Good Investing Talks - From China to Elephants & Snapchat: Rom Wilson on ACM Capital

Episode Date: October 5, 2021

Rom Wilson of ACM Capital has a very interesting investing journey. He learned to invest in China before starting a US-focused fund.

Hello, audience. It's great to have you back. And today, it's great to have Rom on. Hi, Rom. Hey, Tillman. Thank you for having me on as well. It's great that you're joining me from Boston today. And we have the chance to discuss ACM Capital, which is your firm. And I want to start our conversation with a question. You have partly learned investing in China, but looking at your portfolio. From what I know, it's mostly U.S. based. Why is that so? Yeah. Well, I think that's a good question.

So in terms of my links to China, you know, basically when I was in China, I was looking at infrastructure assets, you know, up and down the coast and about two to three hours inland. And I think it was a very interesting education at a very interesting time. It was sort of in the mid-2000s where China infrastructure growth was a huge topic and a huge consideration and thinking about the development of the country. However, I think the way that my investing style evolved is, you know, coming out of business school, I then went into investment banking before joining the buy side. And most of my investment experience has been, I guess, what you would sort of term as OECD economies.

So U.S., Europe, Japan, Australia, and just have a more intimate sense of the companies there, the business environment there, the regulatory environment there. I think China is amazing and it's an amazing economy, and I oftentimes joke about how it's still considered developing, even though it's the second largest economy in the world. But that's part of the reason why our portfolio is comprised the way it is, that our ability to move with conviction and build a concentrated portfolio is more solidly grounded in the OECD economies that we know quite well. You already named a bit of the stations you had as an investor, and as we did the pre-talk,

it sounded a bit like you were playing billiard to finally end up at ACM from the stations you described. Can you maybe map it out a bit more that the viewers can get an idea? Sure, sure. You know, so I often remark in the irony of like, let's say, for example, with my nieces and nephews, you see them after three or six months and it's like, oh, you're so different and you've gotten so much bigger and that sort of thing. So, you know, from my perspective, I feel like I've constantly been evolving as an investor. But there's no doubt that there is certainly a more established, more linear path that most people take in this industry. You know, you come out, you do investment banking, you might do consulting, you draw on the buy side, and it all looks very linear and neat.

I think my path was slightly different. I would say from the beginning, maybe one of the influences is, you know, my dad's a contractor and my mom as an administrator. you know, there weren't many investors, lawyers, doctors, people in professional services of my family. So, you know, I think having gone to some good schools, it was a process of discovery of trying to figure out what it is that I wanted to do. I think, you know, by the time I got to business school around, you know, the age of 24 or so, I started gravitating towards an investor mindset and trying to learn more about what was involved in the profession. But, you know, and then I basically went through what I would consider a fairly

traditional path after that, which is, you know, I did investment banking for three years. I did consulting for a year and a half, you know, prior to joining the by side. But I would say the things about my experience that look more nonlinear, like the time in China or the type of consulting that I did, you know, or the interests that I've had along the way, I think are very powerful strengths that kind of inform my investment thought process and my open-mindedness to different ideas. Are there any key learnings you have taken away from the different stations you want to share with us that made you to invest a year today? Sure, absolutely. So, you know, as I mentioned, there was a little bit of figuring out which direction I would actually go professionally coming out of college.

Then quite frankly, I think like most people around my vintage, you know, I graduated Stanford in 2001. You know, I graduated right into a recession. And maybe the other thing that I should have mentioned is that I think that without getting, you know, too political or, you know, about it, I think women and people of color are typically not given comparable opportunities, particularly during times of economic stress, right? So one of my first jobs, which I'm incredibly proud of, I actually ended up working for a nonprofit organization, you know, and we can go into the details of it if you'd like. But I would say, you know, at a nonprofit, you have to wear several hats, right? They're not super well-funded organizations. And, you know, my experience in that first year and a half, you know, I worked on marketing. I worked on fundraising for the nonprofit. You know, I worked with the CFO, you know, doing accounts receivable and accounts payable and delivering monies and cash to the bank. You know, I basically got involved in almost everything that I could. And I think that that gave me. You know, let's say if you're a chef that gave me a competency in several different cuisines, if you will, so that by the time I got to business school or even as I examined companies today, you know, I can put myself more in the mind of a marketer or someone who's running, you know, the company's cash management capabilities, right? And then, you know, my experience in China, you know, one thing that I love about infrastructure is that it's a very tangible physical thing, right?

So you can draw a direct line between a bridge or a port being built in a particular city and that city's economic development for several decades, whereas, you know, there are a lot of businesses these days where things are built quite intangibly. They're still brilliant businesses, right? So I think that the spatial reasoning of like how a port then leads to economic development in terms of the businesses that spring up, the people who then get jobs, you know, both directly and indirectly, you know, the ability to think a few levels deeper into an economic event or advent, I think is something that I took away from that. My investment banking experience,

you know, one thing I liked about it is I worked for a smaller firm that had capabilities in both M&A as well as restructuring. So I was able to see, you know, what happens when businesses are doing extremely well and everyone wants to own them and buy them, you know, but also what happens when businesses fail, either through their individual decisions or industries or a secular decline and how that works itself out in the capital structure, you know, what type of businesses are then able to pivot and reinvent themselves, what types of business go into restructuring or foreclosure, if you will. And that was, you know, I think that that has been a very tangible, powerful thing to bring to the way we invest here as well.

You have some books behind you and this book stand for interesting content. or as their biographies, interesting investors or business people, are then, maybe do you want to share three of this concepts of people that have moved you as an investor or changed you as an investor? Yeah. Well, I did put aside some books in case I was asked this question. And I'll answer the question in any way you would like. But I basically put aside three books that I thought were, where we're just good for life learning. But then also three books that were good for financials. So that's six books.

That might be too many. I mean, I think in terms of, you know, investors who have influenced me, which is sort of like a separate question, I would certainly say that, you know, my pathway to investing went through the value school. Of course, you know, I think my first influence was really reading Seth Clarmine's margin of safety, which I think many people know about. And if you haven't read it and you're interested in investing, you probably should. Right. And then from there, I found my way to Buffett and like the Buffett letter.

you know, Howard Marks has been, you know, a great, you know, professor at large for me. I think a lot of times folks compare our letters a little bit, you know, some of the letters to some of the things that he may write or just in terms of their depth and openness. So I think those are investors. And then, of course, if you go all the way back to the grandfather at all, you know, Ben Graham, I think those are the investors that really built the scaffolding of my investment approach, which I think is slightly different from their traditional. traditional writings. But in terms of books that you would like me to share, you know, to the

extent that folks out there, particularly younger folks, would like to learn a little bit more about the profession and the skills needed to be successful in it, you know, I would go back and certainly recommend, you know, as I did up front, you know, security analysis by, you know, Ben Graham. I think this is a little bit more of advanced reading, but I've actually read this several times, you know, all the way from being a novice to being a little bit more advanced. And I think if you're a novice, you're probably going to understand 30 to 50% of it, but then it instructs you and where you need to go fill the knowledge gaps that you have. And then when you come back in more advanced stages, it's like watching a really rich movie over

and over again, you'll find something new. In terms of like the skepticism, I think, required to be a good investor as well as to be on guard, you know, for some things that might negatively affect your portfolio. You know, I've always enjoyed this book, Quality of Earnings by Thornton O'Glove. And I mean, this is really kind of a skeptical take on some of the tricks that management teams or accounting practices can take to hide the health or lack thereof business. And then, you know, also, again, on the investing front. I've always enjoyed this book as well, which is a distressed debt analysis. So we do, we do mostly equity on our front, but this is what I was speaking to about before,

