be interesting i mean we like we're prime examples you basically whatever bank your parents have you grab it And then you just keep it there. That doesn't mean most of your deposits will go there,

but I'm probably always going to have a checking account with the BECU or whatever bank you use. And you just don't think about switching. You just, wherever most of your money is, you can put it somewhere else. Yeah, I don't know. I think I might be more on that side, but it's tough. And I think that if, you know,

obviously something like Square or PayPal, it's priced for growth like that. And I think it is pretty inevitable that they will continue growing and having um you know if the consumer starts with them at age 22 like us they're going to continue being with them for the next 10 20 years but the banks are priced at a you know there could be a nice value proposition there as well because they're trading at such a big discount well maybe not JP Morgan but someone like Wells Fargo so you don't have to tell me the dollars because I was

22 so I had about 75 in my checking account but so but how much how much do you guys roughly keep percentage terms between your traditional bank account versus a cash app or something like that uh cash up uh some spending money because i do like the cash card and i think that's the big proposition for something specifically like square where they give you those boosts that are basically a marketing tool where i get like 10 off doordash or groceries or things like that but the majority is in the actual bank account at bank of america and it's also really easy to move it into the cash app if you find like one of those deals that you really want to use like if you really want chipotle and they have their 10 off or whatever it's not that hard to move yeah because

they have instant uh yeah the upload or not uploading depositing money into the cash app is uh you can do it instantly but depositing back to your bank account takes one day And just anecdotally, I think a lot of people, they basically do that same thing where most of their money is stored within the bank, but they use the Cash App or Venmo very frequently. That's a good point. To what you said, Matt, you can buy stock or Bitcoin. Obviously, you can buy stock on Wells Fargo's platform as well. And they also have similar offerings where you can get discounts. But to the point that all three of you guys are making, obviously, the way it's presented to a consumer is much cleaner and much easier to use.

So the big banks need to obviously address issues like this over the long term. They can't have – they're spending so much money on tech anyways. There's no reason they should have, but they need to have best-in-class consumer-facing platforms. And I think they will. Again, I think the big banks will. Like I don't think the big banks are – you might see them hurt around the margins, but I think it's the smaller banks is where I would – I think you're going to – they're going to see – I think they're going to – I think they're going to feel it the most like in the next few years. like as uh like the technology gap grows it's just how i kind of i think the big banks they have the war chest to like just throw a lot of money you know at like whatever whatever they

need to to kind of fix the problem and i think they will and as crazy as it is like people our age care so much about user interface and or i mean or else robin hood wouldn't exist right that's that's a good point very good point yeah okay wrap up questions Matt we've asked these to you before we ask these to all our interviewees so Matt if you have one feel free to go go with Alex I want to hear his answers too and so just go with Alex okay what is one financial saying that you disagree with so I'm gonna pick one that I don't necessarily disagree with it but I certainly struggle with this idea and it's it's something that the team at Ockrey capital management

Chuck Hockney's firm, they wrote last year in an article called The Art of Not Selling. And what they said is, to the surprise of many, neither valuation nor price targets play a role in our sell decisions. And it's a way of thinking that I certainly can appreciate. I'm someone who tends to, as I said earlier, concentrate on a long-term investor. So I understand this idea of not being so pinpoint accurate price targets. At the same time, I think the argument that the truly great businesses are generally or almost always undervalued is different than saying that they are always undervalued. So I struggle with this idea of completely disregarding valuation price when you consider a business to be great. And obviously, in some ways, what I'm really

saying is greatness is very difficult to define 10, 20 years into the future. So when you pay a certain price you're implicitly saying that you think something's going to be great for the next 10 20 30 years i just think that's a very difficult game to play so i am uh you know it's it's the hashtag never sell which is my buddy jerry cap on twitter um right right i i'm not sold on the never sell but i do like to toy with the idea and give them a lot of crap for it so and i think uh an example of that would be and they may have been in a difficult situation because they had so much capital within that business is berkshire with coca-cola in the late 90s right where they probably identified that when i was trading i think at an earnings ratio above 80 for a good few years there

that you know buffett and the other guys were probably thinking like yeah i mean we wouldn't buy this here but if you have that idea of being in the never sell category you can really hurt your returns if you just hold that asset for the next 10 years which hindsight is 2020 with that one, but I do think there are certain situations where that can occur. Last question. What's one piece of advice you would have for anyone considering a career in investing or finance? Oh, gosh. Well, there's a lot there. I think I'd probably just say at this point, I'd recommend getting your voice out there and building a network somewhere like Twitter. I mean, it's such a great place to meet people who think like you, people who can question your