of understanding what happens, you know, when businesses are challenged and need to correct and what happens, you know, after such a thing occurs. You know, maybe just one or two more on just general life learnings that have nothing to do with finance. Yeah, great. I'll make it very quick um so one i would recommend is uh you know it's funny there's a film in the 90s or 2000 that became very popular called ghost dog um where it's it's about like an african-american guy who's very captured by japanese samurai philosophy uh but i was reading i was reading some of these things prior to the film so one book that i always found instructive was a book called you know the Hagakure. And I mean, it's really kind of an instructional of how to be a samurai, but also a

good retainer. And there's like some very practical, you know, like life lessons in it, right? Clearly being an investor isn't as intense as being a samurai. But there, it's basically a set of short quotes that kind of teach you how to give advice to others, you know, like how to build your resolve, how to approach, you know, very hard and complex challenges. And I think the second book I'd recommend that was recommended to me by, you know, a very good friend, you know, who hopefully is watching, thank you for the recommendation, is a book called Empire of the Word. I think I probably read this about a decade ago. And the book is basically traces the linguistic history of the planet, right? So it says, you know, which languages survive, you know, and which languages thrive and then become the lingua franca of their particular age.

And it's very interesting because you choose a very specific lens, which is language, but you get into many complexities about culture and, of course, you know, conflict between nations and commerce. And so it's just an interesting sort of bigger think read that certainly expanded my mind. Great. And maybe if you have the third as well, we'll finish it. Well, the third is basically, you know, as a, you know, I think the wonderful thing about. young people you know in our family we've got nieces and nephews that are out from four to eight is you can sort of see them go through the same fascination that maybe you had so i mean i certainly went through a phase where i was very fascinated by mythology from around the world and i think if there was

a mythological tradition i read it um and so my nieces and nephews are going through that now and i think the next step for them kind of brought me back around to like the uh you know the iliad by by homer you know like, you know, this is the Spanish version. You know, I was using it as a way to try to learn Spanish while I was living in Spain. But it's an amazing tale. It's got everything you need. It's got heroes and villains. It's got grand arcs.

It's got huge battles. It's got very human stories, like the story of Hector versus Achilles. And so I would say that this is one I've picked up again recently. And I recommend anyone who hasn't read it to read it and anyone who read it many, many years ago to revisit it. maybe after the books let's address um the elephant in the room there's one elephant behind you and not only has a decorative meaning it also stands for acm your firm because the elephant is a symbol for acm why that yeah no definitely definitely i mean i think the the elephant has like several different meanings but i would say that like you know when you start something new like a firm

it's very difficult, but there's also very interesting and cool ways to be collaborative about it. You know, my oldest friend is actually an artist. You know, this is someone I've known since I was about nine or ten years old. And, you know, we've collaborated on a few things through the years. It's a gentleman named, you know, Ari. And so when I was starting a firm, you know, I wanted like, at least for me, I know several firms just sort of use the letters and, you know, like there's sort of standards in the industry. But I wanted, like, a symbol that would, like, help us to remember our origin story and kind of focus us, you know, when times were more difficult.

So, you know, we kind of settled on the elephants because, you know, I also grew up in a multicultural household. I'm in one now. You know, my mother's Indian. My father's black. My wife is Chinese. My nieces and nephews are mixed. You know, their parents are Caucasian. One of their parents is Caucasian.

And basically, I was trying to, I would never burden the next generation with saying you have to do what I did, right? You know, or in the advent that we have kids of our own, right? Like, but, you know, I wanted something that could be multi-generational, right? You know, so growing up, I always loved elephants because they're amazing creatures. They're very smart. They do complex problem solving, which I think is very important in this industry. You know, they go on very long journeys and inclement weather conditions, which I think is a good parable for value. investing right um and i was always fascinated that you can find them in both africa and india where

both of my parents were from right um and and so we kind of took that concept and we combined them with the uh the chinese concept of she which are if you go to some of the most famous chinese architectural works you'll see these figurines that are symmetrical you know one will have like a symmetrical ball under their paw that represents the globe and the other will have a cub that sense, you know, the generations to come. And so I think it was a, you know, Ari and I sat down and talked about this and came up with this concept of combining, you know, basically three of the cultures in our household into a, you know, what I think is a great logo.

And certainly, you know, again, when things are inclement, either in terms of challenges or, you know, returns or whatever, you know, I sometimes look at the logo and then reminds me of what we're doing and what we're trying to build. And it's been a very powerful symbol for us. Now I want to really watch a documentary about elephants, but only for the years, only after you finished the video. Basically. Let's fall up with the next question.

You describe ACM as a global concentrated value fund. Yeah. So please help me understand the global, the concentrated and the value in the description. What is global in this sense for you? No, absolutely. We'll take it one by one. So Global, I mentioned a little bit before, which is, you know, in my work, you know, particularly in M&A and consulting, I always wanted to work on the international deals, you know, whether it be in France or Japan or prospectively Australia, you know, because I think my experiences in China kind of showed me quite clearly that, you know, globalization was a very important and big part of business. And I think it will continue to be a very important, a big part of business, right?

So I think by the time I launched ACM, you know, as I mentioned, I acquired this competency, for example, in how, you know, the German healthcare system works or the European health care system works, you know, or how industrials work in Japan. And so that's really the global part of it. But of course, you know, I forget the exact country count, but maybe there's over 170 countries. You know, don't kill me if I'm wrong on that. So, of course, we can't cover every country, right, which is why we kind of stay in kind of our circle of competence in the geographies we understand, right?

The concentrated part of it is, I mean, I've always believed in doing deeper work on a smaller number of companies, I mean, for two reasons, because number one, I do think that there are diminishing returns to diversification, right? Like, I've met certain people who might manage two to 300 company portfolios. And I think that that's great. That's another way of making money in this business. It's not really my style. So for me, I think a concentration was a back solve for the amount of research and diligence that I wanted to do on each name.

And for many years, ACM was just me myself. So I thought, you know, I think that I can probably keep up with 10 to 20, you know, core thesis that are multi. that are multi-year thesis. So that's the concentrated part. And the value part, I certainly think, has been evolving. To be honest, I never thought about value as just the traditional, you know, whatever people think it is, low PE or net nets or discount to hard asset value. I think when you find those positions, they're great.

And we find them every once in a while. And we know that framework and concept. And we take it and apply it, you know, in the same way that Graham did. or Buffett and Munger did or, you know, Howard Marks does. But, you know, I think for me, the way I would describe value is having enough knowledge and conviction to know whether something is undervalued, right? So I think sort of an example I give in one of our letters is, you know, in 2015, when I was job searching and not launching ACM, you know, actually, you know, one of the thesis

that I was using in my job search process was Amazon, and I think the company was around $255 or so. And the thesis was rather simple. You know, I'd had a very successful investment in Equinix, you know, which is a data center and co-location company. And in my diligence and multi-year investment in that company, like one thing that I knew for fact was that 80AWS was growing like a weed and was becoming a very, very important part in terms of the way the new economy was being constructed, as well as the IT stacks of the traditional economy. And so basically, when we did the sum of the parts, just comparing retail to AWS, we thought that there was something very interesting there, and the stock could double, right,

and go to 500. Now, I think people who are very hung up on the word value in the very traditional sense, you know, kind of laughed us out of the room with that thesis and that pitch, right? But it actually ended up being clearly a very compelling investment from that point forward. So I think there are things in our portfolio that will look very traditionally like the value framework that you will find in the books of your. And then there are things in our portfolio that are really like, we know enough about these types of companies and this situation and this company specifically to say we think

that it's discounted versus its longer term intrinsic value. Coming back to Amazon, are you still holding the company? And what is your general holding period? Yeah, so we are still holding the company. You know, it's funny. We actually both, we have both Amazon and Google in our portfolio, which I think many people do, but which many people do. But I think the way that we got to them were very different. Well, well, maybe not super different.

There might be some people who had the same thesis as us. There are millions of people doing this job around the globe. But I think the way that we got to them, you know, in addition to what I just shared about Amazon, is that I think that there was a point several years ago where it was very clear to me that like if these companies broke up, they would be worth more. And if they didn't break up because regulators, you know, due to regulatory inaction, you know, then they would also be worth more, right? Because it would just be a continuation of competitive advantages that they've, they've viewed out for themselves, right? So we continue to hold them because I think they've kind of moved from that more special situations with regulatory inaction backstop to, you know, steady compounders that have benefited even more from the pandemic and have carved out even more advantages. And quite frankly, I would be happy to see, I'm not pushing for them in any way, shape, of form. But if they broke up, I would be happy to own more of them on any prospective dip, you know, like or least.

leading into it as well. In terms of typical whole period, we typically underwrite our positions to three to five year time horizons. You know, like, I think if there's something that we think could take longer, but again, we know enough about the industry and how these companies evolve and whether the challenges the company faces are solvable, then, you know, maybe we'll stretch our imagination to say, like, okay, for example, we're happy to hold this for seven years. And that actually might not just be for a growth thesis. So for example, let's say, are you familiar with this company Airport to Paris? No.

So we have an investment in Airport to Paris. You know, we've made some money on it. It hasn't been a huge winner for us. But they basically own the major airports in the Paris metro area, right? They own and operate those major airports, as well as some other airports globally that have like a higher growth profile. So number one, we like those mixes between you have airports in Paris, which is sort of traditional Western developed, but you also have airports in India and Kazakhstan and Chile, right, you know, like which may provide higher growth regions in the future. But for example, when we underwrote those, that thesis in the depth of the pandemic, we basically said, you know, look, we don't know if they return to comparable traffic in three years or five years or seven years. But, we do think that there is a return to comparable traffic. And if it's seven years, it'll probably be sort of a steady, middling compounder for us. If it's three years, it'll be a great

outperformer for us. So that is an instance where we might stretch our imagination to consider the seven-year thesis even. But in general, when we're building our models up front, we're looking at the three to five-year time horizon, but willing to hold for much longer, you know, like if it continues to compound. When I was reading through your letters, I think two concepts came up to me that are quite interesting. Yeah. Ecosystems and controversy. How are you using them for your investment approach? Yeah. So like ecosystems basically goes back to what I mentioned about the backsaw for concentration, right? So, you know, I try to approach life and everything in this job, quite frankly, with a sense of humility. I remember the first investing conference that I went

to, I came back home and my wife, then-fiancee asked me what I thought about it. And I said, you know, there are a lot of people there who are very confident in almost everything they're saying. But there's no like score above our heads or saying who is a good investor. So there's a lot of projection of confidence. But I try to approach it a little bit more humility. So I would say the first, the first The first investment that I put on on the buy side of meaningful scale that was not just in my personal portfolio was an investment in a company called CVS. You may not be familiar with them, but they historically have ran drugstores in the U.S., right? And basically, you know, to understand that company, I thought you needed to understand who their competitors were, who the other drugstores were, which was basically Walgreens and Rite Aid here. You also have grocery stores that had pharmacy businesses.

You needed to understand that. You know, CVS had acquired in the last year or two a company called CareMark, that was a pharmacy benefit manager that was more of a services mail order pharmacy business. Right. And so to understand that, you needed to understand other players like Express Scripts and Medco and Catamaran. And then, you know, maybe this is something that I took from my M&A days because in my M&A days, I, I, I, dealt a lot with companies that had products where, you know, if you have a product, commodity prices will affect your profitability and how you can bring things to market, which are being clearly exemplified by the pandemic right now.

And then you have like customers on the other end. And then you have customers of customers and you have suppliers of suppliers. And I just sort of saw it as like this sort of great grid or mesh where if you pull one circle, the entire thing sort of shifts and changes a little bit. So to understand the implications of those shifts and changes, you often have to know at least, I'm going to say, 10 to 20 companies with a certain level of competence. And so that's where the concept of ecosystems comes from, right, which is basically just knowing, knowing like the partners and the stakeholders around a company, but the more important part is to figure out where the fulcrum points are. If this is pulled in this direction, is it favorable or unfavorable for the investment? If this is pulled, and it moves very three-dimensionally.

And then over time, you consider the regulatory environment and things like that. So that's really the concept of the ecosystem. I think the benefit of it is the ability to build and scale concentrated investments. But also the other benefit to it is because you're accruing knowledge in these different companies, I've generally found that dislocates when a company is extremely. undervalued, unless it's like in some sort of secular decline or something like the opioid crisis, for example, it tends to be short, right? Like, you might have, like, a few weeks to maybe a month or two to make a decision.

So the ecosystem sort of gets you to 50 to 75% of the research already, you know, on other companies so that when they stumble, you can move quite quickly, right? Like, and I think your other question was about controversy. And, I mean, I think for controversy, I'll sort of use. use like a martial arts analogy, right? So when I was younger, I took a lot more martial arts than I do today. And I had a very great sense, you know, who was an amazing teacher in his own right. And I find like in the beginning, you know, particularly when you're sparring, you know, your mind is just like very loud. It's active. There's like punches and kicks coming at you

and like there's a lot of self-doubt and, you know, like, and so the analogy for controversies that like I think martial arts and just sort of doing this job for a while just sort of trained me to not have an emotional reaction to like a controversy, right? So for example, if the oil and gas complex is falling apart or if the market is going down five to seven percent like every day or if a thesis is moving against us, it's not like I'm completely emotionally zeroed. I'm a human I'm a human as well, right? Like, you know, but I think my inclination is to very quickly move beyond it and to run towards the controversy and see, you know, what can be solved, you know, and what needs to be cauterized per se, you know, like to fix it. And so I've oftentimes found in investing,

like you find some of your best thesis. So the one that I just described in CVS, the major controversy is that people thought that it was an idiotic acquisition. Like if you go back and read the analyst reports and the general investor settlement of the time, they thought that it was a really bad acquisition and it led to like the CEO, it was one of the reasons it led to the CEO retiring, you know, but actually when I looked at it just from a calm outside perspective, I thought the acquisition was quite brilliant because when you looked at the curves, mail order delivery of prescriptions were going like this, you know, and people going into the store was flattening, and basically by making the acquisition, they'd made themselves agnostic.

So I think the ability to run towards controversies, consider them calmly, and to decide if you have a differentiated point of view, is a very powerful part of finding interesting investment thesis. Did you do any work to find out the extra return you get from this controversy perspective, or how does that help you? Oh, absolutely. Absolutely. You know, I think that like, you know, I think an investment banking, I think one of the great parts of doing that job is that, well, it teaches you a basic vocabulary. It certainly teaches you to work very long hours. It kind of gives you an insight into how businesses, how business is conducted, you know, whether you're on the equity capital market, debt capital market, or at M&A side, right? like, you know, but I think it also gives you a great modeling skill set, right?