ideas and make you think and just a great place to get started and i would say you know write articles or you know post tweet storms do whatever it is that you you can do to get out there and you know take the time and effort to do good work and then and then reach out to people like us and talk with us and if you you know i've never had an experience on twitter where if i reached out to someone with a you know honest well thought out question that they wouldn't at least consider giving me the time and i think that'll continue to be true so just do good work and reach out to people and start building a network yeah i like that i mean that's how we get most of our interviews so that's yeah that's how this happened today so right how you do it all right well that

is going to do it alex matt thank you for both joining us i had a blast yeah nice to meet you i had a great time yep likewise all right welcome back in thanks again to alex the science of hitting and matt cochran enjoyed the interview had a lot of fun now we've got hot water um how many do you have i have three uh average week for me you want to go first or who went first last week that i'll go first because i think you might have some of mine i'm guessing yeah go ahead then OK, so the Whole Foods CEO was interviewed by The New York Times and he was quoted saying the whole world is getting fat. It's just that Americans are at the leading edge of that. He also linked it to our linked our obesity rate to covid deaths.

There was actually some merit in the interview. What did you think of the interview as a whole? I mean, I read it, right? yeah he i mean he's not lying but he's also you know he's being maybe a little too frank for a billionaire um i don't think it's probably not the right thing to do um it's probably not good to scold people you got to kind of teach them how to do the right thing and also he says that it isn't hard to find a cheaper healthy foods but you're not finding that whole foods that's for damn sure you can find it at other places like kroger's or walmart's yeah i mean it's if you're

gonna be like eating healthy is just as cheap as eating poorly just don't shop at whole foods like maybe lower your prices i mean you can get all that stuff for half the price at safeway that's why i'm optimistic about sprouts farmer's market um yeah just because they're like whole foods but cheaper okay um second one here robin hood again is in hot water they always are they took this so according to a new york times article in the first quarter robin hood users bought and sold 88 times as many risky options contracts as schwab customers granted schwab has much more stringent uh rules so that you can trade options and it was what twenty six thousand dollars traded and in contact contracts traded per dollar in your account right yeah so apparently there

were twenty five thousand eight hundred forty options contracts traded for every dollar in the average customer's account that's roughly twelve times more than any other brokerage it's absurd is this the perfect time to sell ridiculous out of the money call options it actually might be also i found that on robin hood there's so many things that get terribly mispriced like if you look in there sometimes things are selling for like a cent when anything around it even lower or higher is selling for like 20 cents which in you know it's like 20 an option contract lingo but they're totally inefficient on that i cannot believe some of numbers that are on there it's a there it's the wild wild west uh to put it lightly yeah and i

think and there's probably data on this but it feels like it exacerbates sort of bubbles yeah like it drives prices even higher because then people are trying to catch the bubble like they're trying to make more money on the bubble and it's mini it's mini bubbles kind of like cannabis uh the ev stuff here spax till right like till right whatever two years till right r.i.p um no it also i actually saw come across the twitter wire uh this morning that there's a spack out that's actually only investing in spax spackception oh that's good that's a good idea lever the spack we'll lever it up we'll turn on two points of leverage or whatever they call that two keys i don't even know how they call that all right what uh what did you have okay anyone who ever

touch nicola motors again tough one there i mean you already knew it but there was more news out today that trevor milton didn't even make the original models and drawings himself he bought them from someone in croatia so stocks below 20 now was almost at 80 beforehand it's just i see no reason why by the dip no no no no no just they have some revenue i mean they lost they lost their largest customer trevor milton what their only revenue they had was from him right yeah i mean he's more than 10 of sales that is a you know they got a solar installation or something yeah i can't believe they didn't even couldn't even get enough revenue so they had to disclose that he's got 36 000 in solar roof tiles from his own company they didn't even get a million in revenue

so they didn't have to disclose that that's optionality they could pivot to solar they can they have optionality and fraud that's for sure all right my other one i had that robin hood thing as well which is just the i can't even believe all right tiktok ad spend though this is a little serious so apparently uh according to their filings they're spending upwards of 10 to 30 dollars to acquire each of their users when their users have an arpu which is that is average revenue per user each year of only five dollars is that a red flag for the long-term profitability of their business because that assumes a long long what do they call it customer lifetime or lifetime value yeah it assumes very low churn and which i guess could suck if it got banned or something

that would obviously hurt churn but then there's i mean it's early in the monetization life cycle life it's true they're probably not and they know they can ramp it up if they want to arp will probably go up higher yeah that's true but they're still spending a lot um and it shows that it's going to take a lot um to dethrone anyone from facebook or instagram it's pretty sticky from what i've seen it's pretty sticky um it's more like youtube though right almost it's like a cross yeah kind of it's hard to explain you kind of gotta you kind of gotta see it yeah i feel old um okay fuck marry kill this week the theme is public companies with an imaginary top line oh man nicola number one nano x number two and virgin galactic number three am i getting that