So the model is really kind of the ability to pencil, right? So, for example, if I look out my window here, I might see an empty lot or an existing home or whatnot. And if someone wants to use that lot or demolish this home and sort of build a house, right, you get a contractor to come out and they'll say, well, we need to do this. We need to get the permits. We need to, like, you know, dig the basement for the foundation, you know, Like, we need to order, like, you know, wood and sheetrock and all these different materials.

And this is how much it's going to cost you, right? Well, the thing about that is I think everyone knows that that is an inexact science, right? So, for example, you know, I have some people in my network who are building properties now and they find the cost of wood might be way up or the cost of plastics and resins might be. So these things are estimates. So I think for us, you know, the financial model is basically that initial evaluation. of like, you know, if we can build a home here and sell it for Y, what does that imply about how much we should be paying for the land and the materials X, right? And so I think in that case, I mean, I don't remember my exact model. It was so long ago. But I think in general, that one was, you know, I thought that the stock could double in the best case and probably produce a high teens or more return in the base case. and, you know, maybe produce like a mid to, you know, high single digit, you know, negative compounded return over three years in the case that the market was right about

that being a bad transaction, right? So we do use that to inform our thinking, but in general, I find all of that to basically just be directional and an establishment of the odds, right? It's like if you and I, I'm not a big gambler, but let's say you and I were playing a dice game and I said, hey, Tillman, if you roll a two or above, like this $50 is yuz, you know, like versus if you roll a five or above, right? It's more appealing if the odds are in your favor for that great return. But of course, even with two or above, you still have the prospect that you might roll a one

and owe me $50. So it's basically using the model to inform what the prospective returns are. But in general, I think the older I get, I find it more important. important to get the directional thinking about the ecosystem and whether this company has a sustainable competitive advantage and can outlast some of the shots on its bow that it might take. I find that to be the more important part of choosing great investments. Whereas when I was younger, I was definitely more model focused about this being a great investment or not. Let's zoom up it out and take a look back at the history of ACM. Yeah. And my question is, what advice has helped you building your firm and where would you have

loved to have great advice looking backwards? Like what were the pain points where you love to have great advice? Yeah, you know, that's a great question, Tillman. You know, I would say, you know, building a firm is challenging, right? So I forgot what I've shared about the history of ACM, but ACM launched with like about a million dollars. And I love what I do. I'm grateful that I did it. But I oftentimes joke that it's one of the dumbest decisions I've ever made in my life.

I mean, I think today we're closer to about 60 or so, which still makes us a very small minnow in the grand scheme of the investor management industry. You know, like, but we started from very humble beginnings. And I take a research's approach to almost everything that I do in my life, right? And I would say that despite those challenges and some other challenges we face along the way, I am grateful to some people, you know, particularly other firm founders who I thank in person all the time, but I will, you know, exclude their names here because I'd like to preserve their privacy. But, you know, some very great investors, you know, like spend some time with me talking about their own experiences. And I found that like a lot of the investors that I really, I respect all investors, but a lot of the investors are really established, for example, the way I think about investing, they all told me the same thing, right?

They told me to focus on returns, you know, keep expenses low so that you can survive, you know, the vagaries of the number of years it might take to gain traction, right? and really just to stay very true to our investment philosophy and cultivating our swing. On the other hand, I think there were much, much more people who are like, well, Ram, you know, like what you need to do is to do like a very splashy launch and get the best office and like, you know, the glass tower and, you know, like, and so it's really interesting. You've decided for the glass tower we see in the frame. Well, it's actually very interesting. So I actually took the advice of the folks who were like, okay, well, they built the sort of

fund that I would want to build. You know, I kind of view myself as being closer to their investment tradition. And I think that that was very sage advice because it's taken us five or six years to kind of get to the point where we have some meaningful scale, right? Like, and I think if we done the glass tower and, you know, like the splash year launch, we would not have had the longevity. Another great piece of advice that I got from a firm founder was like, look, you know, anyone who's going to invest in you now already knows you, right? And so we kind of took that to heart in terms of we spent our time speaking to people where we had like a great direct relationship or people where those direct relationships would call or write a strong recommendation on our behalf.

and that's really the way we've sort of that's the way we've sort of built our business and I think that those were two great piece of advice that I received along the way I mean I would say as it concerns returns right I mean this is in some ways this is kind of like an athletic sport right like you can sit with the best surfer in the world and they can walk you through hours of their footage

and telling you exactly what they're doing to surf that big wave but you're not going to be able to surf that big wave until you're out there on your own surfing and taking the spills you need to take and learning on your own. So I think in terms of investing returns, we can certainly learn from the books that we've read and the letters we've read and the conversations we've had. But a lot of, I think, being great at this job is developing and cultivating your own judgment and putting that to the test in a measured way.

And then in terms of you ask the second part of the question, advice that we wish we'd had. You know, I think that, you know, you go from an analyst to a PM to a firm founder, right? But none of that skill set, you observe the other functions tangentially, but none of that skill set is actually really managing a firm, right? So I think, for example, I've had to learn the, you know, the legal side of the business, the compliance side of the business, you know, the small amount of marketing that we do, you know, that side of the business. You know, we've been very blessed in terms of our vendors and our vendor teams we worked with. And, you know, we have, we have a good analyst right now that we really enjoy working with. And thankfully, it didn't go

the other way in terms of making a hiring decision that proved to be problematic. But I think some of these other parts of it, you know, I think I certainly could have, you know, used a lot of great advice on. But with that said, a lot of the people who were giving me advice were already 30 or 40 years beyond those challenges. So maybe they'd forgotten some of the tactical, you know, some of the tactical, you know, aspects of building that up by the time I got to them. But that's where I wish I'd gotten a little bit more advice. Aren't there any hacks you can share for people who want to also start an investment business? Sure. I mean, I think there's some things I could share along those lines but it's going to be very difficult to take you know like to take the advice in terms of

like it's kind of it's like the marshmallow test i don't know if you've ever uh i don't know if you've ever heard of the marshmallow test it's this this experiment they did where do you know it where you kind of like put a marshmallow in front of like a three or a four year old and can they resist the marshmallow i think you know one hack and advice i would give to people is number one if you think that this is something that you might want to do from whatever seat you're in Like, whether you're a banker or a younger person on the by side or a consultant, you know, start doing your research now, right? Like, there's no reason you can't do your consulting job,

but also speak with people who founded firms or speak with allocators, you know, and try to have some of these conversations prior to launch that you will end up having after launch. So that's one hack to save on the time, right? I think the other hack is I really would reiterate the advice, of really not marketing that much, probably for your first few years, just focusing on your returns and your infrastructure and building your investment process. And if you're blessed enough to have financial resources, the type of team you want to build and team members you might

have join you. Because I think another piece of advice I got in the beginning from a firm founder who's quite successful is he said, look, you know, a lot, like most allocators won't say no. Like a lot of people will take the meeting with you, you know, like a lot of folks want to have had those meetings with you to the extent that you become one of the great funds of the future. So maybe they can allocate quicker. But I definitely don't think it's a good use of time to be spending. I would say anything more than maybe five to 10 percent of your time marketing in the earlier years, right? So that's that's one hack I would give. The other hack I would say it was very important for us, even though we started with a million and a very, very low budget.

Like, I funded it from my personal savings to build the institutional infrastructure from the beginning, right? So starting with like an accounting firm that you like and a third party admin and, you know, starting with even an outsource CFO because like you don't want to be scrambling to do that on year two or three, right? You know, like it's, it's better to front run the next stage of development. So it's there and it's built, you know, for when the crowds come, you know, then to be trying to build it as you're also scaling. Right.

So I think that those are three pieces of advice that I would give to people looking to found firms. You already have someone working for you. And as coming out of this history, the question came up, how did you learn leadership? leadership it's funny I look off to the side because when you say it I'm thinking

about like the brave heart speech or you know there was like I might mispronounce it but there was actually I don't know if you've seen it there was a recent Netflix series about the the battle in the forest the very famous German battle do you know what I'm talking about like uh... Dengsla? I don't know

I don't know it's all I'll share it after our interview but I think about these very inspirational battle leaders. Look, I think for me, the way that I've always tried to be in my life was just to be a genuine person. I mean, that's not to say other people aren't trying to be that, but I've always tried to be a person where, particularly in my friendships, you know, my friends could, can come to me and share whatever it is they wanted to share, whether it was a thought that they were super comfortable with, you know, like, I like vanilla ice cream or I love when it's something. sunny, you know, like, or whether it's something that they found really challenging to speak about,

like, you know, like, for example, more recently grappling with like social issues or issues of race or inequality. Like, we can have that open forum for conversation. And then beyond that, I think even in today's technological world, I think a lot of the people in my life know that I will drop all the devices. I will drop the phone and I will literally just look them in the eye and listen. And at the end of that, I will try to give them the best advice that I can, you know, with producing good outcomes for them in mind. Right. So I think there are different frameworks for leadership, right? There's like the, I'm the alpha guy and what I say goes and you will follow me and there's a clear hierarchy or whatever the case may be. I think my framework

for leadership is sort of demonstrating knowledge, you know, demonstrating consideration and listening, you know, giving, I mean, similarly with our portfolio, you know, giving good advice more often than you give bad advice, right? Like, and, you know, kind of exercising genuine care and consideration. So people will take that advice and kind of look to you as, as a leader, if you will. But to be honest with you, I don't know, it's not very important to me to be, it's not very important to me to be perceived as a as a leader per se or someone who's on top of the of the of the pyramid per se you know i think that you know my goal with acm you know should we become whatever we become a 10 person firm a 20 person firm a five person firm or or even larger you know never say

never is to create some to create people who are actually smarter than me and better than me And I've told this to our current analyst, and if they feel the need or the itch to start something of their own as well to be supportive of that, or if they prefer to stay here and help us to build this into something bigger and better and be a part of that journey and perhaps take over that mantle further down the line, you know, like to do that as well. But my framework of leadership isn't, you know, me at the top of the pyramid and I'm always acknowledged as the best and the best. supreme leader and that's the way it should be one quote that's also attached to leadership struck into my eyes was reading for your materials yeah i hope i can spell it right because there's some words i haven't spelled before it's we also believe that minority and female led films can meritoriously outperform when afforded equal access and resources of face continued adversity when structurally staffed of them yeah why did you put this

and your materials and what is your message with it yeah you know like um it's interesting i'm trying to recall my thought process i think that i i if you recall because i noticed that you know i i think that this was more of a global phenomenon and and you know i've been to berlin have some friends out there i think that's where you are are as well and i i think i saw pictures of protests in Berlin even. You know, but you know, last year here in the U.S., we had like this catalyzation of events with George Floyd and, you know, some of the other things that flowed from that conversation, right? And quite frankly, within the three months surrounding that, and even to this day, there were a lot of inbound requests to me, you know, asking, you

know, my thoughts on it, you know, and what my experiences were as, you know, a very, very rare a black founder, you know, in the financial services or the byside industry, right? How many black founders have you met in the industry? I mean, so by the way, like, I do, I think that I'm in the flow and I travel and I do everything that everyone does, but by no means is the number that I'm going to give you representative of the entire thing. I just want to put that disclaimer out there. But I've probably conservatively met less than 10 and maybe less than like five. And I'm talking about like pure founders. And what do I mean by pure founders? I mean like founder where you are the founder,

you are the majority owner of the firm, like you control the direction of the firm, you control the direction of the portfolio. That doesn't mean that they're not multiples of that. But by comparison, I've probably met hundreds of why some of them are quite good friends, you know, of like white male founders. So there is a big discrepancy there. But anyway, so I think a lot of people were kind of reaching out to me to have this conversation. And the reason I decided to put it in our materials is that I think that there's a lot of silence around power dynamics, right? And we saw that, for example, with, you know, like the Me Too movement where, like, people felt that, like, for decades, they couldn't say certain things. Like, they couldn't speak up about certain things, right?

And silence have always found to be, like, a little bit, like, it's like a weight on your shoulders, right? Like, it's like a weight on your shoulders. Like, I would like to step out and say something that I truly believe in or that I think might be happening here. But I constantly walk around the world suppressing what it is that I want to say. And that weighs on you in a different psychological way, right? So I think, you know, one thing that I've talked about in founding ACM is just like our early days were a gauntlet, right? You know, like starting with a million dollars, not really having similar networks or similar access um not really you know like being seen as maybe someone who should be there right so i i don't

want to be melodramatic about it but like you know there were certain for example like there were certain parts of our experience where i would arrive 15 to 20 minutes early for meeting because i like to be on time and i i would i would stand in the lobby just checking my email and you know security people would come over and ask me why i was in the lobby of this you know very fancy you know, though I was wearing a full suit or things like that. And so I do think that there's a concept of who's expected to be where. And that kind of goes up throughout the tower as well, right? Like when you go in the elevator and go all the way up to the large allocator's office or whatnot. And so I think for me, like I put that phrase in our deck because I think a lot of

the performance gap is a resource gap, quite frankly. Right. So just to give you an example from our early founding, right? For years, we had virtually zero access to cell-side research. And that's fine, right? Like, we're not a very cell-side research heavy shop, right? You know, like when you're smaller, you also don't have access to management teams as much. And that's true, for example, if you have like a white male with a small firm as well. The difference, however, is there might be some network advantages that we don't enjoy that allow you to get that meeting or the invite to the conference. And certainly, you know, there's a lot of access to allocators as well, right? Because I love this industry. I think in general, it tries to be meritorious, right? This is the whole

concept of if you have great compounded returns and you have a good process and you're bright and you're hardworking, it'll come. Right. But actually, you know, when friends of mine and people that I know speak honestly about the start of their firms, a lot of it does come down to, you know, I knew this person from high school or my aunt and uncle knew this person from the country club and, you know, like a lot of it does come down to those traditional pathways, right? So I think I put that in the slide deck because the downside is people are going to feel offended and they're going to be feel self-conscious and they're going to feel like it's aggressive. And, you know, maybe it's an unfair way of looking at it, but I sort of see that

like folks who might judge us on our face for having included that in our deck most likely will not invest with us anyway. That might be an oversimplification. Whereas I think people who will acknowledge that we're not only trying to do something very difficult, right, but we're trying to do something very difficult without comparable access to resources or networks, right? And let's have a conversation about both of those things, how you outperform, but also, you know, like, what's the handicap you faced in building this and outperforming? I think those are the folks who tend to have the open-mindedness and I dare say the bravery to take the step of investing in a smaller manager in general, you know, but also a manager that maybe is not expected to be there specifically. And then the last thing I'll say about it is that it was important for me to, I can't speak to the experience of being a Mexican man or a Middle Eastern woman or, you know, like, or a white woman or an Asian woman. But I wanted to make sure that I wasn't just centering it around my experience because I think that there are many people, including, for example, white males who may not be from the right school or the right social class that face these challenges in garnering comparable access.