wrong does virgin have any revenue no they have like minimal they have minimal very minimal yeah yeah um all right those three fuck marry kill i'm killing nano x because from what i read on that muddy waters research report and i think it probably is a fraud it's a hot topic because there's a lot of people that there i mean there's some investors out on twitter that we respect that have taken an investment in it but it's like i'm not touching it no way dude there's no margin of safety muddy waters has such a good track record too yeah i mean it's and the problem is i feel like a lot of people write off the short they're like yeah no they just you know they've been wrong before i'm like they've been right before and if they're right everything's gone so yeah you lose

all your money which cannot happen it feels like you're sort of anchoring to like prior information i would look i would take it seriously i'm killing yeah i'm killing nano x i'll actually i was making fun of nicola i actually married nicola just because it's probably a better business model than virgin galactic i'm not touching any of these three in my actual portfolio but i'll fuck virgin galactic just because if they land something or launch something the stock probably 2x it's that's not investment advice whatsoever and it's no way to put your money to work but seriously like could you see that if they land something or take someone into space the stock will pop virgin galactic if you're right it's a cool company to be right on like

if they do it well it's like what's more fun to invest in than something that's taking people to space but chamath's very smart if you're betting on yeah i mean that that helps too if you're betting on commitments like if you're actually considering the commitments that they show to be a valuable use they're not like i would commit to it but i probably wouldn't go so i mean maybe but the amount of i bet the conversion rate from people that commit to people that actually go is going to be super low agreed agreed and then nicola i mean i make fun of them but if you know jim gets some management in there they might the stock might totally creator but there could be some value in the electric truck market but no way i'm actually

putting money into that no definitely not okay anecdotal evidence i just have one okay um so i watched tehran i think if i'm saying that right apple tv plus and ted lasso mobile ted lasso was okay um i thought tehran was pretty good i'd only seen the first episode but i think apple tv plus has some actual merit i think they're pretty good they're getting up there i'm gonna watch that whenever i get a pass where i'm gonna watch that tom hanks movie that was okay world war ii it's more it feels more of my alley than yours i mean that's the kind of stuff i typically like but it was okay bridge of spies underrated um but i don't know are they going to be in that tier one content provider level maybe i mean we talked in the interview how they weren't but they're cheap

too like it's a cheap subscription so the subscription fatigue isn't as daunting with them yeah and they can spend a lot of money although i just think the apple music they gotta win at that for the bundle to make sense yeah and even if apple tv plus wins like that doesn't move the needle for them true that is very true it's just it's a bolt-on or not bolt-on just it's nothing really it's like a tiny screw in this giant machine yeah okay uh what did you have well we were talking about stitch fix earlier i signed up i'm gonna get some anecdotal items because we are good i'm getting a little bullish and i want to get some market knowledge get that customer value prop yeah we'll have to write it off right it's just like haircut 70 000 i'm writing

off my 20 business expense on our llc so we don't make any money uh but yeah i signed up to get some anecdotal evidence for real the quiz was pretty easy um i'm gonna get a fix now i can't shop yet because apparently they gotta put me through the algorithm so i can get direct buy i'm gonna test out direct buy probably at least see what they can uh show but they said that there is a high demand right now uh so i won't get my shipment until in the like october 7th which i think is a good sign right is it high demand or is it a screwed supply chain they said something about covid i don't know because i mean we read the we read their annual reports they did have they really had that great of demand true you know we would be we had that call option no yeah the uh

yeah that worked but the uh no the last one did the the first ones did but uh yeah the oh what was i gonna say oh yeah they had those fulfillment centers that had to get shut down because of the covid outbreaks in march and maybe later in the spring but i think they're up and running now but they could have some trouble with that still that's a good way to twist supply constraints overwhelming demand yeah that's a nice that's a nice twist now you're thinking like elon okay that's gonna do it um if you want to watch this go to youtube we put whatever shows on there yeah if you're really inclined to like see our faces you can go see it on youtube just youtube chit chat money um and then twitter chit chat money ccm ryan ccm brett

we're on there if you have any recommendations for the show stuff you want us to talk about feel free to reach out um other than that we are not financial advisors anything we say or discuss here on chitchat money is not formal advice or recommendation thank you guys for listening we'll see you next week this family is on the brink of civil war on september 18th mob land the The kid original series is back on Paramount+. We are the Hurricanes. Don't know the net? Then Google us.

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