But I think, you know, I would hope that as we kind of mature as a society and a culture, will move closer to more people having the shock. thought to build a great investment firm. Do you think that you get from this resource constraints on these hurdles you just named a certain uniqueness or creativity in the way you do your job? Oh, absolutely. You know, absolutely. You know, like, you know, one thing I've always, like, loved about my dad and, you know, like, fascinated me about my dad and what he does for a living as a contractor is that

literally you know like there's probably 10 to 20 ways to do a certain job right like and and none of them and many of them aren't super obvious so like if he has a certain set it's almost like a chef right if you have a certain set of materials or ingredients he can fix the window or he can mount the television or he can reconstruct the kitchen right and if he has a different set of materials he can sort of get to the same place. So I think, I mean, like most things in, like most things in life, you know, like for example, if we're going to use sports as an analogy, you know, I've seen kids in, you know, less advantaged neighborhoods, you know, making a, making a basketball court out of a, out of like a milk crate with a cutout bottom, you know, that's the, that's the way

they've trained themselves to do that shot. So I think for us, for example, you know, like I said, I've never had a very heavy cell-side research process, but going from some access to virtually zero, you know, like really forced us to construct a process. It was always our preference to be with the primary documents, but to say, okay, you know, like, we don't have like the advanced power rifle here, right? Like, you know, we have like, you know, sort of the old traditional, you know, like Japanese Yumi, like the traditional bow, right? But how do we, how do we like get that shot on target, right? And it might demand, it certainly demands that we sort of, you know,

crawl our way through the foliage to get a little bit closer and to take a different angle and to wait for certain sunlight or maybe time of year or period. And so I think the resourcefulness of that is definitely is definitely a strength. And then I think that there's also a certain pride in it as well. I won't deny that, right? That like, let's say we grow to a billion dollar firm and we have all. the access that we want. Like, we know we've made it through this period, you know, where we have fought through

with much less. And there's a certain level of independence and pride that, like, accompanies, I think, that notion. Where do you want to be with ACM in five or ten years? You know, I think that the way I've thought about this and what I've communicated to some allocators, including current as well as perspective, is that, like, I would really like to see what ACM can do when we get to what I would call like our starting five lineup, right, to use like an NBA analogy, you know, which is I am fairly confident that we have a

process and a thought process that works, right? You know, like I've been, you know, I personally have been investing on the by side, you know, like I think for, it's probably about 11 or 12 years now, you know, which still makes me like a guppy, right? I do not have the judgment or the greatness of like a Marx or Buffett, you know, like, or singer or any of those guys. You know, but, you know, over that period, we've outperformed, you know, nine out of those 11 years, I mean, only six years onto the ACM banner, but nine out of those. So I'm fairly confident that we have a process approach and a thought process that works, right? Like, I think that what I would like to see is, you know, when we have kind of a fuller

analyst team, which again, let's call it like the starting five, maybe, you know, anywhere from two to four analysts. And we also have people filling out kind of the administrative and back office side of the business, you know, what we can actually do. Because I know for a fact that there are great investment thesis out there that we miss because we don't have enough coverage. We don't have enough moving pieces so I can, you know, send someone out to survey the the land over here, you know, like while I look at something else and the other analyst looks at something else, right? So I definitely know for a fact that there is that. And or, as I mentioned before, the timing part of this, which is when a gap opens up to purchase something that might

produce a 20 to 30% IRA, you know, just getting there quicker, right? Because oftentimes, you know, the early bird does catch the worm and being able to get their quicker elites to better return profiles. So that's where I really like us to be in five to 10 years. I mean, in terms of culture, you know, I'd kind of like to make, I mean, I'd like us to maintain the culture we have now, which is very collaborative, very open, very entrepreneurial. You know, like I see an important part of my job as developing our analysts so that they're not only just processing stuff that I'm throwing to them. And this has been the way it's been from the beginning with our current analysts. like cultivating them as a young professional so that they can, you know, ride the bike on their own. They can take something from, you know, beginning to end. And then, you know, to the extent that

our story is, I'm not saying it is, that it'll be for others to judge, but to the extent that our story is somewhat inspirational, right? People talk about the importance of representation. You know, I've always thought, I've always thought about ways in which to, you know, be a be a better part of the solution, right? Like, how do you mentor or other young women or people of color or, you know, doing things in the neighborhood that I think could contribute in a positive? So, for example, you know, I, like, I love playing tennis and I've gotten our analysts into it, and we kind of have our inter-office tournament.

And, like, I, you know, I think at some point I've even thought about, like, should we sponsor a local tennis tournament for, you know, kids from less advantage backgrounds, you know, like, you know, so just things like that. I think we'd like to be good citizens and representatives of the benefits that can come from being more inclusive. What partners have you found in the last years that back you and looking out five to ten years? What kind of partners would you wish to back you over the next years? yeah no i think we we have some amazing partners that like um that we are very fond of and uh you know

i think go to bat for every day you know and like i said i think many of these partners have given us permission to kind of share their names and personal meetings and things of that type but i'll refrain from saying their names here just so preserve their privacy and if they want to claim it after seeing the video they can say yeah ron was talking about me there but uh you know our initial partner was, you know, an amazing family. You know, it was a Chinese American family, a good friend of mine that I've known for decades. Mom and dad are great entrepreneurs. But, you know, one thing that we love about having them as our initial partners and continuing to invest for them is they made the decision as a family decision, right? So it was basically mom and dad, the kids, their partners,

and they chose to be, you know, the first larger investors in ACM. And we will always treasure them dearly. And I love the fact that the decision had a mix of genders as well because the types of questions that I received from one versus the other was very different. But I think it's sort of captured holistically what ACM was trying to do from a return perspective, which is make great returns and help our partners compound their wealth. But also from the other perspective of creating more opportunity and inclusivity. Right. I think that we also have amazing individual partners along the way, you know, some of which are close friends. And we're also very thankful and grateful of them. You know, some of which kind of learned our story of we went along and have become, you know, friends and partners and wanted to support us and our vision. Our biggest partner actually is an amazing, you know, outsource CIO for, that you know invest on behalf of endowments and foundations um and they've been a really great partner for us you know they one thing i think that differentiated them is from the beginning

they actually looked at us closer to the meritocratic vision that this industry has of itself of like is there a good process here can it produce great returns let's forget the fact that at the time i think we're only three million dollars and just focus on that you know finding like a good investor. And they made a multi-year commitment, and they've been incredibly true to it, you know, like, and have been amazing partners up until this point. And so, yeah, I think we have a mix of these institutional investors, including ENF investors and family offices and individuals. But I would say, you know, the one sort of defining thing that I would sort of attribute to all of them is they probably would not be offended by the fact that I included that previous statements

in our investor deck and would have an open conversation about it. And then also, I think bravery, right? You know, like, and I say that in no small part. Like, I think for me, personally, I view investing in ACM similarly to when we invest in a small cap company. You know, I don't think it requires like an epic amount of bravery. I think it just requires good research and an investment perspective and a commitment that is measured, right? Whether it's a smaller investment or however people want to control for the risk. But I realize that there is a lot of social pressure in this industry to invest in larger firms, to invest in individuals who've spun out from those larger firms and basically to just be in the same positions as a group, right?

So I think all of our investors to really push against that like pressure to do so, I realize requires a lot of like, you know, intellectual bravery and just, you know, courage in acting. And so I would say that those characteristics that I just mentioned about the investors we have now or the same characteristics we'd love to have, you know, about our investors in the future. Because I also think that those are also characteristics of people or or institutions who are willing to take a longer term approach, right? Some years you'll be up, some years you'll be down, some years you're outperform, some years you're underperform, hopefully much fewer years underperforming, right? But to say, you know, the market is very focused on 3, 6, 12, 18,

month is considered a longer term now, but I'm going to invest in an investor that thinks over a three, five longer time horizon. I think that takes a lot of, you know, professional bravery and intellectual bravery. One of your investment that stood out to me is Snap. When did you start building conviction to invest there? And how was your process for investing? Yeah, no, that's that's a great question um you know um thankfully we've actually spoken about some of my other investments prior to speaking about this because you know the funny thing is that a snap has been such a successful investment of ours and it's certainly been the most successful investment of my career um that i i but i wouldn't want it to define us it's it's a great company we're

thankful for everything the management team has accomplished for us but it's it's i wouldn't say that it's like very much our typical thesis so with that disclaimer you know coming back to your question um so like i've always done well in we have a fairly high batting percentage when it comes to social networks right so we we've had like very successful investment thesis for example on you know facebook in its early days we've done incredibly well and linked in you know like um and and and now snap so all is that to say that there there's a history there There's sort of like the ecosystem knowledge of understanding, you know, what makes for a successful social network in terms of user growth, monetization, you know, constructing feature sets and evolving the platform, right, like as well as demographic uptake. So I would say my experience with Snap goes all the way back to, I'm going to say the early 2010s, you know, when it was coming out of Stanford or sort of.

sort of a startup social network, but also kind of leading up to the case where Facebook was trying to acquire it for, I think, about $3 billion or so. So we track the company since then and continue to read about it. And then, of course, it IPOed and it became, you know, a situation that typically we find compelling from a controversy perspective is when, you know, like an IPO becomes broken, right? You know, like where it starts at a certain price and it trades down massively, right? And I think that that's like a worthwhile controversy to run towards. So in Snap's case, you know, the company at IPO, it traded down massively. I think that there were a few celebrities that kind of talked about its declining lack of relevancy. And the market in general

was very negative on its prospects. Right. I think I didn't really approach Snap from the perspective of, is this going to be like some great amazing investment for us? Like, I actually approached it from the curiosity of, is there something here, you know, is there something about it like that that is a kernel of a social network that means that it can maintain its usership and, in fact, grow from there? And so I would say, like, the first few months of our research were extremely focused on determining that one thing, right? Like, was there something about SNAP that would keep its users continuously, like,

using the platform, right, and hence basically form like a core foundation of the business. And sort of the use case we honed in on is that basically, you know, we did it, we did a survey. The N wasn't large enough. It was tens of people, maybe approaching 100 or whatnot, but it wasn't large enough that I would publish it in any sort of like publication as an empirical study. And what we found is that most of the people who are using Snap were using it to communicate with their five to ten very close friends from high school onward over an extended period of time, some for like almost a decade, which is a different use case from what they were using Facebook for, which was declining amongst younger populations, which is a different use case for what they use Instagram for, a different use case for what they use TikTok for. long story short, we're like, okay, we think that there's enough of a core there that they'll be able to maintain these users for a multi-year period. And then, you know, I think in our thesis, we look for

solvable problems, right? I think one of the things that Snap spoke about repeatedly through that period was basically, you know, the underperformance of their Android application, which was very important because when you move beyond the U.S. and Western economies, they're not iPhone dominant. They're very much Android dominant in terms of devices. So then we focus sort of our next stage of research on that and saying, is this even a real talking point or is the company just making excuses for its underperformance? And we found that it was actually a very real and genuine talking point that there were people in emerging markets that would love to try the app or when they were trying the app it was closing or crashing or the performance.

performance was so slow. And there was an opportunity, particularly for them to leverage their strength in younger cohorts like teenagers or young adults, you know, who want to be a part of, you know, what's hip and what's cool. And, you know, everyone globally wants the same thing. You know, like, and so I think that really kind of gave us confidence that they can then not only maintain users from the first part of our thesis, but grow their users from the second part of their thesis. And then we also went into SNAP's back end as a prospective advertiser. Basically, we established a profile, just said, hey, if we were an advertiser, you know, what can we do on this platform? And we were able to see over a multi-month period, basically the evolution of the tools that were offering to advertisers in terms of the different ad formats, the different targeting, the different ways of measuring ROI. And so, you know, all of that came together.

you know, we established our position, you know, between five and ten, and all of that came together to, like, look, you know, if we take a, if we take, we were looking at it on three to five year time horizon, you know, we certainly think that this business could double in between user growth and basically, you know, just the leverage you get from that two-sided marketplace of there being more users as well as more advertisers who want to advertise to those users, as well, as are competing, you know, and bidding in the auction to get those ad loads. And then we kind of saw the, we saw the app's technological development, say, for example, their strengths in augmented reality, right, and some of the other shots they had on goal, like snap maps, you know, like in Snap games, and now Spotlight. You know, we actually really saw all of those other things as free options, right? Because we do think that they are a very innovative team. We do think that they're a very creative team.

And at the very least, you know, if the company continued to fall apart, you would have this backstop in terms of acquiring it for its technological capability and or its developers. Right. So that's really how the thesis came about. And I'd also, maybe as a final thing like to acknowledge our analysts, you know, as a younger person and, you know, helped us a lot with understanding the dynamics, you know, of being a 20-year-old and using this platform. Although I will say, interestingly enough,

that, you know, I think that they were probably a little bit more skeptical of the thesis than I was. And that was actually great because I think a lot of constructing a good thesis isn't really just finding supporting evidence to continually support your base and your bull cases. It's to understand the bear case and to say, you know what? I'm comfortable with that risk. Right. And so it was interesting that the old guy in the room was more of a believer, but the younger person in the room was like,

I don't know if this thing is going to be as great as you think it might be. At the end of 2020, the snap was 22% of your portfolio. Yeah. How do you think about the size of the position and how does this such a big position come with your general idea of portfolio construction? Hey, Tillman here. I'm sure you're curious about the answer to this question. But this answer is exclusive to the members of my community Good Investing Plus.

Good Investing Plus is a place where we help each other to get better as investors day by day. If you are an ambitious, long-term-oriented investor that likes to share, please apply for Good Investing Plus. Just go to good minusinvesting.net slash plus. You can also find this link into show notes. I'm waiting for your application. And without further ado, let's go back to the conversation. How do you think about fair value of a company over time? Maybe an awesome example of Snap.

Yeah. So, I mean, Snap is a trickier one, particularly for those you come, at it more from a traditional value lens, which we still, which we still do come at investments from discount intrinsic value lens because you're, there is a portion of paying for what the company will become, right? I mean, to a certain extent, like you're, you're always doing that with companies, whether it's, you know, CVS, you know, like, or, or snap. But, you know, I think with more mature companies, I mean, the, the parts will not fluctuate. as much, right? Like, you have 100 billion in sales. It's going to go up three to five percent. You've

got an operating cost structure. Maybe they can continue to squeeze additional margining out of it in terms of suppliers or getting leveraged from, you know, SG&A, right? Maybe there are some financial engineering things that can be done in terms of swapping out higher cost debt for lower cost debt, you know, like, but it's a straighter case. Whereas, for example, let's say a company like snap right snap can double its revenue over the next few years and still you know like for example move into the realm of having a very high P because maybe there is enough opportunity in front of them let's say if spotlight becomes i'm not saying it will but just for purposes of discussion let's say spotlight becomes sort of a alternative YouTube for you know like millennials and

Gen Ziers, right? You know, then all of a sudden they're making a content investment and they're making an investment in their technology stack. And, you know, that will tend to drag on, you know, operating profits. So I think with Snap, you know, our original conception of the company was as a multiple of sales. It was a very high growth company, you know, like there was no way to figure out what its cost structure was going to be with any sort of accuracy. But I thought that we could basically develop a range of outcomes for how quickly the company could grow on the top line. So that's what we focused on. Now I think we're still paying attention to SNAP as multiple sales, but we look at other things like, you know, what their EBIT and EBIT doc can be in the

future, right? Like, you know, what their perspective EPS can be in the future. And so we do look at it from those lenses, those lenses as well. But I still think that like, for example, with their Maps business, with their spotlight business, you know, even with the advertising products, they can release internationally or locally. There are a lot of moving parts that, like, I couldn't slam an estimate down on the table and say, Tillman, I think three to five years from now, they're going to have a dollar in EPS, right? Because their cost line can fluctuate in line with their opportunity.

to come to the end of our interview a bit of a challenging question looking at your past investments from which investing mistakes did you learn the most and why well i think i'm going to use like this the tried and true framework of omission versus commission right so i think in one of our letters i wrote about like why we have investments like snap and amazon you know like in our portfolio and investment that if you sort of put it up against the, you know, Ben Graham, you know, old Warren Buffett, like old school Warren Buffett because his investment style has evolved, right, like Lens wouldn't present as a classic value investment. And I think the example I gave was one that I spoke about earlier, right, which is having very, very high confidence in the growth of AWS and the value that that can generate for Amazon and shareholders, but not putting it in our portfolio because quite frankly, and I'm happy to be candid about, you know, our shortcomings, like we launched

with a fund name global concentrated value, right? And even though I thought it would be a great investment, I was concerned that we would be perceived as deviating from style. And so, you know, we, we didn't put it in the ASAM portfolio, right, until later. So that I would consider like an error of a mission. And I would say for anyone who's an investor and a young person wants to start a firm, like read all of these different books that are recommended to you to like learn how to swing to build your understanding of the sport. But you really have to develop your own personal playing style and how you choose investments and how you construct a portfolio because, you know, I think investing like sports is constantly evolving. The same approaches aren't

going to work all the time on athletes as well as math leads need to involve in how they play their respective sports. That's a mission. Error of commission, right? So there are, you know, I don't really want to call out any specific company because, of course, a very small chance that like their management teams might watch and it's a long-term, you know, thing. But I think that there are some companies that I would describe as traditional value investments, but not necessarily traditional value investments, but, you know, but some companies where we look at them and they are so attractively valued and the problems that they have to solve, right, like seem very doable and the pathway back

to like getting beyond them, you could almost see it, right? And so you bring them in your portfolio, but I think I can generally say without identifying any one company. So for example, we made an investment that basically involved. Part of the thesis was getting beyond, you know, some of the overhang associated with the, the opioid crisis or, you know, one crisis or another, the oil and gas crisis, you know, like we've made those investments. And I think that those are errors of commission in terms of, I'm not saying we'll never make investments like those in the future. There will always be investments that don't work the way you want them to, you know,

like, but I think I consider those errors of commission because we grossly underestimated the timeline to getting those problems. And then the other thing we underestimate is like sometimes, you know, these problems kind of roll downhill like a snowball, right? You know, like they're like, okay, here's the problem. They can solve that. Oh, well, there's like a secondary and a tertiary and, you know, and there's some investments where we've made where it's like just two years of just seeing smaller problems emerge,

but that just compound or extend the timeline solving those problems. And they don't produce great outcomes in terms of compounded annual returns over a multi-year period. So I think that those are the two types of errors we've made in the portfolio. And maybe the last type of error, which every, I think, investment manager, particularly concentrated investment managers, will always lament, honestly, I wish I'd bought more Snap. I wish I'd bought more Amazon. I wish I'd bought more CBS, right? You know, like, you know, it's almost, I think we talked a little bit of my, my love for Formula One.

It's almost like, you know, when those guys just basically take turns at incredibly high speeds, right? You know, if you can maintain your speed through the turn, you can produce a great race winning outcome. But of course, the thing we're trying to avoid is if you do it too fast, you can crash and, you know, basically put yourself in a losing position. But, but yeah, that's the third type of error, which is not being. bigger in the things that have, you know, clearly been great investment thesis. So, those last questions for the end of our interview, do you have anything to add? We haven't covered or we have covered and we have an idea to it. Yeah, no, thanks a lot, Tillman.

Well, I think one thing I want to make sure that I do before we end, and I probably should have done it at the beginning because if anyone who has made it to the end of the interview, thank you for listening to the whole thing. But, you know, I wanted to thank you for spending time with us and taking the time to interview us. You know, it's the first time I've ever done something like this. And it's been interesting and exciting process. You know, certainly want to thank the gentleman who introduced me to you.

They've been, again, I'll be honest about it, but they've been great supporters and sources of advice, sort of being the big brothers of being slightly ahead of ACM's developments and being able to help us with some advice here and there. And certainly thank our investors as well. you know, I think for me, you know, great thesis will come and go and we write about them a fair amount in our year-end fundamental letters, right, which, you know, current and prospective investors can access. But I guess the final thing I'd add is maybe just like a word of encouragement, you know, for any young people who are considering entering the industry, you know,

regardless of race, color, or creed, you know, which is to say, you know, I think this industry like other industries certainly has its challenges. You know, it's very, it's kind of a bit of a pyramid's way it was described to me. So there are fewer and fewer positions, sort of the higher up in the ranks you go. And that's a bit of a gauntlet and like a combine as well. You know, but I would say, you know if you have a genuine love for investing and you have a genuine love for um for learning um and and you're willing to do that right like i mean i guess this is the whole sort of passion perspective i you know one thing i joke about is for three years while we were building acm i actually paid every month for the privilege of doing this right and that that's when you know you're

truly passionate about something right when you're when you're willing to do something like that so so Test your passion to know if you are truly passionate about investing because if you do want to build a firm of your own, it's not going to be an easy journey. You are going to need to outlast different challenges and different points where, you know, maybe you're questioning whether this is the thing you've done. So you need that intestinal, emotional fortitude about it. But if you find that you do have that genuine challenge, then, you know, I would, you know, take the risk of trying doing it on your own. in whatever way you can. Maybe it's a smaller way with your own capital, maybe with friends and family money.

And I would say, you know, don't develop any investing idols in terms of these guys are the greatest investors ever. I'm going to try to replicate exactly what they're doing, what they've done or what they're doing. You know, I mean, maybe your specialty is in looking at very small companies. Maybe it's just retail companies. You know, maybe it's just Korean companies, you know, like, whatever the case may be, I think that there are many wonderful ways to produce

superior, you know, risk-adjusted returns in this business, but I think it demands a good amount of bravery in starting a good amount of bravery and kind of bringing your own personal expression to investing. And a good amount of bravery in terms of pushing against the grain because a lot of people are going to tell you that are going to tell you, no, they don't want to invest with you not at this time you know why you why do you even have a firm of your own go to work for a larger firm you know like but at the end of the day if you can build something great for your clients that's expressive of your value system and just as importantly mentor the people you work with whether it be vendors or employees you bring on board

I think that is incredibly fulfilling thank you very much for this wise words your time And the insights. And thank you to the audience and to all of you. Bye, bye. Have a great day. Thank you, gentlemen. As in every video, also here is the disclaimer. You can find a link to the disclaimer below in the show notes.

The disclaimer says, always do your own work. What we're doing here is no recommendation and no advice. So please always do your own work. Thank you very much.